United States

Securities and Exchange Commission

Washington, D.C. 20549

Form N-CSR

Certified Shareholder Report of Registered Management Investment Companies

811-4017

(Investment Company Act File Number)

Federated Hermes Equity Funds

_______________________________________________________________

(Exact Name of Registrant as Specified in Charter)

Federated Hermes Funds

4000 Ericsson Drive

Warrendale, Pennsylvania 15086-7561

(Address of Principal Executive Offices)

(412) 288-1900

(Registrant's Telephone Number)

Peter J. Germain, Esquire

1001 Liberty Avenue

Pittsburgh, Pennsylvania 15222-3779

(Name and Address of Agent for Service)

(Notices should be sent to the Agent for Service)

Date of Fiscal Year End: 10/31/23

Date of Reporting Period: 10/31/23

Item 1. Reports to Stockholders

Annual Shareholder Report

October 31, 2023

 

 

Share Class | Ticker	A | KAUAX	C | KAUCX	R | KAUFX
	Institutional | KAUIX

Federated Hermes Kaufmann Fund

Successor to the Kaufmann Fund, Inc., with performance history since February 21, 1986

A Portfolio of Federated Hermes Equity Funds

Dear Valued Shareholder,

We are pleased to present the Annual Shareholder Report for your fund covering the period from November 1, 2022 through October 31, 2023. This report includes Management’s Discussion of Fund Performance, a complete listing of your fund’s holdings, performance information and financial statements along with other important fund information.

As a global leader in active, responsible investment management, Federated Hermes is guided by our conviction that responsible investing is the best way to create wealth over the long term. The company provides capabilities across a wide range of asset classes to investors around the world.

In addition, FederatedHermes.com/us offers quick and easy access to valuable resources that include timely fund updates, economic and market insights from our investment strategists and financial planning tools. You can also access many of those insights by following us on Twitter (@FederatedHermes) and LinkedIn.

Thank you for investing with us. We hope you find this information useful and look forward to keeping you informed.

Sincerely,  

J. Christopher Donahue, President

Not FDIC Insured ▪ May Lose Value ▪ No Bank Guarantee

CONTENTS 

Management’s Discussion of Fund Performance	1
Portfolio of Investments Summary Table	5
Portfolio of Investments	6
Financial Highlights	18
Statement of Assets and Liabilities	22
Statement of Operations	24
Statement of Changes in Net Assets	26
Notes to Financial Statements	27
Report of Independent Registered Public Accounting Firm	42
Shareholder Expense Example	44
Board of Trustees and Trust Officers	46
Evaluation and Approval of Advisory Contract	53
Liquidity Risk Management Program– Annual Evaluation of Adequacy and Effectiveness	64
Voting Proxies on Fund Portfolio Securities	66
Quarterly Portfolio Schedule	66

Management’s Discussion of Fund Performance (unaudited)

The total return of Federated Hermes Kaufmann Fund (the “Fund”), based on net asset value for the 12-month reporting period ended October 31, 2023, was -4.61% for the Class A Shares, -4.96% for the Class C Shares, -4.80% for the Class R Shares and -4.22% for the Institutional Shares. The total return of the Russell Midcap Growth Index (RMCGI),1 the Fund’s broad-based securities market index, was 3.35% for the same period. The total return of the Morningstar Mid-Cap Growth Funds Average (MMCGFA),2 a peer group average for the Fund, was -0.45% for the same period. The Fund’s and MMCGFA’s total returns for the most recently completed fiscal year reflected actual cash flows, transaction costs and expenses, which were not reflected in the total return of the RMCGI.

During the reporting period, the Fund’s investment strategy focused on stock selection, sector exposure, international exposure3 and the effect of cash holdings. These were the most significant factors affecting the Fund’s performance relative to the RMCGI.

The following discussion will focus on the performance of the Fund’s Institutional Shares.

MARKET OVERVIEW

During the reporting period, returns in most global equity markets remained muted outside of a narrow group of technology stocks. Broadly, equities struggled to rally as inflation persisted throughout the year. Inflation and slower GDP growth caused negative impacts to the broader markets as investors became worried about the negative impact to earnings and economic growth. The slower economic growth along with aggressive monetary tightening policy led to negative industrial indicators and job growth slowing. As global economic uncertainty along with uncertainty around inflation persisted, economic growth, geopolitical uncertainty and potential responses from global central banks remained top concerns for investors.

STOCK SELECTION

The key factors affecting performance from a macroeconomic standpoint were the aggressive monetary responses to inflation due to fiscal policy in the prior year. Monetary tightening policy, combined with uncertainty of real economic growth, helped to contribute to the narrow-concentrated returns of the S&P 500 Index4 for much of the reporting period. The profitability of many of the companies in which the Fund invested remained strong throughout the reporting period despite the sell off. Fund management continued to seek what it viewed as attractive growth investment opportunities, such as companies it viewed as dominant competitors, possessing strengthening fundamentals, with the potential to deliver both near-term and long-term growth in sales and earnings.

Annual Shareholder Report

1

The majority of the Fund’s underperformance versus the RMCGI was due to sector weighting particularly in Consumer Discretionary, Industrials and Health Care. Individual companies that contributed positively to Fund performance during the reporting period were Argenx SE, Structure Therapeutics, Inc., Albireo Pharma Eli Lilly and Company, and Dynavax Technologies Corp. Holdings that negatively impacted Fund performance were Seres Therapeutics, Inc., New Fortress Energy, Inc., DexCom, Inc., Sarepta Therapeutics, Inc. and Verve Therapeutics, Inc.

SECTOR EXPOSURE

At the end of the reporting period, approximately 68% of the portfolio was invested in four large sectors: Health Care, Information Technology, Financials and Consumer Discretionary. These sectors have historically provided good opportunities for bottom-up growth investors; however, sector exposure negatively impacted relative returns for this reporting period.

INTERNATIONAL EXPOSURE

Stock selection of companies domiciled outside the U.S. was a positive contributor to Fund performance; however, their group weight was a negative contributor. Approximately 11.7% of the Fund’s assets were invested in such companies during the reporting period.

EFFECT OF CASH HOLDINGS

The Fund had an average cash position of 9.02% during the reporting period. With higher rates on cash and a volatile market, these elevated cash levels had a net positive impact on performance.

1

Please see the footnotes to the line graph below for definitions of, and further information about, the RMCGI.

2

Please see the footnotes to the line graph below for definitions of, and further information about, the Morningstar peer group.

3

International investing involves special risks including currency risk, increased volatility, political risks and differences in auditing and other financial standards.

4

The S&P 500® Index is an unmanaged capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The index is unmanaged, and it is not possible to invest directly in an index.

Annual Shareholder Report

2

FUND PERFORMANCE AND GROWTH OF A $10,000 INVESTMENT

The graph below illustrates the hypothetical investment of $10,0001 in the Federated Hermes Kaufmann Fund (the “Fund”) from October 31, 2013 to October 31, 2023, compared to the Russell Midcap® Growth Index (RMCGI)2and the Morningstar Mid-Cap Growth Funds Average (MMCGFA).3 The Average Annual Total Return table below shows returns for each class averaged over the stated periods.

Growth of a $10,000 Investment

Growth of $10,000 as of October 31, 2023  

◾ Total returns shown for Class A Shares include the maximum sales charge of 5.50% ($10,000 investment minus $550 sales charge = $9,450). 

The Fund offers multiple share classes whose performance may be greater than or less than its other share class(es) due to differences in sales charges and expenses. See the Average Annual Total Return table below for the returns of additional classes not shown in the line graph above.

Average Annual Total Returns for the Period Ended 10/31/2023

(returns reflect all applicable sales charges and contingent deferred sales charges as specified below in footnote #1) 

	1 Year	5 Years	10 Years
Class A Shares	-9.86%	1.60%	6.64%
Class C Shares	-5.91%	2.29%	6.80%
Class R Shares	-4.80%	2.74%	7.22%
Institutional Shares4	-4.22%	3.26%	7.61%
RMCGI	3.35%	8.09%	9.09%
MMCGFA	-0.45%	6.77%	7.96%

Annual Shareholder Report

3

Performance data quoted represents past performance which is no guarantee of future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Mutual fund performance changes over time and current performance may be lower or higher than what is stated. For current to the most recent month-end performance and after-tax returns, visit FederatedHermes.com/us or call 1-800-341-7400. Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Mutual funds are not obligations of or guaranteed by any bank and are not federally insured. 

1

Represents a hypothetical investment of $10,000 in the Fund after deducting applicable sales charges: For Class A Shares, the maximum sales charge of 5.50% ($10,000 investment minus $550 sales charge = $9,450); for Class C Shares, the maximum contingent deferred sales charge is 1.00% on any redemption less than one year from the purchase date. The Fund’s performance assumes the reinvestment of all dividends and distributions. The RMCGI and MMCGFA have been adjusted to reflect reinvestment of all dividends on securities in the index and the average.

2

The RMCGI measures the performance of the mid-cap growth segment of the U.S. equity universe. It includes those Russell Midcap® Index companies with higher price-to-book ratios and higher forecasted growth values. The RMCGI is constructed to provide a comprehensive and unbiased barometer of the mid-cap growth market and is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true mid-cap growth market. The RMCGI is not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission requires to be reflected in the Fund’s performance. The index is unmanaged and unlike the Fund, is not affected by cash flows. It is not possible to invest directly in an index.

3

Morningstar figures represent the average of the total returns reported by all the funds designated by Morningstar as falling into the respective category indicated. They do not reflect sales charges. The Morningstar figures in the Growth of a $10,000 Investment line graph are based on historical return information published by Morningstar and reflect the return of the funds comprising the category in the year of publication. Because the funds designated by Morningstar as falling into the category can change over time, the Morningstar figures in the line graph may not match the Morningstar figures in the Average Annual Total Returns table, which reflect the return of the funds that currently comprise the category.

4

The Fund’s Institutional Shares commenced operations on December 29, 2016. The Fund offers three other classes of shares: Class A Shares, Class C Shares and Class R Shares. For the period prior to the commencement of operations of the Institutional Shares, the performance information shown is for the Fund’s Class R Shares. In relation to the Institutional Shares, the performance of Class R Shares has not been adjusted to reflect the expenses of the Institutional Shares since the Institutional Shares have a lower expense ratio than the expense ratio of the Class R Shares. The performance of Class R Shares has been adjusted to remove any voluntary waiver of Fund expenses related to the Class R Shares that may have occurred during the period prior to the commencement of operations of the Institutional Shares.

Annual Shareholder Report

4

Portfolio of Investments Summary Table (unaudited)

At October 31, 2023, the Fund’s sector composition1 was as follows: 

Sector Composition	Percentage of Total Net Assets
Health Care	37.4%
Information Technology	11.0%
Consumer Discretionary	9.9%
Industrials	9.5%
Financials	8.6%
Real Estate	5.1%
Materials	4.4%
Energy	2.9%
Communication Services	2.2%
Consumer Staples	2.0%
Utilities	1.0%
U.S. Treasury Notes	2.9%
Securities Lending Collateral2	1.1%
Cash Equivalents3	5.2%
Other Assets and Liabilities—Net4	(3.2)%
TOTAL	100%

 

1	Except for Securities Lending Collateral, Cash Equivalents and Other Assets and Liabilities, sector classifications are based upon, and individual portfolio securities are assigned to, the classifications of the Global Industry Classification System (GICS), except that the Adviser assigns a classification to securities not classified by the GICS and to securities for which the Adviser does not have access to the classification made by the GICS.
2	Represents cash collateral received for portfolio securities on loan that may be invested in affiliated money market funds, other money market instruments and/or repurchase agreements.
3	Cash Equivalents include any investments in money market mutual funds and/or overnight repurchase agreements other than those representing securities lending collateral.
4	Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities.

Annual Shareholder Report

5

Portfolio of Investments

October 31, 2023 

Shares or Principal Amount			Value
		COMMON STOCKS—   92.8%
		Communication Services—   2.2%
289,449	1	Alphabet, Inc., Class A	$   35,914,832
407,000		Infrastrutture Wireless Italiane S.p.A.	4,456,154
34,128	1	Meta Platforms, Inc.	10,281,743
300,000	1	Pinterest, Inc.	8,964,000
33,800	1	Take-Two Interactive Software, Inc.	4,520,750
1,055,200		Universal Music Group	25,729,551
175,000	1	ZoomInfo Technologies, Inc.	2,268,000
		TOTAL	92,135,030
		Consumer Discretionary—   9.5%
110,000	1	Airbnb, Inc.	13,011,900
250,000	1	Alibaba Group Holding Ltd., ADR	20,635,000
400,550	1	Amazon.com, Inc.	53,309,199
245,040	1	Birkenstock Holding Ltd.	9,573,713
18,150	1	Chipotle Mexican Grill, Inc.	35,250,930
100,000		Choice Hotels International, Inc.	11,050,000
463,700	1	DraftKings, Inc.	12,807,394
50,000	1	Etsy, Inc.	3,115,000
97,800	1	Five Below, Inc.	17,015,244
180,000	1	Floor & Decor Holdings, Inc.	14,832,000
300,000		Las Vegas Sands Corp.	14,238,000
72,300	1	Lululemon Athletica, Inc.	28,448,604
10,000	1	Mercadolibre, Inc.	12,407,400
240,000		Moncler S.p.A	12,483,551
23,311,320		NagaCorp Ltd.	10,037,721
100,000		Nike, Inc., Class B	10,277,000
100,000	1	Planet Fitness, Inc.	5,527,000
1,997,407	1	Sportradar Group AG	17,637,104
130,000		TJX Cos., Inc.	11,449,100
20,000		Vail Resorts, Inc.	4,245,000
485,500		Wingstop, Inc.	88,734,835
		TOTAL	406,085,695
		Consumer Staples—   2.0%
66,400		Costco Wholesale Corp.	36,682,016
150,000	1	Maplebear, Inc.	3,694,500
500,000		Philip Morris International, Inc.	44,580,000
		TOTAL	84,956,516

Annual Shareholder Report

6

Shares or Principal Amount			Value
		COMMON STOCKS—   continued
		Energy—   2.9%
314,000		Cheniere Energy, Inc.	$   52,255,880
2,373,900		New Fortress Energy, Inc.	71,929,170
		TOTAL	124,185,050
		Financials—   8.6%
750,000		Apollo Global Management, Inc.	58,080,000
58,900		BlackRock, Inc.	36,063,292
6,800,000	1	Blue Owl Capital, Inc.	83,844,000
1	1,2,3	FA Private Equity Fund IV LP	86,643
2,102,000		FinecoBank Banca Fineco S.p.A.	24,814,145
699,000		Hamilton Lane, Inc.	58,799,880
100,000		JPMorgan Chase & Co., 5.750%	2,288,000
465,912		London Stock Exchange Group PLC	46,859,379
50,000		MSCI, Inc., Class A	23,577,500
95,000		S&P Global, Inc.	33,184,450
100,000		Wells Fargo & Co., 5.625%	2,142,000
		TOTAL	369,739,289
		Health Care—   37.1%
440,000	1	89Bio, Inc.	3,256,000
110,000		Abbott Laboratories	10,400,500
219,810	1	Acrivon Therapeutics, Inc.	1,151,804
2,000,000	1,2	Albireo Pharma CVR, Rights	4,300,000
1,300,474	1	Ambrx Biopharma, Inc.	13,537,934
1,150,000	1	Amphastar Pharmaceuticals, Inc.	52,060,500
100,000	1	Amylyx Pharmaceuticals, Inc.	1,631,000
1	2,3	Apollo Investment Fund V	84,897
2,451,016	1	Arcturus Therapeutics Holdings, Inc.	46,814,406
623,090	1	Argenx SE	293,624,731
6,530	1	Argenx SE, ADR	3,066,292
72,200		AstraZeneca PLC	9,024,688
4,785,000	1	aTyr Pharma, Inc.	5,981,250
267,745	1	Century Therapeutics, Inc.	409,650
1,942,492	1,2	Contra Akouos, Inc., Rights	1,534,569
1,600,000	1	Corcept Therapeutics, Inc.	44,928,000
195,000	1,2	CRISPR Therapeutics AG	7,591,350
379,400		Danaher Corp.	72,852,388
401,500	1	Denali Therapeutics, Inc.	7,560,245
1,200,000	1	Dexcom, Inc.	106,596,000
6,572,140	1	Dynavax Technologies Corp.	93,390,109
500,000	1	EDAP TMS S.A., ADR	3,465,000

Annual Shareholder Report

7

Shares or Principal Amount			Value
		COMMON STOCKS—   continued
		Health Care—   continued
150,000		Eli Lilly & Co.	$   83,089,500
5,453,093	1	Fusion Pharmaceuticals, Inc.	25,138,759
32,426	1	Genmab A/S	9,185,329
470,400	1	Guardant Health, Inc.	12,173,952
1,740,900	1	IDEAYA Biosciences, Inc.	47,300,253
39,300	1	IDEXX Laboratories, Inc.	15,699,171
330,000	1	Immunovant, Inc.	10,906,500
180,159	1	Inspire Medical Systems, Inc.	26,512,198
113,600	1	Insulet Corp.	15,059,952
990,000	1	Intellia Therapeutics, Inc.	24,799,500
77,400	1	Intuitive Surgical, Inc.	20,295,828
164,133	1,2	Laronde, Inc.	3,559,241
1	1,2,3	Latin Healthcare Fund	253,425
846,455	1	Legend Biotech Corp., ADR	55,925,282
1,425,122	1	Merus NV	28,659,203
725,000	1	Minerva Neurosciences, Inc.	3,494,500
555,000	1	Moonlake Immunotherapeutics	28,754,550
265,000	1	Natera, Inc.	10,459,550
366,400		Novo Nordisk A/S	35,333,902
735,874	1	Orchard Therapeutics PLC, ADR	11,707,755
3,101,000	1	Regulus Therapeutics, Inc.	3,783,220
47,000	1	Regulus Therapeutics, Inc. - Rights	5,734,000
180,000	1	Repligen Corp.	24,220,800
3,215,300	1,3	Rezolute, Inc.	3,110,481
1,225,000	1	Rhythm Pharmaceuticals, Inc.	28,309,750
300,000	1	Sarepta Therapeutics, Inc.	20,193,000
1,180,000	1	Scynexis, Inc.	2,230,200
5,045,896	1	Seres Therapeutics, Inc.	7,720,221
959,018	1,2	Soteira, Inc.	0
843,000	1,2,3	Structure Therapeutics, Inc.	17,237,253
558,130	1	Structure Therapeutics, Inc., ADR	41,469,059
59,700		Stryker Corp.	16,132,134
500,000	1	Tela Bio, Inc.	2,920,000
1,173,000	1	Ultragenyx Pharmaceutical, Inc.	41,524,200
50,700		UnitedHealth Group, Inc.	27,152,892
48,550	1	Vaxcyte, Inc.	2,335,255
216,500	1	Veeva Systems, Inc.	41,721,715
1,334,721	1	Verona Pharma PLC, ADR	18,619,358
1,373,144	1	Verve Therapeutics, Inc.	16,532,654

Annual Shareholder Report

8

Shares or Principal Amount			Value
		COMMON STOCKS—   continued
		Health Care—   continued
737,532	1	Zentalis Pharmaceuticals, Inc.	$   12,066,023
		TOTAL	1,584,581,878
		Industrials—   9.5%
630,000		ABB Ltd.	21,182,347
86,337		Comfort Systems USA, Inc.	15,700,383
264,400		Eaton Corp. PLC	54,971,404
400,000		FTAI Aviation Ltd.	9,700,000
100,000		General Electric Co.	10,863,000
204,100	1	GXO Logistics, Inc.	10,309,091
356,316		HEICO Corp.	56,444,018
29,500		Old Dominion Freight Lines, Inc.	11,111,470
35,500		Owens Corning, Inc.	4,024,635
412,700		Quanta Services, Inc.	68,970,424
269,500		Trane Technologies PLC	51,288,545
307,200	1	Veralto Corp.	21,196,800
407,500		Wabtec Corp.	43,203,150
295,000		Xylem, Inc.	27,594,300
		TOTAL	406,559,567
		Information Technology—   10.6%
32,800	1	Adobe, Inc.	17,451,569
15,000	1	Advanced Micro Devices, Inc.	1,477,500
300,000	1	Alteryx, Inc.	9,603,000
214,410	1	ARM Holdings PLC, ADR	10,568,269
160,300	1	Crowdstrike Holdings, Inc.	28,336,231
200,000	1	Datadog, Inc.	16,294,000
1,059,322	1,2,3	Expand Networks Ltd.	0
500,000	1	HashiCorp, Inc.	9,845,000
25,000		Marvell Technology, Inc.	1,180,500
68,141		Microsoft Corp.	23,039,153
14,620		Motorola Solutions, Inc.	4,071,085
500,000	1	Okta, Inc.	33,705,000
140,500	1	Palo Alto Networks, Inc.	34,144,310
225,000	1	Q2 Holdings, Inc.	6,756,750
83,500	1	Rogers Corp.	10,261,315
65,000	1	Salesforce, Inc.	13,053,950
3,751	1,2,3	Sensable Technologies, Inc.	0
111,400	1	ServiceNow, Inc.	64,818,090
705,700	1	Shopify, Inc.	33,301,983
473,000	1	Splunk, Inc.	69,606,680

Annual Shareholder Report

9

Shares or Principal Amount			Value
		COMMON STOCKS—   continued
		Information Technology—   continued
52,200		Taiwan Semiconductor Manufacturing Co. Ltd., ADR	$    4,505,382
89,200	1	Tyler Technologies, Inc.	33,262,680
130,000	1	Workday, Inc.	27,522,300
		TOTAL	452,804,747
		Materials—   4.4%
1,100,000		Agnico Eagle Mines Ltd.	51,601,000
1,615,000		Barrick Gold Corp.	25,807,700
27,500		Martin Marietta Materials	11,245,850
1,100,000		Newmont Corp.	41,217,000
202,200		Sherwin-Williams Co.	48,166,062
78,500		Westlake Corp.	9,055,760
		TOTAL	187,093,372
		Real Estate—   5.0%
1,150,000		Americold Realty Trust, Inc.	30,153,000
1,136,748	1	CoStar Group, Inc.	83,448,671
200,000		Gaming and Leisure Properties, Inc.	9,078,000
500,000		Physicians Realty Trust	5,430,000
200,000		ProLogis, Inc.	20,150,000
185,000		Ryman Hospitality Properties, Inc.	15,836,000
200,000		STAG Industrial, Inc.	6,644,000
1,500,000		VICI Properties, Inc.	41,850,000
		TOTAL	212,589,671
		Utilities—   1.0%
200,000		American Electric Power Co., Inc.	15,108,000
300,000		Duke Energy Corp.	26,667,000
		TOTAL	41,775,000
		TOTAL COMMON STOCKS (IDENTIFIED COST $2,703,559,840)	3,962,505,815
		U.S. TREASURIES—   2.9%
		U.S. Treasury Notes—   2.9%
$126,500,000		United States Treasury Note, 3.375%, 5/15/2033	111,860,534
10,000,000		United States Treasury Note, 4.375%, 10/31/2024	9,894,138
		TOTAL U.S. TREASURIES (IDENTIFIED COST $122,266,014)	121,754,672
		CORPORATE BONDS—   0.8%
		Communication Services—   0.0%
874,800	2,3	CeQur S.A., Conv. Bond, 0.000%, 6/30/2034	961,689
		Consumer Discretionary—   0.4%
5,000,000		Airbnb, Inc., Conv. Bond, 0.000%, 3/15/2026	4,341,795
5,000,000		Mercadolibre, Inc., Sr. Unsecd. Note, 2.375%, 1/14/2026	4,552,894

Annual Shareholder Report

10

Shares or Principal Amount			Value
		CORPORATE BONDS—   continued
		Consumer Discretionary—   continued
$  6,600,000		NagaCorp Ltd., Sr. Unsecd. Note, 7.950%, 7/6/2024	$    6,492,420
		TOTAL	15,387,109
		Industrials—   0.0%
3,000,000		Fiverr International Ltd., Conv. Bond, 0.000%, 11/1/2025	2,569,833
		Information Technology—   0.4%
5,000,000		DocuSign, Inc., Conv. Bond, 0.000%, 1/15/2024	4,919,440
5,000,000		Okta, Inc., Conv. Bond, 0.125%, 9/1/2025	4,467,650
3,000,000		RingCentral, Inc., Conv. Bond, 6.220%, 3/1/2025	2,758,824
5,000,000		Shopify, Inc., Conv. Bond, 0.125%, 11/1/2025	4,396,070
		TOTAL	16,541,984
		TOTAL CORPORATE BONDS (IDENTIFIED COST $34,845,973)	35,460,615
		PREFERRED STOCKS—   0.3%
		Health Care—   0.2%
1,903,967	2	CeQur S.A.	8,552,712
		Information Technology—   0.0%
679,348	1,2,3	Multiplex, Inc., Pfd., Series C	0
		Real Estate—   0.1%
100,000		Public Storage, 4.000%	1,577,000
100,000		Public Storage, 4.625%	1,850,000
100,000		Rexford Industrial Realty, Inc., 5.875%	2,146,000
		TOTAL	5,573,000
		TOTAL PREFERRED STOCKS (IDENTIFIED COST $21,510,236)	14,125,712
	1	WARRANTS—   0.1%
		Health Care—   0.1%
421,550		Catabasis Pharmaceuticals, Inc., Warrants 2/8/2024	0
183,000		Minerva Neurosciences, Inc., Warrants 12/31/2099	882,060
200,970		Rezolute, Inc., Warrants 10/8/2027	13,686
56,800		Rezolute, Inc., Warrants 1/1/2099	54,948
1,690,301		Rezolute, Inc., Warrants 12/31/2099	1,635,197
853,000		Scynexis, Inc., Warrants 5/21/2024	51,692
167,251		Scynexis, Inc., Warrants 4/26/2029	227,478
1,706,000		Scynexis, Inc., Warrants 1/1/2099	3,224,340
		TOTAL WARRANTS (IDENTIFIED COST $19,279,049)	6,089,401
		INVESTMENT COMPANIES—   6.3%
46,178,284		Federated Hermes Government Obligations Fund, Premier Shares, 5.26%4	46,178,284

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11

Shares or Principal Amount		Value
	INVESTMENT COMPANIES—   continued
222,195,509	Federated Hermes Institutional Prime Value Obligations Fund, Institutional Shares, 5.45%4	$  222,413,334
	TOTAL INVESTMENT COMPANIES (IDENTIFIED COST $268,557,028)	268,591,618
	TOTAL INVESTMENT IN SECURITIES—103.2% (IDENTIFIED COST $3,170,018,140)5	4,408,527,833
	OTHER ASSETS AND LIABILITIES - NET—(3.2)%6	(136,174,905)
	TOTAL NET ASSETS—100%	$4,272,352,928

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12

 

[PAGE INTENTIONALLY LEFT BLANK]

Annual Shareholder Report

13

An affiliated company is a company in which the Fund, alone or in combination with other Federated Hermes funds, has ownership of at least 5% of the voting shares. Transactions with the affiliated companies during the period ended October 31, 2023, were as follows: 

Affiliated	Value as of 10/31/2022	Purchases at Cost	Proceeds from Sales
Health Care:
Amphastar Pharmaceuticals, Inc.	$35,071,500	$4,710,976	$(5,203,207)
Arcturus Therapeutics Holdings, Inc.	$34,892,010	$8,691,058	$(704,463)
aTyr Pharma, Inc.	$5,594,550	$5,670,000	$—
Dynavax Technologies Corp.	$75,251,003	$—	$—
Fusion Pharmaceuticals, Inc.	$1,237,500	$19,637,832	$—
IDEAYA Biosciences, Inc.	$20,619,312	$10,947,850	$—
Merus NV	$31,057,500	$15,812,436	$(14,480,549)
Minerva Neurosciences, Inc.	$1,722,500	$750,000	$—
Orchard Therapeutics PLC, ADR**	$3,165,400	$5,016,908	$(1,669,299)
Regulus Therapeutics, Inc.	$4,023,800	$454,550	$—
Regulus Therapeutics, Inc. - Rights	$—	$4,230,470	$—
Rezolute, Inc.	$5,433,857	$—	$—
Rezolute, Inc., Warrants 10/8/2027	$106,554	$—	$—
Rezolute, Inc., Warrants 1/1/2099	$95,992	$—	$—
Rezolute, Inc., Warrants 12/31/2099	$2,856,609	$—	$—
Rhythm Pharmaceuticals, Inc.	$96,828,990	$—	$(66,111,324)
Scynexis, Inc.	$3,557,400	$—	$(825,970)
Scynexis, Inc., Warrants 5/21/2024	$136,395	$—	$—
Scynexis, Inc., Warrants 4/26/2029	$241,193	$—	$—
Scynexis, Inc., Warrants 1/1/2099	$3,940,860	$—	$—
Seres Therapeutics, Inc.**	$106,231,400	$2,641,121	$(21,611,328)
Affiliated issuers no longer in the portfolio at period end	$131,133,193	$40,726,558	$(186,475,401)
TOTAL OF AFFILIATED COMPANIES TRANSACTIONS	$563,197,518	$119,289,759	$(297,081,541)

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14

 

Change in Unrealized Appreciation/ (Depreciation)	Net Realized Gain/ (Loss)	Value as of 10/31/2023	Shares Held as of 10/31/2023	Dividend Income
$13,966,736	$3,514,495	$52,060,500	1,150,000	$—
$4,624,015	$(688,214)	$46,814,406	2,451,016	$—
$(5,283,300)	$—	$5,981,250	4,785,000	$—
$18,139,106	$—	$93,390,109	6,572,140	$—
$4,263,427	$—	$25,138,759	5,453,093	$—
$15,733,091	$—	$47,300,253	1,740,900	$—
$(1,297,016)	$(2,433,168)	$28,659,203	1,425,122	$—
$1,022,000	$—	$3,494,500	725,000	$—
$15,588,933	$(10,394,187)	$11,707,755	735,874	$—
$(695,130)	$—	$3,783,220	3,101,000	$—
$1,503,530	$—	$5,734,000	47,000	$—
$(2,323,376)	$—	$3,110,481	3,215,300	$—
$(92,868)	$—	$13,686	200,970	$—
$(41,044)	$—	$54,948	56,800	$—
$(1,221,412)	$—	$1,635,197	1,690,301	$—
$(37,097,605)	$34,689,689	$28,309,750	1,225,000	$—
$8,360,450	$(8,861,680)	$2,230,200	1,180,000	$—
$(84,703)	$—	$51,692	853,000	$—
$(13,715)	$—	$227,478	167,251	$—
$(716,520)	$—	$3,224,340	1,706,000	$—
$(56,448,710)	$(23,092,262)	$7,720,221	5,045,896	$—
$45,821,393	$(31,205,743)	$—	—	$—
$23,707,282	$(38,471,070)	$370,641,948	43,526,663	$—

 

** At October 31, 2023, the Fund no longer has ownership of at least 5% of the voting shares.

Annual Shareholder Report

15

Transactions with affiliated investment companies, which are funds managed by the Adviser or an affiliate of the Adviser, during the period ended October 31, 2023, were as follows: 

	Federated Hermes Government Obligations Fund, Premier Shares	Federated Hermes Institutional Prime Value Obligations Fund, Institutional Shares*	Total of Affiliated Transactions
Value as of 10/31/2022	$47,261,098	$849,229,625	$896,490,723
Purchases at Cost	$697,643,054	$1,929,734,790	$2,627,377,844
Proceeds from Sales	$(698,725,868)	$(2,556,956,472)	$(3,255,682,340)
Change in Unrealized Appreciation/ Depreciation	$—	$77,829	$77,829
Net Realized Gain/(Loss)	$—	$327,562	$327,562
Value as of 10/31/2023	$46,178,284	$222,413,334	$268,591,618
Shares Held as of 10/31/2023	46,178,284	222,195,509	268,373,793
Dividend Income	$1,772,688	$23,653,783	$25,426,471

 

1	Non-income-producing security.
2	Market quotations and price valuations are not available. Fair value determined using significant unobservable inputs in accordance with procedures established by and under the supervision of the Fund’s Adviser acting through its Valuation Committee.
3	Denotes a restricted security that either: (a) cannot be offered for public sale without first being registered, or availing of an exemption from registration, under the Securities Act of 1933; or (b) is subject to a contractual restriction on public sales. At October 31, 2023, these restricted securities amounted to $21,734,388, which represented 0.5% of total net assets.

 

4	7-day net yield.
5	The cost of investments for federal tax purposes amounts to $3,204,396,060.
6	Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities.

Note: The categories of investments are shown as a percentage of total net assets at October 31, 2023.

Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three broad levels listed below:

Level 1—quoted prices in active markets for identical securities.

Level 2—other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Also includes securities valued at amortized cost.

Level 3—significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments).

The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.

Annual Shareholder Report

16

The following is a summary of the inputs used, as of October 31, 2023, in valuing the Fund’s assets carried at fair value: 

Valuation Inputs
	Level 1— Quoted Prices	Level 2— Other Significant Observable Inputs	Level 3— Significant Unobservable Inputs	Total
Equity Securities:
Common Stocks
Domestic	$2,791,034,581	$—	$27,056,028	$2,818,090,609
International	644,092,358	492,731,498	7,591,350	1,144,415,206
Preferred Stocks
International	—	—	8,552,712	8,552,712
Domestic	5,573,000	—	—	5,573,000
Debt Securities:
U.S. Treasuries	—	121,754,672	—	121,754,672
Corporate Bonds	—	34,498,926	961,689	35,460,615
Warrants	2,572,205	3,517,196	—	6,089,401
Investment Companies	268,591,618	—	—	268,591,618
TOTAL SECURITIES	$3,711,863,762	$652,502,292	$44,161,779	$4,408,527,833

Following is a reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value: 

	Investments in Trade Finance Agreements
Balance as of 10/31/2022	$13,965,564
Accreted/amortized discount/premiums	10,206,299
Realized gain (loss)	-
Change in unrealized appreciation/depreciation	2,644,954
Purchases	17,344,962
(Sales)	-
Balance as of 10/31/2023	$44,161,779
Total change in unrealized appreciation/depreciation attributable to investments still held at 10/31/2023	$(288,561,807)

 

The following acronym(s) are used throughout this portfolio:
ADR	—American Depositary Receipt
ARM	—Adjustable Rate Mortgage
CVR	—Contingent Value Right
PLC	—Public Limited Company

See Notes which are an integral part of the Financial Statements

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17

Financial Highlights–Class A Shares

(For a Share Outstanding Throughout Each Period) 

	Year Ended October 31,
	2023	2022	2021	2020	2019
Net Asset Value, Beginning of Period	$4.77	$7.77	$6.80	$6.27	$6.03
Income From Investment Operations:
Net investment income (loss)1	(0.02)	(0.06)	(0.10)	(0.09)	(0.05)
Net realized and unrealized gain (loss)	(0.20)	(2.29)	1.57	1.32	1.09
Total From Investment Operations	(0.22)	(2.35)	1.47	1.23	1.04
Less Distributions:
Distributions from net realized gain	—	(0.65)	(0.50)	(0.70)	(0.80)
Net Asset Value, End of Period	$4.55	$4.77	$7.77	$6.80	$6.27
Total Return2	(4.61)%	(32.43)%	22.37%	21.52%	19.52%
Ratios to Average Net Assets:
Net expenses3	1.95%	1.95%	1.92%	1.94%	1.95%
Net investment income (loss)	(0.46)%	(1.09)%	(1.41)%	(1.38)%	(0.81)%
Expense waiver/reimbursement4	0.01%	0.03%	0.04%	0.03%	0.03%
Supplemental Data:
Net assets, end of period (000 omitted)	$973,048	$1,196,453	$2,023,577	$1,808,715	$1,629,524
Portfolio turnover5	57%	25%	34%	38%	42%

 

1	Per share numbers have been calculated using the average shares method.
2	Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable.
3	Amount does not reflect net expenses incurred by investment companies in which the Fund may invest.
4	This expense decrease is reflected in both the net expense and the net investment income (loss) 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.

See Notes which are an integral part of the Financial Statements

Annual Shareholder Report

18

Financial Highlights–Class C Shares

(For a Share Outstanding Throughout Each Period) 

	Year Ended October 31,
	2023	2022	2021	2020	2019
Net Asset Value, Beginning of Period	$3.43	$5.81	$5.22	$4.99	$4.99
Income From Investment Operations:
Net investment income (loss)1	(0.03)	(0.06)	(0.11)	(0.09)	(0.06)
Net realized and unrealized gain (loss)	(0.14)	(1.67)	1.20	1.02	0.86
Total From Investment Operations	(0.17)	(1.73)	1.09	0.93	0.80
Less Distributions:
Distributions from net realized gain	—	(0.65)	(0.50)	(0.70)	(0.80)
Net Asset Value, End of Period	$3.26	$3.43	$5.81	$5.22	$4.99
Total Return2	(4.96)%	(32.74)%	21.80%	20.96%	18.69%
Ratios to Average Net Assets:
Net expenses3	2.46%	2.45%	2.42%	2.44%	2.45%
Net investment income (loss)	(0.94)%	(1.60)%	(1.92)%	(1.87)%	(1.31)%
Expense waiver/reimbursement4	0.01%	0.03%	0.04%	0.03%	0.03%
Supplemental Data:
Net assets, end of period (000 omitted)	$45,676	$64,766	$139,690	$141,074	$135,883
Portfolio turnover5	57%	25%	34%	38%	42%

 

1	Per share numbers have been calculated using the average shares method.
2	Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable.
3	Amount does not reflect net expenses incurred by investment companies in which the Fund may invest.
4	This expense decrease is reflected in both the net expense and the net investment income (loss) 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.

See Notes which are an integral part of the Financial Statements

Annual Shareholder Report

19

Financial Highlights–Class R Shares

(For a Share Outstanding Throughout Each Period) 

	Year Ended October 31,
	2023	2022	2021	2020	2019
Net Asset Value, Beginning of Period	$4.79	$7.79	$6.82	$6.28	$6.04
Income From Investment Operations:
Net investment income (loss)1	(0.02)	(0.06)	(0.11)	(0.09)	(0.05)
Net realized and unrealized gain (loss)	(0.21)	(2.29)	1.58	1.33	1.09
Total From Investment Operations	(0.23)	(2.35)	1.47	1.24	1.04
Less Distributions:
Distributions from net realized gain	—	(0.65)	(0.50)	(0.70)	(0.80)
Net Asset Value, End of Period	$4.56	$4.79	$7.79	$6.82	$6.28
Total Return2	(4.80)%	(32.34)%	22.30%	21.64%	19.48%
Ratios to Average Net Assets:
Net expenses3	1.95%	1.95%	1.95%	1.95%	1.95%
Net investment income (loss)	(0.47)%	(1.10)%	(1.45)%	(1.40)%	(0.81)%
Expense waiver/reimbursement4	0.26%	0.27%	0.25%	0.25%	0.26%
Supplemental Data:
Net assets, end of period (000 omitted)	$2,937,167	$3,428,775	$5,582,064	$4,848,579	$4,313,852
Portfolio turnover5	57%	25%	34%	38%	42%

 

1	Per share numbers have been calculated using the average shares method.
2	Based on net asset value.
3	Amount does not reflect net expenses incurred by investment companies in which the Fund may invest.
4	This expense decrease is reflected in both the net expense and the net investment income (loss) 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.

See Notes which are an integral part of the Financial Statements

Annual Shareholder Report

20

Financial Highlights–Institutional Shares

(For a Share Outstanding Throughout Each Period) 

	Year Ended October 31,
	2023	2022	2021	2020	2019
Net Asset Value, Beginning of Period	$4.98	$8.03	$6.98	$6.39	$6.11
Income From Investment Operations:
Net investment income (loss)1	0.002	(0.03)	(0.07)	(0.06)	(0.02)
Net realized and unrealized gain (loss)	(0.21)	(2.37)	1.62	1.35	1.10
Total From Investment Operations	(0.21)	(2.40)	1.55	1.29	1.08
Less Distributions:
Distributions from net realized gain	—	(0.65)	(0.50)	(0.70)	(0.80)
Net Asset Value, End of Period	$4.77	$4.98	$8.03	$6.98	$6.39
Total Return3	(4.22)%	(31.97)%	22.96%	22.11%	19.98%
Ratios to Average Net Assets:
Net expenses4	1.46%	1.44%	1.42%	1.44%	1.45%
Net investment income (loss)	0.03%	(0.60)%	(0.92)%	(0.89)%	(0.31)%
Expense waiver/reimbursement5	0.01%	0.03%	0.04%	0.03%	0.03%
Supplemental Data:
Net assets, end of period (000 omitted)	$316,462	$390,516	$808,904	$640,411	$452,014
Portfolio turnover6	57%	25%	34%	38%	42%

 

1	Per share numbers have been calculated using the average shares method.
2	Represents less than $0.001.
3	Based on net asset value.
4	Amount does not reflect net expenses incurred by investment companies in which the Fund may invest.
5	This expense decrease is reflected in both the net expense and the net investment income (loss) ratios shown above. Amount does not reflect expense waiver/reimbursement recorded by investment companies in which the Fund may invest.
6	Securities that mature are considered sales for purposes of this calculation.

See Notes which are an integral part of the Financial Statements

Annual Shareholder Report

21

Statement of Assets and Liabilities

October 31, 2023

 

Assets:
Investment in securities, at value including $143,295,995 of securities loaned and $639,233,566 of investments in affiliated holdings* (identified cost $3,170,018,140, including $640,637,071 of identified cost in affiliated holdings)	$4,408,527,833
Cash	206,030
Cash denominated in foreign currencies (identified cost $51,381)	49,267
Income receivable	2,654,741
Income receivable from affiliated holdings	934,172
Receivable for investments sold	20,790,697
Receivable for shares sold	528,521
Total Assets	4,433,691,261
Liabilities:
Payable for investments purchased	5,408,414
Payable for shares redeemed	4,790,213
Payable for collateral due to broker for securities lending (Note 2)	146,820,982
Payable for investment adviser fee (Note 5)	147,362
Payable for administrative fee (Note 5)	9,033
Payable for Directors’/Trustees’ fees (Note 5)	5,015
Payable for distribution services fee (Note 5)	864,615
Payable for other service fees (Notes 2 and 5)	2,224,765
Accrued expenses (Note 5)	1,067,934
Total Liabilities	161,338,333
Net assets for 937,601,104 shares outstanding	$4,272,352,928
Net Assets Consist of:
Paid-in capital	$2,996,663,100
Total distributable earnings (loss)	1,275,689,828
Total Net Assets	$4,272,352,928

Annual Shareholder Report

22

Statement of Assets and Liabilities–continued

Net Asset Value, Offering Price and Redemption Proceeds Per Share:
Class A Shares:
Net asset value per share ($973,048,467 ÷ 213,750,721 shares outstanding), no par value, unlimited shares authorized	$4.55
Offering price per share (100/94.50 of $4.55)	$4.81
Redemption proceeds per share	$4.55
Class C Shares:
Net asset value per share ($45,675,824 ÷ 14,028,400 shares outstanding), no par value, unlimited shares authorized	$3.26
Offering price per share	$3.26
Redemption proceeds per share (99.00/100 of $3.26)	$3.23
Class R Shares:
Net asset value per share ($2,937,166,530 ÷ 643,502,946 shares outstanding), no par value, unlimited shares authorized	$4.56
Offering price per share	$4.56
Redemption proceeds per share	$4.56
Institutional Shares:
Net asset value per share ($316,462,107 ÷ 66,319,037 shares outstanding), no par value, unlimited shares authorized	$4.77
Offering price per share	$4.77
Redemption proceeds per share	$4.77

 

* See information listed after the Fund’s Portfolio of Investments.

See Notes which are an integral part of the Financial Statements

Annual Shareholder Report

23

Statement of Operations

Year Ended October 31, 2023

 

Investment Income:
Dividends (including $20,000,004 received from affiliated holdings* and net of foreign taxes withheld of $907,713)	$65,036,461
Interest	6,213,351
Net income on securities loaned (includes $5,426,467 earned from affiliated holdings related to cash collateral balances) (Note 2)	947,437
TOTAL INCOME	72,197,249
Expenses:
Investment adviser fee (Note 5)	61,739,021
Administrative fee (Note 5)	3,780,244
Custodian fees	470,027
Transfer agent fees (Note 2)	4,543,841
Directors’/Trustees’ fees (Note 5)	26,679
Auditing fees	48,351
Legal fees	14,967
Portfolio accounting fees	206,826
Distribution services fee (Note 5)	19,712,011
Other service fees (Notes 2 and 5)	11,148,884
Share registration costs	84,489
Printing and postage	194,005
Miscellaneous (Note 5)	60,303
TOTAL EXPENSES	102,029,648
Waivers and Reimbursement:
Reimbursement of investment adviser fee (Note 5)	(541,980)
Waiver/reimbursement of other operating expenses (Note 5)	(8,343,773)
TOTAL WAIVERS AND REIMBURSEMENT	(8,885,753)
Net expenses	93,143,895
Net investment income (loss)	(20,946,646)

Annual Shareholder Report

24

Statement of Operations–continued

Realized and Unrealized Gain (Loss) on Investments and Foreign Currency Transactions:
Net realized gain on investments (including net realized loss of $(38,143,508) on sales of investments in affiliated holdings*)	$109,311,489
Net realized loss on foreign currency transactions	(309,430)
Net change in unrealized appreciation of investments (including net change in unrealized depreciation of $23,785,111 on investments in affiliated holdings*)	(288,779,631)
Net change in unrealized appreciation/depreciation of translation of assets and liabilities in foreign currency	24,924
Net realized and unrealized gain (loss) on investments and foreign currency transactions	(179,752,648)
Change in net assets resulting from operations	$(200,699,294)

 

* See information listed after the Fund’s Portfolio of Investments.

See Notes which are an integral part of the Financial Statements

Annual Shareholder Report

25

Statement of Changes in Net Assets

 

 

Year Ended October 31	2023	2022
Increase (Decrease) in Net Assets
Operations:
Net investment loss	$(20,946,646)	$(65,301,288)
Net realized gain (loss)	109,002,059	(10,722,393)
Net change in unrealized appreciation/depreciation	(288,754,707)	(2,610,836,461)
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS	(200,699,294)	(2,686,860,142)
Distributions to Shareholders:
Class A Shares	—	(169,659,986)
Class B Shares	—	(3,408,597)
Class C Shares	—	(15,505,345)
Class R Shares	—	(466,665,097)
Institutional Shares	—	(64,883,150)
CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS	—	(720,122,175)
Share Transactions:
Proceeds from sale of shares1	145,215,298	221,241,432
Net asset value of shares issued to shareholders in payment of distributions declared	—	673,227,029
Cost of shares redeemed1	(764,618,328)	(980,412,406)
CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS	(619,403,030)	(85,943,945)
Change in net assets	(820,102,324)	(3,492,926,262)
Net Assets:
Beginning of period	5,092,455,252	8,585,381,514
End of period	$4,272,352,928	$5,092,455,252

 

1 On February 3, 2023, Class B Shares were converted into Class A Shares. Within the Statement of Changes in Net Assets, the conversion from Class B Shares is within the Cost of shares redeemed and the conversion to Class A Shares is within Proceeds from sale of shares (Note 3).

See Notes which are an integral part of the Financial Statements

Annual Shareholder Report

26

Notes to Financial Statements

October 31, 2023

1. ORGANIZATION

Federated Hermes Equity Funds (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Trust consists of eight portfolios. The financial statements included herein are only those of Federated Hermes Kaufmann Fund (the “Fund”), a diversified portfolio. The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder’s interest is limited to the portfolio in which shares are held. Each portfolio pays its own expenses. The Fund offers four classes of shares: Class A Shares, Class C Shares, Class R Shares and Institutional Shares. All shares of the Fund have equal rights with respect to voting, except on class-specific matters. The investment objective of the Fund is to provide capital appreciation.

At the close of business on February 3, 2023, Class B Shares were converted into the Fund’s existing Class A Shares pursuant to a Plan of Conversion approved by the Fund’s Board of Trustees (the “Trustees”). The conversion occurred on a tax-free basis. The cash value of a shareholder’s investment was not changed as a result of the share class conversion. No action was required by shareholders to effect the conversion.

2. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with U.S. generally accepted accounting principles (GAAP).

Investment Valuation

In calculating its net asset value (NAV), the Fund generally values investments as follows:

◾

Fixed-income securities are fair valued using price evaluations provided by a pricing service approved by Federated Equity Management Company of Pennsylvania (the “Adviser”).

◾

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.

◾

Shares of other mutual funds or non-exchange-traded investment companies are valued based upon their reported NAVs, or NAV per share practical expedient, as applicable.

◾

Derivative contracts listed on exchanges are valued at their reported settlement or closing price, except that options are valued at the mean of closing bid and ask quotations.

◾

Over-the-counter (OTC) derivative contracts are fair valued using price evaluations provided by a pricing service approved by the Adviser.

◾

For securities that are fair valued in accordance with procedures established by and under the general supervision of the Adviser, certain factors may be considered, such as: the last traded or purchase price of the security, information obtained by contacting the issuer or dealers, analysis of the issuer’s financial statements or other available documents, fundamental analytical data, the nature and duration of restrictions on disposition, the movement of the market in which the security is

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normally traded, public trading in similar securities or derivative contracts of the issuer or comparable issuers, movement of a relevant index, or other factors including but not limited to industry changes and relevant government actions.

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 for the Fund, or if information furnished by a pricing service, in the opinion of the Adviser’s valuation committee (“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 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, and the actual value obtained could be materially different.

Fair Valuation and Significant Events Procedures

Pursuant to Rule 2a-5 under the Act, the Trustees have designated the Adviser as the Fund’s valuation designee to perform any fair value determinations for securities and other assets held by the Fund. The Adviser is subject to the Trustees’ oversight and certain reporting and other requirements intended to provide the Trustees the information needed to oversee the Adviser’s fair value determinations.

The Adviser, acting through its Valuation Committee, is responsible for determining the fair value of investments for which market quotations are not readily available. The Valuation Committee is comprised of officers of the Adviser and certain of the Adviser’s affiliated companies and determines fair value and oversees the calculation of the NAV. The Valuation Committee is also authorized to use pricing services to provide fair value evaluations of the current value of certain investments for purposes of calculating the NAV. The Valuation Committee employs various methods for reviewing third-party pricing-service evaluations including periodic reviews of third-party pricing services’ policies, procedures and valuation methods (including key inputs, methods, models and assumptions), transactional back-testing, comparisons of evaluations of different pricing services, and review of price challenges by the Adviser based on recent market activity. 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. The Trustees periodically review the fair valuations made by the Valuation Committee. The Trustees have 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.

Factors considered by pricing services in evaluating an investment include the yields or prices of investments of comparable quality, coupon, maturity, call rights and other potential prepayments, terms and type, reported transactions, indications as to values from dealers and general market conditions. Some pricing services provide a single price evaluation reflecting the bid-side of the market for an investment (a “bid” evaluation). Other pricing services offer both bid evaluations and price evaluations indicative of a price between the prices bid and ask for the investment (a “mid” evaluation). The Fund normally uses bid evaluations for any U.S. Treasury and Agency securities, mortgage-backed securities and municipal securities. The Fund normally uses

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mid evaluations for any other types of fixed-income securities and any OTC derivative contracts. In the event that market quotations and price evaluations are not available for an investment, the fair value of the investment is determined in accordance with procedures adopted by the Adviser.

The Adviser has also adopted procedures requiring an investment to be priced at its fair value whenever the Valuation Committee determines that a significant event affecting the value of the investment has occurred between the time as of which the price of the investment would otherwise be determined and the time as of which the NAV is computed. An event is considered significant if there is both an affirmative expectation that the investment’s value will change in response to the event and a reasonable basis for quantifying the resulting change in value. Examples of significant events that may occur after the close of the principal market on which a security is traded, or after the time of a price evaluation provided by a pricing service or a dealer, include:

◾

With respect to securities traded principally in foreign markets, significant trends in U.S. equity markets or in the trading of foreign securities index futures contracts;

◾

Political or other developments affecting the economy or markets in which an issuer conducts its operations or its securities are traded;

◾

Announcements concerning matters such as acquisitions, recapitalizations, litigation developments, or a natural disaster affecting the issuer’s operations or regulatory changes or market developments affecting the issuer’s industry.

The Adviser has adopted procedures whereby the Valuation Committee uses a pricing service to provide factors to update the fair value of equity securities traded principally in foreign markets from the time of the close of their respective foreign stock exchanges to the pricing time of the Fund. For other significant events, the Fund may seek to obtain more current quotations or price evaluations from alternative pricing sources. If a reliable alternative pricing source is not available, the Valuation Committee will determine the fair value of the investment in accordance with the fair valuation procedures approved by the Adviser. The Trustees periodically review fair valuations made in response to significant events.

Repurchase Agreements

The Fund may invest in repurchase agreements for short-term liquidity purposes. It is the policy of the Fund to require the other party to a repurchase agreement to transfer to the Fund’s custodian or sub-custodian eligible securities or cash with a market value (after transaction costs) at least equal to the repurchase price to be paid under the repurchase agreement. The eligible securities are transferred to accounts with the custodian or sub-custodian in which the Fund holds a “securities entitlement” and exercises “control” as those terms are defined in the Uniform Commercial Code. The Fund has established procedures for monitoring the market value of the transferred securities and requiring the transfer of additional eligible securities if necessary to equal at least the repurchase price. These procedures also allow the other party to require securities to be transferred from the account to the extent that their market value exceeds the repurchase price or in exchange for other eligible securities of equivalent market value.

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The insolvency of the other party or other failure to repurchase the securities may delay the disposition of the underlying securities or cause the Fund to receive less than the full repurchase price. Under the terms of the repurchase agreement, any amounts received by the Fund in excess of the repurchase price and related transaction costs must be remitted to the other party.

The Fund may enter into repurchase agreements in which eligible securities are transferred into joint trading accounts maintained by the custodian or sub-custodian for investment companies and other clients advised by the Fund’s Adviser and its affiliates. The Fund will participate on a pro rata basis with the other investment companies and clients in its share of the securities transferred under such repurchase agreements and in its share of proceeds from any repurchase or other disposition of such securities.

Investment Income, Gains and Losses, Expenses and Distributions

Investment transactions are accounted for on a trade-date basis. Realized gains and losses from investment transactions are recorded on an identified-cost basis. Interest income and expenses are accrued daily. Dividend income and distributions to shareholders are recorded on the ex-dividend date. Foreign dividends are recorded on the ex-dividend date or when the Fund is informed of the ex-dividend date. Distributions of net investment income, if any, are declared and paid annually. Non-cash dividends included in dividend income, if any, are recorded at fair value. Amortization/accretion of premium and discount is included in investment income. Investment income, realized and unrealized gains and losses, and certain fund-level expenses are allocated to each class based on relative average daily net assets, except that select classes will bear certain expenses unique to those classes. Dividends are declared separately for each class. No class has preferential dividend rights; differences in per share dividend rates are generally due to differences in separate class expenses. The detail of the total fund expense waivers and reimbursement of $8,885,753 is disclosed in Note 5.

Transfer Agent Fees

For the year ended October 31, 2023, transfer agent fees for the Fund were as shown below. Prior to their conversion to Class A Shares at the close of business on February 3, 2023, the Class B Shares were also subject to these fees and reimbursements. 

	Transfer Agent Fees Incurred
Class A Shares	$1,054,794
Class B Shares	2,823
Class C Shares	53,171
Class R Shares	3,087,989
Institutional Shares	345,064
TOTAL	$4,543,841

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Other Service Fees

The Fund may pay other service fees up to 0.25% of the average daily net assets of the Fund’s Class A Shares, Class C Shares and Class R Shares to unaffiliated financial intermediaries or to Federated Shareholder Services Company (FSSC) for providing services to shareholders and maintaining shareholder accounts. Prior to their conversion to Class A Shares at the close of business on February 3, 2023, the Class B Shares were also subject to these fees. Subject to the terms described in the Expense Limitation note, FSSC may voluntarily reimburse the Fund for other service fees.

For the year ended October 31, 2023, other service fees for the Fund were as follows: 

	Other Service Fees Incurred
Class A Shares	$2,805,286
Class B Shares	7,290
Class C Shares	141,464
Class R Shares	8,194,844
TOTAL	$11,148,884

Federal Taxes

It is the Fund’s policy to comply with the Subchapter M provision of the Internal Revenue Code of 1986 (the “Code”) and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal income tax is necessary. As of and during the year ended October 31, 2023, the Fund did not have a liability for any uncertain tax positions. The Fund recognizes interest and penalties, if any, related to tax liabilities as income tax expense in the Statement of Operations. As of October 31, 2023, tax years 2020 through 2023 remain subject to examination by the Fund’s major tax jurisdictions, which include the United States of America and the Commonwealth of Massachusetts.

The Fund may be subject to taxes imposed by governments of countries in which it invests. Such taxes are generally based on either income or gains earned or repatriated. The Fund accrues and applies such taxes to net investment income, net realized gains and net unrealized gains as income and/or gains are earned.

When-Issued and Delayed-Delivery Transactions

The Fund may engage in when-issued or delayed-delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed-delivery basis are marked to market daily and begin earning interest on the settlement date. Losses may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the contract.

Futures Contracts

The Fund purchases and sells financial futures contracts to manage cash flows and duration, enhance yield and to potentially reduce transaction costs. Upon entering into a financial futures contract with a broker, the Fund is required to deposit with a broker, either U.S. government securities or a specified amount of cash, which is shown as due

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from broker in the Statement of Assets and Liabilities. Futures contracts are valued daily and unrealized gains or losses are recorded in a “variation margin” account. The Fund receives from or pays to the broker a specified amount of cash based upon changes in the variation margin account. When a contract is closed, the Fund recognizes a realized gain or loss. Futures contracts have market risks, including the risk that the change in the value of the contract may not correlate with the changes in the value of the underlying securities. There is minimal counterparty risk to the Fund since futures contracts are exchange traded and the exchange’s clearing house, as counterparty to all exchange traded futures contracts, guarantees the futures contracts against default.

During the year ended October 31, 2023, the Fund held no futures contracts.

Foreign Currency Translation

The accounting records of the Fund are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the rates of exchange of such currencies against U.S. dollars on the date of valuation. Purchases and sales of securities, income and expenses are translated at the rate of exchange quoted on the respective date that such transactions are recorded. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.

Reported net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund’s books, and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at period end, resulting from changes in the exchange rate.

Securities Lending

The Fund participates in a securities lending program providing for the lending of equity securities to qualified brokers. The term of the loans within the program is one year or less. The Fund normally receives cash collateral for securities loaned that may be invested in affiliated money market funds, other money market instruments and/or repurchase agreements. Investments in money market funds may include funds with a “floating” NAV that can impose redemption fees and liquidity gates, impose certain operational impediments to investing cash collateral, and, if the investee fund’s NAV decreases, result in the Fund recognizing losses and being required to cover the decrease in the value of the cash collateral. Collateral is maintained at a minimum level of 100% of the market value of investments loaned, plus interest, if applicable. Earnings from collateral invested in affiliated holdings as presented parenthetically on the Statement of Operations do not reflect fees and rebates and are allocated between the borrower of the security, the securities lending agent, as a fee for its services under the program and the Fund, according to agreed-upon rates. The Fund will not have the right to vote on securities while they are on loan. However, the Fund will attempt to terminate a loan in an effort to reacquire the securities in time to vote on matters that are deemed to be material by the Adviser. There can be no assurance that the Fund will have sufficient notice of such matters to be able to terminate the loan in time to vote thereon.

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Securities lending transactions are subject to Master Netting Agreements which are agreements between the Fund and its counterparties that provide for the net settlement of all transactions and collateral with the Fund, through a single payment, in the event of default or termination. Amounts presented on the Portfolio of Investments and Statement of Assets and Liabilities are not net settlement amounts but gross. As indicated below, the cash collateral received by the Fund exceeds the market value of the securities loaned reducing the net settlement amount to zero. The chart below identifies the amount of collateral received as well as the market value of securities on loan. Additionally, the securities lending agreement executed by the Fund includes an indemnification clause. This clause stipulates that the borrower will reimburse the Fund for any losses as a result of any failure of the borrower to return equivalent securities to the Fund.

As of October 31, 2023, securities subject to this type of arrangement and related collateral were as follows: 

Fair Value of Securities Loaned	Collateral Received
$143,295,995	$146,820,982

Restricted Securities

The Fund may purchase securities which are considered restricted. Restricted securities are securities that either: (a) cannot be offered for public sale without first being registered, or being able to take advantage of an exemption from registration, under the Securities Act of 1933; or (b) are subject to contractual restrictions on public sales. In some cases, when a security cannot be offered for public sale without first being registered, the issuer of the restricted security has agreed to register such securities for resale, at the issuer’s expense, either upon demand by the Fund or in connection with another registered offering of the securities. Many such restricted securities may be resold in the secondary market in transactions exempt from registration. Restricted securities may be determined to be liquid under criteria established by the Trustees. The Fund will not incur any registration costs upon such resales. The Fund’s restricted securities, like other securities, are priced in accordance with procedures established by and under the general supervision of the Adviser.

Additional information on restricted securities held at October 31, 2023, is as follows: 

Security	Acquisition Date	Cost	Value
Apollo Investment Fund V	5/18/2001	$0	$84,897
CeQur S.A., Conv. Bond, 0.000%, 6/30/2034	3/26/2021	$10,361,728	$961,689
Expand Networks Ltd.	9/22/2000	$2,500,000	$0
FA Private Equity Fund IV LP	3/4/2002	$0	$86,643
Latin Healthcare Fund	11/28/2000	$0	$253,425
Multiplex, Inc., Pfd., Series C	2/22/2001	$5,000,001	$0
Rezolute, Inc.	10/9/2020	$10,048,500	$3,110,481
Sensable Technologies, Inc.	10/15/2004	$0	$0
Structure Therapeutics, Inc.	9/29/2023	$10,529,070	$17,237,253

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Other

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ materially from those estimated. The Fund applies investment company accounting and reporting guidance.

3. SHARES OF BENEFICIAL INTEREST

The following tables summarize share activity: 

	Year Ended 10/31/2023		Year Ended 10/31/2022
Class A Shares:	Shares	Amount	Shares	Amount
Shares sold	9,538,292	$35,414,765	11,778,642	$66,443,588
Shares issued to shareholders in payment of distributions declared	—	—	24,571,531	159,712,501
Conversion of Class B Shares to Class A Shares1	2,181,798	10,756,262	—	—
Shares redeemed	(48,550,329)	(223,338,045)	(46,267,489)	(246,619,737)
NET CHANGE RESULTING FROM CLASS A SHARE TRANSACTIONS	(36,830,239)	$(177,167,018)	(9,917,316)	$(20,463,648)
	Year Ended 10/31/2023		Year Ended 10/31/2022
Class B Shares:	Shares	Amount	Shares	Amount
Shares sold	—	$10,756,262	35,296	$142,413
Shares issued to shareholders in payment of distributions declared	—	—	691,871	3,258,712
Conversion of Class B Shares to Class A Shares1	(3,029,165)	(10,756,262)	—	—
Shares redeemed	(440,530)	(12,256,741)	(2,603,391)	(10,390,549)
NET CHANGE RESULTING FROM CLASS B SHARE TRANSACTIONS	(3,469,695)	$(12,256,741)	(1,876,224)	$(6,989,424)
	Year Ended 10/31/2023		Year Ended 10/31/2022
Class C Shares:	Shares	Amount	Shares	Amount
Shares sold	1,370,750	$4,721,532	1,932,137	$7,789,685
Shares issued to shareholders in payment of distributions declared	—	—	3,146,586	14,788,954
Shares redeemed	(6,212,974)	(21,474,806)	(10,257,512)	(39,840,351)
NET CHANGE RESULTING FROM CLASS C SHARE TRANSACTIONS	(4,842,224)	$(16,753,274)	(5,178,789)	$(17,261,712)

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	Year Ended 10/31/2023		Year Ended 10/31/2022
Class R Shares:	Shares	Amount	Shares	Amount
Shares sold	6,203,538	$30,027,258	9,866,978	$54,978,935
Shares issued to shareholders in payment of distributions declared	—	—	66,633,625	434,451,065
Shares redeemed	(78,922,036)	(382,157,565)	(77,124,359)	(417,451,381)
NET CHANGE RESULTING FROM CLASS R SHARE TRANSACTIONS	(72,718,498)	$(352,130,307)	(623,756)	$71,978,619
	Year Ended 10/31/2023		Year Ended 10/31/2022
Institutional Shares:	Shares	Amount	Shares	Amount
Shares sold	12,817,228	$64,295,481	16,069,132	$91,886,811
Shares issued to shareholders in payment of distributions declared	—	—	9,039,377	61,015,797
Shares redeemed	(24,914,309)	(125,391,171)	(47,370,755)	(266,110,388)
NET CHANGE RESULTING FROM INSTITUTIONAL SHARE TRANSACTIONS	(12,097,081)	$(61,095,690)	(22,262,246)	$(113,207,780)
NET CHANGE RESULTING FROM TOTAL FUND SHARE TRANSACTIONS	(129,957,737)	$(619,403,030)	(39,858,331)	$(85,943,945)

 

1 On February 3, 2023, Class B Shares were converted into Class A Shares. Within the Statement of Changes in Net Assets, the conversion from Class B Shares is within the Cost of shares redeemed and the conversion to Class A Shares is within Proceeds from sale of shares (Note 3).

4. FEDERAL TAX INFORMATION

The accounting treatment of certain items in accordance with income tax regulations may differ from the accounting treatment in accordance with GAAP which may result in permanent differences. In the case of the Fund, such differences primarily result from net operating losses.

For the year ended October 31, 2023, permanent differences identified and reclassified among the components of net assets were as follows: 

Increase (Decrease)
Paid-In Capital	Total Distributable Earnings (Loss)
$(32,499,757)	$32,499,757

The tax character of distributions as reported on the Statement of Changes in Net Assets for the years ended October 31, 2023 and 2022, was as follows: 

	2023	2022
Long-term capital gains	$—	$720,122,175

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As of October 31, 2023, the components of distributable earnings on a tax-basis were as follows: 

Net unrealized appreciation	$1,204,131,773
Undistributed long-term capital gains	$91,825,612
Capital loss carryforwards and deferrals	$(20,275,341)
Other temporary differences	$7,784
TOTAL	$1,275,689,828

At October 31, 2023, the cost of investments for federal tax purposes was $3,204,396,060. The net unrealized appreciation of investments for federal tax purposes was $1,204,131,773. This consists of unrealized appreciation from investments for those securities having an excess of value over cost of $1,528,408,903 and unrealized depreciation from investments for those securities having an excess of cost over value of $324,277,130.

The difference between book-basis and tax-basis net unrealized appreciation is attributable to differing treatments for deferral of losses on wash sales, discount accretion/premium amortization on debt securities, partnership adjustments, and passive foreign investment company adjustments.

Under current tax rules, a late-year ordinary loss may be deferred, in whole or in part, and treated as occurring on the first day of the following fiscal year. As of October 31, 2022, for federal income tax purposes, a late year ordinary loss of $20,275,341 was deferred to November 1, 2023.

The Fund used capital loss carryforwards of $12,547,649 to offset capital gains realized during the year ended .

5. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

Investment Adviser Fee

The Fund’s investment advisory contract provides for payment to the Adviser of an annual investment advisory fee based on the Fund’s average daily net assets as shown in the chart below: 

Assets Under Management	Investment Advisory Fee
Up to $8 billion	1.275%
$8 billion - $9 billion	1.255%
$9 billion - $10 billion	1.235%
$10 billion - $12 billion	1.215%
Excess of $12 billion	1.205%

The Adviser has agreed to reimburse the Fund for certain investment adviser fees as a result of transactions in other affiliated investment companies. For the year ended October 31, 2023, the Adviser reimbursed $541,980.

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Certain of the Fund’s assets are managed by Federated Global Investment Management Corp. (the “Sub-Adviser”). Under the terms of a sub-advisory agreement between the Adviser and the Sub-Adviser, the Sub-Adviser receives an allocable portion of the Fund’s adviser fee. The fee is paid by the Adviser out of its resources and is not an incremental Fund expense. For the year ended October 31, 2023, the Sub-Adviser earned a fee of $50,625,997.

Administrative Fee

Federated Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. For purposes of determining the appropriate rate breakpoint, “Investment Complex” is defined as all of the Federated Hermes Funds subject to a fee under the Administrative Services Agreement. The fee paid to FAS is based on the average daily net assets of the Investment Complex as specified below: 

Administrative Fee	Average Daily Net Assets of the Investment Complex
0.100%	on assets up to $50 billion
0.075%	on assets over $50 billion

Subject to the terms described in the Expense Limitation note, FAS may voluntarily choose to waive any portion of its fee. For the year ended October 31, 2023, the annualized fee paid to FAS was 0.078% of average daily net assets of the Fund.

In addition, FAS may charge certain out-of-pocket expenses to the Fund.

Distribution Services Fee

The Fund has adopted a Distribution Plan (the “Plan”) pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will compensate Federated Securities Corp. (FSC), the principal distributor, from the daily net assets of the Fund’s Class A Shares, Class C Shares and Class R Shares to finance activities intended to result in the sale of these shares. The Plan provides that the Fund may incur distribution expenses at the following percentages of average daily net assets annually, to compensate FSC: 

	Percentage of Average Daily Net Assets of Class
Class A Shares	0.25%
Class C Shares	0.75%
Class R Shares	0.50%

Prior to their conversion to Class A Shares at the close of business on February 3, 2023, the Class B Shares were also subject to the Plan at 0.75% of average daily net assets of the Class B Shares.

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Subject to the terms described in the Expense Limitation note, FSC may voluntarily choose to waive any portion of its fee. For the year ended October 31, 2023, distribution services fees for the Fund were as follows: 

	Distribution Services Fees Incurred	Distribution Services Fees Waived
Class A Shares	$2,809,894	$(34,669)
Class B Shares	21,870	—
Class C Shares	424,393	—
Class R Shares	16,455,854	(8,309,104)
TOTAL	$19,712,011	$(8,343,773)

When FSC receives fees, it may pay some or all of them to financial intermediaries whose customers purchase shares. For the year ended October 31, 2023, FSC retained $10,392,328 of fees paid by the Fund.

Sales Charges

Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Fund. They are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. For the year ended October 31, 2023, FSC retained $29,515 in sales charges from the sale of Class A Shares. FSC also retained $185, $846 and $857 of CDSC relating to redemptions of Class A Shares, Class B Shares and Class C Shares, respectively.

Other Service Fees

For the year ended October 31, 2023, FSSC received $5,952,780 of the other service fees disclosed in Note 2.

Commitments and Contingencies

In the course of pursuing its investment objective, the Fund may invest in limited partnerships and limited liability companies. These entities often require the Fund to commit to a total dollar amount to be invested. The actual investments are usually made in installments over a period of time. At October 31, 2023 the Fund had total commitments to limited partnerships and limited liability companies of $35,957,452; of this amount, $35,804,925 was actually invested by the Fund leaving the Fund contingently liable for additional investments of $152,527.

Expense Limitation

The Adviser and certain of its affiliates (which may include FSC, FAS and FSSC) on their own initiative have agreed to waive certain amounts of their respective fees and/or reimburse expenses. Total annual fund operating expenses (as shown in the financial highlights, excluding dividends and other expenses related to short sales, interest expense, extraordinary expenses, tax reclaim recovery expenses and proxy-related expenses paid by the Fund, if any) paid by the Fund’s Class A Shares, Class C Shares, Class R Shares and Institutional Shares (after the voluntary waivers and/or reimbursements) will not exceed 1.95%, 2.50%, 1.95% and 1.50% (the “Fee Limit”), respectively, up to but not including the later of (the “Termination Date”): (a) January 1, 2025; or (b) the date of the Fund’s next effective Prospectus. While the

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Adviser and its applicable affiliates currently do not anticipate terminating or increasing these arrangements prior to the Termination Date, these arrangements may only be terminated or the Fee Limit increased prior to the Termination Date with the agreement of the Trustees.

Interfund Transactions

During the year ended October 31, 2023, the Fund engaged in purchase and sale transactions with funds that have a common investment adviser (or affiliated investment advisers), common Directors/Trustees and/or common Officers. These purchase and sale transactions complied with Rule 17a-7 under the Act and amounted to $10,052,677 and $5,415,566, respectively. Net realized loss recognized on these transactions was $987,703.

Directors’/Trustees’ and Miscellaneous Fees

Certain Officers and Trustees of the Fund are Officers and Directors or Trustees of certain of the above companies. To efficiently facilitate payment, Independent Directors’/Trustees’ fees and certain expenses related to conducting meetings of the Directors/Trustees and other miscellaneous expenses are paid by an affiliate of the Adviser which in due course are reimbursed by the Fund. These expenses related to conducting meetings of the Directors/Trustees and other miscellaneous expenses may be included in Accrued and Miscellaneous Expenses on the Statement of Assets and Liabilities and Statement of Operations, respectively.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding long-term U.S. government securities and short-term obligations, for the year ended October 31, 2023, were as follows: 

Purchases	$2,258,423,908
Sales	$2,182,814,458

7. CONCENTRATION OF RISK

The Fund invests in securities of non-U.S. issuers. Political or economic developments may have an effect on the liquidity and volatility of portfolio securities and currency holdings.

At October 31, 2023, the diversification of countries was as follows: 

Country	Percentage of Total Net Assets
United States	75.9%
Netherlands	8.2%
Canada	4.2%
Cayman Islands	4.1%
Ireland	2.5%
France	2.3%
United Kingdom	2.3%
Switzerland	1.3%
Denmark	1.0%

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Country	Percentage of Total Net Assets
Italy	1.0%
Jersey Channel Isle	0.2%
Israel	0.1%
Taiwan, Province of China	0.1%

A substantial portion of the Fund’s portfolio may be comprised of entities in the Health Care sector. As a result, the Fund may be more susceptible to any economic, business, political or other developments which generally affect these entities.

8. 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 dated June 21, 2023. The LOC was made available to temporarily finance the repurchase or redemption of shares of the Fund, 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. The Fund’s ability to borrow under the LOC also is subject to the limitations of the Act and various conditions precedent that must be satisfied before the Fund can borrow. Loans under the LOC are charged interest at a fluctuating rate per annum equal to (a) the highest, on any day, of (i) the federal funds effective rate, (ii) the published secured overnight financing rate plus an assigned percentage, and (iii) 0.0%, plus (b) a margin. Any fund eligible to borrow under the LOC pays its pro rata share of a commitment fee based on the amount of the lenders’ commitment that has not been utilized, quarterly in arrears and at maturity. As of October 31, 2023, the Fund had no outstanding loans. During the year ended October 31, 2023, the Fund did not utilize the LOC.

9. INTERFUND LENDING

Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other funds advised by subsidiaries of Federated Hermes, Inc., may participate in an interfund lending program. This program provides an alternative credit facility allowing the Fund to borrow from other participating affiliated funds. As of October 31, 2023, there were no outstanding loans. During the year ended October 31, 2023, the program was not utilized.

10. INDEMNIFICATIONS

Under the Fund’s organizational documents, its Officers and Directors/Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund (other than liabilities arising out of their willful misfeasance, bad faith, gross negligence or reckless disregard of their duties to the Fund). In addition, in the normal course of business, the Fund provides certain indemnifications under arrangements with third parties. Typically, obligations to indemnify a third party arise in the context of an arrangement entered into by the Fund under which the Fund agrees to indemnify such third party for certain liabilities arising out of actions taken pursuant to the arrangement, provided the third party’s actions are not deemed to have breached an agreed-upon standard of care (such as willful misfeasance, bad faith, gross negligence or reckless disregard of their duties under the contract). The Fund’s maximum exposure under

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these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet arisen. The Fund does not anticipate any material claims or losses pursuant to these arrangements at this time, and accordingly expects the risk of loss to be remote.

11. OTHER MATTERS

An outbreak of respiratory disease caused by a novel coronavirus was first detected in China in late 2019 and subsequently spread globally. As of the date of the issuance of these financial statements, this coronavirus has resulted in, and may continue to result in, closed borders, enhanced health screenings, disruptions to healthcare service preparation and delivery, quarantines, cancellations, and disruptions to supply chains, workflow operations and consumer activity, as well as general concern and uncertainty. The impact of this coronavirus has resulted in substantial economic volatility. Health crises caused by outbreaks, such as the coronavirus outbreak, may exacerbate other pre-existing political, social and economic risks. The impact of this outbreak, and other epidemics and pandemics that may arise in the future, could continue to negatively affect the worldwide economy, as well as the economies of individual countries, individual companies (including certain Fund service providers and issuers of the Fund’s investments) and the markets in general in significant and unforeseen ways. In addition, governments, their regulatory agencies, or self-regulatory organizations may take actions in response to the pandemic, including significant fiscal and monetary policy changes, that may affect the instruments in which the Fund invests or the issuers of such investments. Any such impact could adversely affect the Fund’s performance.

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Report of Independent Registered Public Accounting Firm

TO THE BOARD OF TRUSTEES OF FEDERATED HERMES EQUITY FUNDS AND SHAREHOLDERS OF FEDERATED HERMES KAUFMANN FUND:

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities of Federated Hermes Kaufmann Fund (the “Fund”) (one of the portfolios constituting Federated Hermes Equity Funds (the “Trust”)), including the portfolio of investments, as of October 31, 2023, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the portfolios constituting Federated Hermes Equity Funds) at October 31, 2023, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.

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Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2023, by correspondence with the custodian, brokers, and others; when replies were not received from brokers or others, we performed other auditing procedures. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

We have served as the auditor of one or more Federated Hermes investment companies since 1979.

Boston, Massachusetts
December 22, 2023

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Shareholder Expense Example (unaudited)

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase or redemption payments; and (2) ongoing costs, including management fees and to the extent applicable, distribution (12b-1) fees and/or other service fees and other Fund expenses. This Example is intended to help you to understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. It is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from May 1, 2023 to October 31, 2023.

ACTUAL EXPENSES

The first section of the table below provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you incurred over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses attributable to your investment during this period.

HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES

The second section of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. Thus, you should not use the hypothetical account values and expenses to estimate the actual ending account balance or your expenses for the period. Rather, these figures are required to be provided to enable you to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

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Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase or redemption payments. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. 

	Beginning Account Value 5/1/2023	Ending Account Value 10/31/2023	Expenses Paid During Period1
Actual:
Class A Shares	$1,000	$942.00	$9.55
Class C Shares	$1,000	$942.20	$12.04
Class R Shares	$1,000	$942.10	$9.55
Institutional Shares	$1,000	$944.60	$7.16
Hypothetical (assuming a 5% return before expenses):
Class A Shares	$1,000	$1,015.38	$9.91
Class C Shares	$1,000	$1,012.80	$12.48
Class R Shares	$1,000	$1,015.38	$9.91
Institutional Shares	$1,000	$1,017.85	$7.43

 

1 Expenses are equal to the Fund’s annualized net expense ratios, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half-year period). The annualized net expense ratios are as follows:

 

Class A Shares	1.95%
Class C Shares	2.46%
Class R Shares	1.95%
Institutional Shares	1.46%

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Board of Trustees and Trust Officers

The Board of Trustees is responsible for managing the Trust business affairs and for exercising all the Trust powers except those reserved for the shareholders. The following tables give information about each Trustee and the senior officers of the Fund. Where required, the tables separately list Trustees who are “interested persons” of the Fund (i.e., “Interested” Trustees) and those who are not (i.e., “Independent” Trustees). Unless otherwise noted, the address of each person listed is 1001 Liberty Avenue, Pittsburgh, PA 15222-3779. The address of all Independent Trustees listed is 4000 Ericsson Drive, Warrendale, PA 15086-7561; Attention: Mutual Fund Board. As of December 31, 2022, the Trust comprised eight portfolio(s), and the Federated Hermes Fund Family consisted of 33 investment companies (comprising 102 portfolios). Unless otherwise noted, each Officer is elected annually. Unless otherwise noted, each Trustee oversees all portfolios in the Federated Hermes Fund Family and serves for an indefinite term. The Fund’s Statement of Additional Information includes additional information about Trust Trustees and is available, without charge and upon request, by calling 1-800-341-7400, Option #4.

Interested TRUSTEES Background 

Name Birth Date Positions Held with Trust Date Service Began

Principal Occupation(s) for Past Five Years, Other Directorships Held and Previous Position(s)

J. Christopher Donahue* Birth Date: April 11, 1949 President and Trustee Indefinite Term Began serving: January 2000

Principal Occupations: Principal Executive Officer and President of certain of the Funds in the Federated Hermes Fund Family; Director or Trustee of the Funds in the Federated Hermes Fund Family; President, Chief Executive Officer and Director, Federated Hermes, Inc.; Chairman and Trustee, Federated Investment Management Company; Trustee, Federated Investment Counseling; Chairman and Director, Federated Global Investment Management Corp.; Chairman and Trustee, Federated Equity Management Company of Pennsylvania; Trustee, Federated Shareholder Services Company; Director, Federated Services Company. Previous Positions: President, Federated Investment Counseling; President and Chief Executive Officer, Federated Investment Management Company, Federated Global Investment Management Corp. and Passport Research, Ltd; Chairman, Passport Research, Ltd.

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Name Birth Date Positions Held with Trust Date Service Began

Principal Occupation(s) for Past Five Years, Other Directorships Held and Previous Position(s)

John B. Fisher* Birth Date: May 16, 1956 Trustee Indefinite Term Began serving: May 2016

Principal Occupations: Principal Executive Officer and President of certain of the Funds in the Federated Hermes Fund Family; Director or Trustee of certain of the Funds in the Federated Hermes Fund Family; Director and Vice President, Federated Hermes, Inc.; President, Director/Trustee and CEO, Federated Advisory Services Company, Federated Equity Management Company of Pennsylvania, Federated Global Investment Management Corp., Federated Investment Counseling, Federated Investment Management Company, and Federated MDTA LLC; Director, Federated Investors Trust Company. Previous Positions: President and Director of the Institutional Sales Division of Federated Securities Corp.; President and CEO of Passport Research, Ltd.; Director and President, Technology, Federated Services Company.

*

Reasons for “interested” status: J. Christopher Donahue and John B. Fisher are interested due to their beneficial ownership of shares of Federated Hermes, Inc. and due to positions they hold with Federated Hermes, Inc. and its subsidiaries.

INDEPENDENT TRUSTEES Background 

Name Birth Date Positions Held with Trust Date Service Began

Principal Occupation(s) for Past Five Years, Other Directorships Held, Previous Position(s) and Qualifications

John T. Collins Birth Date: January 24, 1947 Trustee Indefinite Term Began serving: October 2013

Principal Occupations: Director or Trustee, and Chair of the Board of Directors or Trustees, of the Federated Hermes Fund Family; formerly, Chairman and CEO, The Collins Group, Inc. (a private equity firm) (Retired). Other Directorships Held: Director, KLX Energy Services Holdings, Inc. (oilfield services); former Director of KLX Corp. (aerospace). Qualifications: Mr. Collins has served in several business and financial management roles and directorship positions throughout his career. Mr. Collins previously served as Chairman and CEO of The Collins Group, Inc. (a private equity firm) and as a Director of KLX Corp. Mr. Collins serves as Chairman Emeriti, Bentley University. Mr. Collins previously served as Director and Audit Committee Member, Bank of America Corp.; Director, FleetBoston Financial Corp.; and Director, Beth Israel Deaconess Medical Center (Harvard University Affiliate Hospital).

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Name Birth Date Positions Held with Trust Date Service Began	Principal Occupation(s) for Past Five Years, Other Directorships Held, Previous Position(s) and Qualifications
G. Thomas Hough Birth Date: February 28, 1955 Trustee Indefinite Term Began serving: August 2015	Principal Occupations: Director or Trustee, Chair of the Audit Committee of the Federated Hermes Fund Family; formerly, Vice Chair, Ernst & Young LLP (public accounting firm) (Retired). Other Directorships Held: Director, Chair of the Audit Committee, Equifax, Inc.; Lead Director, Member of the Audit and Nominating and Corporate Governance Committees, Haverty Furniture Companies, Inc.; formerly, Director, Member of Governance and Compensation Committees, Publix Super Markets, Inc. Qualifications: Mr. Hough has served in accounting, business management and directorship positions throughout his career. Mr. Hough most recently held the position of Americas Vice Chair of Assurance with Ernst & Young LLP (public accounting firm). Mr. Hough serves on the President’s Cabinet and Business School Board of Visitors for the University of Alabama. Mr. Hough previously served on the Business School Board of Visitors for Wake Forest University, and he previously served as an Executive Committee member of the United States Golf Association.
Maureen Lally-Green Birth Date: July 5, 1949 Trustee Indefinite Term Began serving: August 2009	Principal Occupations: Director or Trustee of the Federated Hermes Fund Family; Adjunct Professor Emerita of Law, Duquesne University School of Law; formerly, Dean of the Duquesne University School of Law and Professor of Law and Interim Dean of the Duquesne University School of Law; formerly, Associate General Secretary and Director, Office of Church Relations, Diocese of Pittsburgh. Other Directorships Held: Director, CNX Resources Corporation (natural gas). Qualifications: Judge Lally-Green has served in various legal and business roles and directorship positions throughout her career. Judge Lally-Green previously held the position of Dean of the School of Law of Duquesne University (as well as Interim Dean). Judge Lally-Green previously served as Associate General Secretary of the Diocese of Pittsburgh, a member of the Superior Court of Pennsylvania and as a Professor of Law, Duquesne University School of Law. Judge Lally- Green was appointed by the Supreme Court of Pennsylvania to serve on the Supreme Court’s Board of Continuing Judicial Education and the Supreme Court’s Appellate Court Procedural Rules Committee. Judge Lally-Green also currently holds the positions on not for profit or for profit boards of directors as follows: Director and Chair, UPMC Mercy Hospital; Regent, Saint Vincent Seminary; Member, Pennsylvania State Board of Education (public); Director, Catholic Charities, Pittsburgh; and Director CNX Resources Corporation (natural gas). Judge Lally-Green has held the positions of: Director, Auberle; Director, Epilepsy Foundation of Western and Central Pennsylvania; Director, Ireland Institute of Pittsburgh; Director, Saint Thomas More Society; Director and Chair, Catholic High Schools of the Diocese of Pittsburgh, Inc.; Director, Pennsylvania Bar Institute; Director, St. Vincent College; Director and Chair, North Catholic High School, Inc.; Director and Vice Chair, Our Campaign for the Church Alive!, Inc.; and Director and Vice Chair, Saint Francis University.

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Name Birth Date Positions Held with Trust Date Service Began	Principal Occupation(s) for Past Five Years, Other Directorships Held, Previous Position(s) and Qualifications
Thomas M. O’Neill Birth Date: June 14, 1951 Trustee Indefinite Term Began serving: October 2006	Principal Occupations: Director or Trustee of the Federated Hermes Fund Family; Sole Proprietor, Navigator Management Company (investment and strategic consulting). Other Directorships Held: None. Qualifications: Mr. O’Neill has served in several business, mutual fund and financial management roles and directorship positions throughout his career. Mr. O’Neill serves as Director, Medicines for Humanity. Mr. O’Neill previously served as Chief Executive Officer and President, Managing Director and Chief Investment Officer, Fleet Investment Advisors; President and Chief Executive Officer, Aeltus Investment Management, Inc.; General Partner, Hellman, Jordan Management Co., Boston, MA; Chief Investment Officer, The Putnam Companies, Boston, MA; Credit Analyst and Lending Officer, Fleet Bank; Director and Consultant, EZE Castle Software (investment order management software); Director, Midway Pacific (lumber); and Director, The Golisano Children’s Museum of Naples, Florida.
Madelyn A. Reilly Birth Date: February 2, 1956 Trustee Indefinite Term Began serving: November 2020	Principal Occupations: Director or Trustee of the Federated Hermes Fund Family; formerly, Senior Vice President for Legal Affairs, General Counsel and Secretary of Board of Directors, Duquesne University (Retired). Other Directorships Held: None. Qualifications: Ms. Reilly has served in various business and legal management roles throughout her career. Ms. Reilly previously served as Senior Vice President for Legal Affairs, General Counsel and Secretary of Board of Directors and Director of Risk Management and Associate General Counsel, Duquesne University. Prior to her work at Duquesne University, Ms. Reilly served as Assistant General Counsel of Compliance and Enterprise Risk as well as Senior Counsel of Environment, Health and Safety, PPG Industries. Ms. Reilly currently serves as a member of the Board of Directors of UPMC Mercy Hospital.

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Name Birth Date Positions Held with Trust Date Service Began	Principal Occupation(s) for Past Five Years, Other Directorships Held, Previous Position(s) and Qualifications
P. Jerome Richey Birth Date: February 23, 1949 Trustee Indefinite Term Began serving: October 2013	Principal Occupations: Director or Trustee of the Federated Hermes Fund Family; Retired; formerly, Senior Vice Chancellor and Chief Legal Officer, University of Pittsburgh and Executive Vice President and Chief Legal Officer, CONSOL Energy Inc. (now split into two separate publicly traded companies known as CONSOL Energy Inc. and CNX Resources Corp.). Other Directorships Held: None. Qualifications: Mr. Richey has served in several business and legal management roles and directorship positions throughout his career. Mr. Richey most recently held the positions of Senior Vice Chancellor and Chief Legal Officer, University of Pittsburgh. Mr. Richey previously served as Chairman of the Board, Epilepsy Foundation of Western Pennsylvania and Chairman of the Board, World Affairs Council of Pittsburgh. Mr. Richey previously served as Chief Legal Officer and Executive Vice President, CONSOL Energy Inc. and CNX Gas Company; and Board Member, Ethics Counsel and Shareholder, Buchanan Ingersoll & Rooney PC (a law firm).
John S. Walsh Birth Date: November 28, 1957 Trustee Indefinite Term Began serving: January 1999	Principal Occupations: Director or Trustee of the Federated Hermes Fund Family; President and Director, Heat Wagon, Inc. (manufacturer of construction temporary heaters); President and Director, Manufacturers Products, Inc. (distributor of portable construction heaters); President, Portable Heater Parts, a division of Manufacturers Products, Inc. Other Directorships Held: None. Qualifications: Mr. Walsh has served in several business management roles and directorship positions throughout his career. Mr. Walsh previously served as Vice President, Walsh & Kelly, Inc. (paving contractors).

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OFFICERS 

Name Birth Date Address Positions Held with Trust Date Service Began	Principal Occupation(s) for Past Five Years and Previous Position(s)
Lori A. Hensler Birth Date: January 6, 1967 TREASURER Officer since: April 2013	Principal Occupations: Principal Financial Officer and Treasurer of the Federated Hermes Fund Family; Senior Vice President, Federated Administrative Services; Financial and Operations Principal for Federated Securities Corp.; and Assistant Treasurer, Federated Investors Trust Company. Ms. Hensler has received the Certified Public Accountant designation. Previous Positions: Controller of Federated Hermes, Inc.; Senior Vice President and Assistant Treasurer, Federated Investors Management Company; Treasurer, Federated Investors Trust Company; Assistant Treasurer, Federated Administrative Services, Federated Administrative Services, Inc., Federated Securities Corp., Edgewood Services, Inc., Federated Advisory Services Company, Federated Equity Management Company of Pennsylvania, Federated Global Investment Management Corp., Federated Investment Counseling, Federated Investment Management Company, Passport Research, Ltd., and Federated MDTA, LLC; Financial and Operations Principal for Federated Securities Corp., Edgewood Services, Inc. and Southpointe Distribution Services, Inc.
Peter J. Germain Birth Date: September 3, 1959 CHIEF LEGAL OFFICER, SECRETARY and EXECUTIVE VICE PRESIDENT Officer since: January 2005	Principal Occupations: Mr. Germain is Chief Legal Officer, Secretary and Executive Vice President of the Federated Hermes Fund Family. He is General Counsel, Chief Legal Officer, Secretary and Executive Vice President, Federated Hermes, Inc.; Trustee and Senior Vice President, Federated Investors Management Company; Trustee and President, Federated Administrative Services; Director and President, Federated Administrative Services, Inc.; Director and Vice President, Federated Securities Corp.; Director and Secretary, Federated Private Asset Management, Inc.; Secretary, Federated Shareholder Services Company; and Secretary, Retirement Plan Service Company of America. Mr. Germain joined Federated Hermes, Inc. in 1984 and is a member of the Pennsylvania Bar Association. Previous Positions: Deputy General Counsel, Special Counsel, Managing Director of Mutual Fund Services, Federated Hermes, Inc.; Senior Vice President, Federated Services Company; and Senior Corporate Counsel, Federated Hermes, Inc.
Stephen Van Meter Birth Date: June 5, 1975 CHIEF COMPLIANCE OFFICER AND SENIOR VICE PRESIDENT Officer since: July 2015	Principal Occupations: Senior Vice President and Chief Compliance Officer of the Federated Hermes Fund Family; Vice President and Chief Compliance Officer of Federated Hermes, Inc. and Chief Compliance Officer of certain of its subsidiaries. Mr. Van Meter joined Federated Hermes, Inc. in October 2011. He holds FINRA licenses under Series 3, 7, 24 and 66. Previous Positions: Mr. Van Meter previously held the position of Compliance Operating Officer, Federated Hermes, Inc. Prior to joining Federated Hermes, Inc., Mr. Van Meter served at the United States Securities and Exchange Commission in the positions of Senior Counsel, Office of Chief Counsel, Division of Investment Management and Senior Counsel, Division of Enforcement.

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Name Birth Date Address Positions Held with Trust Date Service Began

Principal Occupation(s) for Past Five Years and Previous Position(s)

Stephen F. Auth Birth Date: September 13, 1956 101 Park Avenue 41st Floor New York, NY 10178 CHIEF INVESTMENT OFFICER Officer since: November 2002

Principal Occupations: Stephen F. Auth is Chief Investment Officer of various Funds in the Federated Hermes Fund Family; Executive Vice President, Federated Investment Counseling, Federated Global Investment Management Corp. and Federated Equity Management Company of Pennsylvania. Previous Positions: Executive Vice President, Federated Investment Management Company and Passport Research, Ltd. (investment advisory subsidiary of Federated); Senior Vice President, Global Portfolio Management Services Division; Senior Vice President, Federated Investment Management Company and Passport Research, Ltd.; Senior Managing Director and Portfolio Manager, Prudential Investments.

 

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Evaluation and Approval of Advisory Contract–May 2023

Federated Hermes Kaufmann Fund (the “Fund”)

At its meetings in May 2023 (the “May Meetings”), the Fund’s Board of Trustees (the “Board”), including those Trustees who are not “interested persons” of the Fund, as defined in the Investment Company Act of 1940 (the “Independent Trustees”), reviewed and unanimously approved the continuation of the investment advisory contract between the Fund and Federated Equity Management Company of Pennsylvania (the “Adviser”) and the investment subadvisory contract between the Adviser and Federated Global Investment Management Corp. (the “Sub-Adviser” and together with the Adviser, the “Advisers”) with respect to the Fund (together, the “Contracts”) for an additional one-year term. The Board’s determination to approve the continuation of the Contracts reflects the exercise of its business judgment after considering all of the information and factors believed to be relevant and appropriate on whether to approve the continuation of the existing arrangements. The information, factors and conclusions that formed the basis for the Board’s approval are summarized below.

Information Received and Review Process

At the request of the Independent Trustees, the Fund’s Chief Compliance Officer (the “CCO”) furnished to the Board in advance of its May Meetings an independent written evaluation of the Fund’s management fee (the “CCO Fee Evaluation Report”). The Board considered the CCO Fee Evaluation Report, along with other information, in evaluating the reasonableness of the Fund’s management fee and in determining to approve the continuation of the Contracts. The CCO, in preparing the CCO Fee Evaluation Report, has the authority to retain consultants, experts or staff as reasonably necessary to assist in the performance of his duties, reports directly to the Board, and can be terminated only with the approval of a majority of the Independent Trustees. At the request of the Independent Trustees, the CCO Fee Evaluation Report followed the same general approach and covered the same topics as that of the report that had previously been delivered by the CCO in his capacity as “Senior Officer” prior to the elimination of the Senior Officer position in December 2017.

In addition to the extensive materials that comprise and accompany the CCO Fee Evaluation Report, the Board considered information specifically prepared in connection with the approval of the continuation of the Contracts that was presented at the May Meetings. In this regard, in the months preceding the May Meetings, the Board requested and reviewed written responses and supporting materials prepared by the Advisers and their affiliates (collectively, “Federated Hermes”) in response to requests posed to Federated Hermes by independent legal counsel on behalf of the Independent Trustees encompassing a wide variety of topics, including those summarized below. The Board also

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considered such additional matters as the Independent Trustees deemed reasonably necessary to evaluate the Contracts, which included detailed information about the Fund and Federated Hermes furnished to the Board at its meetings throughout the year and in between regularly scheduled meetings on particular matters as the need arose. The Independent Trustees also considered the presentation from the Fund’s portfolio managers received at the May Meetings regarding the Fund and its performance and other investment-related matters.

The Board’s consideration of the Contracts included review of materials and information covering the following matters, among others: the nature, quality and extent of the advisory and other services provided to the Fund by Federated Hermes; Federated Hermes’ business and operations; the Advisers’ investment philosophy, personnel and processes; the Fund’s investment objectives and strategies; the Fund’s short-term and long-term performance (in absolute terms, both on a gross basis and net of expenses, and relative to the Fund’s particular investment program and a group of its peer funds and/or its benchmark, as appropriate); the Fund’s fees and expenses, including the advisory fee and the overall expense structure of the Fund (both in absolute terms and relative to a group of its peer funds), with due regard for contractual or voluntary expense limitations (if any); the financial condition of Federated Hermes; the Adviser’s profitability with respect to managing the Fund; distribution and sales activity for the Fund; and the use and allocation of brokerage commissions derived from trading the Fund’s portfolio securities (if any).

The Board also considered judicial decisions concerning allegedly excessive investment advisory fees charged to other registered funds in evaluating the Contracts. Using these judicial decisions as a guide, the Board observed that the following factors may be relevant to an adviser’s fiduciary duty with respect to its receipt of compensation from a fund: (1) the nature and quality of the services provided by the adviser to the fund and its shareholders, including the performance of the fund, its benchmark and comparable funds; (2) the adviser’s cost of providing the services and the profitability to the adviser of providing advisory services to the fund; (3) the extent to which the adviser may realize “economies of scale” as the fund grows larger and, if such economies of scale exist, whether they have been appropriately shared with the fund and its shareholders or the family of funds; (4) any “fall-out” benefits that accrue to the adviser because of its relationship with the fund, including research services received from brokers that execute fund trades and any fees paid to affiliates of the adviser for services rendered to the fund; (5) comparative fee and expense structures, including a comparison of management fees paid to the adviser with those paid by similar funds managed by the same adviser or other advisers as well as management fees charged to institutional and other advisory clients of the same adviser for what might be viewed as like services; and (6) the extent of care, conscientiousness and independence with which the

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fund’s board members perform their duties and their expertise, including whether they are fully informed about all facts the board deems relevant to its consideration of the adviser’s services and fees. The Board noted that the Securities and Exchange Commission (“SEC”) disclosure requirements regarding the basis for a fund board’s approval of the fund’s investment advisory contract generally align with the factors listed above. The Board was guided by these factors in its evaluation of the Contracts to the extent it considered them to be appropriate and relevant, as discussed further below. The Board considered and weighed these factors in light of its substantial accumulated experience in governing the Fund and working with Federated Hermes on matters relating to the oversight of the other funds advised by Federated Hermes (each, a “Federated Hermes Fund” and, collectively, the “Federated Hermes Funds”).

In addition, the Board considered the preferences and expectations of Fund shareholders and the potential disruptions of the Fund’s operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew the Contracts. In particular, the Board recognized that many shareholders likely have invested in the Fund based on the strength of Federated Hermes’ industry standing and reputation and with the expectation that Federated Hermes will have a continuing role in providing advisory services to the Fund. Thus, the Board observed that there are a range of investment options available to the Fund’s shareholders in the marketplace, and such shareholders, having had the opportunity to consider other investment options, have effectively selected Federated Hermes by virtue of investing in the Fund.

In determining to approve the continuation of the Contracts, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate through the exercise of their reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to approve the continuation of the Contracts was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the continuation of the Contracts. The Board recognized that its evaluation process is evolutionary and that the factors considered and emphasis placed on relevant factors may change in recognition of changing circumstances in the registered fund marketplace. The Independent Trustees were assisted throughout the evaluation process by independent legal counsel. In connection with their deliberations at the May Meetings, the Independent Trustees met separately in executive session with their independent legal counsel and without management present to review the relevant materials and consider their responsibilities under applicable laws. In addition, senior management representatives of Federated Hermes also met with the Independent Trustees and their independent legal counsel to discuss the materials and presentations

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furnished to the Board at the May Meetings. The Board considered the approval of the Contracts for the Fund as part of its consideration of agreements for funds across the family of Federated Hermes Funds, but its approvals were made on a fund-by-fund basis.

Nature, Extent and Quality of Services

The Board considered the nature, extent and quality of the services provided to the Fund by the Advisers and the resources of Federated Hermes dedicated to the Fund. In this regard, the Board evaluated, among other things, the terms of the Contracts and the range of services provided to the Fund by Federated Hermes. The Board considered the Advisers’ personnel, investment philosophy and process, investment research capabilities and resources, trade operations capabilities, experience and performance track record. The Board reviewed the qualifications, backgrounds and responsibilities of the portfolio management team primarily responsible for the day-to-day management of the Fund and Federated Hermes’ ability and experience in attracting and retaining qualified personnel to service the Fund. The Board considered the trading operations by the Advisers, including the execution of portfolio transactions and the selection of brokers for those transactions. The Board also considered the Advisers’ ability to deliver competitive investment performance for the Fund when compared to the Fund’s Performance Peer Group (as defined below), which was deemed by the Board to be a useful indicator of how the Advisers are executing the Fund’s investment program. The Board also considered the unique investment strategy of the Fund, including comparative information to similar investment pools.

In addition, the Board considered the financial resources and overall reputation of Federated Hermes and its willingness to consider and make investments in personnel, infrastructure, technology, cybersecurity, business continuity planning and operational enhancements that are designed to benefit the Federated Hermes Funds. The Board noted that the significant acquisition of Hermes Fund Managers Limited by Federated Hermes has deepened Federated Hermes’ investment management expertise and capabilities and expanded its access to analytical resources related to environmental, social and governance (“ESG”) factors and issuer engagement on ESG matters. The Board considered Federated Hermes’ oversight of the securities lending program for the Federated Hermes Funds that engage in securities lending and noted the income earned by the Federated Hermes Funds that participate in such program. In addition, the Board considered the quality of Federated Hermes’ communications with the Board and responsiveness to Board inquiries and requests made from time to time with respect to the Federated Hermes Funds. The Board also considered that Federated Hermes is responsible for providing the Federated Hermes Funds’ officers.

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The Board received and evaluated information regarding Federated Hermes’ regulatory and compliance environment. The Board considered Federated Hermes’ compliance program and compliance history and reports from the CCO about Federated Hermes’ compliance with applicable laws and regulations, including responses to regulatory developments and any compliance or other issues raised by regulatory agencies. The Board also noted Federated Hermes’ support of the Federated Hermes Funds’ compliance control structure and the compliance-related resources devoted by Federated Hermes in support of the Fund’s obligations pursuant to Rule 38a-1 under the Investment Company Act of 1940, including Federated Hermes’ commitment to respond to rulemaking and other regulatory initiatives of the SEC. The Board considered Federated Hermes’ approach to risk management with respect to the Federated Hermes Funds and its day-to-day oversight of the Federated Hermes Funds’ compliance with their investment objectives and policies as well as with applicable laws and regulations, noting that regulatory and other developments had over time led, and continue to lead, to an increase in the scope of Federated Hermes’ oversight in this regard, including in connection with the implementation of new rules on derivatives risk management and fair valuation. The Board also considered the implementation of Federated Hermes’ business continuity plans. In addition, the Board noted Federated Hermes’ commitment to maintaining high quality systems and expending substantial resources to prepare for and respond to ongoing changes due to the market, regulatory and control environments in which the Fund and its service providers operate.

The Board considered Federated Hermes’ efforts to provide shareholders in the Federated Hermes Funds with a comprehensive array of funds with different investment objectives, policies and strategies. The Board considered the expenses that Federated Hermes had incurred, as well as the entrepreneurial and other risks assumed by Federated Hermes, in sponsoring and providing on-going services to new funds to expand these opportunities for shareholders. The Board noted the benefits to shareholders of being part of the family of Federated Hermes Funds, which include the general right to exchange investments between the same class of shares without the incurrence of additional sales charges.

Based on these considerations, the Board concluded that it was satisfied with the nature, extent and quality of the services provided by the Advisers to the Fund.

Fund Investment Performance

The Board considered the investment performance of the Fund. In evaluating the Fund’s investment performance, the Board considered performance results in light of the Fund’s investment objective, strategies and risks. The Board considered detailed investment reports on, and the Advisers’ analysis of, the Fund’s performance over different time periods that were

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provided to the Board throughout the year and in connection with the May Meetings. These reports included, among other items, information on the Fund’s gross and net returns, the Fund’s investment performance compared to one or more relevant categories or groups of peer funds and the Fund’s benchmark index, performance attribution information and commentary on the effect of market conditions. The Board considered that, in its evaluation of investment performance at meetings throughout the year, it focused particular attention on information indicating less favorable performance of certain Federated Hermes Funds for specific time periods and discussed with Federated Hermes the reasons for such performance as well as any specific actions Federated Hermes had taken, or had agreed to take, to seek to enhance Fund investment performance and the results of those actions.

The Board also reviewed comparative information regarding the performance of other registered funds in the category of peer funds selected by Morningstar, Inc. (the “Morningstar”), an independent fund ranking organization (the “Performance Peer Group”). The Board noted the CCO’s view that comparisons to fund peer groups may be helpful, though not conclusive, in evaluating the performance of the Advisers in managing the Fund. The Board considered the CCO’s view that, in evaluating such comparisons, in some cases there may be differences in the funds’ objectives or investment management techniques, or the costs to implement the funds, even within the same Performance Peer Group. In this connection, the Board considered that the longevity and experience of the Fund’s portfolio management team and its extensive bottom-up approach to investing may limit the utility of comparisons to other equity mutual funds.

The Board considered that the Fund’s performance fell below the median of the Performance Peer Group for the one-year, three-year and five-year periods ended December 31, 2022. The Board discussed the Fund’s performance with the Advisers and recognized the efforts being taken by the Advisers in the context of other factors considered relevant by the Board. The Board considered information regarding the historical performance of the Fund, the uniqueness of the Fund’s investment strategy, the substantial investment and research resources utilized in implementing this strategy and the views of the Advisers on the Fund’s relative performance, including with respect to other pooled investment vehicles.

Based on these considerations, the Board concluded that it had continued confidence in the Advisers’ overall capabilities to manage the Fund.

Fund Expenses

The Board considered the advisory fee, sub-advisory fee, and overall expense structure of the Fund and the comparative fee and expense information that had been provided in connection with the May Meetings. In this regard, the Board was presented with, and considered, information regarding the contractual advisory fee rates, net advisory fee rates, total expense ratios and

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each element of the Fund’s total expense ratio (i.e., gross and net advisory fees, administrative fees, custody fees, portfolio accounting fees and transfer agency fees) relative to an appropriate group of peer funds compiled by Federated Hermes from the category of peer funds selected by Morningstar (the “Expense Peer Group”). The Board received a description of the methodology used to select the Expense Peer Group from the overall Morningstar category. The Board also reviewed comparative information regarding the fees and expenses of the broader group of funds in the overall Morningstar category. In addition, the Board received and considered comparative fee information for the Morningstar category of unregistered hedge funds that employ equity strategies similar to the Fund.

While mindful that courts have cautioned against giving too much weight to comparative information concerning fees charged to funds by other advisers, the use of comparisons between the Fund and its Expense Peer Group assisted the Board in its evaluation of the Fund’s fees and expenses. The Board focused on comparisons with other registered funds with comparable investment programs more heavily than non-registered fund products or services because such comparisons are believed to be more relevant. The Board considered that other registered funds are the products most like the Fund, in that they are readily available to Fund shareholders as alternative investment vehicles, and they are the type of investment vehicle, in fact, chosen and maintained by the Fund’s shareholders. The Board noted that the range of such other registered funds’ fees and expenses, therefore, appears to be a relevant indicator of what investors have found to be reasonable in the marketplace in which the Fund competes.

The Board reviewed the contractual advisory fee rate, net advisory fee rate and other expenses of the Fund and noted the position of the Fund’s fee rates relative to its Expense Peer Group. In this regard, the Board noted that the contractual advisory fee rate was above the median of the Expense Peer Group, but the Board noted the applicable waivers and reimbursements, and that the overall expense structure of the Fund remained competitive in the context of other factors considered by the Board. The Board considered the CCO’s view that, in 2022, while the Fund’s total expenses were above median relative to its Expense Peer Group, those expenses remained reasonable in light of its extensive bottom-up investment process, the relative expense of that process, the resulting estimated profitability of the Fund over time, and the performance generated over time compared to peer funds. In considering the Fund’s expenses, the Board noted the gross advisory fee reduction implemented in July 2022.

The Board also received and considered information about the nature and extent of services offered and fees charged by Federated Hermes to other types of clients with investment strategies similar to those of the Federated Hermes Funds, including non-registered fund clients (such as institutional separate accounts) and third-party unaffiliated registered funds for which any of the

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Advisers or their affiliates serve as sub-adviser. The Board noted the CCO’s conclusion that non-registered fund clients are inherently different products due to the following differences, among others: (i) different types of targeted investors; (ii) different applicable laws and regulations; (iii) different legal structures; (iv) different average account sizes and portfolio management techniques made necessary by different cash flows and different associated costs; (v) the time spent by portfolio managers and their teams (among other personnel across various departments, including legal, compliance and risk management) in reviewing securities pricing and fund liquidity; (vi) different administrative responsibilities; (vii) different degrees of risk associated with management; and (viii) a variety of different costs. The Board also considered information regarding the differences in the nature of the services required for Federated Hermes to manage its proprietary registered fund business versus managing a discrete pool of assets as a sub-adviser to another institution’s registered fund, noting the CCO’s view that Federated Hermes generally performs significant additional services and assumes substantially greater risks in managing the Fund and other Federated Hermes Funds than in its role as sub-adviser to an unaffiliated third-party registered fund. The Board noted that the CCO did not consider the fees for providing advisory services to other types of clients to be determinative in judging the appropriateness of the Federated Hermes Funds’ advisory fees.

In the case of the Fund, the Board noted that Federated Hermes does not manage any other types of clients that are comparable to the Fund.

Based on these considerations, the Board concluded that the fees and total operating expenses of the Fund, in conjunction with other matters considered, are reasonable in light of the services provided.

Profitability

The Board received and considered profitability information furnished by Federated Hermes. Such profitability information included revenues reported on a fund-by-fund basis and estimates of the allocation of expenses made on a fund-by-fund basis, using allocation methodologies specified by the CCO and described to the Board. The Board considered the CCO’s view that, while these cost allocation reports apply consistent allocation processes, the inherent difficulties in allocating costs on a fund-by-fund basis continues to cause the CCO to question the precision of the process and to conclude that such reports may be unreliable because a single change in an allocation estimate may dramatically alter the resulting estimate of cost and/or profitability of a Federated Hermes Fund and may produce unintended consequences. In addition, the Board considered the CCO’s view that the allocation methodologies used by Federated Hermes in estimating profitability for purposes of reporting to the Board in connection with the continuation of the Contracts are consistent with the methodologies previously reviewed by an

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independent consultant. The Board noted that the independent consultant had previously conducted a review of the allocation methodologies and reported to the Board that, although there is no single best method to allocate expenses, the methodologies used by Federated Hermes are reasonable.

The Board also reviewed information compiled by Federated Hermes comparing its profitability information to other publicly held fund management companies, including information regarding profitability trends over time. The Board recognized that profitability comparisons among fund management companies are difficult because of the variation in the type of comparative information that is publicly available, and the profitability of any fund management company is affected by numerous factors. The Board considered the CCO’s conclusion that, based on such profitability information, Federated Hermes’ profit margins did not appear to be excessive and the advisory or administrative fees are not unreasonable. The Board also considered the CCO’s view that Federated Hermes appeared financially sound, with the resources necessary to fulfill its obligations under its contracts with the Federated Hermes Funds.

Economies of Scale

The Board received and considered information about the notion of possible realization of “economies of scale” as a fund grows larger, the difficulties of determining economies of scale at an individual fund level, and the extent to which potential scale benefits are shared with shareholders. In this regard, the Board reviewed the breakpoints in the advisory fee schedule for the Fund that were implemented in July 2022, which reduce fee rates as the Fund’s assets grow over time. In addition, the Board considered that Federated Hermes has made significant and long-term investments in areas that support all of the Federated Hermes Funds, such as: portfolio management, investment research and trading operations; shareholder services; compliance; business continuity, cybersecurity and information security programs; internal audit and risk management functions; and technology and use of data. The Board noted that Federated Hermes’ investments in these areas are extensive and are designed to provide enhanced services to the Federated Hermes Funds and their shareholders. The Board considered that the benefits of these investments are likely to be shared with the family of Federated Hermes Funds as a whole.

In addition, the Board considered that fee waivers and expense reimbursements are another means for potential economies of scale to be shared with shareholders and can provide protection from an increase in expenses if a Federated Hermes Fund’s assets decline. The Board considered that, in order for the Federated Hermes Funds to remain competitive in the marketplace, Federated Hermes has frequently waived fees and/or reimbursed expenses for the Federated Hermes Funds and has disclosed to shareholders

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and/or reported to the Board its intention to do so (or continue to do so) in the future. The Board also considered that Federated Hermes has been active in managing expenses of the Federated Hermes Funds in recent years, which has resulted in benefits being realized by shareholders.

The Board also received and considered information on adviser-paid fees (commonly referred to as “revenue sharing” payments) that was provided to the Board throughout the year and in connection with the May Meetings. The Board considered that Federated Hermes and the CCO believe that this information is relevant to considering whether Federated Hermes had an incentive to either not apply breakpoints, or to apply breakpoints at higher levels, but should not be considered when evaluating the reasonableness of advisory fees. The Board also noted the absence of any applicable regulatory or industry guidelines on economies of scale, which is compounded by the lack of any uniform methodology or pattern with respect to structuring fund advisory fees with breakpoints that serve to reduce the fees as a fund attains a certain size.

Other Benefits

The Board considered information regarding the compensation and other ancillary (or “fall-out”) benefits that Federated Hermes derived from its relationships with the Federated Hermes Funds. The Board noted that, in addition to receiving advisory fees under the Federated Hermes Funds’ investment advisory contracts, Federated Hermes’ affiliates also receive fees for providing other services to the Federated Hermes Funds under separate service contracts, including for serving as the Federated Hermes Funds’ administrator and distributor. In this regard, the Board considered that Federated Hermes’ affiliates provide distribution and shareholder services to the Federated Hermes Funds, for which they may be compensated through distribution and servicing fees paid pursuant to Rule 12b-1 plans or otherwise. The Board also received and considered information detailing the benefits, if any, that Federated Hermes may derive from its receipt of research services from brokers who execute portfolio trades for the Federated Hermes Funds.

Conclusions

The Board considered: (i) the CCO’s conclusion that his observations and the information accompanying the CCO Fee Evaluation Report show that the management fee for the Fund is reasonable; and (ii) the CCO’s recommendation that the Board approve the management fee. The Board noted that, under these circumstances, no changes were recommended to, and no objection was raised to the continuation of, the Contracts by the CCO. The CCO also recognized that the Board’s evaluation of the Federated Hermes Funds’ advisory and sub-advisory arrangements is a continuing and ongoing process that is informed by the information that the Board requests and

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receives from management throughout the course of the year and, in this regard, the CCO noted certain items for future reporting to the Board or further consideration by management as the Board continues its ongoing oversight of the Federated Hermes Funds.

On the basis of the information and factors summarized above, among other information and factors deemed relevant by the Board, and the evaluation thereof, the Board, including the Independent Trustees, unanimously voted to approve the continuation of the Contracts. The Board based its determination to approve the Contracts on the totality of the circumstances and relevant factors and with a view of past and future long-term considerations. Not all of the factors and considerations identified above were necessarily deemed to be relevant to the Fund, nor did the Board consider any one of them to be determinative.

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Liquidity Risk Management Program–
Annual Evaluation of Adequacy and Effectiveness

In accordance with Rule 22e-4 under the Investment Company Act of 1940, as amended (the “Liquidity Rule”), Federated Hermes Equity Funds (the “Trust”) has adopted and implemented a liquidity risk management program (the “Program”) for Federated Hermes Kaufmann Fund (the “Fund” and, collectively with the other non-money market open-end funds advised by Federated Hermes, the “Federated Hermes Funds”). The Program seeks to assess and manage the Fund’s liquidity risk. “Liquidity risk” is defined under the Liquidity Rule as the risk that the Fund is unable to meet redemption requests without significantly diluting remaining investors’ interests in the Fund. The Board of Trustees of the Trust (the “Board”) has approved the designation of each Federated Hermes Fund’s investment adviser as the administrator for the Program (the “Administrator”) with respect to that Fund. The Administrator, in turn, has delegated day-to-day responsibility for the administration of the Program to multiple Liquidity Risk Management Committees, which are comprised of representatives from certain divisions within Federated Hermes.

The Program is comprised of various components designed to support the assessment and/or management of liquidity risk, including: (1) the periodic assessment (no less frequently than annually) of certain factors that influence the Fund’s liquidity risk; (2) the periodic classification (no less frequently than monthly) of the Fund’s investments into one of four liquidity categories that reflect an estimate of their liquidity under current market conditions; (3) a 15% limit on the acquisition of “illiquid investments” (as defined under the Liquidity Rule); (4) to the extent a Fund does not invest primarily in “highly liquid investments” (as defined under the Liquidity Rule), the determination of a minimum percentage of the Fund’s assets that generally will be invested in highly liquid investments (an “HLIM”); (5) if a Fund has established an HLIM, the periodic review (no less frequently than annually) of the HLIM and the adoption of policies and procedures for responding to a shortfall of the Fund’s highly liquid investments below its HLIM; and (6) periodic reporting to the Board.

At its meetings in May 2023, the Board received and reviewed a written report (the “Report”) from the Federated Hermes Funds’ Chief Compliance Officer and Chief Risk Officer, on behalf of the Administrator, concerning the operation of the Program for the period from April 1, 2022 through March 31, 2023 (the “Period”). The Report addressed the operation of the Program and assessed the adequacy and effectiveness of its implementation, including, where applicable, the operation of any HLIM established for a Federated Hermes Fund. There were no material changes to the Program during the Period. The Report summarized the operation of the Program and

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the information and factors considered by the Administrator in assessing whether the Program has been adequately and effectively implemented with respect to the Federated Hermes Funds. Such information and factors included, among other things:

◾ confirmation that it was not necessary for the Fund to utilize, and the Fund did not utilize, any alternative funding sources that were available to the Federated Hermes Funds during the Period, such as the Federated Hermes Funds’ interfund lending facility, redemptions in-kind, reverse repurchase agreement transactions, redemptions delayed beyond the normal T+1 settlement but within seven days of the redemption request, and committed lines of credit;

◾ the periodic classifications of the Fund’s investments into one of four liquidity categories and the methodologies and inputs used to classify the investments, including the Fund’s reasonably anticipated trade size;

◾ the analysis received from a third-party liquidity assessment vendor that is taken into account in the process of determining the liquidity classifications of the Fund’s investments, and the results of the Administrator’s evaluation of the services performed by the vendor in support of this process, including the Administrator’s view that the methodologies utilized by the vendor continue to be appropriate;

◾ the fact that the Fund invested primarily in highly liquid investments during the Period and, therefore, was not required to establish, and has not established, an HLIM and the operation of the procedures for monitoring the status of the Fund as investing primarily in highly liquid investments;

◾ the fact that the Fund invested no more than 15% of its assets in illiquid investments during the Period, and the operation of the procedures for monitoring this limit;

◾ the fact that there were no liquidity events during the Period that materially affected the Fund’s liquidity risk;

◾ the impact on liquidity and management of liquidity risk, if any, caused by extended non-U.S. market closures and confirmation that there were no issues for any of the affected Federated Hermes Funds in meeting shareholder redemptions at any time during these temporary non-U.S. market closures.

Based on this review, the Administrator concluded that the Program is operating effectively to assess and manage the Fund’s liquidity risk, and that the Program has been and continues to be adequately and effectively implemented to monitor and, as applicable, respond to the Fund’s liquidity developments.

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Voting Proxies on Fund Portfolio Securities

A description of the policies and procedures that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund’s portfolio is available, without charge and upon request, by calling 1-800-341-7400, Option #4. A report on “Form N-PX” of how the Fund voted any such proxies during the most recent 12-month period ended June 30 is available via the Proxy Voting Record (Form N-PX) link associated with the Fund and share class name at FederatedHermes.com/us/FundInformation. Form N-PX filings are also available at the SEC’s website at sec.gov.

Quarterly Portfolio Schedule

Each fiscal quarter, the Fund will file with the SEC a complete schedule of its monthly portfolio holdings on “Form N-PORT.” The Fund’s holdings as of the end of the third month of every fiscal quarter, as reported on Form N-PORT, will be publicly available on the SEC’s website at sec.gov within 60 days of the end of the fiscal quarter upon filing. You may also access this information via the link to the Fund and share class name at FederatedHermes.com/us.

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Mutual funds are not bank deposits or obligations, are not guaranteed by any bank and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal.

This Report is authorized for distribution to prospective investors only when preceded or accompanied by the Fund’s Prospectus, which contains facts concerning its objective and policies, management fees, expenses and other information.   

 

Federated Hermes Kaufmann Fund
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561

Contact us atFederatedHermes.com/us
or call 1-800-341-7400.

Federated Securities Corp., Distributor

CUSIP 314172677
CUSIP 314172651
CUSIP 314172644
CUSIP 31421N873

26396 (12/23)

© 2023 Federated Hermes, Inc.

Annual Shareholder Report

October 31, 2023

 

 

Share Class | Ticker	A | KLCAX	C | KLCCX	R | KLCKX
	Institutional | KLCIX	R6 | KLCSX

Federated Hermes Kaufmann Large Cap Fund

Fund Established 2007

A Portfolio of Federated Hermes Equity Funds

Dear Valued Shareholder,

We are pleased to present the Annual Shareholder Report for your fund covering the period from November 1, 2022 through October 31, 2023. This report includes Management’s Discussion of Fund Performance, a complete listing of your fund’s holdings, performance information and financial statements along with other important fund information.

As a global leader in active, responsible investment management, Federated Hermes is guided by our conviction that responsible investing is the best way to create wealth over the long term. The company provides capabilities across a wide range of asset classes to investors around the world.

In addition, FederatedHermes.com/us offers quick and easy access to valuable resources that include timely fund updates, economic and market insights from our investment strategists and financial planning tools. You can also access many of those insights by following us on Twitter (@FederatedHermes) and LinkedIn.

Thank you for investing with us. We hope you find this information useful and look forward to keeping you informed.

Sincerely,  

J. Christopher Donahue, President

Not FDIC Insured ▪ May Lose Value ▪ No Bank Guarantee

CONTENTS 

Management’s Discussion of Fund Performance	1
Portfolio of Investments Summary Table	5
Portfolio of Investments	6
Financial Highlights	13
Statement of Assets and Liabilities	18
Statement of Operations	20
Statement of Changes in Net Assets	22
Notes to Financial Statements	23
Report of Independent Registered Public Accounting Firm	36
Shareholder Expense Example	38
Board of Trustees and Trust Officers	40
Evaluation and Approval of Advisory Contract	47
Liquidity Risk Management Program– Annual Evaluation of Adequacy and Effectiveness	57
Voting Proxies on Fund Portfolio Securities	59
Quarterly Portfolio Schedule	59

Management’s Discussion of Fund Performance (unaudited)

The total return of Federated Hermes Kaufmann Large Cap Fund (the “Fund”), based on net asset value for the 12-month reporting period ended October 31, 2023, was 11.33% for the Class A Shares, 10.45% for the Class C Shares, 10.97% for the Class R Shares, 11.59% for the Institutional Shares and 11.68% for the Class R6 Shares. The total return of the Russell 1000® Growth Index (R1000G),1 the Fund’s broad-based securities market index, was 18.95% for the same period. The total return of the Morningstar Large Growth Funds Average (MLGFA),2 a peer group average for the Fund, was 14.19% for the same period. The Fund’s and MLGFA’s total returns for the most recently completed fiscal year reflected actual cash flows, transaction costs and expenses, which were not reflected in the total return of the R1000G.

During the reporting period, the Fund’s investment strategy focused on stock selection, sector exposure, international exposure3 and the effect of cash holdings. These were the most significant factors affecting the Fund’s performance relative to the R1000G.

The following discussion will focus on the performance of the Fund’s Class R6 Shares relative to the R1000G.

MARKET OVERVIEW

During the reporting period, returns in most global equity markets remained muted outside of a narrow group of technology stocks. Broadly, equities struggled to rally as inflation persisted throughout the year. Inflation and slower GDP growth caused negative impacts to the broader markets as investors became worried about the negative impact to earnings and economic growth. The slower economic growth along with aggressive monetary tightening policy led to negative industrial indicators and job growth slowing. As global economic uncertainty persisted along with uncertainty around inflation, economic growth, geopolitical uncertainty and potential responses from global central banks remained top concerns for investors.

STOCK SELECTION

The key factors affecting performance from a macroeconomic standpoint were the aggressive monetary responses to inflation due to fiscal policy in the prior year. Monetary tightening policy, combined with uncertainty of real economic growth, helped to contribute to the narrow-concentrated returns of the S&P 500 Index4 for much of the reporting period. The profitability of many of the companies in which the Fund invested remained strong throughout the reporting period despite the sell off. Fund management continued to seek what it viewed as attractive growth investment opportunities, such as companies it viewed as dominant competitors, possessing strengthening fundamentals, with the potential to deliver both near-term and long-term growth in sales and earnings.

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The majority of the Fund’s underperformance relative to the R1000G was due to sector underweights particularly in Information Technology, Communication Services and Financials. Individual companies that most contributed positively to the Fund’s performance during the reporting period were Microsoft Corporation, Amazon.com, Inc., Splunk, Inc. and ServiceNow, Inc. Holdings that negatively impacted the Fund’s performance were Charles Schwab Corp., DexCom, Inc., Salesforce, Inc., NextEra, Inc. and CoStar Group, Inc.

SECTOR EXPOSURE

At the end of the reporting period, approximately 74% of the portfolio was invested in four large sectors: Information Technology, Health Care, Consumer Discretionary and Financials. These sectors have historically provided good opportunities for bottom-up growth investors. Stock selection in both Health Care and Information Technology helped relative performance versus the R1000G.

INTERNATIONAL EXPOSURE

Stock selection of companies domiciled outside the U.S. was a positive contributor to Fund performance; however, their group weight was a negative contributor. Approximately 10% of the Fund’s assets were invested in such companies during the reporting period.

EFFECT OF CASH HOLDINGS

The Fund had an average cash position of 3.83% during the reporting period. In the rising market, the cash holdings negatively impacted performance relative to the R1000G.

1

Please see the footnotes to the line graph below for definitions of, and further information about, the R1000G.

2

Please see the footnotes to the line graph below for definitions of, and further information about, the Morningstar peer group.

3

International investing involves special risks including currency risk, increased volatility, political risks and differences in auditing and other financial standards.

4

The S&P 500 Index is an unmanaged capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The index is unmanaged, and it is not possible to invest directly in an index.

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FUND PERFORMANCE AND GROWTH OF A $10,000 INVESTMENT

The graph below illustrates the hypothetical investment of $10,0001 in the Federated Hermes Kaufmann Large Cap Fund (the “Fund”) from October 31, 2013 to October 31, 2023, compared to the Russell 1000® Growth Index (R1000G)2 and the Morningstar Large Growth Funds Average (MLGFA).3 The Average Annual Total Return table below shows returns for each class averaged over the stated periods.

Growth of a $10,000 Investment

Growth of $10,000 as of October 31, 2023  

◾ Total returns shown for Class C Shares include the maximum contingent deferred sales charge of 1.00% as applicable. 

The Fund offers multiple share classes whose performance may be greater than or less than its other share class(es) due to differences in sales charges and expenses. See the Average Annual Total Return table below for the returns of additional classes not shown in the line graph above.

Average Annual Total Returns for the Period Ended 10/31/2023

(returns reflect all applicable sales charges and contingent deferred sales charges as specified below in footnote #1) 

	1 Year	5 Years	10 Years
Class A Shares	5.23%	7.35%	8.94%
Class C Shares	9.63%	7.74%	8.89%
Class R Shares	10.97%	8.17%	9.14%
Institutional Shares	11.59%	8.84%	9.83%
Class R6 Shares4	11.68%	8.92%	9.90%
R1000G	18.95%	14.22%	13.83%
MLGFA	14.19%	10.68%	10.98%

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3

Performance data quoted represents past performance which is no guarantee of future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Mutual fund performance changes over time and current performance may be lower or higher than what is stated. For current to the most recent month-end performance and after-tax returns, visit FederatedHermes.com/us or call 1-800-341-7400. Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Mutual funds are not obligations of or guaranteed by any bank and are not federally insured.

1

Represents a hypothetical investment of $10,000 in the Fund after deducting applicable sales charges: For Class A Shares, the maximum sales charge of 5.50% ($10,000 investment minus $550 sales charge = $9,450); for Class C Shares, a 1.00% contingent deferred sales charge would be applied to any redemption less than one year from the purchase date. The Fund’s performance assumes the reinvestment of all dividends and distributions. The R1000G and the MLGFA have been adjusted to reflect the reinvestment of dividends on securities in the index and average.

2

The R1000G Index measures the performance of the large-cap growth segment of the U.S. equity universe. It includes those Russell 1000® Index companies with higher price-to-book ratios and higher forecasted growth values. The R1000G is constructed to provide a comprehensive and unbiased barometer for the large-cap growth segment. The R1000G is completely reconstituted annually to ensure new and growing equities are included and that the represented companies continue to reflect growth characteristics. The R1000G is not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission requires to be reflected in the Fund’s performance. The index is unmanaged and unlike the Fund, is not affected by cash flows. It is not possible to invest directly in an index.

3

Morningstar figures represent the average of the total returns reported by all the funds designated by Morningstar as falling into the respective category indicated. They do not reflect sales charges. The Morningstar figures in the Growth of a $10,000 Investment line graph are based on historical return information published by Morningstar and reflect the return of the funds comprising the category in the year of publication. Because the funds designated by Morningstar as falling into the category can change over time, the Morningstar figures in the line graph may not match the Morningstar figures in the Average Annual Total Returns table, which reflect the return of the funds that currently comprise the category.

4

The Fund’s R6 Shares commenced operations on December 30, 2013. For the period prior to the commencement of operations of R6 Shares, the performance information shown is for the Fund’s Institutional Shares adjusted to reflect expenses of the R6 Shares for each month for which the expenses of R6 Shares would have exceeded the actual expenses paid by Institutional Shares.

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4

Portfolio of Investments Summary Table (unaudited)

At October 31, 2023, the Fund’s sector composition1 was as follows: 

Sector Composition	Percentage of Total Net Assets
Information Technology	29.1%
Health Care	20.4%
Consumer Discretionary	14.8%
Financials	10.0%
Communication Services	8.1%
Industrials	5.3%
Consumer Staples	4.3%
Real Estate	3.1%
Energy	2.3%
Materials	1.4%
Utilities	0.7%
Securities Lending Collateral2	0.3%
Cash Equivalents3	0.4%
Other Assets and Liabilities—Net4	(0.2)%
TOTAL	100%

 

1	Except for Cash Equivalents and Other Assets and Liabilities, sector classifications are based upon, and individual portfolio securities are assigned to, the classifications of the Global Industry Classification Standard (GICS) except that the Adviser assigns a classification to securities not classified by the GICS and to securities for which the Adviser does not have access to the classification made by the GICS.
2	Represents cash collateral received for portfolio securities on loan that may be invested in affiliated money market funds, other money market instruments and/or repurchase agreements.
3	Cash Equivalents include any investments in money market mutual funds and/or overnight repurchase agreements.
4	Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities.

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5

Portfolio of Investments

October 31, 2023 

Shares			Value
		COMMON STOCKS—   99.5%
		Communication Services—   8.1%
610,800	1	Alphabet, Inc., Class A	$   75,788,064
27,900	1	Meta Platforms, Inc.	8,405,433
231,800	1	T-Mobile USA, Inc.	33,346,748
455,800		Universal Music Group	11,114,034
		TOTAL	128,654,279
		Consumer Discretionary—   14.8%
55,000	1	Airbnb, Inc.	6,505,950
567,400	1	Amazon.com, Inc.	75,515,266
18,100	1	Chipotle Mexican Grill, Inc.	35,153,820
37,500		Home Depot, Inc.	10,675,875
125,000		Las Vegas Sands Corp.	5,932,500
100,000	1	Lululemon Athletica, Inc.	39,348,000
20	1,2	New Cotai LLC/Capital	0
169,200		Nike, Inc., Class B	17,388,684
493,100		TJX Cos., Inc.	43,427,317
		TOTAL	233,947,412
		Consumer Staples—   4.3%
64,300		Constellation Brands, Inc., Class A	15,055,845
95,800		Costco Wholesale Corp.	52,923,752
		TOTAL	67,979,597
		Energy—   2.3%
639,500		Schlumberger Ltd.	35,594,570
		Financials—   10.0%
55,700		BlackRock, Inc.	34,103,996
250,000		Charles Schwab Corp.	13,010,000
241,488		London Stock Exchange Group PLC	24,287,800
38,450		MSCI, Inc., Class A	18,131,098
90,500		S&P Global, Inc.	31,612,555
154,700		Visa, Inc., Class A	36,369,970
		TOTAL	157,515,419
		Health Care—   20.4%
169,080	1	Argenx SE, ADR	79,394,896
26,700		AstraZeneca PLC	3,337,385
99,000		Danaher Corp.	19,009,980
346,500	1	Dexcom, Inc.	30,779,595
84,300		Eli Lilly & Co.	46,696,299
33,500	1	IDEXX Laboratories, Inc.	13,382,245

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6

Shares			Value
		COMMON STOCKS—   continued
		Health Care—   continued
44,000	1	Intuitive Surgical, Inc.	$   11,537,680
25,900		Lonza Group AG	9,082,197
294,200		Novo Nordisk A/S	28,371,271
94,000	1	Sarepta Therapeutics, Inc.	6,327,140
40,200		Stryker Corp.	10,862,844
84,000	1	Veeva Systems, Inc.	16,187,640
110,900	1	Vertex Pharmaceuticals, Inc.	40,157,999
50,000		Zoetis, Inc.	7,850,000
		TOTAL	322,977,171
		Industrials—   5.3%
83,300		Eaton Corp. PLC	17,318,903
125,400		Quanta Services, Inc.	20,956,848
187,200		Trane Technologies PLC	35,626,032
44,500		Union Pacific Corp.	9,238,645
		TOTAL	83,140,428
		Information Technology—   29.1%
16,800	1	Adobe, Inc.	8,938,608
52,800	1	Advanced Micro Devices, Inc.	5,200,800
319,200		Apple, Inc.	54,509,784
51,500		Applied Materials, Inc.	6,816,025
80,100	1,3	ARM Holdings PLC, ADR	3,948,129
14,500		Broadcom, Inc.	12,199,865
157,800	1	Crowdstrike Holdings, Inc.	27,894,306
100,000	1	Datadog, Inc.	8,147,000
16,500		Intuit, Inc.	8,166,675
29,100	1	Keysight Technologies, Inc.	3,551,655
285,000		Microsoft Corp.	96,361,350
48,600		NVIDIA Corp.	19,819,080
113,000	1	Palo Alto Networks, Inc.	27,461,260
79,200	1	Salesforce, Inc.	15,905,736
100,000	1	ServiceNow, Inc.	58,185,000
350,400	1	Shopify, Inc.	16,535,376
350,000	1	Splunk, Inc.	51,506,000
160,000	1	Workday, Inc.	33,873,600
		TOTAL	459,020,249
		Materials—   1.4%
27,354		Ecolab, Inc.	4,588,360
73,100		Sherwin-Williams Co.	17,413,151
		TOTAL	22,001,511
		Real Estate—   3.1%
538,200	1	CoStar Group, Inc.	39,509,262

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7

Shares		Value
	COMMON STOCKS—   continued
	Real Estate—   continued
93,900	ProLogis, Inc.	$    9,460,425
	TOTAL	48,969,687
	Utilities—   0.7%
200,000	NextEra Energy, Inc.	11,660,000
	TOTAL COMMON STOCKS (IDENTIFIED COST $812,709,166)	1,571,460,323
	INVESTMENT COMPANIES—   0.7%
3,763,200	Federated Hermes Government Obligations Fund, Premier Shares, 5.26%4	3,763,200
6,466,408	Federated Hermes Institutional Prime Value Obligations Fund, Institutional Shares, 5.45%4	6,466,408
	TOTAL INVESTMENT COMPANIES (IDENTIFIED COST $10,229,608)	10,229,608
	TOTAL INVESTMENT IN SECURITIES—100.2% (IDENTIFIED COST $822,938,774)5	1,581,689,931
	OTHER ASSETS AND LIABILITIES - NET—(0.2)%6	(2,546,169)
	TOTAL NET ASSETS—100%	$1,579,143,762

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8

 

[PAGE INTENTIONALLY LEFT BLANK]

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9

An affiliated company is a company in which the Fund, alone or in combination with other funds, has ownership of at least 5% of the voting shares. Transactions with the affiliated companies during the period ended October 31, 2023, were as follows: 

Affiliated	Value as of 10/31/2022	Purchases at Cost	Proceeds from Sales
Affiliated issuers no longer in the portfolio at period end	$29,009,820	$—	$(26,793,161)
TOTAL OF AFFILIATED COMPANIES TRANSACTIONS	$29,009,820	$—	$(26,793,161)

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10

 

Change in Unrealized Appreciation/ (Depreciation)	Net Realized Gain/ (Loss)	Value as of 10/31/2023	Shares Held as of 10/31/2023	Dividend Income
$12,012,701	$(14,229,360)	$—	—	$—
$12,012,701	$(14,229,360)	$—	—	$—

Transactions with affiliated investment companies, which are funds managed by the Adviser or an affiliate of the Adviser, during the period ended October 31, 2023, were as follows: 

	Federated Hermes Government Obligations Fund, Premier Shares*	Federated Hermes Institutional Prime Value Obligations Fund, Institutional Shares	Total of Affiliated Transactions
Value as of 10/31/2022	$—	$72,757,466	$72,757,466
Purchases at Cost	$48,588,285	$564,897,074	$613,485,359
Proceeds from Sales	$(44,825,085)	$(631,215,454)	$(676,040,539)
Change in Unrealized Appreciation/ Depreciation	$—	$(4,337)	$(4,337)
Net Realized Gain/(Loss)	$—	$31,659	$31,659
Value as of 10/31/2023	$3,763,200	$6,466,408	$10,229,608
Shares Held as of 10/31/2023	3,763,200	6,466,408	10,229,608
Dividend Income	$148,636	$3,367,191	$3,515,827

 

* All or a portion of the balance/activity for the fund relates to cash collateral received on securities lending transactions.

 

1	Non-income-producing security.
2	Market quotations and price valuations are not available. Fair value determined using significant unobservable inputs in accordance with procedures established by and under the supervision of the Fund’s Adviser acting through its Valuation Committee.
3	All or a portion of this security is temporarily on loan to unaffiliated broker/dealers.
4	7-day net yield.
5	The cost of investments for federal tax purposes amounts to $826,477,064.
6	Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities.

Note: The categories of investments are shown as a percentage of total net assets at October 31, 2023.

Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three broad levels listed below:

Level 1—quoted prices in active markets for identical securities.

Level 2—other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Also includes securities valued at amortized cost.

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11

Level 3—significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments).

The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.

The following is a summary of the inputs used, as of October 31, 2023, in valuing the Fund’s assets carried at fair value: 

Valuation Inputs
	Level 1— Quoted Prices	Level 2— Other Significant Observable Inputs	Level 3— Significant Unobservable Inputs	Total
Equity Securities:
Common Stocks
Domestic	$1,310,797,859	$—	$0	$1,310,797,859
International	195,583,811	65,078,653	—	260,662,464
Investment Companies	10,229,608	—	—	10,229,608
TOTAL SECURITIES	$1,516,611,278	$65,078,653	$0	$1,581,689,931

 

The following acronym(s) are used throughout this portfolio:
ADR	—American Depositary Receipt
ARM	—Adjustable Rate Mortgage
PLC	—Public Limited Company

See Notes which are an integral part of the Financial Statements

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12

Financial Highlights–Class A Shares

(For a Share Outstanding Throughout Each Period) 

	Year Ended October 31,
	2023	2022	2021	2020	2019
Net Asset Value, Beginning of Period	$24.12	$39.89	$31.46	$27.39	$24.76
Income From Investment Operations:
Net investment income (loss)1	(0.03)	(0.11)	(0.21)	(0.10)	(0.07)
Net realized and unrealized gain (loss)	2.22	(10.54)	9.88	5.42	5.17
Total From Investment Operations	2.19	(10.65)	9.67	5.32	5.10
Less Distributions:
Distributions from net realized gain	(5.29)	(5.12)	(1.24)	(1.25)	(2.47)
Net Asset Value, End of Period	$21.02	$24.12	$39.89	$31.46	$27.39
Total Return2	11.33%	(30.10)%	31.46%	20.14%	22.76%
Ratios to Average Net Assets:
Net expenses3	1.08%	1.08%	1.08%	1.08%	1.08%
Net investment income (loss)	(0.15)%	(0.38)%	(0.57)%	(0.36)%	(0.29)%
Expense waiver/reimbursement4	0.11%	0.10%	0.08%	0.09%	0.10%
Supplemental Data:
Net assets, end of period (000 omitted)	$512,559	$598,065	$953,814	$741,584	$616,124
Portfolio turnover5	19%	15%	28%	24%	19%

 

1	Per share numbers have been calculated using the average shares method.
2	Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable.
3	Amount does not reflect net expenses incurred by investment companies in which the Fund may invest.
4	This expense decrease is reflected in both the net expense and the net investment income (loss) 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.

See Notes which are an integral part of the Financial Statements

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13

Financial Highlights–Class C Shares

(For a Share Outstanding Throughout Each Period) 

	Year Ended October 31,
	2023	2022	2021	2020	2019
Net Asset Value, Beginning of Period	$20.66	$35.18	$28.08	$24.76	$22.77
Income From Investment Operations:
Net investment income (loss)1	(0.15)	(0.29)	(0.42)	(0.29)	(0.24)
Net realized and unrealized gain (loss)	1.81	(9.11)	8.76	4.86	4.70
Total From Investment Operations	1.66	(9.40)	8.34	4.57	4.46
Less Distributions:
Distributions from net realized gain	(5.29)	(5.12)	(1.24)	(1.25)	(2.47)
Net Asset Value, End of Period	$17.03	$20.66	$35.18	$28.08	$24.76
Total Return2	10.45%	(30.66)%	30.47%	19.21%	21.85%
Ratios to Average Net Assets:
Net expenses3	1.86%	1.86%	1.85%	1.85%	1.85%
Net investment income (loss)	(0.90)%	(1.17)%	(1.33)%	(1.11)%	(1.05)%
Expense waiver/reimbursement4	0.10%	0.09%	0.08%	0.09%	0.09%
Supplemental Data:
Net assets, end of period (000 omitted)	$97,644	$167,622	$355,877	$372,382	$399,208
Portfolio turnover5	19%	15%	28%	24%	19%

 

1	Per share numbers have been calculated using the average shares method.
2	Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable.
3	Amount does not reflect net expenses incurred by investment companies in which the Fund may invest.
4	This expense decrease is reflected in both the net expense and the net investment income (loss) 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.

See Notes which are an integral part of the Financial Statements

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14

Financial Highlights–Class R Shares

(For a Share Outstanding Throughout Each Period) 

	Year Ended October 31,
	2023	2022	2021	2020	2019
Net Asset Value, Beginning of Period	$22.20	$37.27	$29.58	$25.92	$23.64
Income From Investment Operations:
Net investment income (loss)1	(0.09)	(0.20)	(0.32)	(0.20)	(0.16)
Net realized and unrealized gain (loss)	2.00	(9.75)	9.25	5.11	4.91
Total From Investment Operations	1.91	(9.95)	8.93	4.91	4.75
Less Distributions:
Distributions from net realized gain	(5.29)	(5.12)	(1.24)	(1.25)	(2.47)
Net Asset Value, End of Period	$18.82	$22.20	$37.27	$29.58	$25.92
Total Return2	10.97%	(30.38)%	30.94%	19.69%	22.32%
Ratios to Average Net Assets:
Net expenses3	1.43%	1.47%	1.47%	1.46%	1.46%
Net investment income (loss)	(0.50)%	(0.79)%	(0.95)%	(0.72)%	(0.65)%
Expense waiver/reimbursement4	0.15%	0.16%	0.13%	0.14%	0.14%
Supplemental Data:
Net assets, end of period (000 omitted)	$42,590	$42,626	$82,883	$76,374	$74,919
Portfolio turnover5	19%	15%	28%	24%	19%

 

1	Per share numbers have been calculated using the average shares method.
2	Based on net asset value.
3	Amount does not reflect net expenses incurred by investment companies in which the Fund may invest.
4	This expense decrease is reflected in both the net expense and the net investment income (loss) 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.

See Notes which are an integral part of the Financial Statements

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15

Financial Highlights–Institutional Shares

(For a Share Outstanding Throughout Each Period) 

	Year Ended October 31,
	2023	2022	2021	2020	2019
Net Asset Value, Beginning of Period	$25.24	$41.40	$32.53	$28.21	$25.37
Income From Investment Operations:
Net investment income (loss)1	0.03	(0.05)	(0.12)	(0.03)	(0.01)
Net realized and unrealized gain (loss)	2.34	(10.99)	10.23	5.60	5.32
Total From Investment Operations	2.37	(11.04)	10.11	5.57	5.31
Less Distributions:
Distributions from net realized gain	(5.29)	(5.12)	(1.24)	(1.25)	(2.47)
Net Asset Value, End of Period	$22.32	$25.24	$41.40	$32.53	$28.21
Total Return2	11.59%	(29.93)%	31.79%	20.46%	23.07%
Ratios to Average Net Assets:
Net expenses3	0.83%	0.83%	0.83%	0.83%	0.83%
Net investment income (loss)	0.12%	(0.15)%	(0.32)%	(0.10)%	(0.03)%
Expense waiver/reimbursement4	0.11%	0.10%	0.09%	0.09%	0.10%
Supplemental Data:
Net assets, end of period (000 omitted)	$862,452	$1,378,126	$3,090,630	$2,635,157	$2,264,174
Portfolio turnover5	19%	15%	28%	24%	19%

 

1	Per share numbers have been calculated using the average shares method.
2	Based on net asset value.
3	Amount does not reflect net expenses incurred by investment companies in which the Fund may invest.
4	This expense decrease is reflected in both the net expense and the net investment income (loss) 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.

See Notes which are an integral part of the Financial Statements

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16

Financial Highlights–Class R6 Shares

(For a Share Outstanding Throughout Each Period) 

	Year Ended October 31,
	2023	2022	2021	2020	2019
Net Asset Value, Beginning of Period	$25.41	$41.62	$32.68	$28.32	$25.44
Income From Investment Operations:
Net investment income (loss)1	0.04	(0.03)	(0.10)	(0.02)	0.01
Net realized and unrealized gain (loss)	2.37	(11.06)	10.28	5.63	5.34
Total From Investment Operations	2.41	(11.09)	10.18	5.61	5.35
Less Distributions:
Distributions from net realized gain	(5.29)	(5.12)	(1.24)	(1.25)	(2.47)
Net Asset Value, End of Period	$22.53	$25.41	$41.62	$32.68	$28.32
Total Return2	11.68%	(29.88)%	31.86%	20.52%	23.17%
Ratios to Average Net Assets:
Net expenses3	0.77%	0.77%	0.77%	0.77%	0.77%
Net investment income (loss)	0.18%	(0.11)%	(0.26)%	(0.06)%	0.04%
Expense waiver/reimbursement4	0.10%	0.09%	0.08%	0.09%	0.09%
Supplemental Data:
Net assets, end of period (000 omitted)	$63,898	$102,255	$274,128	$228,285	$129,987
Portfolio turnover5	19%	15%	28%	24%	19%

 

1	Per share numbers have been calculated using the average shares method.
2	Based on net asset value.
3	Amount does not reflect net expenses incurred by investment companies in which the Fund may invest.
4	This expense decrease is reflected in both the net expense and the net investment income (loss) 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.

See Notes which are an integral part of the Financial Statements

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17

Statement of Assets and Liabilities

October 31, 2023

 

Assets:
Investment in securities, at value including $3,678,720 of securities loaned and $10,229,608 of investments in affiliated holdings* (identified cost $822,938,774, including $10,229,608 of identified cost in affiliated holdings)	$1,581,689,931
Cash denominated in foreign currencies (identified cost $2,254)	2,290
Income receivable	269,450
Income receivable from affiliated holdings	26,023
Receivable for investments sold	5,242,302
Receivable for shares sold	607,773
Total Assets	1,587,837,769
Liabilities:
Payable for shares redeemed	4,221,590
Payable for collateral due to broker for securities lending (Note 2)	3,763,200
Payable for investment adviser fee (Note 5)	28,106
Payable for administrative fee (Note 5)	3,353
Payable for Directors’/Trustees’ fees (Note 5)	2,575
Payable for distribution services fee (Note 5)	81,338
Payable for other service fees (Notes 2 and 5)	242,964
Accrued expenses (Note 5)	350,881
Total Liabilities	8,694,007
Net assets for 73,857,318 shares outstanding	$1,579,143,762
Net Assets Consist of:
Paid-in capital	$408,466,409
Total distributable earnings (loss)	1,170,677,353
Total Net Assets	$1,579,143,762

Annual Shareholder Report

18

Statement of Assets and Liabilities–continued

Net Asset Value, Offering Price and Redemption Proceeds Per Share:
Class A Shares:
Net asset value per share ($512,559,442 ÷ 24,388,024 shares outstanding), no par value, unlimited shares authorized	$21.02
Offering price per share (100/94.50 of $21.02)	$22.24
Redemption proceeds per share	$21.02
Class C Shares:
Net asset value per share ($97,644,346 ÷ 5,732,500 shares outstanding), no par value, unlimited shares authorized	$17.03
Offering price per share	$17.03
Redemption proceeds per share (99.00/100 of $17.03)	$16.86
Class R Shares:
Net asset value per share ($42,590,009 ÷ 2,263,357 shares outstanding), no par value, unlimited shares authorized	$18.82
Offering price per share	$18.82
Redemption proceeds per share	$18.82
Institutional Shares:
Net asset value per share ($862,451,960 ÷ 38,637,108 shares outstanding), no par value, unlimited shares authorized	$22.32
Offering price per share	$22.32
Redemption proceeds per share	$22.32
Class R6 Shares:
Net asset value per share ($63,898,005 ÷ 2,836,329 shares outstanding), no par value, unlimited shares authorized	$22.53
Offering price per share	$22.53
Redemption proceeds per share	$22.53

 

* See information listed after the Fund’s Portfolio of Investments.

See Notes which are an integral part of the Financial Statements

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Statement of Operations

Year Ended October 31, 2023

 

Investment Income:
Dividends (including $3,367,191 received from affiliated holdings* and net of foreign taxes withheld of $73,496)	$17,164,490
Net income on securities loaned (includes $148,636 earned from affiliated holdings related to cash collateral balances)	174,648
Interest	179
TOTAL INCOME	17,339,317
Expenses:
Investment adviser fee (Note 5)	13,645,773
Administrative fee (Note 5)	1,420,445
Custodian fees	94,897
Transfer agent fees (Note 2)	1,582,965
Directors’/Trustees’ fees (Note 5)	10,668
Auditing fees	52,034
Legal fees	12,677
Portfolio accounting fees	210,294
Distribution services fee (Note 5)	1,164,593
Other service fees (Notes 2 and 5)	1,655,040
Share registration costs	112,454
Printing and postage	89,095
Miscellaneous (Note 5)	43,533
TOTAL EXPENSES	20,094,468
Waivers and Reimbursements:
Waiver/reimbursement of investment adviser fee (Note 5)	(1,836,249)
Waivers/reimbursements of other operating expenses (Notes 2 and 5)	(219,375)
TOTAL WAIVERS AND REIMBURSEMENTS	(2,055,624)
Net expenses	18,038,844
Net investment loss	(699,527)

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Statement of Operations–continued

Realized and Unrealized Gain (Loss) on Investments and Foreign Currency Transactions:
Net realized gain on investments (including net realized loss of $(14,197,701) on sales of investments in affiliated holdings*)	$416,689,503
Net realized loss on foreign currency transactions	(67,443)
Net change in unrealized appreciation of investments (including net change in unrealized depreciation of $12,008,364 on investments in affiliated holdings*)	(213,194,879)
Net change in unrealized appreciation/depreciation of translation of assets and liabilities in foreign currency	7,440
Net realized and unrealized gain (loss) on investments and foreign currency transactions	203,434,621
Change in net assets resulting from operations	$202,735,094

 

* See information listed after the Fund’s Portfolio of Investments.

See Notes which are an integral part of the Financial Statements

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Statement of Changes in Net Assets

 

 

Year Ended October 31	2023	2022
Increase (Decrease) in Net Assets
Operations:
Net investment loss	$(699,527)	$(9,412,277)
Net realized gain (loss)	416,622,060	446,988,361
Net change in unrealized appreciation/depreciation	(213,187,439)	(1,730,754,030)
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS	202,735,094	(1,293,177,946)
Distributions to Shareholders:
Class A Shares	(123,391,855)	(121,749,422)
Class C Shares	(38,334,236)	(50,272,285)
Class R Shares	(9,952,078)	(11,230,248)
Institutional Shares	(253,861,751)	(377,610,464)
Class R6 Shares	(18,104,427)	(33,771,223)
CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS	(443,644,347)	(594,633,642)
Share Transactions:
Proceeds from sale of shares	245,263,111	416,142,661
Net asset value of shares issued to shareholders in payment of distributions declared	403,488,933	542,130,665
Cost of shares redeemed	(1,117,393,954)	(1,539,098,342)
CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS	(468,641,910)	(580,825,016)
Change in net assets	(709,551,163)	(2,468,636,604)
Net Assets:
Beginning of period	2,288,694,925	4,757,331,529
End of period	$1,579,143,762	$2,288,694,925

See Notes which are an integral part of the Financial Statements

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Notes to Financial Statements

October 31, 2023

1. ORGANIZATION

Federated Hermes Equity Funds (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Trust consists of eight portfolios. The financial statements included herein are only those of Federated Hermes Kaufmann Large Cap Fund (the “Fund”), a diversified portfolio. The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder’s interest is limited to the portfolio in which shares are held. Each portfolio pays its own expenses. The Fund offers five classes of shares: Class A Shares, Class C Shares, Class R Shares, Institutional Shares and Class R6 Shares. All shares of the Fund have equal rights with respect to voting, except on class-specific matters. The investment objective of the Fund is to provide capital appreciation.

2. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with U.S. generally accepted accounting principles (GAAP).

Investment Valuation

In calculating its net asset value (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.

◾

Shares of other mutual funds or non-exchange-traded investment companies are valued based upon their reported NAVs, or NAV per share practical expedient, as applicable.

◾

Fixed-income securities are fair valued using price evaluations provided by a pricing service approved by Federated Equity Management Company of Pennsylvania (the “Adviser”).

◾

Derivative contracts listed on exchanges are valued at their reported settlement or closing price, except that options are valued at the mean of closing bid and ask quotations.

◾

Over-the-counter (OTC) derivative contracts are fair valued using price evaluations provided by a pricing service approved by the Adviser.

◾

For securities that are fair valued in accordance with procedures established by and under the general supervision of the Adviser, certain factors may be considered, such as: the last traded or purchase price of the security, information obtained by contacting the issuer or dealers, analysis of the issuer’s financial statements or other available documents, fundamental analytical data, the nature and duration of restrictions on disposition, the movement of the market in which the security is normally traded, public trading in similar securities or derivative contracts of the issuer or comparable issuers, movement of a relevant index, or other factors including but not limited to industry changes and relevant government actions.

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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 for the Fund, or if information furnished by a pricing service, in the opinion of the Adviser’s valuation committee (“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 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, and the actual value obtained could be materially different.

Fair Valuation and Significant Events Procedures

Pursuant to Rule 2a-5 under the Act, the Fund’s Board of Trustees (the “Trustees”) has designated the Adviser as the Fund’s valuation designee to perform any fair value determinations for securities and other assets held by the Fund. The Adviser is subject to the Trustees’ oversight and certain reporting and other requirements intended to provide the Trustees the information needed to oversee the Adviser’s fair value determinations.

The Adviser, acting through its Valuation Committee, is responsible for determining the fair value of investments for which market quotations are not readily available. The Valuation Committee is comprised of officers of the Adviser and certain of the Adviser’s affiliated companies and determines fair value and oversees the calculation of the NAV. The Valuation Committee is also authorized to use pricing services to provide fair value evaluations of the current value of certain investments for purposes of calculating the NAV. The Valuation Committee employs various methods for reviewing third-party pricing-service evaluations including periodic reviews of third-party pricing services’ policies, procedures and valuation methods (including key inputs, methods, models and assumptions), transactional back-testing, comparisons of evaluations of different pricing services, and review of price challenges by the Adviser based on recent market activity. 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. The Trustees periodically review the fair valuations made by the Valuation Committee. The Trustees have 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.

Factors considered by pricing services in evaluating an investment include the yields or prices of investments of comparable quality, coupon, maturity, call rights and other potential prepayments, terms and type, reported transactions, indications as to values from dealers and general market conditions. Some pricing services provide a single price evaluation reflecting the bid-side of the market for an investment (a “bid” evaluation). Other pricing services offer both bid evaluations and price evaluations indicative of a price between the prices bid and ask for the investment (a “mid” evaluation). The Fund normally uses bid evaluations for any U.S. Treasury and Agency securities, mortgage-backed securities and municipal securities. The Fund normally uses

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mid evaluations for any other types of fixed-income securities and any OTC derivative contracts. In the event that market quotations and price evaluations are not available for an investment, the fair value of the investment is determined in accordance with procedures adopted by the Adviser.

The Adviser has also adopted procedures requiring an investment to be priced at its fair value whenever the Valuation Committee determines that a significant event affecting the value of the investment has occurred between the time as of which the price of the investment would otherwise be determined and the time as of which the NAV is computed. An event is considered significant if there is both an affirmative expectation that the investment’s value will change in response to the event and a reasonable basis for quantifying the resulting change in value. Examples of significant events that may occur after the close of the principal market on which a security is traded, or after the time of a price evaluation provided by a pricing service or a dealer, include:

◾

With respect to securities traded principally in foreign markets, significant trends in U.S. equity markets or in the trading of foreign securities index futures contracts;

◾

Political or other developments affecting the economy or markets in which an issuer conducts its operations or its securities are traded;

◾

Announcements concerning matters such as acquisitions, recapitalizations, litigation developments, or a natural disaster affecting the issuer’s operations or regulatory changes or market developments affecting the issuer’s industry.

The Adviser has adopted procedures whereby the Valuation Committee uses a pricing service to provide factors to update the fair value of equity securities traded principally in foreign markets from the time of the close of their respective foreign stock exchanges to the pricing time of the Fund. For other significant events, the Fund may seek to obtain more current quotations or price evaluations from alternative pricing sources. If a reliable alternative pricing source is not available, the Valuation Committee will determine the fair value of the investment in accordance with the fair valuation procedures approved by the Adviser. The Trustees periodically review fair valuations made in response to significant events.

Investment Income, Gains and Losses, Expenses and Distributions

Investment transactions are accounted for on a trade-date basis. Realized gains and losses from investment transactions are recorded on an identified-cost basis. Interest income and expenses are accrued daily. Dividend income and distributions to shareholders are recorded on the ex-dividend date. Foreign dividends are recorded on the ex-dividend date or when the Fund is informed of the ex-dividend date. Distributions of net investment income, if any, are declared and paid annually. Non-cash dividends included in dividend income, if any, are recorded at fair value. Amortization/accretion of premium and discount is included in investment income. Investment income, realized and unrealized gains and losses, and certain fund-level expenses are allocated to each class based on relative average daily net assets, except that select classes will bear certain expenses unique to those classes. Dividends are declared separately for each class. No class has preferential dividend rights; differences in per share dividend rates are generally due to differences in separate class expenses. The detail of the total fund expense waivers and reimbursements of $2,055,624 is disclosed in various locations in this Note 2 and Note 5.

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Transfer Agent Fees

For the year ended October 31, 2023, transfer agent fees for the Fund were as follows: 

	Transfer Agent Fees Incurred	Transfer Agent Fees Reimbursed
Class A Shares	$446,804	$(53,876)
Class C Shares	132,223	(4,552)
Class R Shares	92,345	—
Institutional Shares	901,528	(139,455)
Class R6 Shares	10,065	—
TOTAL	$1,582,965	$(197,883)

Other Service Fees

The Fund may pay other service fees up to 0.25% of the average daily net assets of the Fund’s Class A Shares and Class C Shares to financial intermediaries or to Federated Shareholder Services Company (FSSC) for providing services to shareholders and maintaining shareholder accounts. Subject to the terms described in the Expense Limitation note, FSSC may voluntarily reimburse the Fund for other service fees.

For the year ended October 31, 2023, other service fees for the Fund were as follows: 

	Other Service Fees Incurred
Class A Shares	$1,338,483
Class C Shares	316,557
TOTAL	$1,655,040

Federal Taxes

It is the Fund’s policy to comply with the Subchapter M provision of the Internal Revenue Code of 1986 (the “Code”) and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal income tax is necessary. As of and during the year ended October 31, 2023, the Fund did not have a liability for any uncertain tax positions. The Fund recognizes interest and penalties, if any, related to tax liabilities as income tax expense in the Statement of Operations. As of October 31, 2023, tax years 2020 through 2023 remain subject to examination by the Fund’s major tax jurisdictions, which include the United States of America and the Commonwealth of Massachusetts.

The Fund may be subject to taxes imposed by governments of countries in which it invests. Such taxes are generally based on either income or gains earned or repatriated. The Fund accrues and applies such taxes to net investment income, net realized gains and net unrealized gains as income and/or gains are earned.

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When-Issued and Delayed-Delivery Transactions

The Fund may engage in when-issued or delayed-delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed-delivery basis are marked to market daily and begin earning interest on the settlement date. Losses may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the contract.

Foreign Exchange Contracts

The Fund enters into foreign exchange contracts to manage currency and market risks. Purchased contracts are used to acquire exposure to foreign currencies, whereas, contracts to sell are used to hedge the Fund’s securities against currency fluctuations. Risks may arise upon entering into these transactions from the potential inability of counterparties to meet the terms of their commitments and from unanticipated movements in security prices or foreign exchange rates. The foreign exchange contracts are adjusted by the daily exchange rate of the underlying currency and any gains or losses are recorded for financial statement purposes as unrealized until the settlement date.

At October 31, 2023, the Fund had no outstanding foreign exchange contracts.

Foreign Currency Translation

The accounting records of the Fund are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the rates of exchange of such currencies against U.S. dollars on the date of valuation. Purchases and sales of securities, income and expenses are translated at the rate of exchange quoted on the respective date that such transactions are recorded. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.

Reported net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund’s books, and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at fiscal year end, resulting from changes in the exchange rate.

Restricted Securities

The Fund may purchase securities which are considered restricted. Restricted securities are securities that either: (a) cannot be offered for public sale without first being registered, or being able to take advantage of an exemption from registration, under the Securities Act of 1933; or (b) are subject to contractual restrictions on public sales. In some cases, when a security cannot be offered for public sale without first being registered, the issuer of the restricted security has agreed to register such securities for resale, at the issuer’s expense, either upon demand by the Fund or in connection with another registered offering of the securities. Many such restricted securities may be resold in the secondary market in transactions exempt from registration. Restricted

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securities may be determined to be liquid under criteria established by the Trustees. The Fund will not incur any registration costs upon such resales. The Fund’s restricted securities, like other securities, are priced in accordance with procedures established by and under the general supervision of the Adviser.

Securities Lending

The Fund participates in a securities lending program providing for the lending of equity securities to qualified brokers. The term of the loans within the program is one year or less. The Fund normally receives cash collateral for securities loaned that is invested in affiliated money market funds, other money market instruments and/or repurchase agreements. Investments in money market funds may include funds with a “floating” NAV that can impose redemption fees and liquidity gates, impose certain operational impediments to investing cash collateral, and, if the investee fund’s NAV decreases, result in the Fund recognizing losses and being required to cover the decrease in the value of the cash collateral. Collateral is maintained at a minimum level of 100% of the market value of investments loaned, plus interest, if applicable. In accordance with the Fund’s securities lending agreement, the market value of securities on loan is determined each day at the close of business and any additional collateral required to cover the value of securities on loan is delivered to the Fund on the next business day. Earnings from collateral invested in affiliated holdings as presented parenthetically on the Statement of Operations do not reflect fees and rebates and are allocated between the borrower of the security, the securities lending agent, as a fee for its services under the program and the Fund, according to agreed-upon rates. The Fund will not have the right to vote on securities while they are on loan. However, the Fund will attempt to terminate a loan in an effort to reacquire the securities in time to vote on matters that are deemed to be material by the Adviser. There can be no assurance that the Fund will have sufficient notice of such matters to be able to terminate the loan in time to vote thereon.

Securities lending transactions are subject to Master Netting Agreements which are agreements between the Fund and its counterparties that provide for the net settlement of all transactions and collateral with the Fund, through a single payment, in the event of default or termination. Amounts presented on the Portfolio of Investments and Statement of Assets and Liabilities are not net settlement amounts but gross. As indicated below, the cash collateral received by the Fund exceeds the market value of the securities loaned reducing the net settlement amount to zero. The chart below identifies the amount of collateral received as well as the market value of securities on loan. Additionally, the securities lending agreement executed by the Fund includes an indemnification clause. This clause stipulates that the borrower will reimburse the Fund for any losses as a result of any failure of the borrower to return equivalent securities to the Fund.

As of October 31, 2023, securities subject to this type of arrangement and related collateral were as follows: 

Fair Value of Securities Loaned	Collateral Received
$3,678,720	$3,763,200

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Other

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ materially from those estimated. The Fund applies investment company accounting and reporting guidance.

3. SHARES OF BENEFICIAL INTEREST

The following tables summarize share activity: 

	Year Ended 10/31/2023		Year Ended 10/31/2022
Class A Shares:	Shares	Amount	Shares	Amount
Shares sold	3,718,811	$76,477,198	3,342,575	$96,407,479
Shares issued to shareholders in payment of distributions declared	5,892,566	112,312,298	3,353,287	109,987,824
Shares redeemed	(10,020,704)	(207,469,589)	(5,810,329)	(160,751,120)
NET CHANGE RESULTING FROM CLASS A SHARE TRANSACTIONS	(409,327)	$(18,680,093)	885,533	$45,644,183
	Year Ended 10/31/2023		Year Ended 10/31/2022
Class C Shares:	Shares	Amount	Shares	Amount
Shares sold	627,160	$10,489,661	477,833	$12,096,961
Shares issued to shareholders in payment of distributions declared	2,397,976	37,312,500	1,719,236	48,654,389
Shares redeemed	(5,405,581)	(93,031,643)	(4,201,135)	(102,244,358)
NET CHANGE RESULTING FROM CLASS C SHARE TRANSACTIONS	(2,380,445)	$(45,229,482)	(2,004,066)	$(41,493,008)
	Year Ended 10/31/2023		Year Ended 10/31/2022
Class R Shares:	Shares	Amount	Shares	Amount
Shares sold	226,201	$4,188,546	254,714	$6,554,147
Shares issued to shareholders in payment of distributions declared	573,056	9,810,727	366,917	11,117,577
Shares redeemed	(455,901)	(8,500,110)	(925,265)	(22,590,112)
NET CHANGE RESULTING FROM CLASS R SHARE TRANSACTIONS	343,356	$5,499,163	(303,634)	$(4,918,388)
	Year Ended 10/31/2023		Year Ended 10/31/2022
Institutional Shares:	Shares	Amount	Shares	Amount
Shares sold	6,388,136	$139,087,533	8,238,017	$249,396,256
Shares issued to shareholders in payment of distributions declared	11,431,888	230,924,136	10,104,489	346,078,740
Shares redeemed	(33,787,938)	(750,776,178)	(38,391,765)	(1,116,533,204)
NET CHANGE RESULTING FROM INSTITUTIONAL SHARE TRANSACTIONS	(15,967,914)	$(380,764,509)	(20,049,259)	$(521,058,208)

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	Year Ended 10/31/2023		Year Ended 10/31/2022
Class R6 Shares:	Shares	Amount	Shares	Amount
Shares sold	699,028	$15,020,173	1,723,972	$51,687,818
Shares issued to shareholders in payment of distributions declared	644,223	13,129,272	762,976	26,292,135
Shares redeemed	(2,531,132)	(57,616,434)	(5,048,808)	(136,979,548)
NET CHANGE RESULTING FROM CLASS R6 SHARE TRANSACTIONS	(1,187,881)	$(29,466,989)	(2,561,860)	$(58,999,595)
NET CHANGE RESULTING FROM TOTAL FUND SHARE TRANSACTIONS	(19,602,211)	$(468,641,910)	(24,033,286)	$(580,825,016)

4. FEDERAL TAX INFORMATION

The accounting treatment of certain items in accordance with income tax regulations may differ from the accounting treatment in accordance with GAAP which may result in permanent differences. In the case of the Fund, such differences primarily result from net operating losses.

For the year ended October 31, 2023, permanent differences identified and reclassified among the components of net assets were as follows: 

Increase (Decrease)
Paid-In Capital	Total Distributable Earnings (Loss)
$(4,499,729)	$4,499,729

The tax character of distributions as reported on the Statement of Changes in Net Assets for the years ended October 31, 2023 and 2022, was as follows: 

	2023	2022
Long-term capital gains	$443,644,347	$594,633,642

As of October 31, 2023, the components of distributable earnings on a tax-basis were as follows: 

Net unrealized appreciation	$755,212,867
Undistributed long-term capital gains	$417,716,866
Capital loss deferrals	$(2,233,769)
Other temporary differences	$(18,611)
TOTAL	$1,170,677,353

At October 31, 2023, the cost of investments for federal tax purposes was $826,477,064. The net unrealized appreciation of investments for federal tax purposes was $755,212,867. This consists of unrealized appreciation from investments for those securities having an excess of value over cost of $785,696,759 and unrealized depreciation from investments for those securities having an excess of cost over value of $30,483,892. The difference between book-basis and tax-basis net unrealized appreciation/depreciation is attributable to differing treatments for deferral of losses on wash sales.

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Under current tax rules, a late-year ordinary loss may be deferred, in whole or in part, and treated as occurring on the first day of the following fiscal year. As of October 31, 2023, for federal income tax purposes, a late year ordinary loss of $2,233,769 was deferred to November 1, 2023.

5. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

Investment Adviser Fee

The advisory agreement between the Fund and the Adviser provides for an annual fee equal to 0.75% of the Fund’s average daily net assets. Subject to the terms described in the Expense Limitation note, the Adviser may voluntarily choose to waive any portion of its fee and/or reimburse certain operating expenses of the Fund for competitive reasons such as to maintain the Fund’s expense ratio, or as and when appropriate, to maintain positive or zero net yields. For the year ended October 31, 2023, the Adviser voluntarily waived $1,764,747 of its fee and voluntarily reimbursed $197,883 of transfer agent fees.

The Adviser has agreed to reimburse the Fund for certain investment adviser fees as a result of transactions in other affiliated investment companies. For the year ended October 31, 2023, the Adviser reimbursed $71,502.

Certain of the Fund’s assets are managed by Federated Global Investment Management Corp. (the “Sub-Adviser”). Under the terms of a sub-advisory agreement between the Adviser and the Sub-Adviser, the Sub-Adviser receives an allocable portion of the Fund’s adviser fee. The fee is paid by the Adviser out of its resources and is not an incremental Fund expense. For the year ended October 31, 2023, the Sub-Adviser earned a fee of $11,189,534.

Administrative Fee

Federated Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. For purposes of determining the appropriate rate breakpoint, “Investment Complex” is defined as all of the Federated Hermes Funds subject to a fee under the Administrative Services Agreement. The fee paid to FAS is based on the average daily net assets of the Investment Complex as specified below: 

Administrative Fee	Average Daily Net Assets of the Investment Complex
0.100%	on assets up to $50 billion
0.075%	on assets over $50 billion

Subject to the terms described in the Expense Limitation note, FAS may voluntarily choose to waive any portion of its fee. For the year ended October 31, 2023, the annualized fee paid to FAS was 0.078% of average daily net assets of the Fund.

In addition, FAS may charge certain out-of-pocket expenses to the Fund.

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Distribution Services Fee

The Fund has adopted a Distribution Plan (the “Plan”) pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will compensate Federated Securities Corp. (FSC), the principal distributor, from the daily net assets of the Fund’s Class A Shares, Class C Shares and Class R Shares to finance activities intended to result in the sale of these shares. The Plan provides that the Fund may incur distribution expenses at the following percentages of average daily net assets annually, to compensate FSC: 

	Percentage of Average Daily Net Assets of Class
Class A Shares	0.25%
Class C Shares	0.75%
Class R Shares	0.50%

Subject to the terms described in the Expense Limitation note, FSC may voluntarily choose to waive any portion of its fee. For the year ended October 31, 2023, distribution services fees for the Fund were as follows: 

	Distribution Services Fees Incurred	Distribution Services Fees Waived
Class C Shares	$949,672	$—
Class R Shares	214,921	(21,492)
TOTAL	$1,164,593	$(21,492)

When FSC receives fees, it may pay some or all of them to financial intermediaries whose customers purchase shares. For the year ended October 31, 2023, FSC retained $10,489 of fees paid by the Fund. For the year ended October 31, 2023, the Fund’s Class A Shares did not incur a distribution services fee; however, it may begin to incur this fee upon approval of the Trustees.

Sales Charges

Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Fund. They are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. For the year ended October 31, 2023, FSC retained $18,524 in sales charges from the sale of Class A Shares. FSC also retained $894 of CDSC relating to redemptions of Class A Shares and $10,294 relating to redemptions of Class C Shares, respectively.

Other Service Fees

For the year ended October 31, 2023, FSSC received $32,490 of the other service fees disclosed in Note 2.

Expense Limitation

The Adviser and certain of its affiliates (which may include FSC, FAS and FSSC) on their own initiative have agreed to waive certain amounts of their respective fees and/or reimburse expenses. Total annual fund operating expenses (as shown in the financial highlights, excluding dividends and other expenses related to short sales, interest expense, extraordinary expenses and proxy-related expenses paid by the Fund, if any) paid by the Fund’s Class A Shares, Class C Shares, Class R Shares, Institutional Shares and Class R6 Shares (after the voluntary waivers and/or reimbursements) will not exceed

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1.08%, 1.88%, 1.47%, 0.83% and 0.77% (the “Fee Limit”), respectively, up to but not including the later of (the “Termination Date”): (a) January 1, 2025; or (b) the date of the Fund’s next effective Prospectus. While the Adviser and its applicable affiliates currently do not anticipate terminating or increasing these arrangements prior to the Termination Date, these arrangements may only be terminated or the Fee Limit increased prior to the Termination Date with the agreement of the Trustees.

Interfund Transactions

During the year ended October 31, 2023, the Fund engaged in sale transactions with funds that have a common investment adviser (or affiliated investment advisers), common Directors/Trustees and/or common Officers. These sale transactions complied with Rule 17a-7 under the Act and amounted to $6,499,501. Net realized gain recognized on these transactions was $1,461,984.

Directors’/Trustees’ and Miscellaneous Fees

Certain Officers and Trustees of the Fund are Officers and Directors or Trustees of certain of the above companies. To efficiently facilitate payment, Independent Directors’/Trustees’ fees and certain expenses related to conducting meetings of the Directors/Trustees and other miscellaneous expenses are paid by an affiliate of the Adviser which in due course are reimbursed by the Fund. These expenses related to conducting meetings of the Directors/Trustees and other miscellaneous expenses may be included in Accrued and Miscellaneous Expenses on the Statement of Assets and Liabilities and Statement of Operations, respectively.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding long-term U.S. government securities and short-term obligations, for the year ended October 31, 2023, were as follows: 

Purchases	$337,317,897
Sales	$1,188,463,338

7. CONCENTRATION OF RISK

The Fund may invest a portion of its assets in securities of companies that are deemed by the Fund’s management to be classified in similar business sectors. Economic developments may have an effect on the liquidity and volatility of the portfolio securities.

A substantial portion of the Fund’s portfolio may be comprised of entities in the Information Technology and Health Care sectors. As a result, the Fund may be more susceptible to any economic, business, political or other developments which generally affect these entities.

8. 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 dated June 21, 2023. The LOC was made available to temporarily finance the repurchase or redemption of shares of the Fund, 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. The Fund’s ability to borrow under the LOC also is subject to the

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limitations of the Act and various conditions precedent that must be satisfied before the Fund can borrow. Loans under the LOC are charged interest at a fluctuating rate per annum equal to (a) the highest, on any day, of (i) the federal funds effective rate, (ii) the published secured overnight financing rate plus an assigned percentage, and (iii) 0.0%, plus (b) a margin. Any fund eligible to borrow under the LOC pays its pro rata share of a commitment fee based on the amount of the lenders’ commitment that has not been utilized, quarterly in arrears and at maturity. As of October 31, 2023, the Fund had no outstanding loans. During the year ended October 31, 2023, the Fund did not utilize the LOC.

9. INTERFUND LENDING

Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other funds advised by subsidiaries of Federated Hermes, Inc., may participate in an interfund lending program. This program provides an alternative credit facility allowing the Fund to borrow from other participating affiliated funds. As of October 31, 2023, there were no outstanding loans. During the year ended October 31, 2023, the program was not utilized.

10. INDEMNIFICATIONS

Under the Fund’s organizational documents, its Officers and Directors/Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund (other than liabilities arising out of their willful misfeasance, bad faith, gross negligence or reckless disregard of their duties to the Fund). In addition, in the normal course of business, the Fund provides certain indemnifications under arrangements with third parties. Typically, obligations to indemnify a third party arise in the context of an arrangement entered into by the Fund under which the Fund agrees to indemnify such third party for certain liabilities arising out of actions taken pursuant to the arrangement, provided the third party’s actions are not deemed to have breached an agreed-upon standard of care (such as willful misfeasance, bad faith, gross negligence or reckless disregard of their duties under the contract). The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet arisen. The Fund does not anticipate any material claims or losses pursuant to these arrangements at this time, and accordingly expects the risk of loss to be remote.

11. OTHER MATTERS

An outbreak of respiratory disease caused by a novel coronavirus was first detected in China in late 2019 and subsequently spread globally. As of the date of the issuance of these financial statements, this coronavirus has resulted in, and may continue to result in, closed borders, enhanced health screenings, disruptions to healthcare service preparation and delivery, quarantines, cancellations, and disruptions to supply chains, workflow operations and consumer activity, as well as general concern and uncertainty. The impact of this coronavirus has resulted in substantial economic volatility. Health crises caused by outbreaks, such as the coronavirus outbreak, may exacerbate other pre-existing political, social and economic risks. The impact of this outbreak, and other epidemics and pandemics that may arise in the future, could continue to negatively affect the worldwide economy, as well as the economies of individual countries, individual companies (including certain Fund service providers and issuers of the Fund’s investments) and the markets in general in significant and unforeseen ways. In addition,

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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 investments. Any such impact could adversely affect the Fund’s performance.

12. FEDERAL TAX INFORMATION (UNAUDITED)

For the year ended October 31, 2023, the amount of long-term capital gains designated by the Fund was $443,644,347.

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Report of Independent Registered Public Accounting Firm

TO THE BOARD OF TRUSTEES OF FEDERATED HERMES EQUITY FUNDS AND SHAREHOLDERS OF FEDERATED HERMES KAUFMANN LARGE CAP FUND:

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities of Federated Hermes Kaufmann Large Cap Fund (the “Fund”) (one of the portfolios constituting Federated Hermes Equity Funds (the “Trust”)), including the portfolio of investments, as of October 31, 2023, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the portfolios constituting Federated Hermes Equity Funds) at October 31, 2023, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.

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Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2023, by correspondence with the custodian, brokers, and others; when replies were not received from brokers or others, we performed other auditing procedures. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

We have served as the auditor of one or more Federated Hermes investment companies since 1979.

 

Boston, Massachusetts
December 22, 2023

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Shareholder Expense Example (unaudited)

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase or redemption payments; and (2) ongoing costs, including management fees and to the extent applicable, distribution (12b-1) fees and/or other service fees and other Fund expenses. This Example is intended to help you to understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. It is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from May 1, 2023 to October 31, 2023.

ACTUAL EXPENSES

The first section of the table below provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you incurred over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses attributable to your investment during this period.

HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES

The second section of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. Thus, you should not use the hypothetical account values and expenses to estimate the actual ending account balance or your expenses for the period. Rather, these figures are required to be provided to enable you to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

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Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase or redemption payments. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. 

	Beginning Account Value 5/1/2023	Ending Account Value 10/31/2023	Expenses Paid During Period1
Actual:
Class A Shares	$1,000	$1,049.40	$5.58
Class C Shares	$1,000	$1,044.80	$9.59
Class R Shares	$1,000	$1,047.90	$7.38
Institutional Shares	$1,000	$1,050.40	$4.29
Class R6 Shares	$1,000	$1,050.80	$3.98
Hypothetical (assuming a 5% return before expenses):
Class A Shares	$1,000	$1,019.76	$5.50
Class C Shares	$1,000	$1,015.83	$9.45
Class R Shares	$1,000	$1,018.00	$7.27
Institutional Shares	$1,000	$1,021.02	$4.23
Class R6 Shares	$1,000	$1,021.32	$3.92

 

1 Expenses are equal to the Fund’s annualized net expense ratios, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half-year period). The annualized net expense ratios are as follows:

 

Class A Shares	1.08%
Class C Shares	1.86%
Class R Shares	1.43%
Institutional Shares	0.83%
Class R6 Shares	0.77%

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Board of Trustees and Trust Officers

The Board of Trustees is responsible for managing the Trust’s business affairs and for exercising all the Trust’s powers except those reserved for the shareholders. The following tables give information about each Trustee and the senior officers of the Fund. Where required, the tables separately list Trustees who are “interested persons” of the Fund (i.e., “Interested” Trustees) and those who are not (i.e., “Independent” Trustees). Unless otherwise noted, the address of each person listed is 1001 Liberty Avenue, Pittsburgh, PA 15222-3779. The address of all Independent Trustees listed is 4000 Ericsson Drive, Warrendale, PA 15086-7561; Attention: Mutual Fund Board. As of December 31, 2022, the Trust comprised 9 portfolio(s), and the Federated Hermes Fund Family consisted of 33 investment companies (comprising 102 portfolios). Unless otherwise noted, each Officer is elected annually. Unless otherwise noted, each Trustee oversees all portfolios in the Federated Hermes Fund Family and serves for an indefinite term. The Fund’s Statement of Additional Information includes additional information about Trust Trustees and is available, without charge and upon request, by calling 1-800-341-7400, Option #4.

Interested Trustees Background 

Name Birth Date Positions Held with Trust Date Service Began

Principal Occupation(s) for Past Five Years, Other Directorships Held and Previous Position(s)

J. Christopher Donahue* Birth Date: April 11, 1949 President and Trustee Indefinite Term Began serving: January 2000

Principal Occupations: Principal Executive Officer and President of certain of the Funds in the Federated Hermes Fund Family; Director or Trustee of the Funds in the Federated Hermes Fund Family; President, Chief Executive Officer and Director, Federated Hermes, Inc.; Chairman and Trustee, Federated Investment Management Company; Trustee, Federated Investment Counseling; Chairman and Director, Federated Global Investment Management Corp.; Chairman and Trustee, Federated Equity Management Company of Pennsylvania; Trustee, Federated Shareholder Services Company; Director, Federated Services Company. Previous Positions: President, Federated Investment Counseling; President and Chief Executive Officer, Federated Investment Management Company, Federated Global Investment Management Corp. and Passport Research, Ltd; Chairman, Passport Research, Ltd.

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Name Birth Date Positions Held with Trust Date Service Began

Principal Occupation(s) for Past Five Years, Other Directorships Held and Previous Position(s)

John B. Fisher* Birth Date: May 16, 1956 Trustee Indefinite Term Began serving: May 2016

Principal Occupations: Principal Executive Officer and President of certain of the Funds in the Federated Hermes Fund Family; Director or Trustee of certain of the Funds in the Federated Hermes Fund Family; Director and Vice President, Federated Hermes, Inc.; President, Director/Trustee and CEO, Federated Advisory Services Company, Federated Equity Management Company of Pennsylvania, Federated Global Investment Management Corp., Federated Investment Counseling, Federated Investment Management Company, and Federated MDTA LLC; Director, Federated Investors Trust Company. Previous Positions: President and Director of the Institutional Sales Division of Federated Securities Corp.; President and CEO of Passport Research, Ltd.; Director and President, Technology, Federated Services Company.

*

Reasons for “interested” status: J. Christopher Donahue and John B. Fisher are interested due to their beneficial ownership of shares of Federated Hermes, Inc. and due to positions they hold with Federated Hermes, Inc. and its subsidiaries.

INDEPENDENT Trustees Background 

Name Birth Date Positions Held with Trust Date Service Began

Principal Occupation(s) for Past Five Years, Other Directorships Held, Previous Position(s) and Qualifications

John T. Collins Birth Date: January 24, 1947 Trustee Indefinite Term Began serving: October 2013

Principal Occupations: Director or Trustee, and Chair of the Board of Directors or Trustees, of the Federated Hermes Fund Family; formerly, Chairman and CEO, The Collins Group, Inc. (a private equity firm) (Retired). Other Directorships Held: Director, KLX Energy Services Holdings, Inc. (oilfield services); former Director of KLX Corp. (aerospace). Qualifications: Mr. Collins has served in several business and financial management roles and directorship positions throughout his career. Mr. Collins previously served as Chairman and CEO of The Collins Group, Inc. (a private equity firm) and as a Director of KLX Corp. Mr. Collins serves as Chairman Emeriti, Bentley University. Mr. Collins previously served as Director and Audit Committee Member, Bank of America Corp.; Director, FleetBoston Financial Corp.; and Director, Beth Israel Deaconess Medical Center (Harvard University Affiliate Hospital).

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Name Birth Date Positions Held with Trust Date Service Began	Principal Occupation(s) for Past Five Years, Other Directorships Held, Previous Position(s) and Qualifications
G. Thomas Hough Birth Date: February 28, 1955 Trustee Indefinite Term Began serving: August 2015	Principal Occupations: Director or Trustee, Chair of the Audit Committee of the Federated Hermes Fund Family; formerly, Vice Chair, Ernst & Young LLP (public accounting firm) (Retired). Other Directorships Held: Director, Chair of the Audit Committee, Equifax, Inc.; Lead Director, Member of the Audit and Nominating and Corporate Governance Committees, Haverty Furniture Companies, Inc.; formerly, Director, Member of Governance and Compensation Committees, Publix Super Markets, Inc. Qualifications: Mr. Hough has served in accounting, business management and directorship positions throughout his career. Mr. Hough most recently held the position of Americas Vice Chair of Assurance with Ernst & Young LLP (public accounting firm). Mr. Hough serves on the President’s Cabinet and Business School Board of Visitors for the University of Alabama. Mr. Hough previously served on the Business School Board of Visitors for Wake Forest University, and he previously served as an Executive Committee member of the United States Golf Association.
Maureen Lally-Green Birth Date: July 5, 1949 Trustee Indefinite Term Began serving: August 2009	Principal Occupations: Director or Trustee of the Federated Hermes Fund Family; Adjunct Professor Emerita of Law, Duquesne University School of Law; formerly, Dean of the Duquesne University School of Law and Professor of Law and Interim Dean of the Duquesne University School of Law; formerly, Associate General Secretary and Director, Office of Church Relations, Diocese of Pittsburgh. Other Directorships Held: Director, CNX Resources Corporation (natural gas). Qualifications: Judge Lally-Green has served in various legal and business roles and directorship positions throughout her career. Judge Lally-Green previously held the position of Dean of the School of Law of Duquesne University (as well as Interim Dean). Judge Lally-Green previously served as Associate General Secretary of the Diocese of Pittsburgh, a member of the Superior Court of Pennsylvania and as a Professor of Law, Duquesne University School of Law. Judge Lally- Green was appointed by the Supreme Court of Pennsylvania to serve on the Supreme Court’s Board of Continuing Judicial Education and the Supreme Court’s Appellate Court Procedural Rules Committee. Judge Lally-Green also currently holds the positions on not for profit or for profit boards of directors as follows: Director and Chair, UPMC Mercy Hospital; Regent, Saint Vincent Seminary; Member, Pennsylvania State Board of Education (public); Director, Catholic Charities, Pittsburgh; and Director CNX Resources Corporation (natural gas). Judge Lally-Green has held the positions of: Director, Auberle; Director, Epilepsy Foundation of Western and Central Pennsylvania; Director, Ireland Institute of Pittsburgh; Director, Saint Thomas More Society; Director and Chair, Catholic High Schools of the Diocese of Pittsburgh, Inc.; Director, Pennsylvania Bar Institute; Director, St. Vincent College; Director and Chair, North Catholic High School, Inc.; Director and Vice Chair, Our Campaign for the Church Alive!, Inc.; and Director and Vice Chair, Saint Francis University.

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Name Birth Date Positions Held with Trust Date Service Began	Principal Occupation(s) for Past Five Years, Other Directorships Held, Previous Position(s) and Qualifications
Thomas M. O’Neill Birth Date: June 14, 1951 Trustee Indefinite Term Began serving: October 2006	Principal Occupations: Director or Trustee of the Federated Hermes Fund Family; Sole Proprietor, Navigator Management Company (investment and strategic consulting). Other Directorships Held: None. Qualifications: Mr. O’Neill has served in several business, mutual fund and financial management roles and directorship positions throughout his career. Mr. O’Neill serves as Director, Medicines for Humanity. Mr. O’Neill previously served as Chief Executive Officer and President, Managing Director and Chief Investment Officer, Fleet Investment Advisors; President and Chief Executive Officer, Aeltus Investment Management, Inc.; General Partner, Hellman, Jordan Management Co., Boston, MA; Chief Investment Officer, The Putnam Companies, Boston, MA; Credit Analyst and Lending Officer, Fleet Bank; Director and Consultant, EZE Castle Software (investment order management software); Director, Midway Pacific (lumber); and Director, The Golisano Children’s Museum of Naples, Florida.
Madelyn A. Reilly Birth Date: February 2, 1956 Trustee Indefinite Term Began serving: November 2020	Principal Occupations: Director or Trustee of the Federated Hermes Fund Family; formerly, Senior Vice President for Legal Affairs, General Counsel and Secretary of Board of Directors, Duquesne University (Retired). Other Directorships Held: None. Qualifications: Ms. Reilly has served in various business and legal management roles throughout her career. Ms. Reilly previously served as Senior Vice President for Legal Affairs, General Counsel and Secretary of Board of Directors and Director of Risk Management and Associate General Counsel, Duquesne University. Prior to her work at Duquesne University, Ms. Reilly served as Assistant General Counsel of Compliance and Enterprise Risk as well as Senior Counsel of Environment, Health and Safety, PPG Industries. Ms. Reilly currently serves as a member of the Board of Directors of UPMC Mercy Hospital.

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Name Birth Date Positions Held with Trust Date Service Began	Principal Occupation(s) for Past Five Years, Other Directorships Held, Previous Position(s) and Qualifications
P. Jerome Richey Birth Date: February 23, 1949 Trustee Indefinite Term Began serving: October 2013	Principal Occupations: Director or Trustee of the Federated Hermes Fund Family; Retired; formerly, Senior Vice Chancellor and Chief Legal Officer, University of Pittsburgh and Executive Vice President and Chief Legal Officer, CONSOL Energy Inc. (now split into two separate publicly traded companies known as CONSOL Energy Inc. and CNX Resources Corp.). Other Directorships Held: None. Qualifications: Mr. Richey has served in several business and legal management roles and directorship positions throughout his career. Mr. Richey most recently held the positions of Senior Vice Chancellor and Chief Legal Officer, University of Pittsburgh. Mr. Richey previously served as Chairman of the Board, Epilepsy Foundation of Western Pennsylvania and Chairman of the Board, World Affairs Council of Pittsburgh. Mr. Richey previously served as Chief Legal Officer and Executive Vice President, CONSOL Energy Inc. and CNX Gas Company; and Board Member, Ethics Counsel and Shareholder, Buchanan Ingersoll & Rooney PC (a law firm).
John S. Walsh Birth Date: November 28, 1957 Trustee Indefinite Term Began serving: January 1999	Principal Occupations: Director or Trustee of the Federated Hermes Fund Family; President and Director, Heat Wagon, Inc. (manufacturer of construction temporary heaters); President and Director, Manufacturers Products, Inc. (distributor of portable construction heaters); President, Portable Heater Parts, a division of Manufacturers Products, Inc. Other Directorships Held: None. Qualifications: Mr. Walsh has served in several business management roles and directorship positions throughout his career. Mr. Walsh previously served as Vice President, Walsh & Kelly, Inc. (paving contractors).

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OFFICERS 

Name Birth Date Address Positions Held with Trust Date Service Began	Principal Occupation(s) for Past Five Years and Previous Position(s)
Lori A. Hensler Birth Date: January 6, 1967 TREASURER Officer since: April 2013	Principal Occupations: Principal Financial Officer and Treasurer of the Federated Hermes Fund Family; Senior Vice President, Federated Administrative Services; Financial and Operations Principal for Federated Securities Corp.; and Assistant Treasurer, Federated Investors Trust Company. Ms. Hensler has received the Certified Public Accountant designation. Previous Positions: Controller of Federated Hermes, Inc.; Senior Vice President and Assistant Treasurer, Federated Investors Management Company; Treasurer, Federated Investors Trust Company; Assistant Treasurer, Federated Administrative Services, Federated Administrative Services, Inc., Federated Securities Corp., Edgewood Services, Inc., Federated Advisory Services Company, Federated Equity Management Company of Pennsylvania, Federated Global Investment Management Corp., Federated Investment Counseling, Federated Investment Management Company, Passport Research, Ltd., and Federated MDTA, LLC; Financial and Operations Principal for Federated Securities Corp., Edgewood Services, Inc. and Southpointe Distribution Services, Inc.
Peter J. Germain Birth Date: September 3, 1959 CHIEF LEGAL OFFICER, SECRETARY and EXECUTIVE VICE PRESIDENT Officer since: January 2005	Principal Occupations: Mr. Germain is Chief Legal Officer, Secretary and Executive Vice President of the Federated Hermes Fund Family. He is General Counsel, Chief Legal Officer, Secretary and Executive Vice President, Federated Hermes, Inc.; Trustee and Senior Vice President, Federated Investors Management Company; Trustee and President, Federated Administrative Services; Director and President, Federated Administrative Services, Inc.; Director and Vice President, Federated Securities Corp.; Director and Secretary, Federated Private Asset Management, Inc.; Secretary, Federated Shareholder Services Company; and Secretary, Retirement Plan Service Company of America. Mr. Germain joined Federated Hermes, Inc. in 1984 and is a member of the Pennsylvania Bar Association. Previous Positions: Deputy General Counsel, Special Counsel, Managing Director of Mutual Fund Services, Federated Hermes, Inc.; Senior Vice President, Federated Services Company; and Senior Corporate Counsel, Federated Hermes, Inc.
Stephen Van Meter Birth Date: June 5, 1975 CHIEF COMPLIANCE OFFICER AND SENIOR VICE PRESIDENT Officer since: July 2015	Principal Occupations: Senior Vice President and Chief Compliance Officer of the Federated Hermes Fund Family; Vice President and Chief Compliance Officer of Federated Hermes, Inc. and Chief Compliance Officer of certain of its subsidiaries. Mr. Van Meter joined Federated Hermes, Inc. in October 2011. He holds FINRA licenses under Series 3, 7, 24 and 66. Previous Positions: Mr. Van Meter previously held the position of Compliance Operating Officer, Federated Hermes, Inc. Prior to joining Federated Hermes, Inc., Mr. Van Meter served at the United States Securities and Exchange Commission in the positions of Senior Counsel, Office of Chief Counsel, Division of Investment Management and Senior Counsel, Division of Enforcement.

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Name Birth Date Address Positions Held with Trust Date Service Began

Principal Occupation(s) for Past Five Years and Previous Position(s)

Stephen F. Auth Birth Date: September 13, 1956 101 Park Avenue 41st Floor New York, NY 10178 CHIEF INVESTMENT OFFICER Officer since: November 2002

Principal Occupations: Stephen F. Auth is Chief Investment Officer of various Funds in the Federated Hermes Fund Family; Executive Vice President, Federated Investment Counseling, Federated Global Investment Management Corp. and Federated Equity Management Company of Pennsylvania. Previous Positions: Executive Vice President, Federated Investment Management Company and Passport Research, Ltd. (investment advisory subsidiary of Federated); Senior Vice President, Global Portfolio Management Services Division; Senior Vice President, Federated Investment Management Company and Passport Research, Ltd.; Senior Managing Director and Portfolio Manager, Prudential Investments.

 

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Evaluation and Approval of Advisory Contract–May 2023

Federated Hermes Kaufmann Large Cap Fund (the “Fund”)

At its meetings in May 2023 (the “May Meetings”), the Fund’s Board of Trustees (the “Board”), including those Trustees who are not “interested persons” of the Fund, as defined in the Investment Company Act of 1940 (the “Independent Trustees”), reviewed and unanimously approved the continuation of the investment advisory contract between the Fund and Federated Equity Management Company of Pennsylvania (the “Adviser”) and the investment subadvisory contract between the Adviser and Federated Global Investment Management Corp. (the “Sub-Adviser” and together with the Adviser, the “Advisers”) with respect to the Fund (together, the “Contracts”) for an additional one-year term. The Board’s determination to approve the continuation of the Contracts reflects the exercise of its business judgment after considering all of the information and factors believed to be relevant and appropriate on whether to approve the continuation of the existing arrangements. The information, factors and conclusions that formed the basis for the Board’s approval are summarized below.

Information Received and Review Process

At the request of the Independent Trustees, the Fund’s Chief Compliance Officer (the “CCO”) furnished to the Board in advance of its May Meetings an independent written evaluation of the Fund’s management fee (the “CCO Fee Evaluation Report”). The Board considered the CCO Fee Evaluation Report, along with other information, in evaluating the reasonableness of the Fund’s management fee and in determining to approve the continuation of the Contracts. The CCO, in preparing the CCO Fee Evaluation Report, has the authority to retain consultants, experts or staff as reasonably necessary to assist in the performance of his duties, reports directly to the Board, and can be terminated only with the approval of a majority of the Independent Trustees. At the request of the Independent Trustees, the CCO Fee Evaluation Report followed the same general approach and covered the same topics as that of the report that had previously been delivered by the CCO in his capacity as “Senior Officer” prior to the elimination of the Senior Officer position in December 2017.

In addition to the extensive materials that comprise and accompany the CCO Fee Evaluation Report, the Board considered information specifically prepared in connection with the approval of the continuation of the Contracts that was presented at the May Meetings. In this regard, in the months preceding the May Meetings, the Board requested and reviewed written responses and supporting materials prepared by the Advisers and their affiliates (collectively, “Federated Hermes”) in response to requests posed to Federated Hermes by independent legal counsel on behalf of the Independent Trustees encompassing a wide variety of topics, including those summarized below. The Board also

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considered such additional matters as the Independent Trustees deemed reasonably necessary to evaluate the Contracts, which included detailed information about the Fund and Federated Hermes furnished to the Board at its meetings throughout the year and in between regularly scheduled meetings on particular matters as the need arose. The Independent Trustees also considered the presentation from the Fund’s portfolio managers received at the May Meetings regarding the Fund and its performance and other investment-related matters.

The Board’s consideration of the Contracts included review of materials and information covering the following matters, among others: the nature, quality and extent of the advisory and other services provided to the Fund by Federated Hermes; Federated Hermes’ business and operations; the Advisers’ investment philosophy, personnel and processes; the Fund’s investment objectives and strategies; the Fund’s short-term and long-term performance (in absolute terms, both on a gross basis and net of expenses, and relative to the Fund’s particular investment program and a group of its peer funds and/or its benchmark, as appropriate); the Fund’s fees and expenses, including the advisory fee and the overall expense structure of the Fund (both in absolute terms and relative to a group of its peer funds), with due regard for contractual or voluntary expense limitations (if any); the financial condition of Federated Hermes; the Adviser’s profitability with respect to managing the Fund; distribution and sales activity for the Fund; and the use and allocation of brokerage commissions derived from trading the Fund’s portfolio securities (if any).

The Board also considered judicial decisions concerning allegedly excessive investment advisory fees charged to other registered funds in evaluating the Contracts. Using these judicial decisions as a guide, the Board observed that the following factors may be relevant to an adviser’s fiduciary duty with respect to its receipt of compensation from a fund: (1) the nature and quality of the services provided by the adviser to the fund and its shareholders, including the performance of the fund, its benchmark and comparable funds; (2) the adviser’s cost of providing the services and the profitability to the adviser of providing advisory services to the fund; (3) the extent to which the adviser may realize “economies of scale” as the fund grows larger and, if such economies of scale exist, whether they have been appropriately shared with the fund and its shareholders or the family of funds; (4) any “fall-out” benefits that accrue to the adviser because of its relationship with the fund, including research services received from brokers that execute fund trades and any fees paid to affiliates of the adviser for services rendered to the fund; (5) comparative fee and expense structures, including a comparison of management fees paid to the adviser with those paid by similar funds managed by the same adviser or other advisers as well as management fees charged to institutional and other advisory clients of the same adviser for what might be viewed as like services; and (6) the extent of care, conscientiousness and independence with which the

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fund’s board members perform their duties and their expertise, including whether they are fully informed about all facts the board deems relevant to its consideration of the adviser’s services and fees. The Board noted that the Securities and Exchange Commission (“SEC”) disclosure requirements regarding the basis for a fund board’s approval of the fund’s investment advisory contract generally align with the factors listed above. The Board was guided by these factors in its evaluation of the Contracts to the extent it considered them to be appropriate and relevant, as discussed further below. The Board considered and weighed these factors in light of its substantial accumulated experience in governing the Fund and working with Federated Hermes on matters relating to the oversight of the other funds advised by Federated Hermes (each, a “Federated Hermes Fund” and, collectively, the “Federated Hermes Funds”).

In addition, the Board considered the preferences and expectations of Fund shareholders and the potential disruptions of the Fund’s operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew the Contracts. In particular, the Board recognized that many shareholders likely have invested in the Fund based on the strength of Federated Hermes’ industry standing and reputation and with the expectation that Federated Hermes will have a continuing role in providing advisory services to the Fund. Thus, the Board observed that there are a range of investment options available to the Fund’s shareholders in the marketplace, and such shareholders, having had the opportunity to consider other investment options, have effectively selected Federated Hermes by virtue of investing in the Fund.

In determining to approve the continuation of the Contracts, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate through the exercise of their reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to approve the continuation of the Contracts was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the continuation of the Contracts. The Board recognized that its evaluation process is evolutionary and that the factors considered and emphasis placed on relevant factors may change in recognition of changing circumstances in the registered fund marketplace. The Independent Trustees were assisted throughout the evaluation process by independent legal counsel. In connection with their deliberations at the May Meetings, the Independent Trustees met separately in executive session with their independent legal counsel and without management present to review the relevant materials and consider their responsibilities under applicable laws. In addition, senior management representatives of Federated Hermes also met with the Independent Trustees and their independent legal counsel to discuss the materials and presentations

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furnished to the Board at the May Meetings. The Board considered the approval of the Contracts for the Fund as part of its consideration of agreements for funds across the family of Federated Hermes Funds, but its approvals were made on a fund-by-fund basis.

Nature, Extent and Quality of Services

The Board considered the nature, extent and quality of the services provided to the Fund by the Advisers and the resources of Federated Hermes dedicated to the Fund. In this regard, the Board evaluated, among other things, the terms of the Contracts and the range of services provided to the Fund by Federated Hermes. The Board considered the Advisers’ personnel, investment philosophy and process, investment research capabilities and resources, trade operations capabilities, experience and performance track record. The Board reviewed the qualifications, backgrounds and responsibilities of the portfolio management team primarily responsible for the day-to-day management of the Fund and Federated Hermes’ ability and experience in attracting and retaining qualified personnel to service the Fund. The Board considered the trading operations by the Advisers, including the execution of portfolio transactions and the selection of brokers for those transactions. The Board also considered the Advisers’ ability to deliver competitive investment performance for the Fund when compared to the Fund’s Performance Peer Group (as defined below), which was deemed by the Board to be a useful indicator of how the Advisers are executing the Fund’s investment program.

In addition, the Board considered the financial resources and overall reputation of Federated Hermes and its willingness to consider and make investments in personnel, infrastructure, technology, cybersecurity, business continuity planning and operational enhancements that are designed to benefit the Federated Hermes Funds. The Board noted that the significant acquisition of Hermes Fund Managers Limited by Federated Hermes has deepened Federated Hermes’ investment management expertise and capabilities and expanded its access to analytical resources related to environmental, social and governance (“ESG”) factors and issuer engagement on ESG matters. The Board considered Federated Hermes’ oversight of the securities lending program for the Federated Hermes Funds that engage in securities lending and noted the income earned by the Federated Hermes Funds that participate in such program. In addition, the Board considered the quality of Federated Hermes’ communications with the Board and responsiveness to Board inquiries and requests made from time to time with respect to the Federated Hermes Funds. The Board also considered that Federated Hermes is responsible for providing the Federated Hermes Funds’ officers.

The Board received and evaluated information regarding Federated Hermes’ regulatory and compliance environment. The Board considered Federated Hermes’ compliance program and compliance history and reports from the CCO about Federated Hermes’ compliance with applicable laws and

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regulations, including responses to regulatory developments and any compliance or other issues raised by regulatory agencies. The Board also noted Federated Hermes’ support of the Federated Hermes Funds’ compliance control structure and the compliance-related resources devoted by Federated Hermes in support of the Fund’s obligations pursuant to Rule 38a-1 under the Investment Company Act of 1940, including Federated Hermes’ commitment to respond to rulemaking and other regulatory initiatives of the SEC. The Board considered Federated Hermes’ approach to risk management with respect to the Federated Hermes Funds and its day-to-day oversight of the Federated Hermes Funds’ compliance with their investment objectives and policies as well as with applicable laws and regulations, noting that regulatory and other developments had over time led, and continue to lead, to an increase in the scope of Federated Hermes’ oversight in this regard, including in connection with the implementation of new rules on derivatives risk management and fair valuation. The Board also considered the implementation of Federated Hermes’ business continuity plans. In addition, the Board noted Federated Hermes’ commitment to maintaining high quality systems and expending substantial resources to prepare for and respond to ongoing changes due to the market, regulatory and control environments in which the Fund and its service providers operate.

The Board considered Federated Hermes’ efforts to provide shareholders in the Federated Hermes Funds with a comprehensive array of funds with different investment objectives, policies and strategies. The Board considered the expenses that Federated Hermes had incurred, as well as the entrepreneurial and other risks assumed by Federated Hermes, in sponsoring and providing on-going services to new funds to expand these opportunities for shareholders. The Board noted the benefits to shareholders of being part of the family of Federated Hermes Funds, which include the general right to exchange investments between the same class of shares without the incurrence of additional sales charges.

Based on these considerations, the Board concluded that it was satisfied with the nature, extent and quality of the services provided by the Advisers to the Fund.

Fund Investment Performance

The Board considered the investment performance of the Fund. In evaluating the Fund’s investment performance, the Board considered performance results in light of the Fund’s investment objective, strategies and risks. The Board considered detailed investment reports on, and the Advisers’ analysis of, the Fund’s performance over different time periods that were provided to the Board throughout the year and in connection with the May Meetings. These reports included, among other items, information on the Fund’s gross and net returns, the Fund’s investment performance compared to one or more relevant categories or groups of peer funds and the Fund’s

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benchmark index, performance attribution information and commentary on the effect of market conditions. The Board considered that, in its evaluation of investment performance at meetings throughout the year, it focused particular attention on information indicating less favorable performance of certain Federated Hermes Funds for specific time periods and discussed with Federated Hermes the reasons for such performance as well as any specific actions Federated Hermes had taken, or had agreed to take, to seek to enhance Fund investment performance and the results of those actions.

The Board also reviewed comparative information regarding the performance of other registered funds in the category of peer funds selected by Morningstar, Inc. (the “Morningstar”), an independent fund ranking organization (the “Performance Peer Group”). The Board noted the CCO’s view that comparisons to fund peer groups may be helpful, though not conclusive, in evaluating the performance of the Advisers in managing the Fund. The Board considered the CCO’s view that, in evaluating such comparisons, in some cases there may be differences in the funds’ objectives or investment management techniques, or the costs to implement the funds, even within the same Performance Peer Group. In this connection, the Board considered that the longevity and experience of the Fund’s portfolio management team and its extensive bottom-up approach to investing may limit the utility of comparisons to other equity mutual funds.

The Board considered that the Fund’s performance fell below the median of the Performance Peer Group for the one-year, three-year and five-year periods ended December 31, 2022. The Board discussed the Fund’s performance with the Advisers and recognized the efforts being taken by the Advisers in the context of other factors considered relevant by the Board.

Based on these considerations, the Board concluded that it had continued confidence in the Advisers’ overall capabilities to manage the Fund.

Fund Expenses

The Board considered the advisory fee, sub-advisory fee, and overall expense structure of the Fund and the comparative fee and expense information that had been provided in connection with the May Meetings. In this regard, the Board was presented with, and considered, information regarding the contractual advisory fee rates, net advisory fee rates, total expense ratios and each element of the Fund’s total expense ratio (i.e., gross and net advisory fees, administrative fees, custody fees, portfolio accounting fees and transfer agency fees) relative to an appropriate group of peer funds compiled by Federated Hermes from the category of peer funds selected by Morningstar (the “Expense Peer Group”). The Board received a description of the methodology used to select the Expense Peer Group from the overall Morningstar category. The Board also reviewed comparative information regarding the fees and expenses of the broader group of funds in the overall Morningstar category.

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While mindful that courts have cautioned against giving too much weight to comparative information concerning fees charged to funds by other advisers, the use of comparisons between the Fund and its Expense Peer Group assisted the Board in its evaluation of the Fund’s fees and expenses. The Board focused on comparisons with other registered funds with comparable investment programs more heavily than non-registered fund products or services because such comparisons are believed to be more relevant. The Board considered that other registered funds are the products most like the Fund, in that they are readily available to Fund shareholders as alternative investment vehicles, and they are the type of investment vehicle, in fact, chosen and maintained by the Fund’s shareholders. The Board noted that the range of such other registered funds’ fees and expenses, therefore, appears to be a relevant indicator of what investors have found to be reasonable in the marketplace in which the Fund competes.

The Board reviewed the contractual advisory fee rate, net advisory fee rate and other expenses of the Fund and noted the position of the Fund’s fee rates relative to its Expense Peer Group. In this regard, the Board noted that the contractual advisory fee rate was above the median of the Expense Peer Group, but the Board noted the applicable waivers and reimbursements, and that the overall expense structure of the Fund remained competitive in the context of other factors considered by the Board.

The Board also received and considered information about the nature and extent of services offered and fees charged by Federated Hermes to other types of clients with investment strategies similar to those of the Federated Hermes Funds, including non-registered fund clients (such as institutional separate accounts) and third-party unaffiliated registered funds for which any of the Advisers or their affiliates serve as sub-adviser. The Board noted the CCO’s conclusion that non-registered fund clients are inherently different products due to the following differences, among others: (i) different types of targeted investors; (ii) different applicable laws and regulations; (iii) different legal structures; (iv) different average account sizes and portfolio management techniques made necessary by different cash flows and different associated costs; (v) the time spent by portfolio managers and their teams (among other personnel across various departments, including legal, compliance and risk management) in reviewing securities pricing and fund liquidity; (vi) different administrative responsibilities; (vii) different degrees of risk associated with management; and (viii) a variety of different costs. The Board also considered information regarding the differences in the nature of the services required for Federated Hermes to manage its proprietary registered fund business versus managing a discrete pool of assets as a sub-adviser to another institution’s registered fund, noting the CCO’s view that Federated Hermes generally performs significant additional services and assumes substantially greater risks in managing the Fund and other Federated Hermes Funds than in its role as

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sub-adviser to an unaffiliated third-party registered fund. The Board noted that the CCO did not consider the fees for providing advisory services to other types of clients to be determinative in judging the appropriateness of the Federated Hermes Funds’ advisory fees.

Based on these considerations, the Board concluded that the fees and total operating expenses of the Fund, in conjunction with other matters considered, are reasonable in light of the services provided.

Profitability

The Board received and considered profitability information furnished by Federated Hermes. Such profitability information included revenues reported on a fund-by-fund basis and estimates of the allocation of expenses made on a fund-by-fund basis, using allocation methodologies specified by the CCO and described to the Board. The Board considered the CCO’s view that, while these cost allocation reports apply consistent allocation processes, the inherent difficulties in allocating costs on a fund-by-fund basis continues to cause the CCO to question the precision of the process and to conclude that such reports may be unreliable because a single change in an allocation estimate may dramatically alter the resulting estimate of cost and/or profitability of a Federated Hermes Fund and may produce unintended consequences. In addition, the Board considered the CCO’s view that the allocation methodologies used by Federated Hermes in estimating profitability for purposes of reporting to the Board in connection with the continuation of the Contracts are consistent with the methodologies previously reviewed by an independent consultant. The Board noted that the independent consultant had previously conducted a review of the allocation methodologies and reported to the Board that, although there is no single best method to allocate expenses, the methodologies used by Federated Hermes are reasonable.

The Board also reviewed information compiled by Federated Hermes comparing its profitability information to other publicly held fund management companies, including information regarding profitability trends over time. The Board recognized that profitability comparisons among fund management companies are difficult because of the variation in the type of comparative information that is publicly available, and the profitability of any fund management company is affected by numerous factors. The Board considered the CCO’s conclusion that, based on such profitability information, Federated Hermes’ profit margins did not appear to be excessive and the advisory or administrative fees are not unreasonable. The Board also considered the CCO’s view that Federated Hermes appeared financially sound, with the resources necessary to fulfill its obligations under its contracts with the Federated Hermes Funds.

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Economies of Scale

The Board received and considered information about the notion of possible realization of “economies of scale” as a fund grows larger, the difficulties of determining economies of scale at an individual fund level, and the extent to which potential scale benefits are shared with shareholders. In this regard, the Board considered that Federated Hermes has made significant and long-term investments in areas that support all of the Federated Hermes Funds, such as: portfolio management, investment research and trading operations; shareholder services; compliance; business continuity, cybersecurity and information security programs; internal audit and risk management functions; and technology and use of data. The Board noted that Federated Hermes’ investments in these areas are extensive and are designed to provide enhanced services to the Federated Hermes Funds and their shareholders. The Board considered that the benefits of these investments are likely to be shared with the family of Federated Hermes Funds as a whole.

In addition, the Board considered that fee waivers and expense reimbursements are another means for potential economies of scale to be shared with shareholders and can provide protection from an increase in expenses if a Federated Hermes Fund’s assets decline. The Board considered that, in order for the Federated Hermes Funds to remain competitive in the marketplace, Federated Hermes has frequently waived fees and/or reimbursed expenses for the Federated Hermes Funds and has disclosed to shareholders and/or reported to the Board its intention to do so (or continue to do so) in the future. The Board also considered that Federated Hermes has been active in managing expenses of the Federated Hermes Funds in recent years, which has resulted in benefits being realized by shareholders.

The Board also received and considered information on adviser-paid fees (commonly referred to as “revenue sharing” payments) that was provided to the Board throughout the year and in connection with the May Meetings. The Board considered that Federated Hermes and the CCO believe that this information is relevant to considering whether Federated Hermes had an incentive to either not apply breakpoints, or to apply breakpoints at higher levels, but should not be considered when evaluating the reasonableness of advisory fees. The Board also noted the absence of any applicable regulatory or industry guidelines on economies of scale, which is compounded by the lack of any uniform methodology or pattern with respect to structuring fund advisory fees with breakpoints that serve to reduce the fees as a fund attains a certain size.

Other Benefits

The Board considered information regarding the compensation and other ancillary (or “fall-out”) benefits that Federated Hermes derived from its relationships with the Federated Hermes Funds. The Board noted that, in addition to receiving advisory fees under the Federated Hermes Funds’ investment advisory contracts, Federated Hermes’ affiliates also receive fees

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for providing other services to the Federated Hermes Funds under separate service contracts, including for serving as the Federated Hermes Funds’ administrator and distributor. In this regard, the Board considered that Federated Hermes’ affiliates provide distribution and shareholder services to the Federated Hermes Funds, for which they may be compensated through distribution and servicing fees paid pursuant to Rule 12b-1 plans or otherwise. The Board also received and considered information detailing the benefits, if any, that Federated Hermes may derive from its receipt of research services from brokers who execute portfolio trades for the Federated Hermes Funds.

Conclusions

The Board considered: (i) the CCO’s conclusion that his observations and the information accompanying the CCO Fee Evaluation Report show that the management fee for the Fund is reasonable; and (ii) the CCO’s recommendation that the Board approve the management fee. The Board noted that, under these circumstances, no changes were recommended to, and no objection was raised to the continuation of, the Contracts by the CCO. The CCO also recognized that the Board’s evaluation of the Federated Hermes Funds’ advisory and sub-advisory arrangements is a continuing and ongoing process that is informed by the information that the Board requests and receives from management throughout the course of the year and, in this regard, the CCO noted certain items for future reporting to the Board or further consideration by management as the Board continues its ongoing oversight of the Federated Hermes Funds.

On the basis of the information and factors summarized above, among other information and factors deemed relevant by the Board, and the evaluation thereof, the Board, including the Independent Trustees, unanimously voted to approve the continuation of the Contracts. The Board based its determination to approve the Contracts on the totality of the circumstances and relevant factors and with a view of past and future long-term considerations. Not all of the factors and considerations identified above were necessarily deemed to be relevant to the Fund, nor did the Board consider any one of them to be determinative.

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Liquidity Risk Management Program–
Annual Evaluation of Adequacy and Effectiveness

In accordance with Rule 22e-4 under the Investment Company Act of 1940, as amended (the “Liquidity Rule”), Federated Hermes Equity Funds (the “Trust”) has adopted and implemented a liquidity risk management program (the “Program”) for Federated Hermes Kaufmann Large Cap Fund (the “Fund” and, collectively with the other non-money market open-end funds advised by Federated Hermes, the “Federated Hermes Funds”). The Program seeks to assess and manage the Fund’s liquidity risk. “Liquidity risk” is defined under the Liquidity Rule as the risk that the Fund is unable to meet redemption requests without significantly diluting remaining investors’ interests in the Fund. The Board of Trustees of the Trust (the “Board”) has approved the designation of each Federated Hermes Fund’s investment adviser as the administrator for the Program (the “Administrator”) with respect to that Fund. The Administrator, in turn, has delegated day-to-day responsibility for the administration of the Program to multiple Liquidity Risk Management Committees, which are comprised of representatives from certain divisions within Federated Hermes.

The Program is comprised of various components designed to support the assessment and/or management of liquidity risk, including: (1) the periodic assessment (no less frequently than annually) of certain factors that influence the Fund’s liquidity risk; (2) the periodic classification (no less frequently than monthly) of the Fund’s investments into one of four liquidity categories that reflect an estimate of their liquidity under current market conditions; (3) a 15% limit on the acquisition of “illiquid investments” (as defined under the Liquidity Rule); (4) to the extent a Fund does not invest primarily in “highly liquid investments” (as defined under the Liquidity Rule), the determination of a minimum percentage of the Fund’s assets that generally will be invested in highly liquid investments (an “HLIM”); (5) if a Fund has established an HLIM, the periodic review (no less frequently than annually) of the HLIM and the adoption of policies and procedures for responding to a shortfall of the Fund’s highly liquid investments below its HLIM; and (6) periodic reporting to the Board.

At its meetings in May 2023, the Board received and reviewed a written report (the “Report”) from the Federated Hermes Funds’ Chief Compliance Officer and Chief Risk Officer, on behalf of the Administrator, concerning the operation of the Program for the period from April 1, 2022 through March 31, 2023 (the “Period”). The Report addressed the operation of the Program and assessed the adequacy and effectiveness of its implementation, including, where applicable, the operation of any HLIM established for a Federated Hermes Fund. There were no material changes to the Program during the Period. The Report summarized the operation of the Program and

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the information and factors considered by the Administrator in assessing whether the Program has been adequately and effectively implemented with respect to the Federated Hermes Funds. Such information and factors included, among other things:

◾ confirmation that it was not necessary for the Fund to utilize, and the Fund did not utilize, any alternative funding sources that were available to the Federated Hermes Funds during the Period, such as the Federated Hermes Funds’ interfund lending facility, redemptions in-kind, reverse repurchase agreement transactions, redemptions delayed beyond the normal T+1 settlement but within seven days of the redemption request, and committed lines of credit;

◾ the periodic classifications of the Fund’s investments into one of four liquidity categories and the methodologies and inputs used to classify the investments, including the Fund’s reasonably anticipated trade size;

◾ the analysis received from a third-party liquidity assessment vendor that is taken into account in the process of determining the liquidity classifications of the Fund’s investments, and the results of the Administrator’s evaluation of the services performed by the vendor in support of this process, including the Administrator’s view that the methodologies utilized by the vendor continue to be appropriate;

◾ the fact that the Fund invested primarily in highly liquid investments during the Period and, therefore, was not required to establish, and has not established, an HLIM and the operation of the procedures for monitoring the status of the Fund as investing primarily in highly liquid investments;

◾ the fact that the Fund invested no more than 15% of its assets in illiquid investments during the Period, and the operation of the procedures for monitoring this limit;

◾ the fact that there were no liquidity events during the Period that materially affected the Fund’s liquidity risk;

◾ the impact on liquidity and management of liquidity risk, if any, caused by extended non-U.S. market closures and confirmation that there were no issues for any of the affected Federated Hermes Funds in meeting shareholder redemptions at any time during these temporary non-U.S. market closures.

Based on this review, the Administrator concluded that the Program is operating effectively to assess and manage the Fund’s liquidity risk, and that the Program has been and continues to be adequately and effectively implemented to monitor and, as applicable, respond to the Fund’s liquidity developments.

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Voting Proxies on Fund Portfolio Securities

A description of the policies and procedures that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund’s portfolio is available, without charge and upon request, by calling 1-800-341-7400, Option #4. A report on “Form N-PX” of how the Fund voted any such proxies during the most recent 12-month period ended June 30 is available via the Proxy Voting Record (Form N-PX) link associated with the Fund and share class name at FederatedHermes.com/us/FundInformation. Form N-PX filings are also available at the SEC’s website at sec.gov.

Quarterly Portfolio Schedule

Each fiscal quarter, the Fund will file with the SEC a complete schedule of its monthly portfolio holdings on “Form N-PORT.” The Fund’s holdings as of the end of the third month of every fiscal quarter, as reported on Form N-PORT, will be publicly available on the SEC’s website at sec.gov within 60 days of the end of the fiscal quarter upon filing. You may also access this information via the link to the Fund and share class name at FederatedHermes.com/us.

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Mutual funds are not bank deposits or obligations, are not guaranteed by any bank and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal.

This Report is authorized for distribution to prospective investors only when preceded or accompanied by the Fund’s Prospectus, which contains facts concerning its objective and policies, management fees, expenses and other information.   

 

Federated Hermes Kaufmann Large Cap Fund
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561

Contact us atFederatedHermes.com/us
or call 1-800-341-7400.

Federated Securities Corp., Distributor

CUSIP 314172446
CUSIP 314172438
CUSIP 314172420
CUSIP 314172412
CUSIP 314172131

39667 (12/23)

© 2023 Federated Hermes, Inc.

Annual Shareholder Report

October 31, 2023

 

 

Share Class | Ticker	A | FKASX	C | FKCSX	R | FKKSX
	Institutional | FKAIX	R6 | FKALX

Federated Hermes Kaufmann Small Cap Fund

Fund Established 2002

A Portfolio of Federated Hermes Equity Funds

Dear Valued Shareholder,

We are pleased to present the Annual Shareholder Report for your fund covering the period from November 1, 2022 through October 31, 2023. This report includes Management’s Discussion of Fund Performance, a complete listing of your fund’s holdings, performance information and financial statements along with other important fund information.

As a global leader in active, responsible investment management, Federated Hermes is guided by our conviction that responsible investing is the best way to create wealth over the long term. The company provides capabilities across a wide range of asset classes to investors around the world.

In addition, FederatedHermes.com/us offers quick and easy access to valuable resources that include timely fund updates, economic and market insights from our investment strategists and financial planning tools. You can also access many of those insights by following us on Twitter (@FederatedHermes) and LinkedIn.

Thank you for investing with us. We hope you find this information useful and look forward to keeping you informed.

Sincerely,  

J. Christopher Donahue, President

Not FDIC Insured ▪ May Lose Value ▪ No Bank Guarantee

CONTENTS 

Management’s Discussion of Fund Performance	1
Portfolio of Investments Summary Table	6
Portfolio of Investments	7
Financial Highlights	18
Statement of Assets and Liabilities	23
Statement of Operations	25
Statement of Changes in Net Assets	27
Notes to Financial Statements	28
Report of Independent Registered Public Accounting Firm	42
Shareholder Expense Example	44
Board of Trustees and Trust Officers	46
Evaluation and Approval of Advisory Contract	53
Liquidity Risk Management Program– Annual Evaluation of Adequacy and Effectiveness	63
Voting Proxies on Fund Portfolio Securities	65
Quarterly Portfolio Schedule	65

Management’s Discussion of Fund Performance (unaudited)

The total return of Federated Hermes Kaufmann Small Cap Fund (the “Fund”), based on net asset value for the 12-month reporting period ended October 31, 2023, was -5.81% for the Class A Shares, -6.41% for the Class C Shares, -5.77% for the Class R Shares, -5.39% for the Institutional Shares and -5.39% for the Class R6 Shares. The total return of the Russell 2000® Growth Index (R2000G),1 the Fund’s broad-based securities market index, was -7.63% for the same period. The total return of the Morningstar Small Growth Funds Average (MSGFA),2 a peer group average for the Fund, was -6.91% for the same period. The Fund’s and MSGFA’s total returns for the most recently completed fiscal year reflected actual cash flows, transaction costs and expenses, which were not reflected in the total return of the R2000G.

During the reporting period, the Fund’s investment strategy focused on stock selection, sector exposure, international exposure3 and the effect of cash holdings. These were the most significant factors affecting the Fund’s performance relative to the R2000G.

The following discussion will focus on the performance of the Fund’s Institutional Shares relative to the R2000G.

MARKET OVERVIEW

During the reporting period, returns in most global equity markets remained muted outside of a narrow group of technology stocks. Broadly, equities struggled to rally as inflation persisted throughout the year. Inflation and slower GDP growth caused negative impacts to the broader markets as investors became worried about the negative impact to earnings and economic growth. The slower economic growth along with aggressive monetary tightening policy led to negative industrial indicators and job growth slowing. As global economic uncertainty along with uncertainty around inflation persisted, economic growth, geopolitical uncertainty and potential responses from global central banks remained top concerns for investors.

STOCK SELECTION

The key factors affecting performance from a macroeconomic standpoint were the aggressive monetary responses to inflation due to fiscal policy in the prior year. Monetary tightening policy, combined with uncertainty of real economic growth, helped to contribute to the narrow-concentrated returns of the S&P 500 Index4 for much of the reporting period. The profitability of many of the companies in which the Fund invested remained strong throughout the reporting period despite the sell off. Fund management continued to seek what it viewed as attractive growth investment opportunities, such as companies it viewed as dominant competitors, possessing strengthening fundamentals, with the potential to deliver both near-term and long-term growth in sales and earnings.

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The majority of the Fund’s outperformance versus the R2000G was due to stock selection, particularly in Health Care and Financials. Individual companies that most contributed to Fund performance during the reporting period were Structure Therapeutics, Prometheus Biosciences, Amphastar Pharmaceuticals, Argenx SE and Hamilton Lane, Inc. Holdings that negatively impacted Fund performance were New Fortress Energy, Inc., SoundThinking, Inc., Livent Corporation, Intellia Therapeutics and Alteryx, Inc.

SECTOR EXPOSURE

At the end of the reporting period, approximately 71% of the portfolio was invested in four large sectors: Health Care, Information Technology, Consumer Discretionary and Industrials. These sectors have historically provided good opportunities for bottom-up growth investors. Stocks selection in both Health Care and Financials helped relative performance versus the R2000G.

INTERNATIONAL EXPOSURE

Stock selection of companies domiciled outside the U.S. was a positive contributor to Fund performance; however, their group weight was a negative contributor. Approximately 5.4% of the Fund’s assets were invested in such companies during the reporting period.

EFFECT OF CASH HOLDINGS

The Fund had an average cash position of 7.49% during the reporting period. With higher rates on cash and a volatile market, these elevated cash levels had a net positive impact on performance.

1

Please see the footnotes to the line graph below for definitions of, and further information about, the R2000G.

2

Please see the footnotes to the line graph below for definitions of, and further information about, the Morningstar peer group.

3

International investing involves special risks including currency risk, increased volatility, political risks and differences in auditing and other financial standards. Small company stocks may be less liquid and subject to greater price volatility than large capitalization stocks.

4

The S&P 500 Index is an unmanaged capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The index is unmanaged, and it is not possible to invest directly in an index.

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FUND PERFORMANCE AND GROWTH OF A $10,000 INVESTMENT

The graph below illustrates the hypothetical investment of $10,0001 in the Federated Hermes Kaufmann Small Cap Fund (the “Fund”) from October 31, 2013 to October 31, 2023, compared to the Russell 2000® Growth Index (R2000G)2 and the Morningstar Small Growth Funds Average (MSGFA).3 The Average Annual Total Return table below shows returns for each class averaged over the stated periods.

Growth of a $10,000 Investment

Growth of $10,000 as of October 31, 2023  

◾ Total returns shown for Class A Shares include the maximum sales charge of 5.50% ($10,000 investment minus $550 sales charge = $9,450). 

The Fund offers multiple share classes whose performance may be greater than or less than its other share class(es) due to differences in sales charges and expenses. See the Average Annual Total Return table below for the returns of additional classes not shown in the line graph above.

Average Annual Total Returns for the Period Ended 10/31/2023

(returns reflect all applicable sales charges and contingent deferred sales charges as specified below in footnote #1) 

	1 Year	5 Years	10 Years
Class A Shares	-10.98%	3.27%	8.98%
Class C Shares	-6.41%	3.80%	9.08%
Class R Shares	-5.77%	4.48%	9.64%
Institutional Shares4	-5.39%	4.93%	9.99%
Class R6 Shares4	-5.39%	4.94%	9.91%
R2000G	-7.63%	2.68%	5.67%
MSGFA	-6.91%	4.71%	6.67%

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Performance data quoted represents past performance which is no guarantee of future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Mutual fund performance changes over time and current performance may be lower or higher than what is stated. For current to the most recent month-end performance and after-tax returns, visit FederatedHermes.com/us or call 1-800-341-7400. Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Mutual funds are not obligations of or guaranteed by any bank and are not federally insured.

1

Represents a hypothetical investment of $10,000 in the Fund after deducting the applicable sales charges: for Class A Shares, the maximum sales charge of 5.50% ($10,000 investment minus $550 sales charge = $9,450); for Class C Shares, a 1.00% contingent deferred sales charge would be applied on any redemption less than one year from the purchase date. The Fund’s performance assumes the reinvestment of all dividends and distributions. The R2000G and the MSGFA have been adjusted to reflect reinvestment of dividends on securities in the index and the average.

2

The Russell 2000® Growth Index measures the performance of the small-cap growth segment of the U.S. equity universe. It includes those Russell 2000® Index companies with higher price-to-value ratios and higher forecasted growth values. The R2000G is constructed to provide a comprehensive and unbiased barometer for the small-cap growth segment. The R2000G is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap opportunity set and that the represented companies continue to reflect growth characteristics. The R2000G is not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission requires to be reflected in the Fund’s performance. The index is unmanaged and, unlike the Fund, is not affected by cash flows. It is not possible to invest directly in an index.

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3

Morningstar figures represent the average of the total returns reported by all the funds designated by Morningstar as falling into the respective category indicated. They do not reflect sales charges. The Morningstar figures in the Growth of a $10,000 Investment line graph are based on historical return information published by Morningstar and reflect the return of the funds comprising the category in the year of publication. Because the funds designated by Morningstar as falling into the category can change over time, the Morningstar figures in the line graph may not match the Morningstar figures in the Average Annual Total Returns table, which reflect the return of the funds that currently comprise the category.

4

The Fund’s Institutional Shares commenced operations on December 30, 2015. The Fund’s Class R6 Shares commenced operations on September 1, 2017. For the period prior to commencement of operations of the Institutional Shares and Class R6 Shares, the performance information shown is for the Fund’s Class A Shares and has not been adjusted to reflect expenses of the Institutional Shares or Class R6 Shares since Institutional Shares and Class R6 Shares have a lower expense ratio than Class A Shares. The performance of Class A Shares has been adjusted to remove any voluntary waiver of Fund expenses related to Class A Shares that may have occurred during the period prior to commencement of operations of Institutional Shares and Class R6 Shares. Additionally, the performance information shown above has been adjusted to reflect the absence of any sales charges applicable to Class A Shares.

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5

Portfolio of Investments Summary Table (unaudited)

At October 31, 2023, the Fund’s sector composition1 was as follows: 

Sector Composition	Percentage of Total Net Assets
Health Care	33.9%
Consumer Discretionary	16.0%
Information Technology	10.7%
Industrials	10.7%
Real Estate	6.8%
Financials	6.3%
Energy	4.2%
Materials	2.7%
Consumer Staples	1.7%
Communication Services	1.0%
Securities Lending Collateral2	8.3%
Cash Equivalents3	5.7%
Other Assets and Liabilities—Net4	(8.0)%
TOTAL	100%

 

1	Except for Securities Lending Collateral, Cash Equivalents and Other Assets and Liabilities, sector classifications are based upon, and individual portfolio securities are assigned to, the classifications of the Global Industry Classification System (GICS), except that the Adviser assigns a classification to securities not classified by the GICS and to securities for which the Adviser does not have access to the classification made by the GICS.
2	Represents cash collateral received for portfolio securities on loan that may be invested in affiliated money market funds, other money market instruments and/or repurchase agreements.
3	Cash Equivalents include any investments in money market mutual funds and/or overnight repurchase agreements other than those representing cash collateral for securities lending.
4	Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities.

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6

Portfolio of Investments

October 31, 2023 

Shares or Principal Amount			Value
		COMMON STOCKS—   92.8%
		Communication Services—   1.0%
1,826,100		Infrastrutture Wireless Italiane S.p.A.	$   19,993,572
225,000	1	Pinterest, Inc.	6,723,000
1,500,000	1	Reservoir Media Management, Inc.	8,445,000
		TOTAL	35,161,572
		Consumer Discretionary—   15.6%
355,000	2	Academy Sports and Outdoors, Inc.	15,918,200
306,000	1,2	Birkenstock Holding Ltd.	11,955,420
900,000	1,2	Bowlero Corp.	9,081,000
510,000	1,2	Cava Group, Inc.	16,110,900
330,000	2	Choice Hotels International, Inc.	36,465,000
4,000,000	1	CTOS LLC	23,080,000
734,720	1	Custom Truck One Source, Inc.	4,239,334
396,800	1	DraftKings, Inc.	10,959,616
400,000	1,2	Dutch Bros, Inc.	9,736,000
410,000	1,2	Etsy, Inc.	25,543,000
1,200,000	1,2	European Wax Center, Inc.	17,724,000
1,780,300	1,2	First Watch Restaurant Group, Inc.	29,748,813
99,200	1,2	Five Below, Inc.	17,258,816
300,000	1,2	Floor & Decor Holdings, Inc.	24,720,000
10,000	1,2	GEN Restaurant Group, Inc.	86,200
548,800	1,2	Lovesac Co./The	9,033,248
271,200		Moncler S.p.A	14,106,413
32,200,000		NagaCorp Ltd.	13,865,136
360,000	1,2	On Holding AG	9,241,200
890,000	1	Planet Fitness, Inc.	49,190,300
3,448,000	1	Samsonite International S.A.	10,727,666
460,000	1,2	Savers Value Village, Inc.	6,886,200
700,000	1	Six Flags Entertainment Corp.	13,930,000
2,205,500	1,2	Sportradar Group AG	19,474,565
146,000		Vail Resorts, Inc.	30,988,500
461,300		Wingstop, Inc.	84,311,801
1,535,000	1	Xponential Fitness, Inc.	21,904,450
794,400	1,2	YETI Holdings, Inc.	33,777,888
		TOTAL	570,063,666
		Consumer Staples—   1.7%
801,199	1	Chefs Warehouse, Inc.	15,246,817

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7

Shares or Principal Amount			Value
		COMMON STOCKS—   continued
		Consumer Staples—   continued
1,116,200	1,2	Grocery Outlet Holding Corp.	$   30,885,254
200,000	1,2	Maplebear, Inc.	4,926,000
750,000	1	The Duckhorn Portfolio, Inc.	7,822,500
400,000	1	Vital Farms, Inc.	4,424,000
		TOTAL	63,304,571
		Energy—   4.2%
579,000		Cactus, Inc.	27,178,260
1,074,100	2	Matador Resources Co.	66,261,229
1,967,000		New Fortress Energy, Inc.	59,600,100
		TOTAL	153,039,589
		Financials—   6.3%
625,000		Ares Management Corp.	61,618,750
925,000	2	Artisan Partners Asset Management, Inc.	30,525,000
890,000	1	CrossFirst Bankshares, Inc.	9,416,200
2,265,000		FinecoBank Banca Fineco SPA	26,738,362
865,000		Hamilton Lane, Inc.	72,763,800
3,181,933	2	P10, Inc.	29,973,809
		TOTAL	231,035,921
		Health Care—   33.3%
1,011,966	1,2	89Bio, Inc.	7,488,548
1,080,415	1,2	Ambrx Biopharma, Inc.	11,247,120
1,940,000	1,2	Amphastar Pharmaceuticals, Inc.	87,823,800
2,198,020	1,2	Arcturus Therapeutics Holdings, Inc.	41,982,182
418,354	1	Argenx SE	197,145,005
125,300	1	Argenx SE, ADR	58,837,121
5,264,000	1	aTyr Pharma, Inc.	6,580,000
338,980	1	Century Therapeutics, Inc.	518,639
70,000	1	Charles River Laboratories International, Inc.	11,785,200
190,200	1,3	Clementia Pharmaceuticals, Inc., Rights	0
1,950,000	1,2,3	Contra Akouos, Inc., Rights	1,540,500
308,000	1,2,3	CRISPR Therapeutics AG	11,990,440
290,000	1	Cryoport, Inc.	2,813,000
940,000	1	Denali Therapeutics, Inc.	17,700,200
358,220	1	Dexcom, Inc.	31,820,683
5,699,766	1	Dynavax Technologies Corp.	80,993,675
500,000	1	EDAP TMS S.A., ADR	3,465,000
576,933	1,2	Evotec SE, ADR	4,967,393
5,051,207	1	Fusion Pharmaceuticals, Inc.	23,286,064
205,886	1	Galapagos NV	6,873,190

Annual Shareholder Report

8

Shares or Principal Amount			Value
		COMMON STOCKS—   continued
		Health Care—   continued
3,065,136	1	Gossamer Bio, Inc.	$    1,532,568
424,800	1	Guardant Health, Inc.	10,993,824
2,098,100	1	IDEAYA Biosciences, Inc.	57,005,377
285,000	1	Immunovant, Inc.	9,419,250
240,000	1	Inspire Medical Systems, Inc.	35,318,400
57,500	1	Insulet Corp.	7,622,775
1,000,000	1	Intellia Therapeutics, Inc.	25,050,000
188,702	1,3	Laronde, Inc.	4,092,022
857,874	1,2	Legend Biotech Corp., ADR	56,679,735
2,176,101	1,2	Merus NV	43,761,391
605,000	1	Minerva Neurosciences, Inc.	2,916,100
471,276	1,2	Moonlake Immunotherapeutics	24,416,810
1,000,000	1	Morphic Holding, Inc.	19,950,000
235,624	1	Natera, Inc.	9,300,079
113,682	1	Orchard Therapeutics PLC, ADR	1,808,681
57,500	1,2	Penumbra, Inc.	10,991,125
3,342,000	1	Regulus Therapeutics, Inc.	4,077,240
205,716	1,2	Repligen Corp.	27,681,145
3,310,800	1	Rezolute, Inc.	3,202,868
1,051,300	1	Rhythm Pharmaceuticals, Inc.	24,295,543
304,966	1,2	Sarepta Therapeutics, Inc.	20,527,261
3,593,000	1,2	Scynexis, Inc.	6,790,770
736,800	1,3,4	Structure Therapeutics, Inc.	15,065,727
636,652	1	Structure Therapeutics, Inc., ADR	47,303,244
200,000	1	Tela Bio, Inc.	1,168,000
1,243,500	1	Ultragenyx Pharmaceutical, Inc.	44,019,900
344,442	1	Vaxcyte, Inc.	16,567,660
148,800	1	Veeva Systems, Inc.	28,675,248
1,124,643	1,2	Verona Pharma PLC, ADR	15,688,770
1,254,077	1,2	Verve Therapeutics, Inc.	15,099,087
986,461	1	Zentalis Pharmaceuticals, Inc.	16,138,502
		TOTAL	1,216,016,862
		Industrials—   10.6%
205,000		Advanced Drainage System, Inc.	21,900,150
165,000		Applied Industrial Technologies, Inc.	25,329,150
788,836		Aris Water Solutions, Inc.	6,586,781
205,000	1,2	Chart Industries, Inc.	23,827,150
326,000		Comfort Systems USA, Inc.	59,283,100
725,000	1,2	Fiverr International Ltd.	15,348,250

Annual Shareholder Report

9

Shares or Principal Amount			Value
		COMMON STOCKS—   continued
		Industrials—   continued
467,000	1	GMS, Inc.	$   27,310,160
869,221	1	GXO Logistics, Inc.	43,904,353
201,600		HEICO Corp.	31,935,456
1,140,500	1	Montrose Environmental Group, Inc.	26,368,360
158,086	1	MYR Group, Inc.	18,311,101
61,200		Owens Corning, Inc.	6,938,244
344,000	1,2	Trex Co., Inc.	19,336,240
293,000	1,2	XPO, Inc.	22,212,330
403,300		Xylem, Inc.	37,724,682
		TOTAL	386,315,507
	1	Information Technology—   10.7%
900,000		Allegro MicroSystems, Inc.	23,364,000
1,300,000	2	Alteryx, Inc.	41,613,000
695,000		Camtek Ltd.	36,557,000
549,449	2	Docebo, Inc.	21,582,357
300,000	2	DoubleVerify Holdings, Inc.	8,349,000
120,000		Envestnet, Inc.	4,440,000
1,285,000		HashiCorp, Inc.	25,301,650
183,800	2	Novanta, Inc.	24,272,628
460,000		Okta, Inc.	31,008,600
375,000		Q2 Holdings, Inc.	11,261,250
500,000		Rapid7, Inc.	23,245,000
114,500		Rogers Corp.	14,070,905
384,867,729	2	Seeing Machines Ltd.	24,268,801
343,000		Shopify, Inc.	16,186,170
800,000		Smartsheet, Inc.	31,632,000
1,315,000		SoundThinking, Inc.	19,843,350
100,000		SPS Commerce, Inc.	16,034,000
46,900		Tyler Technologies, Inc.	17,489,010
		TOTAL	390,518,721
		Materials—   2.7%
750,000	1	Aspen Aerogels, Inc.	5,790,000
1,125,000	1,2	ATI, Inc.	42,491,250
1,130,000	1	Livent Corp.	16,486,700
745,000	1,2	MP Materials Corp.	12,218,000
187,300	2	Westlake Corp.	21,606,928
		TOTAL	98,592,878
		Real Estate—   6.7%
930,000		Americold Realty Trust, Inc.	24,384,600

Annual Shareholder Report

10

Shares or Principal Amount			Value
		COMMON STOCKS—   continued
		Real Estate—   continued
492,000	1	CoStar Group, Inc.	$   36,117,720
198,956	2	Easterly Government Properties, Inc.	2,140,767
825,000	2	Gaming and Leisure Properties, Inc.	37,446,750
365,000		Lamar Advertising Co.	30,028,550
1,000,000		Physicians Realty Trust	10,860,000
570,000		Ryman Hospitality Properties, Inc.	48,792,000
625,000		STAG Industrial, Inc.	20,762,500
1,250,000		VICI Properties, Inc.	34,875,000
		TOTAL	245,407,887
		TOTAL COMMON STOCKS (IDENTIFIED COST $2,645,309,851)	3,389,457,174
		CORPORATE BONDS—   0.6%
		Consumer Discretionary—   0.4%
$ 15,000,000		NagaCorp Ltd., Sr. Unsecd. Note, 7.950%, 7/6/2024	14,755,500
		Health Care—   0.1%
900,000	1,3	CeQur S.A., Conv. Bond, 0.000%, 6/30/2034	989,392
3,000,000		Cryoport, Inc., Conv. Bond, 0.750%, 12/1/2026	2,370,729
		TOTAL	3,360,121
		Industrials—   0.1%
3,000,000		Fiverr International Ltd., Conv. Bond, 0.000%, 11/1/2025	2,569,833
3,000,000		Upwork, Inc., Conv. Bond, 0.250%, 8/15/2026	2,487,096
		TOTAL	5,056,929
		TOTAL CORPORATE BONDS (IDENTIFIED COST $22,976,417)	23,172,550
		PREFERRED STOCKS—   0.5%
		Health Care—   0.4%
1,957,807	3	CeQur S.A.	8,794,564
41,900		Regulus Therapeutics, Inc. - Rights	5,111,800
		TOTAL	13,906,364
		Real Estate—   0.1%
50,000		DigitalBridge Group, Inc., 7.125%	1,075,000
50,000		DigitalBridge Group, Inc., 7.150%	1,050,500
50,000		DigitalBridge Group, Inc., Pfd., 7.125%	1,043,000
		TOTAL	3,168,500
		TOTAL PREFERRED STOCKS (IDENTIFIED COST $17,364,986)	17,074,864
	1	WARRANTS—   0.2%
		Health Care—   0.2%
129,500		Catabasis Pharmaceuticals, Inc., Warrants 2/8/2024	0
766,284		Gossamer Bio, Inc., Warrants 7/24/2028	313,180

Annual Shareholder Report

11

Shares or Principal Amount			Value
	1	WARRANTS—   continued
		Health Care—   continued
200,000		Immatics N.V., Warrants 12/31/2025	$      398,000
162,100		Minerva Neurosciences, Inc., Warrants 12/31/2099	781,322
193,334		Rezolute, Inc., Warrants 10/8/2027	13,166
64,800		Rezolute, Inc., Warrants 1/1/2099	62,688
1,685,800		Rezolute, Inc., Warrants 12/31/2099	1,630,843
720,500		Scynexis, Inc., Warrants 5/21/2024	43,662
165,355		Scynexis, Inc., Warrants 4/26/2029	224,899
1,441,000		Scynexis, Inc., Warrants 1/1/2099	2,723,490
		TOTAL WARRANTS (IDENTIFIED COST $18,142,603)	6,191,250
		INVESTMENT COMPANIES—   13.9%
54,966,211		Federated Hermes Government Obligations Fund, Premier Shares, 5.26%5	54,966,211
454,979,568		Federated Hermes Institutional Prime Value Obligations Fund, Institutional Shares, 5.45%5	454,714,770
		TOTAL INVESTMENT COMPANIES (IDENTIFIED COST $509,559,799)	509,680,981
		TOTAL INVESTMENT IN SECURITIES—108.0% (IDENTIFIED COST $3,213,353,656)6	3,945,576,819
		OTHER ASSETS AND LIABILITIES - NET—(8.0)%7	(291,479,045)
		TOTAL NET ASSETS—100%	$3,654,097,774

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Annual Shareholder Report

13

An affiliated company is a company in which the Fund, alone or in combination with other Federated Hermes funds, has ownership of at least 5% of the voting shares. Transactions with affiliated companies during the period ended October 31, 2023, were as follows: 

Affiliated	Value as of 10/31/2022	Purchases at Cost*	Proceeds from Sales*
Communication Services:
Reservoir Media Management, Inc.**	$8,700,000	$—	$—
Consumer Discretionary:
Xponential Fitness, Inc.**	$36,281,250	$3,729,184	$(14,816,741)
Financials:
P10, Inc.	$33,060,284	$—	$—
Health Care:
Amphastar Pharmaceuticals, Inc.	$61,787,640	$7,066,465	$(11,867,154)
Arcturus Therapeutics Holdings, Inc.	$27,227,857	$16,905,311	$(5,871,444)
aTyr Pharma, Inc.	$7,163,000	$5,319,000	$—
Dynavax Technologies Corp.	$66,966,298	$—	$(2,079,165)
Fusion Pharmaceuticals, Inc.	$6,212,250	$9,632,749	$—
IDEAYA Biosciences, Inc.	$27,150,675	$10,216,600	$—
Merus NV	$41,770,800	$19,704,542	$(13,655,326)
Minerva Neurosciences, Inc.	$1,415,232	$709,501	$—
Minerva Neurosciences, Inc., Warrants 12/31/2099	$—	$1,619,379	$—
Regulus Therapeutics, Inc.	$4,482,600	$405,045	$—
Regulus Therapeutics, Inc. - Rights	$—	$3,771,419	$—
Rezolute, Inc.	$5,595,252	$—	$—
Rezolute, Inc., Warrants 10/8/2027	$102,506	$—	$—
Rezolute, Inc., Warrants 1/1/2099	$109,512	$—	$—
Rezolute, Inc., Warrants 12/31/2099	$2,849,002	$—	$—
Rhythm Pharmaceuticals, Inc.**	$59,083,454	$—	$(33,348,798)
Scynexis, Inc.	$8,299,830	$—	$—
Scynexis, Inc., Warrants 5/21/2024	$115,208	$—	$—
Scynexis, Inc., Warrants 4/26/2029	$238,458	$—	$—
Scynexis, Inc., Warrants 1/1/2099	$3,328,710	$—	$—
Ultragenyx Pharmaceutical, Inc.**	$62,713,000	$13,590,124	$(28,382,983)
Industrials:
Aris Water Solutions, Inc.**	$44,083,858	$—	$(24,770,977)
Information Technology:
Seeing Machines Ltd.	$30,028,454	$—	$(610,650)
SoundThinking, Inc.	$50,163,800	$1,611,992	$(2,663,227)
Affiliated issuers no longer in the portfolio at period end	$153,418,599	$1,409,325	$(155,752,694)
TOTAL OF AFFILIATED COMPANIES TRANSACTIONS	$742,347,529	$95,690,636	$(293,819,159)

Annual Shareholder Report

14

 

Change in Unrealized Appreciation/ (Depreciation)*	Net Realized Gain/ (Loss)*	Value as of 10/31/2023	Shares Held as of 10/31/2023	Dividend Income*
$(255,000)	$—	$8,445,000	1,500,000	$—
$(8,791,389)	$5,502,146	$21,904,450	1,535,000	$—
$(3,086,475)	$—	$29,973,809	3,181,933	$397,742
$24,852,503	$5,984,346	$87,823,800	1,940,000	$—
$10,695,374	$(6,974,916)	$41,982,182	2,198,020	$—
$(5,902,000)	$—	$6,580,000	5,264,000	$—
$15,266,477	$840,065	$80,993,675	5,699,766	$—
$7,441,065	$—	$23,286,064	5,051,207	$—
$19,638,102	$—	$57,005,377	2,098,100	$—
$2,164,236	$(6,222,861)	$43,761,391	2,176,101	$—
$791,367	$—	$2,916,100	605,000	$—
$(838,057)	$—	$781,322	162,100	$—
$(810,405)	$—	$4,077,240	3,342,000	$—
$1,340,381	$—	$5,111,800	41,900	$—
$(2,392,384)	$—	$3,202,868	3,310,800	$—
$(89,340)	$—	$13,166	193,334	$—
$(46,824)	$—	$62,688	64,800	$—
$(1,218,159)	$—	$1,630,843	1,685,800	$—
$(6,084,670)	$4,645,557	$24,295,543	1,051,300	$—
$(1,509,060)	$—	$6,790,770	3,593,000	$—
$(71,546)	$—	$43,662	720,500	$—
$(13,559)	$—	$224,899	165,355	$—
$(605,220)	$—	$2,723,490	1,441,000	$—
$17,089,987	$(20,990,228)	$44,019,900	1,243,500	$—
$(10,297,001)	$(2,429,099)	$6,586,781	788,836	$456,855
$(4,783,639)	$(365,364)	$24,268,801	384,867,729	$—
$(28,724,597)	$(544,618)	$19,843,350	1,315,000	$—
$29,199,416	$(28,274,646)	$—	—	$—
$52,959,583	$(48,829,618)	$548,348,971	435,236,081	$854,597

 

*	A portion of the amount shown may have been recorded when the Fund no longer had ownership of at least 5% of the voting shares.
**	At October 31, 2023, the Fund no longer has ownership of at least 5% of the voting shares.

Annual Shareholder Report

15

Transactions with affiliated investment companies, which are funds managed by the Adviser or an affiliate of the Adviser, during the period ended October 31, 2023, were as follows: 

	Federated Hermes Government Obligations Fund, Premier Shares*	Federated Hermes Institutional Prime Value Obligations Fund, Institutional Shares**	Total of Affiliated Transactions
Value as of 10/31/2022	$54,752,001	$539,478,128	$594,230,129
Purchases at Cost	$647,078,306	$1,908,208,520	$2,555,286,826
Proceeds from Sales	$(646,864,096)	$(1,993,199,144)	$(2,640,063,240)
Change in Unrealized Appreciation/ Depreciation	$—	$137,654	$137,654
Net Realized Gain/(Loss)	$—	$89,612	$89,612
Value as of 10/31/2023	$54,966,211	$454,714,770	$509,680,981
Shares Held as of 10/31/2023	54,966,211	454,979,568	509,945,779
Dividend Income	$2,370,444	$23,259,716	$25,630,160

 

* All or a portion of the balance/activity for the fund relates to cash collateral received on securities lending transactions.

 

1	Non-income-producing security.
2	All or a portion of these securities are temporarily on loan to unaffiliated broker/dealers.
3	Market quotations and price valuations are not available. Fair value determined using significant unobservable inputs in accordance with procedures established by and under the supervision of the Fund’s Adviser acting through its Valuation Committee.
4	Denotes a restricted security that either: (a) cannot be offered for public sale without first being registered, or availing of an exemption from registration, under the Securities Act; or (b) is subject to a contractual restriction on public sales. At October 31, 2023, these restricted securities amounted to $15,065,727, which represented 0.4% of total net assets.
5	7-day net yield.
6	The cost of investments for federal tax purposes amounts to $3,247,356,780.
7	Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities.

Note: The categories of investments are shown as a percentage of total net assets at October 31, 2023.

Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three broad levels listed below:

Level 1—quoted prices in active markets for identical securities.

Level 2—other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Also includes securities valued at amortized cost.

Level 3—significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments).

The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.

Annual Shareholder Report

16

The following is a summary of the inputs used, as of October 31, 2023, in valuing the Fund’s assets carried at fair value: 

Valuation Inputs
	Level 1— Quoted Prices	Level 2— Other Significant Observable Inputs	Level 3— Significant Unobservable Inputs	Total
Equity Securities:
Common Stocks
Domestic	$2,584,973,541	$10,727,666	$20,698,249	$2,616,399,456
International	458,076,799	302,990,479	11,990,440	773,057,718
Preferred Stocks
International	—	—	8,794,564	8,794,564
Domestic	8,280,300	—	—	8,280,300
Debt Securities:
Corporate Bonds	—	22,183,158	989,392	23,172,550
Warrants	2,872,853	3,318,397	—	6,191,250
Investment Companies	509,680,981	—	—	509,680,981
TOTAL SECURITIES	$3,563,884,474	$339,219,700	$42,472,645	$3,945,576,819

 

The following acronym(s) are used throughout this portfolio:
ADR	—American Depositary Receipt

See Notes which are an integral part of the Financial Statements

Annual Shareholder Report

17

Financial Highlights–Class A Shares

(For a Share Outstanding Throughout Each Period) 

	Year Ended October 31,
	2023	2022	2021	2020	2019
Net Asset Value, Beginning of Period	$41.14	$70.27	$49.86	$40.09	$36.01
Income From Investment Operations:
Net investment income (loss)1	(0.08)	(0.23)	(0.58)	(0.29)	0.01
Net realized and unrealized gain (loss)	(2.31)	(23.97)	21.07	10.16	6.14
Total From Investment Operations	(2.39)	(24.20)	20.49	9.87	6.15
Less Distributions:
Distributions from net investment income	—	—	—	(0.02)	—
Distributions from net realized gain	—	(4.93)	(0.08)	(0.08)	(2.07)
Total Distributions	—	(4.93)	(0.08)	(0.10)	(2.07)
Net Asset Value, End of Period	$38.75	$41.14	$70.27	$49.86	$40.09
Total Return2	(5.81)%	(36.41)%	41.12%	24.64%	17.96%
Ratios to Average Net Assets:
Net expenses3	1.35%	1.35%	1.35%	1.35%	1.36%
Net investment income (loss)	(0.19)%	(0.48)%	(0.89)%	(0.64)%	0.03%
Expense waiver/reimbursement4	0.15%	0.15%	0.12%	0.15%	0.16%
Supplemental Data:
Net assets, end of period (000 omitted)	$656,294	$795,872	$1,452,855	$1,068,689	$826,240
Portfolio turnover5	31%	19%	34%	20%	33%

 

1	Per share numbers have been calculated using the average shares method.
2	Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable.
3	Amount does not reflect net expenses incurred by investment companies in which the Fund may invest.
4	This expense decrease is reflected in both the net expense and the net investment income (loss) 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.

See Notes which are an integral part of the Financial Statements

Annual Shareholder Report

18

Financial Highlights–Class C Shares

(For a Share Outstanding Throughout Each Period) 

	Year Ended October 31,
	2023	2022	2021	2020	2019
Net Asset Value, Beginning of Period	$33.68	$58.87	$42.03	$34.01	$31.03
Income From Investment Operations:
Net investment income (loss)1	(0.29)	(0.44)	(0.83)	(0.49)	(0.19)
Net realized and unrealized gain (loss)	(1.87)	(19.82)	17.75	8.59	5.24
Total From Investment Operations	(2.16)	(20.26)	16.92	8.10	5.05
Less Distributions:
Distributions from net realized gain	—	(4.93)	(0.08)	(0.08)	(2.07)
Net Asset Value, End of Period	$31.52	$33.68	$58.87	$42.03	$34.01
Total Return2	(6.41)%	(36.80)%	40.28%	23.84%	17.25%
Ratios to Average Net Assets:
Net expenses3	1.99%	1.98%	1.97%	1.98%	1.97%
Net investment income (loss)	(0.83)%	(1.11)%	(1.51)%	(1.28)%	(0.57)%
Expense waiver/reimbursement4	0.03%	0.03%	0.02%	0.04%	0.05%
Supplemental Data:
Net assets, end of period (000 omitted)	$160,847	$208,954	$410,961	$289,794	$204,247
Portfolio turnover5	31%	19%	34%	20%	33%

 

1	Per share numbers have been calculated using the average shares method.
2	Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable.
3	Amount does not reflect net expenses incurred by investment companies in which the Fund may invest.
4	This expense decrease is reflected in both the net expense and the net investment income (loss) 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.

See Notes which are an integral part of the Financial Statements

Annual Shareholder Report

19

Financial Highlights–Class R Shares

(For a Share Outstanding Throughout Each Period) 

	Year Ended October 31,
	2023	2022	2021	2020	2019
Net Asset Value, Beginning of Period	$41.39	$70.65	$50.12	$40.29	$36.17
Income From Investment Operations:
Net investment income (loss)1	(0.07)	(0.22)	(0.57)	(0.28)	0.03
Net realized and unrealized gain (loss)	(2.32)	(24.11)	21.18	10.22	6.16
Total From Investment Operations	(2.39)	(24.33)	20.61	9.94	6.19
Less Distributions:
Distributions from net investment income	—	—	—	(0.03)	—
Distributions from net realized gain	—	(4.93)	(0.08)	(0.08)	(2.07)
Total Distributions	—	(4.93)	(0.08)	(0.11)	(2.07)
Net Asset Value, End of Period	$39.00	$41.39	$70.65	$50.12	$40.29
Total Return2	(5.77)%	(36.40)%	41.14%	24.71%	17.99%
Ratios to Average Net Assets:
Net expenses3	1.33%	1.34%	1.34%	1.31%	1.31%
Net investment income (loss)	(0.17)%	(0.46)%	(0.87)%	(0.61)%	0.08%
Expense waiver/reimbursement4	0.33%	0.34%	0.32%	0.34%	0.34%
Supplemental Data:
Net assets, end of period (000 omitted)	$111,893	$141,312	$263,675	$188,549	$120,487
Portfolio turnover5	31%	19%	34%	20%	33%

 

1	Per share numbers have been calculated using the average shares method.
2	Based on net asset value.
3	Amount does not reflect net expenses incurred by investment companies in which the Fund may invest.
4	This expense decrease is reflected in both the net expense and the net investment income (loss) 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.

See Notes which are an integral part of the Financial Statements

Annual Shareholder Report

20

Financial Highlights–Institutional Shares

(For a Share Outstanding Throughout Each Period) 

	Year Ended October 31,
	2023	2022	2021	2020	2019
Net Asset Value, Beginning of Period	$42.49	$72.07	$50.90	$40.86	$36.50
Income From Investment Operations:
Net investment income (loss)1	0.12	(0.01)	(0.29)	(0.10)	0.22
Net realized and unrealized gain (loss)	(2.41)	(24.64)	21.54	10.37	6.21
Total From Investment Operations	(2.29)	(24.65)	21.25	10.27	6.43
Less Distributions:
Distributions from net investment income	—	—	—	(0.15)	—
Distributions from net realized gain	—	(4.93)	(0.08)	(0.08)	(2.07)
Total Distributions	—	(4.93)	(0.08)	(0.23)	(2.07)
Net Asset Value, End of Period	$40.20	$42.49	$72.07	$50.90	$40.86
Total Return2	(5.39)%	(36.10)%	41.77%	25.20%	18.51%
Ratios to Average Net Assets:
Net expenses3	0.89%	0.89%	0.89%	0.89%	0.90%
Net investment income (loss)	0.27%	(0.02)%	(0.43)%	(0.21)%	0.56%
Expense waiver/reimbursement4	0.12%	0.11%	0.10%	0.12%	0.12%
Supplemental Data:
Net assets, end of period (000 omitted)	$2,201,922	$2,930,184	$6,454,097	$5,114,974	$2,339,131
Portfolio turnover5	31%	19%	34%	20%	33%

 

1	Per share numbers have been calculated using the average shares method.
2	Based on net asset value.
3	Amount does not reflect net expenses incurred by investment companies in which the Fund may invest.
4	This expense decrease is reflected in both the net expense and the net investment income (loss) 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.

See Notes which are an integral part of the Financial Statements

Annual Shareholder Report

21

Financial Highlights–Class R6 Shares

(For a Share Outstanding Throughout Each Period) 

	Year Ended October 31,
	2023	2022	2021	2020	2019
Net Asset Value, Beginning of Period	$42.14	$71.52	$50.51	$40.51	$36.20
Income From Investment Operations:
Net investment income (loss)1	0.12	(0.00)	(0.29)	(0.10)	0.25
Net realized and unrealized gain (loss)	(2.39)	(24.45)	21.38	10.30	6.13
Total From Investment Operations	(2.27)	(24.45)	21.09	10.20	6.38
Less Distributions:
Distributions from net investment income	—	—	—	(0.12)	—
Distributions from net realized gain	—	(4.93)	(0.08)	(0.08)	(2.07)
Total Distributions	—	(4.93)	(0.08)	(0.20)	(2.07)
Net Asset Value, End of Period	$39.87	$42.14	$71.52	$50.51	$40.51
Total Return2	(5.39)%	(36.10)%	41.78%	25.24%	18.53%
Ratios to Average Net Assets:
Net expenses3	0.88%	0.88%	0.88%	0.88%	0.88%
Net investment income (loss)	0.28%	(0.01)%	(0.43)%	(0.21)%	0.63%
Expense waiver/reimbursement4	0.03%	0.04%	0.02%	0.04%	0.04%
Supplemental Data:
Net assets, end of period (000 omitted)	$523,142	$661,748	$1,195,120	$651,978	$195,775
Portfolio turnover5	31%	19%	34%	20%	33%

 

1	Per share numbers have been calculated using the average shares method.
2	Based on net asset value.
3	Amount does not reflect net expenses incurred by investment companies in which the Fund may invest.
4	This expense decrease is reflected in both the net expense and the net investment income (loss) 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.

See Notes which are an integral part of the Financial Statements

Annual Shareholder Report

22

Statement of Assets and Liabilities

October 31, 2023

 

Assets:
Investment in securities, at value including $295,175,457 of securities loaned and $1,058,029,952 of investments in affiliated holdings* (identified cost $3,213,353,656, including $1,029,001,356 of identified cost in affiliated holdings)	$3,945,576,819
Cash	233,176
Cash denominated in foreign currencies (identified cost $155,950)	143,284
Income receivable	779,726
Income receivable from affiliated holdings	951,912
Receivable for investments sold	14,028,458
Receivable for shares sold	3,401,259
Total Assets	3,965,114,634
Liabilities:
Payable for investments purchased	1,372,513
Payable for shares redeemed	6,599,928
Payable for collateral due to broker for securities lending (Note 2)	301,600,569
Payable for investment adviser fee (Note 5)	76,093
Payable for administrative fee (Note 5)	7,711
Payable for Directors’/Trustees’ fees (Note 5)	4,804
Payable for distribution services fee (Note 5)	243,222
Payable for other service fees (Notes 2 and 5)	326,018
Accrued expenses (Note 5)	786,002
Total Liabilities	311,016,860
Net assets for 92,804,002 shares outstanding	$3,654,097,774
Net Assets Consist of:
Paid-in capital	$2,940,814,085
Total distributable earnings (loss)	713,283,689
Total Net Assets	$3,654,097,774

Annual Shareholder Report

23

Statement of Assets and Liabilities–continued

Net Asset Value, Offering Price and Redemption Proceeds Per Share:
Class A Shares:
Net asset value per share ($656,294,310 ÷ 16,936,191 shares outstanding), no par value, unlimited shares authorized	$38.75
Offering price per share (100/94.50 of $38.75)	$41.01
Redemption proceeds per share	$38.75
Class C Shares:
Net asset value per share ($160,846,692 ÷ 5,103,736 shares outstanding), no par value, unlimited shares authorized	$31.52
Offering price per share	$31.52
Redemption proceeds per share (99.00/100 of $31.52)	$31.20
Class R Shares:
Net asset value per share ($111,892,669 ÷ 2,869,402 shares outstanding), no par value, unlimited shares authorized	$39.00
Offering price per share	$39.00
Redemption proceeds per share	$39.00
Institutional Shares:
Net asset value per share ($2,201,921,802 ÷ 54,774,935 shares outstanding), no par value, unlimited shares authorized	$40.20
Offering price per share	$40.20
Redemption proceeds per share	$40.20
Class R6 Shares:
Net asset value per share ($523,142,301 ÷ 13,119,738 shares outstanding), no par value, unlimited shares authorized	$39.87
Offering price per share	$39.87
Redemption proceeds per share	$39.87

 

* See information listed after the Fund’s Portfolio of Investments.

See Notes which are an integral part of the Financial Statements

Annual Shareholder Report

24

Statement of Operations

Year Ended October 31, 2023

 

Investment Income:
Dividends (including $16,387,844 received from affiliated holdings* and net of foreign taxes withheld of $319,502)	$46,539,063
Interest	2,181,169
Net income on securities loaned (includes $10,096,913 earned from affiliated holdings related to cash collateral balances*) (Note 2)	1,985,301
TOTAL INCOME	50,705,533
Expenses:
Investment adviser fee (Note 5)	34,794,596
Administrative fee (Note 5)	3,395,828
Custodian fees	194,520
Transfer agent fees (Note 2)	4,375,963
Directors’/Trustees’ fees (Note 5)	22,484
Auditing fees	53,602
Legal fees	14,872
Portfolio accounting fees	216,723
Distribution services fee (Note 5)	4,062,456
Other service fees (Notes 2 and 5)	2,412,023
Share registration costs	118,327
Printing and postage	304,871
Miscellaneous (Note 5)	54,231
TOTAL EXPENSES	50,020,496
Waivers and Reimbursements:
Waiver/reimbursement of investment adviser fee (Note 5)	(1,345,283)
Waivers/reimbursements of other operating expenses (Notes 2 and 5)	(3,532,105)
TOTAL WAIVERS AND REIMBURSEMENTS	(4,877,388)
Net expenses	45,143,108
Net investment income	5,562,425

Annual Shareholder Report

25

Statement of Operations–continued

Realized and Unrealized Gain (Loss) on Investments and Foreign Currency Transactions:
Net realized gain on investments (including net realized loss of $(48,740,006) on sales of investments in affiliated holdings*)	$32,275,689
Net realized loss on foreign currency transactions	(41,640)
Net change in unrealized appreciation of investments (including net change in unrealized depreciation of $53,097,237 on investments in affiliated holdings*)	(239,029,448)
Net change in unrealized appreciation/depreciation of translation of assets and liabilities in foreign currency	47,185
Net realized and unrealized gain (loss) on investments and foreign currency transactions	(206,748,214)
Change in net assets resulting from operations	$(201,185,789)

 

* See information listed after the Fund’s Portfolio of Investments.

See Notes which are an integral part of the Financial Statements

Annual Shareholder Report

26

Statement of Changes in Net Assets

 

 

Year Ended October 31	2023	2022
Increase (Decrease) in Net Assets
Operations:
Net investment income (loss)	$5,562,425	$(9,505,393)
Net realized gain (loss)	32,234,049	(32,854,574)
Net change in unrealized appreciation/depreciation	(238,982,263)	(3,281,653,435)
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS	(201,185,789)	(3,324,013,402)
Distributions to Shareholders:
Class A Shares	—	(101,147,716)
Class B Shares1	—	(1,197,159)
Class C Shares	—	(34,090,746)
Class R Shares	—	(18,092,847)
Institutional Shares	—	(432,690,042)
Class R6 Shares	—	(82,470,909)
CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS	—	(669,689,419)
Share Transactions:
Proceeds from sale of shares	677,445,406	1,065,820,914
Net asset value of shares issued to shareholders in payment of distributions declared	—	632,723,892
Cost of shares redeemed	(1,565,745,423)	(2,752,467,125)
CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS	(888,300,017)	(1,053,922,319)
Change in net assets	(1,089,485,806)	(5,047,625,140)
Net Assets:
Beginning of period	4,743,583,580	9,791,208,720
End of period	$3,654,097,774	$4,743,583,580

 

1 On February 3, 2023, Class B Shares were converted into Class A Shares.

See Notes which are an integral part of the Financial Statements

Annual Shareholder Report

27

Notes to Financial Statements

October 31, 2023

1. ORGANIZATION

Federated Hermes Equity Funds (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Trust consists of eight portfolios. The financial statements included herein are only those of Federated Hermes Kaufmann Small Cap Fund (the “Fund”), a diversified portfolio. The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder’s interest is limited to the portfolio in which shares are held. Each portfolio pays its own expenses. The Fund offers five classes of shares: Class A Shares, Class C Shares, Class R Shares, Institutional Shares and Class R6 Shares. All shares of the Fund have equal rights with respect to voting, except on class-specific matters. The investment objective of the Fund is to provide capital appreciation.

At the close of business on February 3, 2023, Class B Shares were converted into the Fund’s existing Class A Shares pursuant to a Plan of Conversion approved by the Fund’s Board of Trustees (the “Trustees”). The conversion occurred on a tax-free basis. The cash value of a shareholder’s investment was not changed as a result of the share class conversion. No action was required by shareholders to effect the conversion.

Effective April 18, 2022, the Fund was re-opened to new investors. Since March 1, 2021, the Fund had been closed to new investors, with the exception of new investments by employer-sponsored retirement plans if the Fund was an established plan option as of March 1, 2021.

2. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with U.S. generally accepted accounting principles (GAAP).

Investment Valuation

In calculating its net asset value (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.

◾

Shares of other mutual funds or non-exchange-traded investment companies are valued based upon their reported NAVs, or NAV per share practical expedient, as applicable.

◾

Fixed-income securities are fair valued using price evaluations provided by a pricing service approved by Federated Equity Management Company of Pennsylvania (the “Adviser”).

◾

Derivative contracts listed on exchanges are valued at their reported settlement or closing price, except that options are valued at the mean of closing bid and ask quotations.

◾

Over-the-counter (OTC) derivative contracts are fair valued using price evaluations provided by a pricing service approved by the Adviser.

◾

For securities that are fair valued in accordance with procedures established by and under the general supervision of the Adviser, certain factors may be considered, such

Annual Shareholder Report

28

as: the last traded or purchase price of the security, information obtained by contacting the issuer or dealers, analysis of the issuer’s financial statements or other available documents, fundamental analytical data, the nature and duration of restrictions on disposition, the movement of the market in which the security is normally traded, public trading in similar securities or derivative contracts of the issuer or comparable issuers, movement of a relevant index, or other factors including but not limited to industry changes and relevant government actions.

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 for the Fund, or if information furnished by a pricing service, in the opinion of the Adviser’s valuation committee (“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 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, and the actual value obtained could be materially different.

Fair Valuation and Significant Events Procedures

Pursuant to Rule 2a-5 under the Act, the Fund’s Trustees have designated the Adviser as the Fund’s valuation designee to perform any fair value determinations for securities and other assets held by the Fund. The Adviser is subject to the Trustees’ oversight and certain reporting and other requirements intended to provide the Trustees the information needed to oversee the Adviser’s fair value determinations.

The Adviser, acting through its Valuation Committee, is responsible for determining the fair value of investments for which market quotations are not readily available. The Valuation Committee is comprised of officers of the Adviser and certain of the Adviser’s affiliated companies and determines fair value and oversees the calculation of the NAV. The Valuation Committee is also authorized to use pricing services to provide fair value evaluations of the current value of certain investments for purposes of calculating the NAV. The Valuation Committee employs various methods for reviewing third-party pricing-service evaluations including periodic reviews of third-party pricing services’ policies, procedures and valuation methods (including key inputs, methods, models and assumptions), transactional back-testing, comparisons of evaluations of different pricing services, and review of price challenges by the Adviser based on recent market activity. 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. The Trustees periodically review the fair valuations made by the Valuation Committee. The Trustees have 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.

Factors considered by pricing services in evaluating an investment include the yields or prices of investments of comparable quality, coupon, maturity, call rights and other potential prepayments, terms and type, reported transactions, indications as to values from dealers and general market conditions. Some pricing services provide a single price evaluation reflecting the bid-side of the market for an investment (a “bid” evaluation). Other pricing services offer both bid evaluations and price evaluations

Annual Shareholder Report

29

indicative of a price between the prices bid and ask for the investment (a “mid” evaluation). The Fund normally uses bid evaluations for any U.S. Treasury and Agency securities, mortgage-backed securities and municipal securities. The Fund normally uses mid evaluations for any other types of fixed-income securities and any OTC derivative contracts. In the event that market quotations and price evaluations are not available for an investment, the fair value of the investment is determined in accordance with procedures adopted by the Adviser.

The Adviser has also adopted procedures requiring an investment to be priced at its fair value whenever the Valuation Committee determines that a significant event affecting the value of the investment has occurred between the time as of which the price of the investment would otherwise be determined and the time as of which the NAV is computed. An event is considered significant if there is both an affirmative expectation that the investment’s value will change in response to the event and a reasonable basis for quantifying the resulting change in value. Examples of significant events that may occur after the close of the principal market on which a security is traded, or after the time of a price evaluation provided by a pricing service or a dealer, include:

◾

With respect to securities traded principally in foreign markets, significant trends in U.S. equity markets or in the trading of foreign securities index futures contracts;

◾

Political or other developments affecting the economy or markets in which an issuer conducts its operations or its securities are traded;

◾

Announcements concerning matters such as acquisitions, recapitalizations, litigation developments, or a natural disaster affecting the issuer’s operations or regulatory changes or market developments affecting the issuer’s industry.

The Adviser has adopted procedures whereby the Valuation Committee uses a pricing service to provide factors to update the fair value of equity securities traded principally in foreign markets from the time of the close of their respective foreign stock exchanges to the pricing time of the Fund. For other significant events, the Fund may seek to obtain more current quotations or price evaluations from alternative pricing sources. If a reliable alternative pricing source is not available, the Valuation Committee will determine the fair value of the investment in accordance with the fair valuation procedures approved by the Adviser. The Trustees periodically review fair valuations made in response to significant events.

Repurchase Agreements

The Fund may invest in repurchase agreements for short-term liquidity purposes. It is the policy of the Fund to require the other party to a repurchase agreement to transfer to the Fund’s custodian or sub-custodian eligible securities or cash with a market value (after transaction costs) at least equal to the repurchase price to be paid under the repurchase agreement. The eligible securities are transferred to accounts with the custodian or sub-custodian in which the Fund holds a “securities entitlement” and exercises “control” as those terms are defined in the Uniform Commercial Code. The Fund has established procedures for monitoring the market value of the transferred securities and requiring the transfer of additional eligible securities if necessary to equal at least the repurchase price. These procedures also allow the other party to require securities to be transferred from the account to the extent that their market value exceeds the repurchase price or in exchange for other eligible securities of equivalent market value.

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The insolvency of the other party or other failure to repurchase the securities may delay the disposition of the underlying securities or cause the Fund to receive less than the full repurchase price. Under the terms of the repurchase agreement, any amounts received by the Fund in excess of the repurchase price and related transaction costs must be remitted to the other party.

The Fund may enter into repurchase agreements in which eligible securities are transferred into joint trading accounts maintained by the custodian or sub-custodian for investment companies and other clients advised by the Fund’s Adviser and its affiliates. The Fund will participate on a pro rata basis with the other investment companies and clients in its share of the securities transferred under such repurchase agreements and in its share of proceeds from any repurchase or other disposition of such securities.

Investment Income, Gains and Losses, Expenses and Distributions

Investment transactions are accounted for on a trade-date basis. Realized gains and losses from investment transactions are recorded on an identified-cost basis. Interest income and expenses are accrued daily. Dividend income and distributions to shareholders are recorded on the ex-dividend date. Foreign dividends are recorded on the ex-dividend date or when the Fund is informed of the ex-dividend date. Distributions of net investment income, if any, are declared and paid annually. Non-cash dividends included in dividend income, if any, are recorded at fair value. Amortization/accretion of premium and discount is included in investment income. Investment income, realized and unrealized gains and losses, and certain fund-level expenses are allocated to each class based on relative average daily net assets, except that select classes will bear certain expenses unique to those classes. Dividends are declared separately for each class. No class has preferential dividend rights; differences in per share dividend rates are generally due to differences in separate class expenses. The detail of the total fund expense waivers and reimbursements of $4,877,388 is disclosed in various locations in this Note 2 and Note 5.

Transfer Agent Fees

For the year ended October 31, 2023, transfer agent fees for the Fund were as follows: 

	Transfer Agent Fees Incurred	Transfer Agent Fees Reimbursed
Class A Shares	$784,005	$(508,542)
Class B Shares	2,171	(341)
Class C Shares	241,571	—
Class R Shares	351,717	—
Institutional Shares	2,904,093	(2,238,632)
Class R6 Shares	92,406	—
TOTAL	$4,375,963	$(2,747,515)

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Other Service Fees

The Fund may pay other service fees up to 0.25% of the average daily net assets of the Fund’s Class A Shares and Class C Shares to financial intermediaries or to Federated Shareholder Services Company (FSSC) for providing services to shareholders and maintaining shareholder accounts. Prior to their conversion to Class A Shares at the close of business on February 3, 2023, the Class B Shares were also subject to these fees. Subject to the terms described in the Expense Limitation note, FSSC may voluntarily reimburse the Fund for other service fees.

For the year ended October 31, 2023, other service fees for the Fund were as follows: 

	Other Service Fees Incurred
Class A Shares	$1,921,713
Class B Shares	3,538
Class C Shares	486,772
TOTAL	$2,412,023

Federal Taxes

It is the Fund’s policy to comply with the Subchapter M provision of the Internal Revenue Code of 1986 and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal income tax is necessary. As of and during the year ended October 31, 2023, the Fund did not have a liability for any uncertain tax positions. The Fund recognizes interest and penalties, if any, related to tax liabilities as income tax expense in the Statement of Operations. As of October 31, 2023, tax years 2020 through 2023 remain subject to examination by the Fund’s major tax jurisdictions, which include the United States of America and the Commonwealth of Massachusetts.

The Fund may be subject to taxes imposed by governments of countries in which it invests. Such taxes are generally based on either income or gains earned or repatriated. The Fund accrues and applies such taxes to net investment income, net realized gains and net unrealized gains as income and/or gains are earned.

When-Issued and Delayed-Delivery Transactions

The Fund may engage in when-issued or delayed-delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed-delivery basis are marked to market daily and begin earning interest on the settlement date. Losses may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the contract.

Foreign Exchange Contracts

The Fund enters into foreign exchange contracts to manage currency and market risks. Purchased contracts are used to acquire exposure to foreign currencies, whereas, contracts to sell are used to hedge the Fund’s securities against currency fluctuations. Risks may arise upon entering into these transactions from the potential inability of counterparties to meet the terms of their commitments and from unanticipated

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movements in security prices or foreign exchange rates. The foreign exchange contracts are adjusted by the daily exchange rate of the underlying currency and any gains or losses are recorded for financial statement purposes as unrealized until the settlement date.

At October 31, 2023, the Fund had no outstanding foreign exchange contracts.

Foreign Currency Translation

The accounting records of the Fund are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the rates of exchange of such currencies against U.S. dollars on the date of valuation. Purchases and sales of securities, income and expenses are translated at the rate of exchange quoted on the respective date that such transactions are recorded. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.

Reported net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund’s books, and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at fiscal year end, resulting from changes in the exchange rate.

Securities Lending

The Fund participates in a securities lending program providing for the lending of equity securities to qualified brokers. The term of the loans within the program is one year or less. The Fund normally receives cash collateral for securities loaned that may be invested in affiliated money market funds, other money market instruments and/or repurchase agreements. Investments in money market funds may include funds with a “floating” NAV that can impose redemption fees and liquidity gates, impose certain operational impediments to investing cash collateral, and, if the investee fund’s NAV decreases, result in the Fund recognizing losses and being required to cover the decrease in the value of the cash collateral. Collateral is maintained at a minimum level of 100% of the market value of investments loaned, plus interest, if applicable. Earnings from collateral invested in affiliated holdings as presented parenthetically on the Statement of Operations do not reflect fees and rebates and are allocated between the borrower of the security, the securities lending agent, as a fee for its services under the program and the Fund, according to agreed-upon rates. The Fund will not have the right to vote on securities while they are on loan. However, the Fund will attempt to terminate a loan in an effort to reacquire the securities in time to vote on matters that are deemed to be material by the Adviser. There can be no assurance that the Fund will have sufficient notice of such matters to be able to terminate the loan in time to vote thereon.

Securities lending transactions are subject to Master Netting Agreements which are agreements between the Fund and its counterparties that provide for the net settlement of all transactions and collateral with the Fund, through a single payment, in the event of default or termination. Amounts presented on the Portfolio of Investments and Statement of Assets and Liabilities are not net settlement amounts but gross. As

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indicated below, the cash collateral received by the Fund exceeds the market value of the securities loaned reducing the net settlement amount to zero. The chart below identifies the amount of collateral received as well as the market value of securities on loan. Additionally, the securities lending agreement executed by the Fund includes an indemnification clause. This clause stipulates that the borrower will reimburse the Fund for any losses as a result of any failure of the borrower to return equivalent securities to the Fund.

As of October 31, 2023, securities subject to this type of arrangement and related collateral were as follows: 

Fair Value of Securities Loaned	Collateral Received
$295,175,457	$301,600,569

Restricted Securities

The Fund may purchase securities which are considered restricted. Restricted securities are securities that either: (a) cannot be offered for public sale without first being registered, or being able to take advantage of an exemption from registration, under the Securities Act of 1933; or (b) are subject to contractual restrictions on public sales. In some cases, when a security cannot be offered for public sale without first being registered, the issuer of the restricted security has agreed to register such securities for resale, at the issuer’s expense, either upon demand by the Fund or in connection with another registered offering of the securities. Many such restricted securities may be resold in the secondary market in transactions exempt from registration. Restricted securities may be determined to be liquid under criteria established by the Trustees. The Fund will not incur any registration costs upon such resales. The Fund’s restricted securities, like other securities, are priced in accordance with procedures established by and under the general supervision of the Adviser.

Additional information on restricted securities, held at October 31, 2023, is as follows: 

Security	Acquisition Date	Cost	Value
Structure Therapeutics, Inc.	9/29/2023	$9,202,632	$15,065,727

Other

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ materially from those estimated. The Fund applies investment company accounting and reporting guidance.

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3. SHARES OF BENEFICIAL INTEREST

The following tables summarize share activity: 

	Year Ended 10/31/2023		Year Ended 10/31/2022
Class A Shares:	Shares	Amount	Shares	Amount
Shares sold	1,185,128	$50,129,510	1,530,260	$73,184,961
Shares issued to shareholders in payment of distributions declared	—	—	1,674,041	95,688,203
Conversion of Class B Shares to Class A Shares1	125,602	5,626,994	—	—
Shares redeemed	(3,718,448)	(157,077,221)	(4,535,857)	(214,855,756)
NET CHANGE RESULTING FROM CLASS A SHARE TRANSACTIONS	(2,407,718)	$(101,320,717)	(1,331,556)	$(45,982,592)
	Year Ended 10/31/2023		Year Ended 10/31/2022
Class B Shares:	Shares	Amount	Shares	Amount
Shares sold	3	$102	1,017	$39,776
Shares issued to shareholders in payment of distributions declared	—	—	25,149	1,183,010
Conversion of Class B Shares to Class A Shares1	(153,756)	(5,626,994)	—	—
Shares redeemed	(10,024)	(334,282)	(108,817)	(4,175,494)
NET CHANGE RESULTING FROM CLASS B SHARE TRANSACTIONS	(163,777)	$(5,961,174)	(82,651)	$(2,952,708)
	Year Ended 10/31/2023		Year Ended 10/31/2022
Class C Shares:	Shares	Amount	Shares	Amount
Shares sold	357,161	$12,365,064	415,804	$16,186,192
Shares issued to shareholders in payment of distributions declared	—	—	703,297	33,090,127
Shares redeemed	(1,458,311)	(50,017,863)	(1,895,545)	(72,415,703)
NET CHANGE RESULTING FROM CLASS C SHARE TRANSACTIONS	(1,101,150)	$(37,652,799)	(776,444)	$(23,139,384)
	Year Ended 10/31/2023		Year Ended 10/31/2022
Class R Shares:	Shares	Amount	Shares	Amount
Shares sold	268,872	$11,535,009	335,394	$16,171,089
Shares issued to shareholders in payment of distributions declared	—	—	314,493	18,083,325
Shares redeemed	(813,329)	(34,460,925)	(968,244)	(45,767,933)
NET CHANGE RESULTING FROM CLASS R SHARE TRANSACTIONS	(544,457)	$(22,925,916)	(318,357)	$(11,513,519)

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	Year Ended 10/31/2023		Year Ended 10/31/2022
Institutional Shares:	Shares	Amount	Shares	Amount
Shares sold	11,389,248	$499,723,057	16,251,449	$775,568,956
Shares issued to shareholders in payment of distributions declared	—	—	6,963,343	409,305,296
Shares redeemed	(25,583,816)	(1,108,585,722)	(43,798,331)	(2,126,528,197)
NET CHANGE RESULTING FROM INSTITUTIONAL SHARE TRANSACTIONS	(14,194,568)	$(608,862,665)	(20,583,539)	$(941,653,945)
	Year Ended 10/31/2023		Year Ended 10/31/2022
Class R6 Shares:	Shares	Amount	Shares	Amount
Shares sold	2,246,884	$98,065,670	3,869,658	$184,669,940
Shares issued to shareholders in payment of distributions declared	—	—	1,293,085	75,373,931
Shares redeemed	(4,831,663)	(209,642,416)	(6,168,680)	(288,724,042)
NET CHANGE RESULTING FROM CLASS R6 SHARE TRANSACTIONS	(2,584,779)	$(111,576,746)	(1,005,937)	$(28,680,171)
NET CHANGE RESULTING FROM TOTAL FUND SHARE TRANSACTIONS	(20,996,449)	$(888,300,017)	(24,098,484)	$(1,053,922,319)

 

1 On February 3, 2023, Class B Shares were converted to Class A Shares. Within the Statement of Changes in Net Assets, the conversion from Class B Shares is within the Cost of shares redeemed and the conversion to Class A Shares is within Proceeds from sale of shares.

4. FEDERAL TAX INFORMATION

The tax character of distributions as reported on the Statement of Changes in Net Assets for the years ended October 31, 2023 and 2022, was as follows: 

	2023	2022
Ordinary income	$—	$141,944,647
Long-term capital gains	$—	$527,744,772

As of October 31, 2023, the components of distributable earnings on a tax-basis were as follows: 

Undistributed ordinary income	$15,074,049
Net unrealized appreciation	$698,220,039
Other temporary differences	$(10,399)
TOTAL	$713,283,689

The difference between book-basis and tax-basis net unrealized appreciation is attributable to differing treatments for the deferral of losses on wash sales, passive foreign investment company adjustments, discount accretion/premium amortization on debt securities and return of capital dividends.

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At October 31, 2023, the cost of investments for federal tax purposes was $3,247,356,780. The net unrealized appreciation of investments for federal tax purposes was $698,220,039. This consists of unrealized appreciation from investments for those securities having an excess of value over cost of $1,142,726,708 and unrealized depreciation from investments for those securities having an excess of cost over value of $444,506,669.

5. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

Investment Adviser Fee

The advisory agreement between the Fund and the Adviser provides for an annual fee equal to 0.80% of the Fund’s average daily net assets. Subject to the terms described in the Expense Limitation note, the Adviser may voluntarily choose to waive any portion of its fee and/or reimburse certain operating expenses of the Fund for competitive reasons such as to maintain the Fund’s expense ratio, or as and when appropriate, to maintain positive or zero net yields. For the year ended October 31, 2023, the Adviser voluntarily waived $799,998 of its fee and voluntarily reimbursed $2,747,515 of transfer agent fees.

The Adviser has agreed to reimburse the Fund for certain investment adviser fees as a result of transactions in other affiliated investment companies. For the year ended October 31, 2023, the Adviser reimbursed $545,285.

Certain of the Fund’s assets are managed by Federated Global Investment Management Corp. (the “Sub-Adviser”). Under the terms of a sub-advisory agreement between the Adviser and the Sub-Adviser, the Sub-Adviser receives an allocable portion of the Fund’s adviser fee. The fee is paid by the Adviser out of its resources and is not an incremental Fund expense. For the year ended October 31, 2023, the Sub-Adviser earned a fee of $28,531,568.

Administrative Fee

Federated Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. For purposes of determining the appropriate rate breakpoint, “Investment Complex” is defined as all of the Federated Hermes Funds subject to a fee under the Administrative Services Agreement. The fee paid to FAS is based on the average daily net assets of the Investment Complex as specified below: 

Administrative Fee	Average Daily Net Assets of the Investment Complex
0.100%	on assets up to $50 billion
0.075%	on assets over $50 billion

Subject to the terms described in the Expense Limitation note, FAS may voluntarily choose to waive any portion of its fee. For the year ended October 31, 2023, the annualized fee paid to FAS was 0.078% of average daily net assets of the Fund.

In addition, FAS may charge certain out-of-pocket expenses to the Fund.

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Distribution Services Fee

The Fund has adopted a Distribution Plan (the “Plan”) pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will compensate Federated Securities Corp. (FSC), the principal distributor, from the daily net assets of the Fund’s Class A Shares, Class C Shares and Class R Shares to finance activities intended to result in the sale of these shares. The Plan provides that the Fund may incur distribution expenses at the following percentages of average daily net assets annually, to compensate FSC: 

	Percentage of Average Daily Net Assets of Class
Class A Shares	0.25%
Class C Shares	0.75%
Class R Shares	0.50%

Prior to their conversion to Class A Shares at the close of business on February 3, 2023, the Class B Shares were also subject to the Plan at 0.75% of average daily net assets of the Class B Shares.

Subject to the terms described in the Expense Limitation note, FSC may voluntarily choose to waive any portion of its fee. For the year ended October 31, 2023, distribution services fees for the Fund were as follows: 

	Distribution Services Fees Incurred	Distribution Services Fees Waived
Class A Shares	$1,925,815	$(385,163)
Class B Shares	10,612	—
Class C Shares	1,460,317	—
Class R Shares	665,712	(399,427)
TOTAL	$4,062,456	$(784,590)

When FSC receives fees, it may pay some or all of them to financial intermediaries whose customers purchase shares. For the year ended October 31, 2023, FSC retained $1,217,521 of fees paid by the Fund.

Sales Charges

Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Fund. They are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. For the year ended October 31, 2023, FSC retained $40,599 in sales charges from the sale of Class A Shares. FSC also retained $9,047, $487 and $6,249 of CDSC relating to redemptions of Class A Shares, Class B Shares and Class C Shares, respectively.

Other Service Fees

For the year ended October 31, 2023, FSSC received $98,272 of the other service fees disclosed in Note 2.

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Expense Limitation

The Adviser and certain of its affiliates (which may include FSC, FAS and FSSC) on their own initiative have agreed to waive certain amounts of their respective fees and/or reimburse expenses. Total annual fund operating expenses (as shown in the financial highlights, excluding dividends and other expenses related to short sales, extraordinary expenses and proxy-related expenses paid by the Fund, if any) paid by the Fund’s Class A Shares, Class R Shares, Institutional Shares and Class R6 Shares (after the voluntary waivers and/or reimbursements) will not exceed 1.35%, 1.35%, 0.89% and 0.88% (the “Fee Limit”), respectively, up to but not including the later of (the “Termination Date”): (a) January 1, 2025; or (b) the date of the Fund’s next effective Prospectus. While the Adviser and its applicable affiliates currently do not anticipate terminating or increasing these arrangements prior to the Termination Date, these arrangements may only be terminated or the Fee Limit increased prior to the Termination Date with the agreement of the Trustees.

Directors’/Trustees’ and Miscellaneous Fees

Certain Officers and Trustees of the Fund are Officers and Directors or Trustees of certain of the above companies. To efficiently facilitate payment, Independent Directors’/Trustees’ fees and certain expenses related to conducting meetings of the Directors/Trustees and other miscellaneous expenses are paid by an affiliate of the Adviser which in due course are reimbursed by the Fund. These expenses related to conducting meetings of the Directors/Trustees and other miscellaneous expenses may be included in Accrued and Miscellaneous Expenses on the Statement of Assets and Liabilities and Statement of Operations, respectively.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding long-term U.S. government securities and short-term obligations, for the year ended October 31, 2023, were as follows: 

Purchases	$1,232,826,808
Sales	$1,896,490,772

7. CONCENTRATION OF RISK

The Fund may invest a portion of its assets in securities of companies that are deemed by the Fund’s management to be classified in similar business sectors. Economic developments may have an effect on the liquidity and volatility of the portfolio securities.

A substantial portion of the Fund’s portfolio may be comprised of entities in the Health Care sector. As a result, the Fund may be more susceptible to any economic, business, political or other developments which generally affect these entities.

8. 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 dated June 21, 2023. The LOC was made available to temporarily finance the repurchase or redemption of shares of the Fund, 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. The Fund’s ability to borrow under the LOC also is subject to the

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limitations of the Act and various conditions precedent that must be satisfied before the Fund can borrow. Loans under the LOC are charged interest at a fluctuating rate per annum equal to (a) the highest, on any day, of (i) the federal funds effective rate, (ii) the published secured overnight financing rate plus an assigned percentage, and (iii) 0.0%, plus (b) a margin. Any fund eligible to borrow under the LOC pays its pro rata share of a commitment fee based on the amount of the lenders’ commitment that has not been utilized, quarterly in arrears and at maturity. As of October 31, 2023, the Fund had no outstanding loans. During the year ended October 31, 2023, the Fund did not utilize the LOC.

9. Interfund Lending

Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other funds advised by subsidiaries of Federated Hermes, Inc., may participate in an interfund lending program. This program provides an alternative credit facility allowing the Fund to borrow from other participating affiliated funds. As of October 31, 2023, there were no outstanding loans. During the year ended October 31, 2023, the program was not utilized.

10. INDEMNIFICATIONS

Under the Fund’s organizational documents, its Officers and Directors/Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund (other than liabilities arising out of their willful misfeasance, bad faith, gross negligence or reckless disregard of their duties to the Fund). In addition, in the normal course of business, the Fund provides certain indemnifications under arrangements with third parties. Typically, obligations to indemnify a third party arise in the context of an arrangement entered into by the Fund under which the Fund agrees to indemnify such third party for certain liabilities arising out of actions taken pursuant to the arrangement, provided the third party’s actions are not deemed to have breached an agreed-upon standard of care (such as willful misfeasance, bad faith, gross negligence or reckless disregard of their duties under the contract). The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet arisen. The Fund does not anticipate any material claims or losses pursuant to these arrangements at this time, and accordingly expects the risk of loss to be remote.

11. OTHER MATTERS

An outbreak of respiratory disease caused by a novel coronavirus was first detected in China in late 2019 and subsequently spread globally. As of the date of the issuance of these financial statements, this coronavirus has resulted in, and may continue to result in, closed borders, enhanced health screenings, disruptions to healthcare service preparation and delivery, quarantines, cancellations, and disruptions to supply chains, workflow operations and consumer activity, as well as general concern and uncertainty. The impact of this coronavirus has resulted in substantial economic volatility. Health crises caused by outbreaks, such as the coronavirus outbreak, may exacerbate other pre-existing political, social and economic risks. The impact of this outbreak, and other epidemics and pandemics that may arise in the future, could continue to negatively affect the worldwide economy, as well as the economies of individual countries, individual companies (including certain Fund service providers and issuers of the Fund’s investments) and the markets in general in significant and unforeseen ways. In addition,

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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 investments. Any such impact could adversely affect the Fund’s performance.

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Report of Independent Registered Public Accounting Firm

TO THE BOARD OF TRUSTEES OF FEDERATED HERMES EQUITY FUNDS AND SHAREHOLDERS OF FEDERATED HERMES KAUFMANN SMALL CAP FUND:

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities of Federated Hermes Kaufmann Small Cap Fund (the “Fund”) (one of the portfolios constituting Federated Hermes Equity Funds (the “Trust”)), including the portfolio of investments, as of October 31, 2023, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the portfolios constituting Federated Hermes Equity Funds) at October 31, 2023, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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We conducted our audits in accordance with standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2023, by correspondence with the custodian, brokers, and others; when replies were not received from brokers or others, we performed other auditing procedures. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

We have served as the auditor of one or more Federated Hermes investment companies since 1979.

Boston, Massachusetts
December 22, 2023

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Shareholder Expense Example (unaudited)

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase or redemption payments; and (2) ongoing costs, including management fees and to the extent applicable, distribution (12b-1) fees and/or other service fees and other Fund expenses. This Example is intended to help you to understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. It is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from May 1, 2023 to October 31, 2023.

ACTUAL EXPENSES

The first section of the table below provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you incurred over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses attributable to your investment during this period.

HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES

The second section of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. Thus, you should not use the hypothetical account values and expenses to estimate the actual ending account balance or your expenses for the period. Rather, these figures are required to be provided to enable you to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

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Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase or redemption payments. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. 

	Beginning Account Value 5/1/2023	Ending Account Value 10/31/2023	Expenses Paid During Period1
Actual:
Class A Shares	$1,000	$916.90	$6.52
Class C Shares	$1,000	$914.20	$9.60
Class R Shares	$1,000	$917.00	$6.38
Institutional Shares	$1,000	$919.10	$4.31
Class R6 Shares	$1,000	$919.10	$4.26
Hypothetical (assuming a 5% return before expenses):
Class A Shares	$1,000	$1,018.40	$6.87
Class C Shares	$1,000	$1,015.17	$10.11
Class R Shares	$1,000	$1,018.55	$6.72
Institutional Shares	$1,000	$1,020.72	$4.53
Class R6 Shares	$1,000	$1,020.77	$4.48

 

1 Expenses are equal to the Fund’s annualized net expense ratios, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half-year period). The annualized net expense ratios are as follows:

 

Class A Shares	1.35%
Class C Shares	1.99%
Class R Shares	1.32%
Institutional Shares	0.89%
Class R6 Shares	0.88%

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Board of Trustees and Trust Officers

The Board of Trustees is responsible for managing the Trust’s business affairs and for exercising all the Trust’s powers except those reserved for the shareholders. The following tables give information about each Trustee and the senior officers of the Fund. Where required, the tables separately list Trustees who are “interested persons” of the Fund (i.e., “Interested” Trustees) and those who are not (i.e., “Independent” Trustees). Unless otherwise noted, the address of each person listed is 1001 Liberty Avenue, Pittsburgh, PA 15222-3779. The address of all Independent Trustees listed is 4000 Ericsson Drive, Warrendale, PA 15086-7561; Attention: Mutual Fund Board. As of December 31, 2022, the Trust comprised 9 portfolio(s), and the Federated Hermes Fund Family consisted of 33 investment companies (comprising 102 portfolios). Unless otherwise noted, each Officer is elected annually. Unless otherwise noted, each Trustee oversees all portfolios in the Federated Hermes Fund Family and serves for an indefinite term. The Fund’s Statement of Additional Information includes additional information about Trust Trustees and is available, without charge and upon request, by calling 1-800-341-7400, Option #4.

Interested Trustees Background 

Name Birth Date Positions Held with Trust Date Service Began

Principal Occupation(s) for Past Five Years, Other Directorships Held and Previous Position(s)

J. Christopher Donahue* Birth Date: April 11, 1949 President and Trustee Indefinite Term Began serving: January 2000

Principal Occupations: Principal Executive Officer and President of certain of the Funds in the Federated Hermes Fund Family; Director or Trustee of the Funds in the Federated Hermes Fund Family; President, Chief Executive Officer and Director, Federated Hermes, Inc.; Chairman and Trustee, Federated Investment Management Company; Trustee, Federated Investment Counseling; Chairman and Director, Federated Global Investment Management Corp.; Chairman and Trustee, Federated Equity Management Company of Pennsylvania; Trustee, Federated Shareholder Services Company; Director, Federated Services Company. Previous Positions: President, Federated Investment Counseling; President and Chief Executive Officer, Federated Investment Management Company, Federated Global Investment Management Corp. and Passport Research, Ltd; Chairman, Passport Research, Ltd.

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Name Birth Date Positions Held with Trust Date Service Began

Principal Occupation(s) for Past Five Years, Other Directorships Held and Previous Position(s)

John B. Fisher* Birth Date: May 16, 1956 Trustee Indefinite Term Began serving: May 2016

Principal Occupations: Principal Executive Officer and President of certain of the Funds in the Federated Hermes Fund Family; Director or Trustee of certain of the Funds in the Federated Hermes Fund Family; Director and Vice President, Federated Hermes, Inc.; President, Director/Trustee and CEO, Federated Advisory Services Company, Federated Equity Management Company of Pennsylvania, Federated Global Investment Management Corp., Federated Investment Counseling, Federated Investment Management Company, and Federated MDTA LLC; Director, Federated Investors Trust Company. Previous Positions: President and Director of the Institutional Sales Division of Federated Securities Corp.; President and CEO of Passport Research, Ltd.; Director and President, Technology, Federated Services Company.

*

Reasons for “interested” status: J. Christopher Donahue and John B. Fisher are interested due to their beneficial ownership of shares of Federated Hermes, Inc. and due to positions they hold with Federated Hermes, Inc. and its subsidiaries.

INDEPENDENT Trustees Background 

Name Birth Date Positions Held with Trust Date Service Began

Principal Occupation(s) for Past Five Years, Other Directorships Held, Previous Position(s) and Qualifications

John T. Collins Birth Date: January 24, 1947 Trustee Indefinite Term Began serving: October 2013

Principal Occupations: Director or Trustee, and Chair of the Board of Directors or Trustees, of the Federated Hermes Fund Family; formerly, Chairman and CEO, The Collins Group, Inc. (a private equity firm) (Retired). Other Directorships Held: Director, KLX Energy Services Holdings, Inc. (oilfield services); former Director of KLX Corp. (aerospace). Qualifications: Mr. Collins has served in several business and financial management roles and directorship positions throughout his career. Mr. Collins previously served as Chairman and CEO of The Collins Group, Inc. (a private equity firm) and as a Director of KLX Corp. Mr. Collins serves as Chairman Emeriti, Bentley University. Mr. Collins previously served as Director and Audit Committee Member, Bank of America Corp.; Director, FleetBoston Financial Corp.; and Director, Beth Israel Deaconess Medical Center (Harvard University Affiliate Hospital).

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Name Birth Date Positions Held with Trust Date Service Began	Principal Occupation(s) for Past Five Years, Other Directorships Held, Previous Position(s) and Qualifications
G. Thomas Hough Birth Date: February 28, 1955 Trustee Indefinite Term Began serving: August 2015	Principal Occupations: Director or Trustee, Chair of the Audit Committee of the Federated Hermes Fund Family; formerly, Vice Chair, Ernst & Young LLP (public accounting firm) (Retired). Other Directorships Held: Director, Chair of the Audit Committee, Equifax, Inc.; Lead Director, Member of the Audit and Nominating and Corporate Governance Committees, Haverty Furniture Companies, Inc.; formerly, Director, Member of Governance and Compensation Committees, Publix Super Markets, Inc. Qualifications: Mr. Hough has served in accounting, business management and directorship positions throughout his career. Mr. Hough most recently held the position of Americas Vice Chair of Assurance with Ernst & Young LLP (public accounting firm). Mr. Hough serves on the President’s Cabinet and Business School Board of Visitors for the University of Alabama. Mr. Hough previously served on the Business School Board of Visitors for Wake Forest University, and he previously served as an Executive Committee member of the United States Golf Association.
Maureen Lally-Green Birth Date: July 5, 1949 Trustee Indefinite Term Began serving: August 2009	Principal Occupations: Director or Trustee of the Federated Hermes Fund Family; Adjunct Professor Emerita of Law, Duquesne University School of Law; formerly, Dean of the Duquesne University School of Law and Professor of Law and Interim Dean of the Duquesne University School of Law; formerly, Associate General Secretary and Director, Office of Church Relations, Diocese of Pittsburgh. Other Directorships Held: Director, CNX Resources Corporation (natural gas). Qualifications: Judge Lally-Green has served in various legal and business roles and directorship positions throughout her career. Judge Lally-Green previously held the position of Dean of the School of Law of Duquesne University (as well as Interim Dean). Judge Lally-Green previously served as Associate General Secretary of the Diocese of Pittsburgh, a member of the Superior Court of Pennsylvania and as a Professor of Law, Duquesne University School of Law. Judge Lally- Green was appointed by the Supreme Court of Pennsylvania to serve on the Supreme Court’s Board of Continuing Judicial Education and the Supreme Court’s Appellate Court Procedural Rules Committee. Judge Lally-Green also currently holds the positions on not for profit or for profit boards of directors as follows: Director and Chair, UPMC Mercy Hospital; Regent, Saint Vincent Seminary; Member, Pennsylvania State Board of Education (public); Director, Catholic Charities, Pittsburgh; and Director CNX Resources Corporation (natural gas). Judge Lally-Green has held the positions of: Director, Auberle; Director, Epilepsy Foundation of Western and Central Pennsylvania; Director, Ireland Institute of Pittsburgh; Director, Saint Thomas More Society; Director and Chair, Catholic High Schools of the Diocese of Pittsburgh, Inc.; Director, Pennsylvania Bar Institute; Director, St. Vincent College; Director and Chair, North Catholic High School, Inc.; Director and Vice Chair, Our Campaign for the Church Alive!, Inc.; and Director and Vice Chair, Saint Francis University.

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Name Birth Date Positions Held with Trust Date Service Began	Principal Occupation(s) for Past Five Years, Other Directorships Held, Previous Position(s) and Qualifications
Thomas M. O’Neill Birth Date: June 14, 1951 Trustee Indefinite Term Began serving: August 2006	Principal Occupations: Director or Trustee of the Federated Hermes Fund Family; Sole Proprietor, Navigator Management Company (investment and strategic consulting). Other Directorships Held: None. Qualifications: Mr. O’Neill has served in several business, mutual fund and financial management roles and directorship positions throughout his career. Mr. O’Neill serves as Director, Medicines for Humanity. Mr. O’Neill previously served as Chief Executive Officer and President, Managing Director and Chief Investment Officer, Fleet Investment Advisors; President and Chief Executive Officer, Aeltus Investment Management, Inc.; General Partner, Hellman, Jordan Management Co., Boston, MA; Chief Investment Officer, The Putnam Companies, Boston, MA; Credit Analyst and Lending Officer, Fleet Bank; Director and Consultant, EZE Castle Software (investment order management software); Director, Midway Pacific (lumber); and Director, The Golisano Children’s Museum of Naples, Florida.
Madelyn A. Reilly Birth Date: February 2, 1956 Trustee Indefinite Term Began serving: November 2020	Principal Occupations: Director or Trustee of the Federated Hermes Fund Family; formerly, Senior Vice President for Legal Affairs, General Counsel and Secretary of Board of Directors, Duquesne University (Retired). Other Directorships Held: None. Qualifications: Ms. Reilly has served in various business and legal management roles throughout her career. Ms. Reilly previously served as Senior Vice President for Legal Affairs, General Counsel and Secretary of Board of Directors and Director of Risk Management and Associate General Counsel, Duquesne University. Prior to her work at Duquesne University, Ms. Reilly served as Assistant General Counsel of Compliance and Enterprise Risk as well as Senior Counsel of Environment, Health and Safety, PPG Industries. Ms. Reilly currently serves as a member of the Board of Directors of UPMC Mercy Hospital.

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Name Birth Date Positions Held with Trust Date Service Began	Principal Occupation(s) for Past Five Years, Other Directorships Held, Previous Position(s) and Qualifications
P. Jerome Richey Birth Date: February 23, 1949 Trustee Indefinite Term Began serving: October 2013	Principal Occupations: Director or Trustee of the Federated Hermes Fund Family; Retired; formerly, Senior Vice Chancellor and Chief Legal Officer, University of Pittsburgh and Executive Vice President and Chief Legal Officer, CONSOL Energy Inc. (now split into two separate publicly traded companies known as CONSOL Energy Inc. and CNX Resources Corp.). Other Directorships Held: None. Qualifications: Mr. Richey has served in several business and legal management roles and directorship positions throughout his career. Mr. Richey most recently held the positions of Senior Vice Chancellor and Chief Legal Officer, University of Pittsburgh. Mr. Richey previously served as Chairman of the Board, Epilepsy Foundation of Western Pennsylvania and Chairman of the Board, World Affairs Council of Pittsburgh. Mr. Richey previously served as Chief Legal Officer and Executive Vice President, CONSOL Energy Inc. and CNX Gas Company; and Board Member, Ethics Counsel and Shareholder, Buchanan Ingersoll & Rooney PC (a law firm).
John S. Walsh Birth Date: November 28, 1957 Trustee Indefinite Term Began serving: January 1999	Principal Occupations: Director or Trustee of the Federated Hermes Fund Family; President and Director, Heat Wagon, Inc. (manufacturer of construction temporary heaters); President and Director, Manufacturers Products, Inc. (distributor of portable construction heaters); President, Portable Heater Parts, a division of Manufacturers Products, Inc. Other Directorships Held: None. Qualifications: Mr. Walsh has served in several business management roles and directorship positions throughout his career. Mr. Walsh previously served as Vice President, Walsh & Kelly, Inc. (paving contractors).

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OFFICERS 

Name Birth Date Address Positions Held with Trust Date Service Began	Principal Occupation(s) for Past Five Years and Previous Position(s)
Lori A. Hensler Birth Date: January 6, 1967 TREASURER Officer since: April 2013	Principal Occupations: Principal Financial Officer and Treasurer of the Federated Hermes Fund Family; Senior Vice President, Federated Administrative Services; Financial and Operations Principal for Federated Securities Corp.; and Assistant Treasurer, Federated Investors Trust Company. Ms. Hensler has received the Certified Public Accountant designation. Previous Positions: Controller of Federated Hermes, Inc.; Senior Vice President and Assistant Treasurer, Federated Investors Management Company; Treasurer, Federated Investors Trust Company; Assistant Treasurer, Federated Administrative Services, Federated Administrative Services, Inc., Federated Securities Corp., Edgewood Services, Inc., Federated Advisory Services Company, Federated Equity Management Company of Pennsylvania, Federated Global Investment Management Corp., Federated Investment Counseling, Federated Investment Management Company, Passport Research, Ltd., and Federated MDTA, LLC; Financial and Operations Principal for Federated Securities Corp., Edgewood Services, Inc. and Southpointe Distribution Services, Inc.
Peter J. Germain Birth Date: September 3, 1959 CHIEF LEGAL OFFICER, SECRETARY and EXECUTIVE VICE PRESIDENT Officer since: January 2005	Principal Occupations: Mr. Germain is Chief Legal Officer, Secretary and Executive Vice President of the Federated Hermes Fund Family. He is General Counsel, Chief Legal Officer, Secretary and Executive Vice President, Federated Hermes, Inc.; Trustee and Senior Vice President, Federated Investors Management Company; Trustee and President, Federated Administrative Services; Director and President, Federated Administrative Services, Inc.; Director and Vice President, Federated Securities Corp.; Director and Secretary, Federated Private Asset Management, Inc.; Secretary, Federated Shareholder Services Company; and Secretary, Retirement Plan Service Company of America. Mr. Germain joined Federated Hermes, Inc. in 1984 and is a member of the Pennsylvania Bar Association. Previous Positions: Deputy General Counsel, Special Counsel, Managing Director of Mutual Fund Services, Federated Hermes, Inc.; Senior Vice President, Federated Services Company; and Senior Corporate Counsel, Federated Hermes, Inc.
Stephen Van Meter Birth Date: June 5, 1975 CHIEF COMPLIANCE OFFICER AND SENIOR VICE PRESIDENT Officer since: July 2015	Principal Occupations: Senior Vice President and Chief Compliance Officer of the Federated Hermes Fund Family; Vice President and Chief Compliance Officer of Federated Hermes, Inc. and Chief Compliance Officer of certain of its subsidiaries. Mr. Van Meter joined Federated Hermes, Inc. in October 2011. He holds FINRA licenses under Series 3, 7, 24 and 66. Previous Positions: Mr. Van Meter previously held the position of Compliance Operating Officer, Federated Hermes, Inc. Prior to joining Federated Hermes, Inc., Mr. Van Meter served at the United States Securities and Exchange Commission in the positions of Senior Counsel, Office of Chief Counsel, Division of Investment Management and Senior Counsel, Division of Enforcement.

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Name Birth Date Address Positions Held with Trust Date Service Began

Principal Occupation(s) for Past Five Years and Previous Position(s)

Stephen F. Auth Birth Date: September 13, 1956 101 Park Avenue 41st Floor New York, NY 10178 CHIEF INVESTMENT OFFICER Officer since: November 2002

Principal Occupations: Stephen F. Auth is Chief Investment Officer of various Funds in the Federated Hermes Fund Family; Executive Vice President, Federated Investment Counseling, Federated Global Investment Management Corp. and Federated Equity Management Company of Pennsylvania. Previous Positions: Executive Vice President, Federated Investment Management Company and Passport Research, Ltd. (investment advisory subsidiary of Federated); Senior Vice President, Global Portfolio Management Services Division; Senior Vice President, Federated Investment Management Company and Passport Research, Ltd.; Senior Managing Director and Portfolio Manager, Prudential Investments.

 

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Evaluation and Approval of Advisory Contract–May 2023

Federated Hermes Kaufmann Small Cap Fund (the “Fund”)

At its meetings in May 2023 (the “May Meetings”), the Fund’s Board of Trustees (the “Board”), including those Trustees who are not “interested persons” of the Fund, as defined in the Investment Company Act of 1940 (the “Independent Trustees”), reviewed and unanimously approved the continuation of the investment advisory contract between the Fund and Federated Equity Management Company of Pennsylvania (the “Adviser”) and the investment subadvisory contract between the Adviser and Federated Global Investment Management Corp. (the “Sub-Adviser” and together with the Adviser, the “Advisers”) with respect to the Fund (together, the “Contracts”) for an additional one-year term. The Board’s determination to approve the continuation of the Contracts reflects the exercise of its business judgment after considering all of the information and factors believed to be relevant and appropriate on whether to approve the continuation of the existing arrangements. The information, factors and conclusions that formed the basis for the Board’s approval are summarized below.

Information Received and Review Process

At the request of the Independent Trustees, the Fund’s Chief Compliance Officer (the “CCO”) furnished to the Board in advance of its May Meetings an independent written evaluation of the Fund’s management fee (the “CCO Fee Evaluation Report”). The Board considered the CCO Fee Evaluation Report, along with other information, in evaluating the reasonableness of the Fund’s management fee and in determining to approve the continuation of the Contracts. The CCO, in preparing the CCO Fee Evaluation Report, has the authority to retain consultants, experts or staff as reasonably necessary to assist in the performance of his duties, reports directly to the Board, and can be terminated only with the approval of a majority of the Independent Trustees. At the request of the Independent Trustees, the CCO Fee Evaluation Report followed the same general approach and covered the same topics as that of the report that had previously been delivered by the CCO in his capacity as “Senior Officer” prior to the elimination of the Senior Officer position in December 2017.

In addition to the extensive materials that comprise and accompany the CCO Fee Evaluation Report, the Board considered information specifically prepared in connection with the approval of the continuation of the Contracts that was presented at the May Meetings. In this regard, in the months preceding the May Meetings, the Board requested and reviewed written responses and supporting materials prepared by the Advisers and their affiliates (collectively, “Federated Hermes”) in response to requests posed to Federated Hermes by independent legal counsel on behalf of the Independent Trustees encompassing a wide variety of topics, including those summarized below. The Board also

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considered such additional matters as the Independent Trustees deemed reasonably necessary to evaluate the Contracts, which included detailed information about the Fund and Federated Hermes furnished to the Board at its meetings throughout the year and in between regularly scheduled meetings on particular matters as the need arose. The Independent Trustees also considered the presentation from the Fund’s portfolio managers received at the May Meetings regarding the Fund and its performance and other investment-related matters.

The Board’s consideration of the Contracts included review of materials and information covering the following matters, among others: the nature, quality and extent of the advisory and other services provided to the Fund by Federated Hermes; Federated Hermes’ business and operations; the Advisers’ investment philosophy, personnel and processes; the Fund’s investment objectives and strategies; the Fund’s short-term and long-term performance (in absolute terms, both on a gross basis and net of expenses, and relative to the Fund’s particular investment program and a group of its peer funds and/or its benchmark, as appropriate); the Fund’s fees and expenses, including the advisory fee and the overall expense structure of the Fund (both in absolute terms and relative to a group of its peer funds), with due regard for contractual or voluntary expense limitations (if any); the financial condition of Federated Hermes; the Adviser’s profitability with respect to managing the Fund; distribution and sales activity for the Fund; and the use and allocation of brokerage commissions derived from trading the Fund’s portfolio securities (if any).

The Board also considered judicial decisions concerning allegedly excessive investment advisory fees charged to other registered funds in evaluating the Contracts. Using these judicial decisions as a guide, the Board observed that the following factors may be relevant to an adviser’s fiduciary duty with respect to its receipt of compensation from a fund: (1) the nature and quality of the services provided by the adviser to the fund and its shareholders, including the performance of the fund, its benchmark and comparable funds; (2) the adviser’s cost of providing the services and the profitability to the adviser of providing advisory services to the fund; (3) the extent to which the adviser may realize “economies of scale” as the fund grows larger and, if such economies of scale exist, whether they have been appropriately shared with the fund and its shareholders or the family of funds; (4) any “fall-out” benefits that accrue to the adviser because of its relationship with the fund, including research services received from brokers that execute fund trades and any fees paid to affiliates of the adviser for services rendered to the fund; (5) comparative fee and expense structures, including a comparison of management fees paid to the adviser with those paid by similar funds managed by the same adviser or other advisers as well as management fees charged to institutional and other advisory clients of the same adviser for what might be viewed as like services; and (6) the extent of care, conscientiousness and independence with which the

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fund’s board members perform their duties and their expertise, including whether they are fully informed about all facts the board deems relevant to its consideration of the adviser’s services and fees. The Board noted that the Securities and Exchange Commission (“SEC”) disclosure requirements regarding the basis for a fund board’s approval of the fund’s investment advisory contract generally align with the factors listed above. The Board was guided by these factors in its evaluation of the Contracts to the extent it considered them to be appropriate and relevant, as discussed further below. The Board considered and weighed these factors in light of its substantial accumulated experience in governing the Fund and working with Federated Hermes on matters relating to the oversight of the other funds advised by Federated Hermes (each, a “Federated Hermes Fund” and, collectively, the “Federated Hermes Funds”).

In addition, the Board considered the preferences and expectations of Fund shareholders and the potential disruptions of the Fund’s operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew the Contracts. In particular, the Board recognized that many shareholders likely have invested in the Fund based on the strength of Federated Hermes’ industry standing and reputation and with the expectation that Federated Hermes will have a continuing role in providing advisory services to the Fund. Thus, the Board observed that there are a range of investment options available to the Fund’s shareholders in the marketplace, and such shareholders, having had the opportunity to consider other investment options, have effectively selected Federated Hermes by virtue of investing in the Fund.

In determining to approve the continuation of the Contracts, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate through the exercise of their reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to approve the continuation of the Contracts was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the continuation of the Contracts. The Board recognized that its evaluation process is evolutionary and that the factors considered and emphasis placed on relevant factors may change in recognition of changing circumstances in the registered fund marketplace. The Independent Trustees were assisted throughout the evaluation process by independent legal counsel. In connection with their deliberations at the May Meetings, the Independent Trustees met separately in executive session with their independent legal counsel and without management present to review the relevant materials and consider their responsibilities under applicable laws. In addition, senior management representatives of Federated Hermes also met with the Independent Trustees and their independent legal counsel to discuss the materials and presentations

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furnished to the Board at the May Meetings. The Board considered the approval of the Contracts for the Fund as part of its consideration of agreements for funds across the family of Federated Hermes Funds, but its approvals were made on a fund-by-fund basis.

Nature, Extent and Quality of Services

The Board considered the nature, extent and quality of the services provided to the Fund by the Advisers and the resources of Federated Hermes dedicated to the Fund. In this regard, the Board evaluated, among other things, the terms of the Contracts and the range of services provided to the Fund by Federated Hermes. The Board considered the Advisers’ personnel, investment philosophy and process, investment research capabilities and resources, trade operations capabilities, experience and performance track record. The Board reviewed the qualifications, backgrounds and responsibilities of the portfolio management team primarily responsible for the day-to-day management of the Fund and Federated Hermes’ ability and experience in attracting and retaining qualified personnel to service the Fund. The Board considered the trading operations by the Advisers, including the execution of portfolio transactions and the selection of brokers for those transactions. The Board also considered the Advisers’ ability to deliver competitive investment performance for the Fund when compared to the Fund’s Performance Peer Group (as defined below), which was deemed by the Board to be a useful indicator of how the Advisers are executing the Fund’s investment program.

In addition, the Board considered the financial resources and overall reputation of Federated Hermes and its willingness to consider and make investments in personnel, infrastructure, technology, cybersecurity, business continuity planning and operational enhancements that are designed to benefit the Federated Hermes Funds. The Board noted that the significant acquisition of Hermes Fund Managers Limited by Federated Hermes has deepened Federated Hermes’ investment management expertise and capabilities and expanded its access to analytical resources related to environmental, social and governance (“ESG”) factors and issuer engagement on ESG matters. The Board considered Federated Hermes’ oversight of the securities lending program for the Federated Hermes Funds that engage in securities lending and noted the income earned by the Federated Hermes Funds that participate in such program. In addition, the Board considered the quality of Federated Hermes’ communications with the Board and responsiveness to Board inquiries and requests made from time to time with respect to the Federated Hermes Funds. The Board also considered that Federated Hermes is responsible for providing the Federated Hermes Funds’ officers.

The Board received and evaluated information regarding Federated Hermes’ regulatory and compliance environment. The Board considered Federated Hermes’ compliance program and compliance history and reports from the CCO about Federated Hermes’ compliance with applicable laws and

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regulations, including responses to regulatory developments and any compliance or other issues raised by regulatory agencies. The Board also noted Federated Hermes’ support of the Federated Hermes Funds’ compliance control structure and the compliance-related resources devoted by Federated Hermes in support of the Fund’s obligations pursuant to Rule 38a-1 under the Investment Company Act of 1940, including Federated Hermes’ commitment to respond to rulemaking and other regulatory initiatives of the SEC. The Board considered Federated Hermes’ approach to risk management with respect to the Federated Hermes Funds and its day-to-day oversight of the Federated Hermes Funds’ compliance with their investment objectives and policies as well as with applicable laws and regulations, noting that regulatory and other developments had over time led, and continue to lead, to an increase in the scope of Federated Hermes’ oversight in this regard, including in connection with the implementation of new rules on derivatives risk management and fair valuation. The Board also considered the implementation of Federated Hermes’ business continuity plans. In addition, the Board noted Federated Hermes’ commitment to maintaining high quality systems and expending substantial resources to prepare for and respond to ongoing changes due to the market, regulatory and control environments in which the Fund and its service providers operate.

The Board considered Federated Hermes’ efforts to provide shareholders in the Federated Hermes Funds with a comprehensive array of funds with different investment objectives, policies and strategies. The Board considered the expenses that Federated Hermes had incurred, as well as the entrepreneurial and other risks assumed by Federated Hermes, in sponsoring and providing on-going services to new funds to expand these opportunities for shareholders. The Board noted the benefits to shareholders of being part of the family of Federated Hermes Funds, which include the general right to exchange investments between the same class of shares without the incurrence of additional sales charges.

Based on these considerations, the Board concluded that it was satisfied with the nature, extent and quality of the services provided by the Advisers to the Fund.

Fund Investment Performance

The Board considered the investment performance of the Fund. In evaluating the Fund’s investment performance, the Board considered performance results in light of the Fund’s investment objective, strategies and risks. The Board considered detailed investment reports on, and the Advisers’ analysis of, the Fund’s performance over different time periods that were provided to the Board throughout the year and in connection with the May Meetings. These reports included, among other items, information on the Fund’s gross and net returns, the Fund’s investment performance compared to one or more relevant categories or groups of peer funds and the Fund’s

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benchmark index, performance attribution information and commentary on the effect of market conditions. The Board considered that, in its evaluation of investment performance at meetings throughout the year, it focused particular attention on information indicating less favorable performance of certain Federated Hermes Funds for specific time periods and discussed with Federated Hermes the reasons for such performance as well as any specific actions Federated Hermes had taken, or had agreed to take, to seek to enhance Fund investment performance and the results of those actions.

The Board also reviewed comparative information regarding the performance of other registered funds in the category of peer funds selected by Morningstar, Inc. (the “Morningstar”), an independent fund ranking organization (the “Performance Peer Group”). The Board noted the CCO’s view that comparisons to fund peer groups may be helpful, though not conclusive, in evaluating the performance of the Advisers in managing the Fund. The Board considered the CCO’s view that, in evaluating such comparisons, in some cases there may be differences in the funds’ objectives or investment management techniques, or the costs to implement the funds, even within the same Performance Peer Group. In this connection, the Board considered that the longevity and experience of the Fund’s portfolio management team and its extensive bottom-up approach to investing may limit the utility of comparisons to other equity mutual funds.

For the periods ended December 31, 2022, the Fund’s performance fell below the Performance Peer Group median for the one-year and three-year periods, and was above the Performance Peer Group median for the five-year period. The Board discussed the Fund’s performance with the Advisers and recognized the efforts being taken by the Advisers in the context of other factors considered relevant by the Board.

Based on these considerations, the Board concluded that it had continued confidence in the Advisers’ overall capabilities to manage the Fund.

Fund Expenses

The Board considered the advisory fee, sub-advisory fee, and overall expense structure of the Fund and the comparative fee and expense information that had been provided in connection with the May Meetings. In this regard, the Board was presented with, and considered, information regarding the contractual advisory fee rates, net advisory fee rates, total expense ratios and each element of the Fund’s total expense ratio (i.e., gross and net advisory fees, administrative fees, custody fees, portfolio accounting fees and transfer agency fees) relative to an appropriate group of peer funds compiled by Federated Hermes from the category of peer funds selected by Morningstar (the “Expense Peer Group”). The Board received a description of the methodology used to select the Expense Peer Group from the overall Morningstar category. The Board also reviewed comparative information regarding the fees and expenses of the broader group of funds in the overall Morningstar category.

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While mindful that courts have cautioned against giving too much weight to comparative information concerning fees charged to funds by other advisers, the use of comparisons between the Fund and its Expense Peer Group assisted the Board in its evaluation of the Fund’s fees and expenses. The Board focused on comparisons with other registered funds with comparable investment programs more heavily than non-registered fund products or services because such comparisons are believed to be more relevant. The Board considered that other registered funds are the products most like the Fund, in that they are readily available to Fund shareholders as alternative investment vehicles, and they are the type of investment vehicle, in fact, chosen and maintained by the Fund’s shareholders. The Board noted that the range of such other registered funds’ fees and expenses, therefore, appears to be a relevant indicator of what investors have found to be reasonable in the marketplace in which the Fund competes.

The Board reviewed the contractual advisory fee rate, net advisory fee rate and other expenses of the Fund and noted the position of the Fund’s fee rates relative to its Expense Peer Group. In this regard, the Board noted that the contractual advisory fee rate was below the median of the Expense Peer Group, and the Board was satisfied that the overall expense structure of the Fund remained competitive. The Board considered the CCO’s view that, in 2022, while the Fund’s total expenses were above median relative to its Expense Peer Group, those expenses remained reasonable in light of its extensive bottom-up investment process, the relative expense of that process, the resulting estimated profitability of the Fund over time, and the performance generated over time compared to peer funds.

The Board also received and considered information about the nature and extent of services offered and fees charged by Federated Hermes to other types of clients with investment strategies similar to those of the Federated Hermes Funds, including non-registered fund clients (such as institutional separate accounts) and third-party unaffiliated registered funds for which any of the Advisers or their affiliates serve as sub-adviser. The Board noted the CCO’s conclusion that non-registered fund clients are inherently different products due to the following differences, among others: (i) different types of targeted investors; (ii) different applicable laws and regulations; (iii) different legal structures; (iv) different average account sizes and portfolio management techniques made necessary by different cash flows and different associated costs; (v) the time spent by portfolio managers and their teams (among other personnel across various departments, including legal, compliance and risk management) in reviewing securities pricing and fund liquidity; (vi) different administrative responsibilities; (vii) different degrees of risk associated with management; and (viii) a variety of different costs. The Board also considered information regarding the differences in the nature of the services required for Federated Hermes to manage its proprietary registered fund business versus managing a discrete pool of assets as a sub-adviser to another institution’s

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registered fund, noting the CCO’s view that Federated Hermes generally performs significant additional services and assumes substantially greater risks in managing the Fund and other Federated Hermes Funds than in its role as sub-adviser to an unaffiliated third-party registered fund. The Board noted that the CCO did not consider the fees for providing advisory services to other types of clients to be determinative in judging the appropriateness of the Federated Hermes Funds’ advisory fees.

Based on these considerations, the Board concluded that the fees and total operating expenses of the Fund, in conjunction with other matters considered, are reasonable in light of the services provided.

Profitability

The Board received and considered profitability information furnished by Federated Hermes. Such profitability information included revenues reported on a fund-by-fund basis and estimates of the allocation of expenses made on a fund-by-fund basis, using allocation methodologies specified by the CCO and described to the Board. The Board considered the CCO’s view that, while these cost allocation reports apply consistent allocation processes, the inherent difficulties in allocating costs on a fund-by-fund basis continues to cause the CCO to question the precision of the process and to conclude that such reports may be unreliable because a single change in an allocation estimate may dramatically alter the resulting estimate of cost and/or profitability of a Federated Hermes Fund and may produce unintended consequences. In addition, the Board considered the CCO’s view that the allocation methodologies used by Federated Hermes in estimating profitability for purposes of reporting to the Board in connection with the continuation of the Contracts are consistent with the methodologies previously reviewed by an independent consultant. The Board noted that the independent consultant had previously conducted a review of the allocation methodologies and reported to the Board that, although there is no single best method to allocate expenses, the methodologies used by Federated Hermes are reasonable.

The Board also reviewed information compiled by Federated Hermes comparing its profitability information to other publicly held fund management companies, including information regarding profitability trends over time. The Board recognized that profitability comparisons among fund management companies are difficult because of the variation in the type of comparative information that is publicly available, and the profitability of any fund management company is affected by numerous factors. The Board considered the CCO’s conclusion that, based on such profitability information, Federated Hermes’ profit margins did not appear to be excessive and the advisory or administrative fees are not unreasonable. The Board also considered the CCO’s view that Federated Hermes appeared financially sound, with the resources necessary to fulfill its obligations under its contracts with the Federated Hermes Funds.

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Economies of Scale

The Board received and considered information about the notion of possible realization of “economies of scale” as a fund grows larger, the difficulties of determining economies of scale at an individual fund level, and the extent to which potential scale benefits are shared with shareholders. In this regard, the Board considered that Federated Hermes has made significant and long-term investments in areas that support all of the Federated Hermes Funds, such as: portfolio management, investment research and trading operations; shareholder services; compliance; business continuity, cybersecurity and information security programs; internal audit and risk management functions; and technology and use of data. The Board noted that Federated Hermes’ investments in these areas are extensive and are designed to provide enhanced services to the Federated Hermes Funds and their shareholders. The Board considered that the benefits of these investments are likely to be shared with the family of Federated Hermes Funds as a whole.

In addition, the Board considered that fee waivers and expense reimbursements are another means for potential economies of scale to be shared with shareholders and can provide protection from an increase in expenses if a Federated Hermes Fund’s assets decline. The Board considered that, in order for the Federated Hermes Funds to remain competitive in the marketplace, Federated Hermes has frequently waived fees and/or reimbursed expenses for the Federated Hermes Funds and has disclosed to shareholders and/or reported to the Board its intention to do so (or continue to do so) in the future. The Board also considered that Federated Hermes has been active in managing expenses of the Federated Hermes Funds in recent years, which has resulted in benefits being realized by shareholders.

The Board also received and considered information on adviser-paid fees (commonly referred to as “revenue sharing” payments) that was provided to the Board throughout the year and in connection with the May Meetings. The Board considered that Federated Hermes and the CCO believe that this information is relevant to considering whether Federated Hermes had an incentive to either not apply breakpoints, or to apply breakpoints at higher levels, but should not be considered when evaluating the reasonableness of advisory fees. The Board also noted the absence of any applicable regulatory or industry guidelines on economies of scale, which is compounded by the lack of any uniform methodology or pattern with respect to structuring fund advisory fees with breakpoints that serve to reduce the fees as a fund attains a certain size.

Other Benefits

The Board considered information regarding the compensation and other ancillary (or “fall-out”) benefits that Federated Hermes derived from its relationships with the Federated Hermes Funds. The Board noted that, in addition to receiving advisory fees under the Federated Hermes Funds’ investment advisory contracts, Federated Hermes’ affiliates also receive fees

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for providing other services to the Federated Hermes Funds under separate service contracts, including for serving as the Federated Hermes Funds’ administrator and distributor. In this regard, the Board considered that Federated Hermes’ affiliates provide distribution and shareholder services to the Federated Hermes Funds, for which they may be compensated through distribution and servicing fees paid pursuant to Rule 12b-1 plans or otherwise. The Board also received and considered information detailing the benefits, if any, that Federated Hermes may derive from its receipt of research services from brokers who execute portfolio trades for the Federated Hermes Funds.

Conclusions

The Board considered: (i) the CCO’s conclusion that his observations and the information accompanying the CCO Fee Evaluation Report show that the management fee for the Fund is reasonable; and (ii) the CCO’s recommendation that the Board approve the management fee. The Board noted that, under these circumstances, no changes were recommended to, and no objection was raised to the continuation of, the Contracts by the CCO. The CCO also recognized that the Board’s evaluation of the Federated Hermes Funds’ advisory and sub-advisory arrangements is a continuing and ongoing process that is informed by the information that the Board requests and receives from management throughout the course of the year and, in this regard, the CCO noted certain items for future reporting to the Board or further consideration by management as the Board continues its ongoing oversight of the Federated Hermes Funds.

On the basis of the information and factors summarized above, among other information and factors deemed relevant by the Board, and the evaluation thereof, the Board, including the Independent Trustees, unanimously voted to approve the continuation of the Contracts. The Board based its determination to approve the Contracts on the totality of the circumstances and relevant factors and with a view of past and future long-term considerations. Not all of the factors and considerations identified above were necessarily deemed to be relevant to the Fund, nor did the Board consider any one of them to be determinative.

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Liquidity Risk Management Program–
Annual Evaluation of Adequacy and Effectiveness

In accordance with Rule 22e-4 under the Investment Company Act of 1940, as amended (the “Liquidity Rule”), Federated Hermes Equity Funds (the “Trust”) has adopted and implemented a liquidity risk management program (the “Program”) for Federated Hermes Kaufmann Small Cap Fund (the “Fund” and, collectively with the other non-money market open-end funds advised by Federated Hermes, the “Federated Hermes Funds”). The Program seeks to assess and manage the Fund’s liquidity risk. “Liquidity risk” is defined under the Liquidity Rule as the risk that the Fund is unable to meet redemption requests without significantly diluting remaining investors’ interests in the Fund. The Board of Trustees of the Trust (the “Board”) has approved the designation of each Federated Hermes Fund’s investment adviser as the administrator for the Program (the “Administrator”) with respect to that Fund. The Administrator, in turn, has delegated day-to-day responsibility for the administration of the Program to multiple Liquidity Risk Management Committees, which are comprised of representatives from certain divisions within Federated Hermes.

The Program is comprised of various components designed to support the assessment and/or management of liquidity risk, including: (1) the periodic assessment (no less frequently than annually) of certain factors that influence the Fund’s liquidity risk; (2) the periodic classification (no less frequently than monthly) of the Fund’s investments into one of four liquidity categories that reflect an estimate of their liquidity under current market conditions; (3) a 15% limit on the acquisition of “illiquid investments” (as defined under the Liquidity Rule); (4) to the extent a Fund does not invest primarily in “highly liquid investments” (as defined under the Liquidity Rule), the determination of a minimum percentage of the Fund’s assets that generally will be invested in highly liquid investments (an “HLIM”); (5) if a Fund has established an HLIM, the periodic review (no less frequently than annually) of the HLIM and the adoption of policies and procedures for responding to a shortfall of the Fund’s highly liquid investments below its HLIM; and (6) periodic reporting to the Board.

At its meetings in May 2023, the Board received and reviewed a written report (the “Report”) from the Federated Hermes Funds’ Chief Compliance Officer and Chief Risk Officer, on behalf of the Administrator, concerning the operation of the Program for the period from April 1, 2022 through March 31, 2023 (the “Period”). The Report addressed the operation of the Program and assessed the adequacy and effectiveness of its implementation, including, where applicable, the operation of any HLIM established for a Federated Hermes Fund. There were no material changes to the Program during the Period. The Report summarized the operation of the Program and

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the information and factors considered by the Administrator in assessing whether the Program has been adequately and effectively implemented with respect to the Federated Hermes Funds. Such information and factors included, among other things:

◾ confirmation that it was not necessary for the Fund to utilize, and the Fund did not utilize, any alternative funding sources that were available to the Federated Hermes Funds during the Period, such as the Federated Hermes Funds’ interfund lending facility, redemptions in-kind, reverse repurchase agreement transactions, redemptions delayed beyond the normal T+1 settlement but within seven days of the redemption request, and committed lines of credit;

◾ the periodic classifications of the Fund’s investments into one of four liquidity categories and the methodologies and inputs used to classify the investments, including the Fund’s reasonably anticipated trade size;

◾ the analysis received from a third-party liquidity assessment vendor that is taken into account in the process of determining the liquidity classifications of the Fund’s investments, and the results of the Administrator’s evaluation of the services performed by the vendor in support of this process, including the Administrator’s view that the methodologies utilized by the vendor continue to be appropriate;

◾ the fact that the Fund invested primarily in highly liquid investments during the Period and, therefore, was not required to establish, and has not established, an HLIM and the operation of the procedures for monitoring the status of the Fund as investing primarily in highly liquid investments;

◾ the fact that the Fund invested no more than 15% of its assets in illiquid investments during the Period, and the operation of the procedures for monitoring this limit;

◾ the fact that there were no liquidity events during the Period that materially affected the Fund’s liquidity risk;

◾ the impact on liquidity and management of liquidity risk, if any, caused by extended non-U.S. market closures and confirmation that there were no issues for any of the affected Federated Hermes Funds in meeting shareholder redemptions at any time during these temporary non-U.S. market closures.

Based on this review, the Administrator concluded that the Program is operating effectively to assess and manage the Fund’s liquidity risk, and that the Program has been and continues to be adequately and effectively implemented to monitor and, as applicable, respond to the Fund’s liquidity developments.

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Voting Proxies on Fund Portfolio Securities

A description of the policies and procedures that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund’s portfolio is available, without charge and upon request, by calling 1-800-341-7400, Option #4. A report on “Form N-PX” of how the Fund voted any such proxies during the most recent 12-month period ended June 30 is available via the Proxy Voting Record (Form N-PX) link associated with the Fund and share class name at FederatedHermes.com/us/FundInformation. Form N-PX filings are also available at the SEC’s website at sec.gov.

Quarterly Portfolio Schedule

Each fiscal quarter, the Fund will file with the SEC a complete schedule of its monthly portfolio holdings on “Form N-PORT.” The Fund’s holdings as of the end of the third month of every fiscal quarter, as reported on Form N-PORT, will be publicly available on the SEC’s website at sec.gov within 60 days of the end of the fiscal quarter upon filing. You may also access this information via the link to the Fund and share class name at FederatedHermes.com/us.

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Mutual funds are not bank deposits or obligations, are not guaranteed by any bank and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal.

This Report is authorized for distribution to prospective investors only when preceded or accompanied by the Fund’s Prospectus, which contains facts concerning its objective and policies, management fees, expenses and other information.   

 

Federated Hermes Kaufmann Small Cap Fund
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561

Contact us atFederatedHermes.com/us
or call 1-800-341-7400.

Federated Securities Corp., Distributor

CUSIP 314172636
CUSIP 314172610
CUSIP 314172537
CUSIP 31421N402
CUSIP 31421N683

29503 (12/23)

© 2023 Federated Hermes, Inc.

Annual Shareholder Report

October 31, 2023

 

 

Share Class | Ticker A | FGSAX C | FGSCX Institutional | FGSIX R6 | FGSKX

Federated Hermes MDT Mid Cap Growth Fund

Fund Established 1984

A Portfolio of Federated Hermes Equity Funds

Dear Valued Shareholder,

We are pleased to present the Annual Shareholder Report for your fund covering the period from November 1, 2022 through October 31, 2023. This report includes Management’s Discussion of Fund Performance, a complete listing of your fund’s holdings, performance information and financial statements along with other important fund information.

As a global leader in active, responsible investment management, Federated Hermes is guided by our conviction that responsible investing is the best way to create wealth over the long term. The company provides capabilities across a wide range of asset classes to investors around the world.

In addition, FederatedHermes.com/us offers quick and easy access to valuable resources that include timely fund updates, economic and market insights from our investment strategists and financial planning tools. You can also access many of those insights by following us on Twitter (@FederatedHermes) and LinkedIn.

Thank you for investing with us. We hope you find this information useful and look forward to keeping you informed.

Sincerely,  

J. Christopher Donahue, President

Not FDIC Insured ▪ May Lose Value ▪ No Bank Guarantee

CONTENTS 

Management’s Discussion of Fund Performance	1
Portfolio of Investments Summary Table	6
Portfolio of Investments	7
Financial Highlights	12
Statement of Assets and Liabilities	16
Statement of Operations	18
Statement of Changes in Net Assets	19
Notes to Financial Statements	20
Report of Independent Registered Public Accounting Firm	32
Shareholder Expense Example	34
Board of Trustees and Trust Officers	36
Evaluation and Approval of Advisory Contract	43
Liquidity Risk Management Program– Annual Evaluation of Adequacy and Effectiveness	53
Voting Proxies on Fund Portfolio Securities	55
Quarterly Portfolio Schedule	55

Management’s Discussion of Fund Performance (unaudited)

The total return of Federated Hermes MDT Mid Cap Growth Fund (the “Fund”), based on net asset value for the 12-month reporting period ended October 31, 2023, was 6.37% for the Class A Shares, 5.54% for the Class C Shares, 6.65% for the Institutional Shares and 6.68% for the Class R6 Shares. The total return of the Russell Midcap® Growth Index (RMCGI),1,2 the Fund’s broad-based securities market index, was 3.35% for the same period. The total return of the Morningstar Mid Cap Growth Funds Average (MMCGFA),3 a peer group average for the Fund, was -0.45% during the same period. The Fund’s and the MMCGFA’s total returns for the most recently completed fiscal year reflected actual cash flows, transaction costs and expenses which were not reflected in the total return of the RMCGI.

During the reporting period, the Fund’s investment strategy focused on stock selection, which was the most significant factor affecting the Fund’s performance relative to the RMCGI.

The following discussion will focus on the performance of the Fund’s Class R6 Shares relative to the RMCGI.

MARKET OVERVIEW

During the reporting period, market sentiment was influenced by evolving expectations of monetary policy actions by the Federal Reserve (the “Fed”) in its campaign to slow inflation. Over the first several months of the reporting period, U.S. equities surged higher as market participants were buoyed by the prospects of interest rate easing by the Fed in late 2023 or 2024. However, markets pulled back subsequently as expectations shifted to the Fed keeping interest rates higher for longer. For the reporting period, the returns for U.S. equity indices were mixed, with larger caps (Russell 3000 Index4 returned 8.4%) advancing while smaller caps (Russell 2000 Index5 returned -8.6%) declined. As has been the case recently, large cap growth stocks were the best performing U.S. equity segment while value stocks generally lagged. The Russell 3000 Growth Index6 returned 17.3% for the reporting period, while the Russell 3000 Value Index7 returned -0.5%.

The best performing sectors in the RMCGI during the reporting period were Industrials 14.3%, Information Technology 10.3% and Consumer Discretionary 9.2%. Underperforming sectors during the same period included Utilities -13.2%, Health Care -11.1% and Materials -9.8%.

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1

STOCK SELECTION

Stock selection was the biggest contributor to the Fund’s outperformance relative to the RMCGI during the reporting period. The Fund looked for stocks with the specific combinations of fundamental and technical factors that internal research has shown to predict outperformance relative to the RMCGI. In the reporting period, the Fund’s outperformance versus the RMCGI was driven by overweighting stocks with depressed prices that did not require significant external financing. Relative performance was also helped by underweighting stocks with flat or worsening earnings-to-price ratios and low to neutral analyst conviction, as this segment underperformed for the reporting period. On the other hand, the Fund’s overweight position in stocks with strong relative price trends and neutral to high analyst conviction did not help, as these stocks generally lagged.

The Fund’s sector exposures remained close to RMCGI weights. Favorable stock selection in the Information Technology, Health Care and Energy sectors contributed the most to the Fund’s performance. Unfavorable stock selection in the Financials, Materials and Real Estate sectors detracted the most from the Fund’s performance.

Individual stocks enhancing the Fund’s performance included Spotify Technology SA, Align Technology, Inc., XPO, Inc. and Jabil Inc., which were all overweighted in the Fund versus RMCGI weights and outperformed. Individual stocks detracting from the Fund’s performance during the reporting period included Signature Bank, Altice USA, Inc. (Class A), Teladoc Health, Inc. and Adaptive Biotechnologies Corp., which were overweighted in the Fund versus RMCGI weights and underperformed.

1

Please see the footnotes to the line graph below for definitions of, and further information about, the RMCGI.

2

Mid-Capitalization companies often have narrower markets and limited managerial and financial resources compared to larger and more established companies.

3

Please see the footnotes to the line graph below for definitions of, and further information about, the Morningstar peer group.

4

The Russell 3000® Index measures the performance of the largest 3,000 U.S. companies that represent approximately 98% of the investable U.S. equity market. The Russell 3000 Index is constructed to provide a comprehensive, unbiased, and stable barometer of the broad market and is completely reconstituted annually to ensure that new and growing equities are included.*

5

The Russell 2000® Index measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000® Index is a subset of the Russell 3000® Index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership. The Russell 2000® is constructed to provide a comprehensive and unbiased small-cap barometer and is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap opportunity set.*

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6

The Russell 3000® Growth Index measures the performance of the broad growth segment of the U.S. equity universe. It includes those Russell 3000® Index companies with higher price-to-book ratios and higher forecasted growth values. The Russell 3000® Growth Index is constructed to provide a comprehensive, unbiased and stable barometer of the broad growth market.*

7

The Russell 3000® Value Index measures the performance of the broad value segment of the U.S. equity value universe. It includes those Russell 3000® Index companies with lower price-to-book ratios and lower forecasted growth values. The Russell 3000® Value Index is constructed to provide a comprehensive, unbiased and stable barometer of the broad value market.*

*

The index is unmanaged, and it is not possible to invest directly in an index.

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FUND PERFORMANCE AND GROWTH OF A $10,000 INVESTMENT

The graph below illustrates the hypothetical investment of $10,0001 in the Federated Hermes MDT Mid Cap Growth Fund (the “Fund”) from October 31, 2013 to October 31, 2023, compared to the Russell Midcap®Growth Index (RMCGI)2 and the Morningstar Mid Cap Growth Funds Average (MMCGFA).3 The Average Annual Total Return table below shows returns for each class averaged over the stated periods.

Growth of a $10,000 Investment

Growth of $10,000 as of October 31, 2023  

◾ Total returns shown for the Class C Shares include the maximum contingent deferred sales charge of 1.00% as applicable.

◾ Total returns shown for the Class A Shares include the maximum sales charge of 5.50% ($10,000 investment minus $550 sales charge = $9,450). 

The Fund offers multiple share classes whose performance may be greater than or less than its other share class(es) due to differences in sales charges and expenses. See the Average Annual Total Return table below for the returns of additional classes not shown in the line graph above. 

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Average Annual Total Returns for the Period Ended 10/31/2023

(returns reflect all applicable sales charges and contingent deferred sales charges as specified below in footnote #1) 

	1 Year	5 Years	10 Years
Class A Shares	0.51%	8.16%	9.39%
Class C Shares	4.54%	8.54%	9.35%
Institutional Shares	6.65%	9.71%	10.30%
Class R6 Shares4	6.68%	9.72%	10.08%
RMCGI	3.35%	8.09%	9.09%
MMCGFA	-0.45%	6.77%	7.96%

Performance data quoted represents past performance which is no guarantee of future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Mutual fund performance changes over time and current performance may be lower or higher than what is stated. For current to the most recent month-end performance and after-tax returns, visit FederatedHermes.com/us or call 1-800-341-7400. Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Mutual funds are not obligations of or guaranteed by any bank and are not federally insured.

1

Represents a hypothetical investment of $10,000 in the Fund after deducting applicable sales charges: for Class A Shares, the maximum sales charge of 5.50% ($10,000 investment minus $550 sales charge = $9,450); for Class C Shares, the maximum contingent deferred sales charge is 1.00% on any redemption less than one year from the purchase date. The Fund’s performance assumes the reinvestment of all dividends and distributions. The RMCGI and the MMCGFA have been adjusted to reflect reinvestment of dividends on securities in the index and average.

2

The RMCGI measures the performance of the mid-cap growth segment of the U.S. equity universe. It includes those Russell Midcap® Index companies with higher price-to-book ratios and higher forecasted growth values. The RMCGI is constructed to provide a comprehensive and unbiased barometer of the mid-cap growth market and is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true mid-cap growth market. The RMCGI is not adjusted to reflect sales loads, expenses or other fees that the Securities and Exchange Commission (SEC) requires to be reflected in the Fund’s performance. The index is unmanaged and unlike the Fund, is not affected by cash flows. It is not possible to invest directly in an index.

3

Morningstar figures represent the average of the total returns reported by all the funds designated by Morningstar as falling into the respective category indicated. They do not reflect sales charges. The Morningstar figures in the Growth of $10,000 line graph are based on historical return information published by Morningstar and reflect the return of the funds comprising the category in the year of publication. Because the funds designated by Morningstar as falling into the category can change over time, the Morningstar figures in the line graph may not match the Morningstar figures in the Average Annual Total Returns table, which reflect the return of the funds that currently comprise the category.

4

Prior to September 1, 2016, Class R6 Shares were known as Class R Shares and included 12b-1 fees and certain other expenses. As of September 1, 2016, Class R6 does not include such 12b-1 fees and certain other expenses, and the performance shown above for Class R6 prior to September 1, 2016, reflects the higher Class R expenses.

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Portfolio of Investments Summary Table (unaudited)

At October 31, 2023, the Fund’s sector composition1 was as follows: 

Sector Composition	Percentage of Total Net Assets
Information Technology	22.8%
Industrials	19.2%
Health Care	19.1%
Consumer Discretionary	14.0%
Financials	10.6%
Communication Services	4.9%
Energy	3.2%
Consumer Staples	1.9%
Utilities	1.4%
Real Estate	0.5%
Materials	0.3%
Securities Lending Collateral2	0.6%
Cash Equivalents3	2.1%
Other Assets and Liabilities—Net4	(0.6)%
TOTAL	100%

 

1	Except for Securities Lending Collateral, Cash Equivalents and Other Assets and Liabilities, sector classifications are based upon, and individual portfolio securities are assigned to, the classifications of the Global Industry Classification Standard (GICS), except that the Adviser assigns a classification to securities not classified by the GICS and to securities for which the Adviser does not have access to the classification made by the GICS.
2	Represents cash collateral received for portfolio securities on loan that may be invested in affiliated money market funds, other money market instruments and/or repurchase agreements.
3	Cash Equivalents include any investments in money market mutual funds and/or overnight repurchase agreements other than those representing securities lending collateral.
4	Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities.

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Portfolio of Investments

October 31, 2023 

Shares			Value
		COMMON STOCKS—   97.9%
		Communication Services—   4.9%
494,073	1	Altice USA, Inc.	$  1,427,871
2,090		Cable One, Inc.	1,149,228
23,293	1	Live Nation Entertainment, Inc.	1,863,906
56,757	1	Match Group, Inc.	1,963,792
77,507	1	Spotify Technology SA	12,770,053
18,824	1	Trade Desk, Inc./The	1,335,751
63,338	1	TripAdvisor, Inc.	934,869
713,640	1	ZoomInfo Technologies, Inc.	9,248,775
		TOTAL	30,694,245
		Consumer Discretionary—   14.0%
2,391	1	AutoZone, Inc.	5,922,818
872	1	Chipotle Mexican Grill, Inc.	1,693,598
3,580		Domino’s Pizza, Inc.	1,213,584
152,347	1	DoorDash, Inc.	11,418,408
191,508	1	DraftKings, Inc.	5,289,451
36,720		eBay, Inc.	1,440,526
141,082	1	Expedia Group, Inc.	13,443,704
28,526		Genuine Parts Co.	3,675,860
25,819		Hilton Worldwide Holdings, Inc.	3,912,353
11,759	1	Lululemon Athletica, Inc.	4,626,931
143,054	2	Nordstrom, Inc.	1,999,895
7,565	1	O’Reilly Automotive, Inc.	7,038,779
58,660		Ross Stores, Inc.	6,802,800
56,515	1	Royal Caribbean Cruises, Ltd.	4,788,516
37,741		Texas Roadhouse, Inc.	3,832,221
2,294	1	TopBuild Corp.	524,775
9,317	1	Ulta Beauty, Inc.	3,552,665
9,009	1	Wayfair, Inc.	383,874
14,638		Wingstop, Inc.	2,675,387
22,917		Yum! Brands, Inc.	2,769,749
		TOTAL	87,005,894
		Consumer Staples—   1.9%
157,191		Albertsons Cos., Inc.	3,411,045
3,338	1	Celsius Holdings, Inc.	507,676
21,697		Church and Dwight, Inc.	1,973,125
18,867		Hershey Foods Corp.	3,534,733

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7

Shares			Value
		COMMON STOCKS—   continued
		Consumer Staples—   continued
29,598		Lamb Weston Holdings, Inc.	$  2,657,900
		TOTAL	12,084,479
		Energy—   3.2%
11,782		APA Corp.	467,981
36,852		Cheniere Energy, Inc.	6,132,910
39,645		Devon Energy Corp.	1,846,268
24,865		Halliburton Co.	978,189
96,020		ONEOK, Inc.	6,260,504
81,392		Ovintiv, Inc.	3,906,816
		TOTAL	19,592,668
		Financials—   10.6%
60,760		Ameriprise Financial, Inc.	19,113,273
201,382		Apollo Global Management, Inc.	15,595,022
49,926	1	Arch Capital Group Ltd.	4,327,586
11,106		Gallagher (Arthur J.) & Co.	2,615,352
6,720		Kinsale Capital Group, Inc.	2,243,875
16,728		MSCI, Inc., Class A	7,888,088
13,712		RLI Corp.	1,826,987
24,558	1	Ryan Specialty Group Holdings, Inc.	1,060,906
636,953	1	StoneCo Ltd.	6,315,389
23,373		Tradeweb Markets, Inc.	2,103,804
133,736		Western Union Co.	1,509,879
65,371	1	XP, Inc.	1,307,420
		TOTAL	65,907,581
		Health Care—   19.1%
686,375	1	Adaptive Biotechnologies Corp.	3,047,505
33,045		Agilent Technologies, Inc.	3,415,862
49,973	1	Align Technology, Inc.	9,224,516
5,923	1	BioMarin Pharmaceutical, Inc.	482,428
76,165		Bruker Corp.	4,341,405
115,070		Cardinal Health, Inc.	10,471,370
58,705		Cencora, Inc.	10,869,231
22,223	1	Exact Sciences Corp.	1,368,715
45,918	1	Exelixis, Inc.	945,452
18,502	1	IDEXX Laboratories, Inc.	7,390,994
302,520	1	Incyte Genomics, Inc.	16,314,904
5,292	1	IQVIA Holdings, Inc.	956,952
59,359	1	Jazz Pharmaceuticals PLC	7,539,780
43,349	1	Maravai LifeSciences Holdings, Inc.	297,374
3,532		McKesson Corp.	1,608,332
11,417	1	Medpace Holdings, Inc.	2,770,563

Annual Shareholder Report

8

Shares			Value
		COMMON STOCKS—   continued
		Health Care—   continued
3,558	1	Mettler-Toledo International, Inc.	$  3,505,342
27,359	1	Molina Healthcare, Inc.	9,109,179
47,325	1	Neurocrine Biosciences, Inc.	5,250,235
316,865	1	Novocure Ltd.	4,214,305
26,591	1	Penumbra, Inc.	5,082,870
1,624	1	Repligen Corp.	218,525
150,845	1	Teladoc Health, Inc.	2,494,976
37,628	1	Veeva Systems, Inc.	7,251,292
2,612		West Pharmaceutical Services, Inc.	831,373
		TOTAL	119,003,480
		Industrials—   19.2%
10,812		AGCO Corp.	1,239,704
237,875		Allison Transmission Holdings, Inc.	11,993,658
86,589		Booz Allen Hamilton Holding Corp.	10,384,619
75,101	1	Ceridian HCM Holding, Inc.	4,807,215
17,142		Cintas Corp.	8,693,051
36,664		Delta Air Lines, Inc.	1,145,750
86,382		Paychex, Inc.	9,592,721
37,737		Rockwell Automation, Inc.	9,917,661
65,163		Trane Technologies PLC	12,401,171
3,047	1	Transdigm Group, Inc.	2,523,190
103,453	1	Trex Co., Inc.	5,815,093
2,820		United Rentals, Inc.	1,145,682
976		Valmont Industries, Inc.	192,184
97,003		Verisk Analytics, Inc.	22,054,602
41,434		Vertiv Holdings Co.	1,627,113
8,457		W.W. Grainger, Inc.	6,172,172
102,025	1	Willscot Corp.	4,020,805
78,641	1	XPO, Inc.	5,961,774
		TOTAL	119,688,165
		Information Technology—   22.8%
159,014	1,2	AppLovin Corp.	5,794,470
20,052	1	Cadence Design Systems, Inc.	4,809,472
102,657	1	Crowdstrike Holdings, Inc.	18,146,678
33,338		Dell Technologies, Inc.	2,230,646
78,458	1	DocuSign, Inc.	3,050,447
59,288	1	Dropbox, Inc.	1,559,274
136,707	1	Dynatrace Holdings LLC	6,112,170
128,997	1	Enphase Energy, Inc.	10,265,581
4,140	1	EPAM Systems, Inc.	900,740
29,492	1	HubSpot, Inc.	12,497,825

Annual Shareholder Report

9

Shares			Value
		COMMON STOCKS—   continued
		Information Technology—   continued
90,880	1	Informatica, Inc.	$  1,743,078
82,117		Jabil, Inc.	10,083,968
13,442	1	Manhattan Associates, Inc.	2,620,921
40,797	1	MongoDB, Inc.	14,058,238
198,612	1	Nutanix, Inc.	7,187,768
2,917	1	Okta, Inc.	196,635
193,406		Pegasystems, Inc.	8,266,172
161,540	1	Procore Technologies, Inc.	9,868,479
167,492	1	Pure Storage, Inc.	5,662,904
54,569	1	RingCentral, Inc.	1,450,444
4,520	1	Synopsys, Inc.	2,121,869
40,471	1	Teradata Corp.	1,728,921
140,842		Vontier Corp.	4,163,290
97,163	1	Zoom Video Communications, Inc.	5,827,837
8,478	1	Zscaler, Inc.	1,345,374
		TOTAL	141,693,201
		Materials—   0.3%
14,439		Steel Dynamics, Inc.	1,537,898
		Real Estate—   0.5%
2,620	1	CoStar Group, Inc.	192,334
7,572		SBA Communications Corp.	1,579,747
1,763		Simon Property Group, Inc.	193,736
38,513	1	Zillow Group, Inc.	1,368,367
		TOTAL	3,334,184
		Utilities—   1.4%
274,234		Vistra Corp.	8,972,936
		TOTAL COMMON STOCKS (IDENTIFIED COST $598,149,134)	609,514,731
		INVESTMENT COMPANIES—   2.7%
3,389,503		Federated Hermes Government Obligations Fund, Premier Shares, 5.26%3	3,389,503
13,173,430		Federated Hermes Institutional Prime Value Obligations Fund, Institutional Shares, 5.45%3	13,173,430
		TOTAL INVESTMENT COMPANIES (IDENTIFIED COST $16,561,670)	16,562,933
		TOTAL INVESTMENT IN SECURITIES—100.6% (IDENTIFIED COST $614,710,804)4	626,077,664
		OTHER ASSETS AND LIABILITIES - NET—(0.6)%5	(3,645,737)
		TOTAL NET ASSETS—100%	$622,431,927

Annual Shareholder Report

10

Transactions with affiliated investment companies, which are funds managed by the Adviser or an affiliate of the Adviser, during the period ended October 31, 2023, were as follows: 

	Federated Hermes Government Obligations Fund, Premier Shares*	Federated Hermes Institutional Prime Value Obligations Fund, Institutional Shares	Total of Affiliated Transactions
Value as of 10/31/2022	$7,385,401	$8,548,662	$15,934,063
Purchases at Cost	$80,844,847	$199,414,098	$280,258,945
Proceeds from Sales	$(84,840,745)	$(194,801,690)	$(279,642,435)
Change in Unrealized Appreciation/ Depreciation	$—	$905	$905
Net Realized Gain/(Loss)	$—	$11,455	$11,455
Value as of 10/31/2023	$3,389,503	$13,173,430	$16,562,933
Shares Held as of 10/31/2023	3,389,503	13,173,430	16,562,933
Dividend Income	$215,132	$641,051	$856,183

 

* All or a portion of the balance/activity for the fund relates to cash collateral received on securities lending transactions.

 

1	Non-income-producing security.
2	All or a portion of these securities are temporarily on loan to unaffiliated broker/dealers.
3	7-day net yield.
4	The cost of investments for federal tax purposes amounts to $621,122,816.
5	Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities.

Note: The categories of investments are shown as a percentage of total net assets at October 31, 2023.

Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three broad levels listed below:

Level 1—quoted prices in active markets for identical securities.

Level 2—other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Also includes securities valued at amortized cost.

Level 3—significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments).

The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.

At October 31, 2023, all investments of the Fund utilized Level 1 inputs in valuing the Fund’s assets carried at fair value.

See Notes which are an integral part of the Financial Statements

Annual Shareholder Report

11

Financial Highlights–Class A Shares

(For a Share Outstanding Throughout Each Period) 

	Year Ended October 31,
	2023	2022	2021	2020	2019
Net Asset Value, Beginning of Period	$36.23	$62.37	$44.93	$41.20	$41.35
Income From Investment Operations:
Net investment income (loss)1	(0.10)	(0.11)	(0.39)	(0.19)	(0.07)
Net realized and unrealized gain (loss)	2.37	(13.61)	21.36	7.14	4.77
Total From Investment Operations	2.27	(13.72)	20.97	6.95	4.70
Less Distributions:
Distributions from net realized gain	(0.79)	(12.42)	(3.53)	(3.22)	(4.85)
Distributions from return of capital	(0.03)	—	—	—	—
Total Distributions	(0.82)	(12.42)	(3.53)	(3.22)	(4.85)
Net Asset Value, End of Period	$37.68	$36.23	$62.37	$44.93	$41.20
Total Return2	6.37%	(26.23)%	49.08%	18.07%	13.40%
Ratios to Average Net Assets:
Net expenses3	1.14%	1.14%	1.13%	1.14%	1.14%
Net investment income (loss)	(0.26)%	(0.27)%	(0.73)%	(0.46)%	(0.18)%
Expense waiver/reimbursement4	0.10%	0.09%	0.08%	0.11%	0.11%
Supplemental Data:
Net assets, end of period (000 omitted)	$246,732	$243,046	$367,018	$266,252	$257,818
Portfolio turnover5	142%	174%	141%	227%	179%

 

1	Per share number has been calculated using the average shares method.
2	Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable.
3	Amount does not reflect net expenses incurred by investment companies in which the Fund may invest.
4	This expense decrease is reflected in both the net expense and the net investment income (loss) 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.

See Notes which are an integral part of the Financial Statements

Annual Shareholder Report

12

Financial Highlights–Class C Shares

(For a Share Outstanding Throughout Each Period) 

	Year Ended October 31,
	2023	2022	2021	2020	2019
Net Asset Value, Beginning of Period	$17.34	$36.97	$28.09	$27.12	$29.12
Income From Investment Operations:
Net investment income (loss)1	(0.19)	(0.22)	(0.48)	(0.31)	(0.25)
Net realized and unrealized gain (loss)	1.12	(6.99)	12.89	4.50	3.10
Total From Investment Operations	0.93	(7.21)	12.41	4.19	2.85
Less Distributions:
Distributions from net realized gain	(0.79)	(12.42)	(3.53)	(3.22)	(4.85)
Distributions from return of capital	(0.03)	—	—	—	—
Total Distributions	(0.82)	(12.42)	(3.53)	(3.22)	(4.85)
Net Asset Value, End of Period	$17.45	$17.34	$36.97	$28.09	$27.12
Total Return2	5.54%	(26.83)%	47.91%	17.17%	12.54%
Ratios to Average Net Assets:
Net expenses3	1.92%	1.93%	1.92%	1.93%	1.88%
Net investment income (loss)	(1.05)%	(1.07)%	(1.51)%	(1.23)%	(0.94)%
Expense waiver/reimbursement4	0.10%	0.09%	0.08%	0.12%	0.16%
Supplemental Data:
Net assets, end of period (000 omitted)	$9,216	$9,600	$16,184	$13,309	$15,460
Portfolio turnover5	142%	174%	141%	227%	179%

 

1	Per share number has been calculated using the average shares method.
2	Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable.
3	Amount does not reflect net expenses incurred by investment companies in which the Fund may invest.
4	This expense decrease is reflected in both the net expense and the net investment income (loss) 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.

See Notes which are an integral part of the Financial Statements

Annual Shareholder Report

13

Financial Highlights–Institutional Shares

(For a Share Outstanding Throughout Each Period) 

	Year Ended October 31,
	2023	2022	2021	2020	2019
Net Asset Value, Beginning of Period	$38.47	$65.24	$46.74	$42.60	$42.48
Income From Investment Operations:
Net investment income (loss)1	(0.00)2	0.01	(0.25)	(0.06)	0.04
Net realized and unrealized gain (loss)	2.52	(14.36)	22.28	7.42	4.93
Total From Investment Operations	2.52	(14.35)	22.03	7.36	4.97
Less Distributions:
Distributions from net realized gain	(0.79)	(12.42)	(3.53)	(3.22)	(4.85)
Distributions from return of capital	(0.03)	—	—	—	—
Total Distributions	(0.82)	(12.42)	(3.53)	(3.22)	(4.85)
Net Asset Value, End of Period	$40.17	$38.47	$65.24	$46.74	$42.60
Total Return3	6.65%	(26.00)%	49.47%	18.46%	13.71%
Ratios to Average Net Assets:
Net expenses4	0.84%	0.84%	0.84%	0.84%	0.84%
Net investment income (loss)	(0.00)%5	0.02%	(0.44)%	(0.13)%	0.10%
Expense waiver/reimbursement6	0.18%	0.18%	0.15%	0.19%	0.21%
Supplemental Data:
Net assets, end of period (000 omitted)	$287,671	$169,730	$279,045	$188,839	$246,222
Portfolio turnover7	142%	174%	141%	227%	179%

 

1	Per share number has been calculated using the average shares method.
2	Represents less than $0.01.
3	Based on net asset value.
4	Amount does not reflect net expenses incurred by investment companies in which the Fund may invest.
5	Represents less than 0.01%.
6	This expense decrease is reflected in both the net expense and the net investment income (loss) 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.

See Notes which are an integral part of the Financial Statements

Annual Shareholder Report

14

Financial Highlights–Class R6 Shares

(For a Share Outstanding Throughout Each Period) 

	Year Ended October 31,
	2023	2022	2021	2020	2019
Net Asset Value, Beginning of Period	$33.23	$58.16	$41.99	$38.59	$38.95
Income From Investment Operations:
Net investment income (loss)1	0.002	0.02	(0.22)	(0.05)	0.01
Net realized and unrealized gain (loss)	2.18	(12.53)	19.92	6.67	4.48
Total From Investment Operations	2.18	(12.51)	19.70	6.62	4.49
Less Distributions:
Distributions from net realized gain	(0.79)	(12.42)	(3.53)	(3.22)	(4.85)
Distributions from return of capital	(0.03)	—	—	—	—
Total Distributions	(0.82)	(12.42)	(3.53)	(3.22)	(4.85)
Net Asset Value, End of Period	$34.59	$33.23	$58.16	$41.99	$38.59
Total Return3	6.68%	(26.00)%	49.52%	18.46%	13.72%
Ratios to Average Net Assets:
Net expenses4	0.83%	0.83%	0.83%	0.83%	0.83%
Net investment income (loss)	0.01%	0.04%	(0.43)%	(0.14)%	0.03%
Expense waiver/reimbursement5	0.10%	0.09%	0.08%	0.11%	0.11%
Supplemental Data:
Net assets, end of period (000 omitted)	$78,813	$36,273	$49,431	$31,388	$31,590
Portfolio turnover6	142%	174%	141%	227%	179%

 

1	Per share number has been calculated using the average shares method.
2	Represents less than $0.01.
3	Based on net asset value.
4	Amount does not reflect net expenses incurred by investment companies in which the Fund may invest.
5	This expense decrease is reflected in both the net expense and the net investment income (loss) ratios shown above. Amount does not reflect expense waiver/reimbursement recorded by investment companies in which the Fund may invest.
6	Securities that mature are considered sales for purposes of this calculation.

See Notes which are an integral part of the Financial Statements

Annual Shareholder Report

15

Statement of Assets and Liabilities

October 31, 2023

 

Assets:
Investment in securities, at value including $3,255,290 of securities loaned and $16,562,933 of investments in affiliated holdings* (identified cost $614,710,804, including $16,561,670 of identified cost in affiliated holdings)	$626,077,664
Income receivable	122,402
Income receivable from affiliated holdings	60,555
Receivable for investments sold	9,512,388
Receivable for shares sold	1,047,906
Total Assets	636,820,915
Liabilities:
Payable for investments purchased	10,085,890
Payable for shares redeemed	606,380
Payable for collateral due to broker for securities lending (Note 2)	3,389,503
Payable for investment adviser fee (Note 5)	10,860
Payable for administrative fee (Note 5)	1,318
Payable for Directors’/Trustees’ fees (Note 5)	576
Payable for distribution services fee (Note 5)	5,947
Payable for other service fees (Notes 2 and 5)	125,014
Accrued expenses (Note 5)	163,500
Total Liabilities	14,388,988
Net assets for 16,516,426 shares outstanding	$622,431,927
Net Assets Consist of:
Paid-in capital	$618,305,035
Total distributable earnings (loss)	4,126,892
Total Net Assets	$622,431,927

Annual Shareholder Report

16

Statement of Assets and Liabilities–continued

Net Asset Value, Offering Price and Redemption Proceeds Per Share:
Class A Shares:
Net asset value per share ($246,732,283 ÷ 6,548,818 shares outstanding), no par value, unlimited shares authorized	$37.68
Offering price per share (100/94.50 of $37.68)	$39.87
Redemption proceeds per share	$37.68
Class C Shares:
Net asset value per share ($9,215,515 ÷ 528,095 shares outstanding), no par value, unlimited shares authorized	$17.45
Offering price per share	$17.45
Redemption proceeds per share (99.00/100 of $17.45)	$17.28
Institutional Shares:
Net asset value per share ($287,670,947 ÷ 7,160,877 shares outstanding), no par value, unlimited shares authorized	$40.17
Offering price per share	$40.17
Redemption proceeds per share	$40.17
Class R6 Shares:
Net asset value per share ($78,813,182 ÷ 2,278,636 shares outstanding), no par value, unlimited shares authorized	$34.59
Offering price per share	$34.59
Redemption proceeds per share	$34.59

 

* See information listed after the Fund’s Portfolio of Investments.

See Notes which are an integral part of the Financial Statements

Annual Shareholder Report

17

Statement of Operations

Year Ended October 31, 2023

 

Investment Income:
Dividends (including $641,051 received from affiliated holdings* )	$4,853,965
Net income on securities loaned (includes $215,132 earned from affiliated holdings related to cash collateral balances*) (Note 2)	143,334
TOTAL INCOME	4,997,299
Expenses:
Investment adviser fee (Note 5)	4,360,468
Administrative fee (Note 5)	454,811
Custodian fees	55,480
Transfer agent fees (Note 2)	595,556
Directors’/Trustees’ fees (Note 5)	3,802
Auditing fees	29,421
Legal fees	11,171
Portfolio accounting fees	139,700
Distribution services fee (Note 5)	72,686
Other service fees (Notes 2 and 5)	669,197
Share registration costs	107,083
Printing and postage	40,434
Miscellaneous (Note 5)	27,258
TOTAL EXPENSES	6,567,067
Waiver and Reimbursements:
Waiver/reimbursement of investment adviser fee (Note 5)	(589,129)
Reimbursement of other operating expenses (Notes 2 and 5)	(207,821)
TOTAL WAIVER AND REIMBURSEMENTS	(796,950)
Net expenses	5,770,117
Net investment income (loss)	(772,818)
Realized and Unrealized Gain (Loss) on Investments and Foreign Currency Transactions:
Net realized gain on investments (including net realized gain of $11,455 on sales of investments in affiliated holdings*)	2,203,246
Net realized gain on foreign currency transactions	18
Net change in unrealized depreciation of investments (including net change in unrealized appreciation of $905 on investments in affiliated holdings*)	20,825,263
Net realized and unrealized gain (loss) on investments and foreign currency transactions	23,028,527
Change in net assets resulting from operations	$22,255,709

 

* See information listed after the Fund’s Portfolio of Investments.

See Notes which are an integral part of the Financial Statements

Annual Shareholder Report

18

Statement of Changes in Net Assets

 

 

Year Ended October 31	2023	2022
Increase (Decrease) in Net Assets
Operations:
Net investment loss	$(772,818)	$(825,254)
Net realized gain (loss)	2,203,264	3,637,488
Net change in unrealized appreciation/depreciation	20,825,263	(180,640,715)
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS	22,255,709	(177,828,481)
Distributions to Shareholders:
Distributions From Net Realized Gain:
Class A Shares	(5,281,082)	(71,880,618)
Class C Shares	(419,426)	(5,393,678)
Institutional Shares	(3,517,241)	(53,644,485)
Class R6 Shares	(867,454)	(10,379,505)
Distributions From Return of Capital:
Class A Shares	(198,930)	—
Class C Shares	(15,799)	—
Institutional Shares	(132,490)	—
Class R6 Shares	(32,676)	—
CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS	(10,465,098)	(141,298,286)
Share Transactions:
Proceeds from sale of shares	292,721,507	91,485,100
Net asset value of shares issued to shareholders in payment of distributions declared	8,793,692	122,473,749
Cost of shares redeemed	(149,521,983)	(147,862,414)
CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS	151,993,216	66,096,435
Change in net assets	163,783,827	(253,030,332)
Net Assets:
Beginning of period	458,648,100	711,678,432
End of period	$622,431,927	$458,648,100

See Notes which are an integral part of the Financial Statements

Annual Shareholder Report

19

Notes to Financial Statements

October 31, 2023

1. ORGANIZATION

Federated Hermes Equity Funds (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Trust consists of eight portfolios. The financial statements included herein are only those of Federated Hermes MDT Mid Cap Growth Fund (the “Fund”), a diversified portfolio. The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder’s interest is limited to the portfolio in which shares are held. Each portfolio pays its own expenses. The Fund offers four classes of shares: Class A Shares, Class C Shares, Institutional Shares and Class R6 Shares. All shares of the Fund have equal rights with respect to voting, except on class-specific matters. The investment objective of the Fund is appreciation of capital.

2. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with U.S. generally accepted accounting principles (GAAP).

Investment Valuation

In calculating its net asset value (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.

◾

Shares of other mutual funds or non-exchange-traded investment companies are valued based upon their reported NAVs, or NAV per share practical expedient, as applicable.

◾

Fixed-income securities are fair valued using price evaluations provided by a pricing service approved by Federated MDTA LLC (the “Adviser”).

◾

Derivative contracts listed on exchanges are valued at their reported settlement or closing price, except that options are valued at the mean of closing bid and ask quotations.

◾

Over-the-counter (OTC) derivative contracts are fair valued using price evaluations provided by a pricing service approved by the Adviser.

◾

For securities that are fair valued in accordance with procedures established by and under the general supervision of the Adviser, certain factors may be considered, such as: the last traded or purchase price of the security, information obtained by contacting the issuer or dealers, analysis of the issuer’s financial statements or other available documents, fundamental analytical data, the nature and duration of restrictions on disposition, the movement of the market in which the security is normally traded, public trading in similar securities or derivative contracts of the issuer or comparable issuers, movement of a relevant index, or other factors including but not limited to industry changes and relevant government actions.

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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 for the Fund, or if information furnished by a pricing service, in the opinion of the Adviser’s valuation committee (“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 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, and the actual value obtained could be materially different.

Fair Valuation and Significant Events Procedures

Pursuant to Rule 2a-5 under the Act, the Fund’s Board of Trustees (the “Trustees”) has designated the Adviser as the Fund’s valuation designee to perform any fair value determinations for securities and other assets held by the Fund. The Adviser is subject to the Trustees’ oversight and certain reporting and other requirements intended to provide the Trustees the information needed to oversee the Adviser’s fair value determinations.

The Adviser, acting through its Valuation Committee, is responsible for determining the fair value of investments for which market quotations are not readily available. The Valuation Committee is comprised of officers of the Adviser and certain of the Adviser’s affiliated companies and determines fair value and oversees the calculation of the NAV. The Valuation Committee is also authorized to use pricing services to provide fair value evaluations of the current value of certain investments for purposes of calculating the NAV. The Valuation Committee employs various methods for reviewing third-party pricing-service evaluations including periodic reviews of third-party pricing services’ policies, procedures and valuation methods (including key inputs, methods, models and assumptions), transactional back-testing, comparisons of evaluations of different pricing services, and review of price challenges by the Adviser based on recent market activity. 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. The Trustees periodically review the fair valuations made by the Valuation Committee. The Trustees have 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.

Factors considered by pricing services in evaluating an investment include the yields or prices of investments of comparable quality, coupon, maturity, call rights and other potential prepayments, terms and type, reported transactions, indications as to values from dealers and general market conditions. Some pricing services provide a single price evaluation reflecting the bid-side of the market for an investment (a “bid” evaluation). Other pricing services offer both bid evaluations and price evaluations indicative of a price between the prices bid and ask for the investment (a “mid” evaluation). The Fund normally uses bid evaluations for any U.S. Treasury and Agency securities, mortgage-backed securities and municipal securities. The Fund normally uses

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mid evaluations for any other types of fixed-income securities and any OTC derivative contracts. In the event that market quotations and price evaluations are not available for an investment, the fair value of the investment is determined in accordance with procedures adopted by the Adviser.

The Adviser has also adopted procedures requiring an investment to be priced at its fair value whenever the Valuation Committee determines that a significant event affecting the value of the investment has occurred between the time as of which the price of the investment would otherwise be determined and the time as of which the NAV is computed. An event is considered significant if there is both an affirmative expectation that the investment’s value will change in response to the event and a reasonable basis for quantifying the resulting change in value. Examples of significant events that may occur after the close of the principal market on which a security is traded, or after the time of a price evaluation provided by a pricing service or a dealer, include:

◾

With respect to securities traded principally in foreign markets, significant trends in U.S. equity markets or in the trading of foreign securities index futures contracts;

◾

Political or other developments affecting the economy or markets in which an issuer conducts its operations or its securities are traded;

◾

Announcements concerning matters such as acquisitions, recapitalizations, litigation developments, or a natural disaster affecting the issuer’s operations or regulatory changes or market developments affecting the issuer’s industry.

The Adviser has adopted procedures whereby the Valuation Committee uses a pricing service to provide factors to update the fair value of equity securities traded principally in foreign markets from the time of the close of their respective foreign stock exchanges to the pricing time of the Fund. For other significant events, the Fund may seek to obtain more current quotations or price evaluations from alternative pricing sources. If a reliable alternative pricing source is not available, the Valuation Committee will determine the fair value of the investment in accordance with the fair valuation procedures approved by the Adviser. The Trustees periodically review fair valuations made in response to significant events.

Repurchase Agreements

The Fund may invest in repurchase agreements for short-term liquidity purposes. It is the policy of the Fund to require the other party to a repurchase agreement to transfer to the Fund’s custodian or sub-custodian eligible securities or cash with a market value (after transaction costs) at least equal to the repurchase price to be paid under the repurchase agreement. The eligible securities are transferred to accounts with the custodian or sub-custodian in which the Fund holds a “securities entitlement” and exercises “control” as those terms are defined in the Uniform Commercial Code. The Fund has established procedures for monitoring the market value of the transferred securities and requiring the transfer of additional eligible securities if necessary to equal at least the repurchase price. These procedures also allow the other party to require securities to be transferred from the account to the extent that their market value exceeds the repurchase price or in exchange for other eligible securities of equivalent market value.

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The insolvency of the other party or other failure to repurchase the securities may delay the disposition of the underlying securities or cause the Fund to receive less than the full repurchase price. Under the terms of the repurchase agreement, any amounts received by the Fund in excess of the repurchase price and related transaction costs must be remitted to the other party.

The Fund may enter into repurchase agreements in which eligible securities are transferred into joint trading accounts maintained by the custodian or sub-custodian for investment companies and other clients advised by the Fund’s Adviser and its affiliates. The Fund will participate on a pro rata basis with the other investment companies and clients in its share of the securities transferred under such repurchase agreements and in its share of proceeds from any repurchase or other disposition of such securities.

Investment Income, Gains and Losses, Expenses and Distributions

Investment transactions are accounted for on a trade-date basis. Realized gains and losses from investment transactions are recorded on an identified-cost basis. Interest income and expenses are accrued daily. Dividend income and distributions to shareholders are recorded on the ex-dividend date. Foreign dividends are recorded on the ex-dividend date or when the Fund is informed of the ex-dividend date. Distributions of net investment income, if any, are declared and paid annually. Non-cash dividends included in dividend income, if any, are recorded at fair value. Amortization/accretion of premium and discount is included in investment income. Investment income, realized and unrealized gains and losses, and certain fund-level expenses are allocated to each class based on relative average daily net assets, except that select classes will bear certain expenses unique to those classes. The detail of the total fund expense waiver and reimbursements of $796,950 is disclosed in various locations in this Note 2 and Note 5. Dividends are declared separately for each class. No class has preferential dividend rights; differences in per share dividend rates are generally due to differences in separate class expenses.

Transfer Agent Fees

For the year ended October 31, 2023, transfer agent fees for the Fund were as follows: 

	Transfer Agent Fees Incurred	Transfer Agent Fees Reimbursed
Class A Shares	$235,995	$(19)
Class C Shares	12,217	—
Institutional Shares	326,611	(207,802)
Class R6 Shares	20,733	—
TOTAL	$595,556	$(207,821)

Other Service Fees

The Fund may pay other service fees up to 0.25% of the average daily net assets of the Fund’s Class A Shares and Class C Shares to financial intermediaries or to Federated Shareholder Services Company (FSSC) for providing services to shareholders and maintaining shareholder accounts. Subject to the terms described in the Expense Limitation note, FSSC may voluntarily reimburse the Fund for other service fees.

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For the year ended October 31, 2023, other service fees for the Fund were as follows: 

	Other Service Fees Incurred
Class A Shares	$644,968
Class C Shares	24,229
TOTAL	$669,197

Federal Taxes

It is the Fund’s policy to comply with the Subchapter M provision of the Internal Revenue Code of 1986 and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal income tax is necessary. As of and during the year ended October 31, 2023, the Fund did not have a liability for any uncertain tax positions. The Fund recognizes interest and penalties, if any, related to tax liabilities as income tax expense in the Statement of Operations. As of October 31, 2023, tax years 2020 through 2023 remain subject to examination by the Fund’s major tax jurisdictions, which include the United States of America and the Commonwealth of Massachusetts.

The Fund may be subject to taxes imposed by governments of countries in which it invests. Such taxes are generally based on either income or gains earned or repatriated. The Fund accrues and applies such taxes to net investment income, net realized gains and net unrealized gains as income and/or gains are earned.

When-Issued and Delayed-Delivery Transactions

The Fund may engage in when-issued or delayed-delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed-delivery basis are marked to market daily and begin earning interest on the settlement date. Losses may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the contract.

Foreign Currency Translation

The accounting records of the Fund are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the rates of exchange of such currencies against U.S. dollars on the date of valuation. Purchases and sales of securities, income and expenses are translated at the rate of exchange quoted on the respective date that such transactions are recorded. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.

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Reported net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund’s books, and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at fiscal year end, resulting from changes in the exchange rate.

Securities Lending

The Fund participates in a securities lending program providing for the lending of equity securities to qualified brokers. The term of the loans within the program is one year or less. The Fund normally receives cash collateral for securities loaned that may be invested in affiliated money market funds, other money market instruments and/or repurchase agreements. Investments in money market funds may include funds with a “floating” NAV that can impose redemption fees and liquidity gates, impose certain operational impediments to investing cash collateral, and, if the investee fund’s NAV decreases, result in the Fund recognizing losses and being required to cover the decrease in the value of the cash collateral. Collateral is maintained at a minimum level of 100% of the market value of investments loaned, plus interest, if applicable. In accordance with the Fund’s securities lending agreement, the market value of securities on loan is determined each day at the close of business and any additional collateral required to cover the value of securities on loan is delivered to the Fund on the next business day. Earnings from collateral invested in affiliated holdings as presented parenthetically on the Statement of Operations do not reflect fees and rebates and are allocated between the borrower of the security, the securities lending agent, as a fee for its services under the program and the Fund, according to agreed-upon rates. The Fund will not have the right to vote on securities while they are on loan. However, the Fund will attempt to terminate a loan in an effort to reacquire the securities in time to vote on matters that are deemed to be material by the Adviser. There can be no assurance that the Fund will have sufficient notice of such matters to be able to terminate the loan in time to vote thereon.

Securities lending transactions are subject to Master Netting Agreements which are agreements between the Fund and its counterparties that provide for the net settlement of all transactions and collateral with the Fund, through a single payment, in the event of default or termination. Amounts presented on the Portfolio of Investments and Statement of Assets and Liabilities are not net settlement amounts but gross. As indicated below, the cash collateral received by the Fund exceeds the market value of the securities loaned reducing the net settlement amount to zero. The chart below identifies the amount of collateral received as well as the market value of securities on loan. Additionally, the securities lending agreement executed by the Fund includes an indemnification clause. This clause stipulates that the borrower will reimburse the Fund for any losses as a result of any failure of the borrower to return equivalent securities to the Fund.

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As of October 31, 2023, securities subject to this type of arrangement and related collateral were as follows: 

Fair Value of Securities Loaned	Collateral Received
$3,255,290	$3,389,503

Other

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ materially from those estimated. The Fund applies investment company accounting and reporting guidance.

3. SHARES OF BENEFICIAL INTEREST

The following table summarizes share activity: 

	Year Ended 10/31/2023		Year Ended 10/31/2022
Class A Shares:	Shares	Amount	Shares	Amount
Shares sold	468,425	$18,229,920	346,284	$14,501,942
Shares issued to shareholders in payment of distributions declared	135,724	4,901,001	1,402,103	64,482,748
Shares redeemed	(763,693)	(29,668,437)	(924,943)	(39,312,167)
NET CHANGE RESULTING FROM CLASS A SHARE TRANSACTIONS	(159,544)	$(6,537,516)	823,444	$39,672,523
	Year Ended 10/31/2023		Year Ended 10/31/2022
Class C Shares:	Shares	Amount	Shares	Amount
Shares sold	138,947	$2,553,201	66,292	$1,365,010
Shares issued to shareholders in payment of distributions declared	22,763	383,324	219,180	4,859,223
Shares redeemed	(187,113)	(3,362,318)	(169,793)	(3,378,550)
NET CHANGE RESULTING FROM CLASS C SHARE TRANSACTIONS	(25,403)	$(425,793)	115,679	$2,845,683
	Year Ended 10/31/2023		Year Ended 10/31/2022
Institutional Shares:	Shares	Amount	Shares	Amount
Shares sold	5,121,844	$214,968,760	1,330,208	$60,066,031
Shares issued to shareholders in payment of distributions declared	80,084	3,075,223	971,383	47,306,343
Shares redeemed	(2,453,382)	(101,948,484)	(2,166,536)	(93,252,686)
NET CHANGE RESULTING FROM INSTITUTIONAL SHARE TRANSACTIONS	2,748,546	$116,095,499	135,055	$14,119,688

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	Year Ended 10/31/2023		Year Ended 10/31/2022
Class R6 Shares:	Shares	Amount	Shares	Amount
Shares sold	1,581,214	$56,969,626	418,479	$15,552,117
Shares issued to shareholders in payment of distributions declared	13,132	434,144	138,503	5,825,435
Shares redeemed	(407,368)	(14,542,744)	(315,307)	(11,919,011)
NET CHANGE RESULTING FROM CLASS R6 SHARE TRANSACTIONS	1,186,978	$42,861,026	241,675	$9,458,541
NET CHANGE RESULTING FROM TOTAL FUND SHARE TRANSACTIONS	3,750,577	$151,993,216	1,315,853	$66,096,435

4. FEDERAL TAX INFORMATION

The accounting treatment of certain items in accordance with income tax regulations may differ from the accounting treatment in accordance with GAAP which may result in permanent differences. In the case of the Fund, such differences primarily result from net operating loss and return of capital.

For the year ended October 31, 2023, permanent differences identified and reclassified among the components of net assets were as follows: 

Increase (Decrease)
Paid-In Capital	Total Distributable Earnings (Loss)
$(1,123,992)	$1,123,992

The tax character of distributions as reported on the Statement of Changes in Net Assets for the years ended October 31, 2023 and 2022, was as follows: 

	2023	2022
Ordinary income	$—	$91,019,954
Long-term capital gains	$10,085,203	$50,278,332
Return of capital	$379,895	$—

As of October 31, 2023, the components of distributable earnings on a tax-basis were as follows: 

Net unrealized appreciation	$4,954,848
Deferrals	$(827,956)
TOTAL	$4,126,892

At October 31, 2023, the cost of investments for federal tax purposes was $621,122,816. The net unrealized appreciation of investments for federal tax purposes was $4,954,848. This consists of unrealized appreciation from investments for those securities having an excess of value over cost of $47,776,720 and unrealized depreciation from investments for those securities having an excess of cost over value of $42,821,872. The difference between book-basis and tax-basis net unrealized appreciation/depreciation is attributable to differing treatments for the deferral of losses on wash sales.

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Under current tax rules, a late-year ordinary loss may be deferred, in whole or in part, and treated as occurring on the first day of the following fiscal year. As of October 31, 2023, for federal income tax purposes, a late year ordinary loss of $827,956 was deferred to November 1, 2023.

5. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

Investment Adviser Fee

The advisory agreement between the Fund and the Adviser provides for an annual fee equal to 0.75% of the Fund’s average daily net assets. Subject to the terms described in the Expense Limitation note, the Adviser may voluntarily choose to waive any portion of its fee and/or reimburse certain operating expenses of the Fund for competitive reasons such as to maintain the Fund’s expense ratio, or as and when appropriate, to maintain positive or zero net yields. For the year ended October 31, 2023, the Adviser voluntarily waived $572,631 of its fee and voluntarily reimbursed $207,821 of transfer agent fees.

The Adviser has agreed to reimburse the Fund for certain investment adviser fees as a result of transactions in other affiliated investment companies. For the year ended October 31, 2023, the Adviser reimbursed $16,498.

Administrative Fee

Federated Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. For purposes of determining the appropriate rate breakpoint, “Investment Complex” is defined as all of the Federated Hermes Funds subject to a fee under the Administrative Services Agreement. The fee paid to FAS is based on the average daily net assets of the Investment Complex as specified below: 

Administrative Fee	Average Daily Net Assets of the Investment Complex
0.100%	on assets up to $50 billion
0.075%	on assets over $50 billion

Subject to the terms described in the Expense Limitation note, FAS may voluntarily choose to waive any portion of its fee. For the year ended October 31, 2023, the annualized fee paid to FAS was 0.078% of average daily net assets of the Fund.

In addition, FAS may charge certain out-of-pocket expenses to the Fund.

Distribution Services Fee

The Fund has adopted a Distribution Plan (the “Plan”) pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will compensate Federated Securities Corp. (FSC), the principal distributor, from the daily net assets of the Fund’s Class C Shares to finance activities intended to result in the sale of these shares. The Plan provides that the Fund may incur distribution expenses at 0.75% of average daily net assets, annually, to compensate FSC. Subject to the terms described in the Expense Limitation note, FSC may voluntarily choose to waive any portion of its fee.

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For the year ended October 31, 2023, distribution services fees for the Fund were as follows: 

	Distribution Services Fees Incurred
Class C Shares	$72,686

When FSC receives fees, it may pay some or all of them to financial intermediaries whose customers purchase shares. For the year ended October 31, 2023, FSC retained $5,108 of fees paid by the Fund.

Sales Charges

Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Fund. They are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. For the year ended October 31, 2023, FSC retained $6,939 in sales charges from the sale of Class A Shares. FSC also retained $476 of CDSC relating to redemptions of Class C Shares.

Other Service Fees

For the year ended October 31, 2023, FSSC received $60,842 of the other service fees disclosed in Note 2.

Expense Limitation

The Adviser and certain of its affiliates (which may include FSC, FAS and FSSC) on their own initiative have agreed to waive certain amounts of their respective fees and/or reimburse expenses. Total annual fund operating expenses (as shown in the financial highlights, excluding interest expense, extraordinary expenses and proxy-related expenses paid by the Fund, if any) paid by the Fund’s Class A Shares, Class C Shares, Institutional Shares and Class R6 Shares (after the voluntary waivers and/or reimbursements) will not exceed 1.14%, 1.94%, 0.84% and 0.83% (the “Fee Limit”), respectively, up to but not including the later of (the “Termination Date”): (a) January 1, 2025; or (b) the date of the Fund’s next effective Prospectus. While the Adviser and its applicable affiliates currently do not anticipate terminating or increasing these arrangements prior to the Termination Date, these arrangements may only be terminated or the Fee Limit increased prior to the Termination Date with the agreement of the Trustees.

Directors’/Trustees’ and Miscellaneous Fees

Certain Officers and Trustees of the Fund are Officers and Directors or Trustees of certain of the above companies. To efficiently facilitate payment, Independent Directors’/Trustees’ fees and certain expenses related to conducting meetings of the Directors/Trustees and other miscellaneous expenses are paid by an affiliate of the Adviser which in due course are reimbursed by the Fund. These expenses related to conducting meetings of the Directors/Trustees and other miscellaneous expenses may be included in Accrued and Miscellaneous Expenses on the Statement of Assets and Liabilities and Statement of Operations, respectively.

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6. INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding long-term U.S. government securities and short-term obligations, for the year ended October 31, 2023, were as follows: 

Purchases	$942,875,719
Sales	$805,928,582

7. CONCENTRATION OF RISK

The Fund may invest a portion of its assets in securities of companies that are deemed by the Fund’s management to be classified in similar business sectors. Economic developments may have an effect on the liquidity and volatility of the portfolio securities.

8. 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 dated June 21, 2023. The LOC was made available to temporarily finance the repurchase or redemption of shares of the Fund, 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. The Fund’s ability to borrow under the LOC also is subject to the limitations of the Act and various conditions precedent that must be satisfied before the Fund can borrow. Loans under the LOC are charged interest at a fluctuating rate per annum equal to (a) the highest, on any day, of (i) the federal funds effective rate, (ii) the published secured overnight financing rate plus an assigned percentage, and (iii) 0.0%, plus (b) a margin. Any fund eligible to borrow under the LOC pays its pro rata share of a commitment fee based on the amount of the lenders’ commitment that has not been utilized, quarterly in arrears and at maturity. As of October 31, 2023, the Fund had no outstanding loans. During the year ended October 31, 2023, the Fund did not utilize the LOC.

9. INTERFUND LENDING

Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other funds advised by subsidiaries of Federated Hermes, Inc., may participate in an interfund lending program. This program provides an alternative credit facility allowing the Fund to borrow from other participating affiliated funds. As of October 31, 2023, there were no outstanding loans. During the year ended October 31, 2023, the program was not utilized.

10. INDEMNIFICATIONS

Under the Fund’s organizational documents, its Officers and Directors/Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund (other than liabilities arising out of their willful misfeasance, bad faith, gross negligence or reckless disregard of their duties to the Fund). In addition, in the normal course of business, the Fund provides certain indemnifications under arrangements with third parties. Typically, obligations to indemnify a third party arise in the context of an arrangement entered into by the Fund under which the Fund agrees to indemnify such third party for certain liabilities arising out of actions taken pursuant to the arrangement, provided the third party’s actions are not deemed to have breached an agreed-upon

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standard of care (such as willful misfeasance, bad faith, gross negligence or reckless disregard of their duties under the contract). The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet arisen. The Fund does not anticipate any material claims or losses pursuant to these arrangements at this time, and accordingly expects the risk of loss to be remote.

11. OTHER MATTERS

An outbreak of respiratory disease caused by a novel coronavirus was first detected in China in late 2019 and subsequently spread globally. As of the date of the issuance of these financial statements, this coronavirus has resulted in, and may continue to result in, closed borders, enhanced health screenings, disruptions to healthcare service preparation and delivery, quarantines, cancellations, and disruptions to supply chains, workflow operations and consumer activity, as well as general concern and uncertainty. The impact of this coronavirus has resulted in substantial economic volatility. Health crises caused by outbreaks, such as the coronavirus outbreak, may exacerbate other pre-existing political, social and economic risks. The impact of this outbreak, and other epidemics and pandemics that may arise in the future, could continue to negatively affect the worldwide economy, as well as the economies of individual countries, individual companies (including certain Fund service providers and issuers of the Fund’s investments) and the markets in general in significant and unforeseen ways. In addition, governments, their regulatory agencies, or self-regulatory organizations may take actions in response to the pandemic, including significant fiscal and monetary policy changes, that may affect the instruments in which the Fund invests or the issuers of such investments. Any such impact could adversely affect the Fund’s performance.

12. FEDERAL TAX INFORMATION (UNAUDITED)

For the year ended October 31, 2023, the amount of long-term capital gains designated by the Fund was $10,465,098.

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Report of Independent Registered Public Accounting Firm

To the Board of Trustees of Federated Hermes Equity Funds and the Shareholders of Federated Hermes MDT Mid Cap Growth Fund:

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities of Federated Hermes MDT Mid Cap Growth Fund (the Fund), a portfolio of Federated Hermes Equity Funds, including the portfolio of investments, as of October 31, 2023, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the related notes (collectively, the financial statements) and the financial highlights for each of the years in the five-year period then ended. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2023, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Such procedures also included confirmation of securities owned as of October 31, 2023, by correspondence with custodians and brokers; when replies were not received from brokers, we performed other auditing procedures. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. We believe that our audits provide a reasonable basis for our opinion.  

We have served as the auditor for one or more of Federated Hermes’ investment companies since 2006.

Boston, Massachusetts
December 22, 2023

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Shareholder Expense Example (unaudited)

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase or redemption payments; and (2) ongoing costs, including management fees and to the extent applicable, distribution (12b-1) fees and/or other service fees and other Fund expenses. This Example is intended to help you to understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. It is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from May 1, 2023 to October 31, 2023.

ACTUAL EXPENSES

The first section of the table below provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you incurred over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses attributable to your investment during this period.

HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES

The second section of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. Thus, you should not use the hypothetical account values and expenses to estimate the actual ending account balance or your expenses for the period. Rather, these figures are required to be provided to enable you to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

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Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase or redemption payments. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. 

	Beginning Account Value 5/1/2023	Ending Account Value 10/31/2023	Expenses Paid During Period1
Actual:
Class A Shares	$1,000	$975.20	$5.68
Class C Shares	$1,000	$971.10	$9.54
Institutional Shares	$1,000	$976.40	$4.18
Class R6 Shares	$1,000	$976.60	$4.14
Hypothetical (assuming a 5% return before expenses):
Class A Shares	$1,000	$1,019.46	$5.80
Class C Shares	$1,000	$1,015.53	$9.75
Institutional Shares	$1,000	$1,020.97	$4.28
Class R6 Shares	$1,000	$1,021.02	$4.23

 

1 Expenses are equal to the Fund’s annualized net expense ratios, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half-year period). The annualized net expense ratios are as follows:

 

Class A Shares	1.14%
Class C Shares	1.92%
Institutional Shares	0.84%
Class R6 Shares	0.83%

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Board of Trustees and Trust Officers

The Board of Trustees is responsible for managing the Trust’s business affairs and for exercising all the Trust’s powers except those reserved for the shareholders. The following tables give information about each Trustee and the senior officers of the Fund. Where required, the tables separately list Trustees who are “interested persons” of the Fund (i.e., “Interested” Trustees) and those who are not (i.e., “Independent” Trustees). Unless otherwise noted, the address of each person listed is 1001 Liberty Avenue, Pittsburgh, PA 15222-3779. The address of all Independent Trustees listed is 4000 Ericsson Drive, Warrendale, PA 15086-7561; Attention: Mutual Fund Board. As of December 31, 2022, the Trust comprised eight portfolio(s), and the Federated Hermes Fund Family consisted of 33 investment companies (comprising 102 portfolios). Unless otherwise noted, each Officer is elected annually. Unless otherwise noted, each Trustee oversees all portfolios in the Federated Hermes Fund Family and serves for an indefinite term. The Fund’s Statement of Additional Information includes additional information about Trust Trustees and is available, without charge and upon request, by calling 1-800-341-7400, Option #4.

Interested TRUSTEES Background 

Name Birth Date Positions Held with Trust Date Service Began

Principal Occupation(s) for Past Five Years, Other Directorships Held and Previous Position(s)

J. Christopher Donahue* Birth Date: April 11, 1949 President and Trustee Indefinite Term Began serving: September 1999

Principal Occupations: Principal Executive Officer and President of certain of the Funds in the Federated Hermes Fund Family; Director or Trustee of the Funds in the Federated Hermes Fund Family; President, Chief Executive Officer and Director, Federated Hermes, Inc.; Chairman and Trustee, Federated Investment Management Company; Trustee, Federated Investment Counseling; Chairman and Director, Federated Global Investment Management Corp.; Chairman and Trustee, Federated Equity Management Company of Pennsylvania; Trustee, Federated Shareholder Services Company; Director, Federated Services Company. Previous Positions: President, Federated Investment Counseling; President and Chief Executive Officer, Federated Investment Management Company, Federated Global Investment Management Corp. and Passport Research, Ltd; Chairman, Passport Research, Ltd.

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Name Birth Date Positions Held with Trust Date Service Began

Principal Occupation(s) for Past Five Years, Other Directorships Held and Previous Position(s)

John B. Fisher* Birth Date: May 16, 1956 Trustee Indefinite Term Began serving: May 2016

Principal Occupations: Principal Executive Officer and President of certain of the Funds in the Federated Hermes Fund Family; Director or Trustee of certain of the Funds in the Federated Hermes Fund Family; Director and Vice President, Federated Hermes, Inc.; President, Director/Trustee and CEO, Federated Advisory Services Company, Federated Equity Management Company of Pennsylvania, Federated Global Investment Management Corp., Federated Investment Counseling, Federated Investment Management Company, and Federated MDTA LLC; Director, Federated Investors Trust Company. Previous Positions: President and Director of the Institutional Sales Division of Federated Securities Corp.; President and CEO of Passport Research, Ltd.; Director and President, Technology, Federated Services Company.

*

Reasons for “interested” status: J. Christopher Donahue and John B. Fisher are interested due to their beneficial ownership of shares of Federated Hermes, Inc. and due to positions they hold with Federated Hermes, Inc. and its subsidiaries.

INDEPENDENT TRUSTEES Background 

Name Birth Date Positions Held with Trust Date Service Began

Principal Occupation(s) for Past Five Years, Other Directorships Held, Previous Position(s) and Qualifications

John T. Collins Birth Date: January 24, 1947 Trustee Indefinite Term Began serving: October 2013

Principal Occupations: Director or Trustee, and Chair of the Board of Directors or Trustees, of the Federated Hermes Fund Family; formerly, Chairman and CEO, The Collins Group, Inc. (a private equity firm) (Retired). Other Directorships Held: Director, KLX Energy Services Holdings, Inc. (oilfield services); former Director of KLX Corp. (aerospace). Qualifications: Mr. Collins has served in several business and financial management roles and directorship positions throughout his career. Mr. Collins previously served as Chairman and CEO of The Collins Group, Inc. (a private equity firm) and as a Director of KLX Corp. Mr. Collins serves as Chairman Emeriti, Bentley University. Mr. Collins previously served as Director and Audit Committee Member, Bank of America Corp.; Director, FleetBoston Financial Corp.; and Director, Beth Israel Deaconess Medical Center (Harvard University Affiliate Hospital).

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Name Birth Date Positions Held with Trust Date Service Began	Principal Occupation(s) for Past Five Years, Other Directorships Held, Previous Position(s) and Qualifications
G. Thomas Hough Birth Date: February 28, 1955 Trustee Indefinite Term Began serving: August 2015	Principal Occupations: Director or Trustee, Chair of the Audit Committee of the Federated Hermes Fund Family; formerly, Vice Chair, Ernst & Young LLP (public accounting firm) (Retired). Other Directorships Held: Director, Chair of the Audit Committee, Equifax, Inc.; Lead Director, Member of the Audit and Nominating and Corporate Governance Committees, Haverty Furniture Companies, Inc.; formerly, Director, Member of Governance and Compensation Committees, Publix Super Markets, Inc. Qualifications: Mr. Hough has served in accounting, business management and directorship positions throughout his career. Mr. Hough most recently held the position of Americas Vice Chair of Assurance with Ernst & Young LLP (public accounting firm). Mr. Hough serves on the President’s Cabinet and Business School Board of Visitors for the University of Alabama. Mr. Hough previously served on the Business School Board of Visitors for Wake Forest University, and he previously served as an Executive Committee member of the United States Golf Association.
Maureen Lally-Green Birth Date: July 5, 1949 Trustee Indefinite Term Began serving: August 2009	Principal Occupations: Director or Trustee of the Federated Hermes Fund Family; Adjunct Professor Emerita of Law, Duquesne University School of Law; formerly, Dean of the Duquesne University School of Law and Professor of Law and Interim Dean of the Duquesne University School of Law; formerly, Associate General Secretary and Director, Office of Church Relations, Diocese of Pittsburgh. Other Directorships Held: Director, CNX Resources Corporation (natural gas). Qualifications: Judge Lally-Green has served in various legal and business roles and directorship positions throughout her career. Judge Lally-Green previously held the position of Dean of the School of Law of Duquesne University (as well as Interim Dean). Judge Lally-Green previously served as Associate General Secretary of the Diocese of Pittsburgh, a member of the Superior Court of Pennsylvania and as a Professor of Law, Duquesne University School of Law. Judge Lally- Green was appointed by the Supreme Court of Pennsylvania to serve on the Supreme Court’s Board of Continuing Judicial Education and the Supreme Court’s Appellate Court Procedural Rules Committee. Judge Lally-Green also currently holds the positions on not for profit or for profit boards of directors as follows: Director and Chair, UPMC Mercy Hospital; Regent, Saint Vincent Seminary; Member, Pennsylvania State Board of Education (public); Director, Catholic Charities, Pittsburgh; and Director CNX Resources Corporation (natural gas). Judge Lally-Green has held the positions of: Director, Auberle; Director, Epilepsy Foundation of Western and Central Pennsylvania; Director, Ireland Institute of Pittsburgh; Director, Saint Thomas More Society; Director and Chair, Catholic High Schools of the Diocese of Pittsburgh, Inc.; Director, Pennsylvania Bar Institute; Director, St. Vincent College; Director and Chair, North Catholic High School, Inc.; Director and Vice Chair, Our Campaign for the Church Alive!, Inc.; and Director and Vice Chair, Saint Francis University.

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Name Birth Date Positions Held with Trust Date Service Began	Principal Occupation(s) for Past Five Years, Other Directorships Held, Previous Position(s) and Qualifications
Thomas M. O’Neill Birth Date: June 14, 1951 Trustee Indefinite Term Began serving: August 2006	Principal Occupations: Director or Trustee of the Federated Hermes Fund Family; Sole Proprietor, Navigator Management Company (investment and strategic consulting). Other Directorships Held: None. Qualifications: Mr. O’Neill has served in several business, mutual fund and financial management roles and directorship positions throughout his career. Mr. O’Neill serves as Director, Medicines for Humanity. Mr. O’Neill previously served as Chief Executive Officer and President, Managing Director and Chief Investment Officer, Fleet Investment Advisors; President and Chief Executive Officer, Aeltus Investment Management, Inc.; General Partner, Hellman, Jordan Management Co., Boston, MA; Chief Investment Officer, The Putnam Companies, Boston, MA; Credit Analyst and Lending Officer, Fleet Bank; Director and Consultant, EZE Castle Software (investment order management software); Director, Midway Pacific (lumber); and Director, The Golisano Children’s Museum of Naples, Florida.
Madelyn A. Reilly Birth Date: February 2, 1956 Trustee Indefinite Term Began serving: November 2020	Principal Occupations: Director or Trustee of the Federated Hermes Fund Family; formerly, Senior Vice President for Legal Affairs, General Counsel and Secretary of Board of Directors, Duquesne University (Retired). Other Directorships Held: None. Qualifications: Ms. Reilly has served in various business and legal management roles throughout her career. Ms. Reilly previously served as Senior Vice President for Legal Affairs, General Counsel and Secretary of Board of Directors and Director of Risk Management and Associate General Counsel, Duquesne University. Prior to her work at Duquesne University, Ms. Reilly served as Assistant General Counsel of Compliance and Enterprise Risk as well as Senior Counsel of Environment, Health and Safety, PPG Industries. Ms. Reilly currently serves as a member of the Board of Directors of UPMC Mercy Hospital.

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Name Birth Date Positions Held with Trust Date Service Began	Principal Occupation(s) for Past Five Years, Other Directorships Held, Previous Position(s) and Qualifications
P. Jerome Richey Birth Date: February 23, 1949 Trustee Indefinite Term Began serving: October 2013	Principal Occupations: Director or Trustee of the Federated Hermes Fund Family; Retired; formerly, Senior Vice Chancellor and Chief Legal Officer, University of Pittsburgh and Executive Vice President and Chief Legal Officer, CONSOL Energy Inc. (now split into two separate publicly traded companies known as CONSOL Energy Inc. and CNX Resources Corp.). Other Directorships Held: None. Qualifications: Mr. Richey has served in several business and legal management roles and directorship positions throughout his career. Mr. Richey most recently held the positions of Senior Vice Chancellor and Chief Legal Officer, University of Pittsburgh. Mr. Richey previously served as Chairman of the Board, Epilepsy Foundation of Western Pennsylvania and Chairman of the Board, World Affairs Council of Pittsburgh. Mr. Richey previously served as Chief Legal Officer and Executive Vice President, CONSOL Energy Inc. and CNX Gas Company; and Board Member, Ethics Counsel and Shareholder, Buchanan Ingersoll & Rooney PC (a law firm).
John S. Walsh Birth Date: November 28, 1957 Trustee Indefinite Term Began serving: January 1999	Principal Occupations: Director or Trustee of the Federated Hermes Fund Family; President and Director, Heat Wagon, Inc. (manufacturer of construction temporary heaters); President and Director, Manufacturers Products, Inc. (distributor of portable construction heaters); President, Portable Heater Parts, a division of Manufacturers Products, Inc. Other Directorships Held: None. Qualifications: Mr. Walsh has served in several business management roles and directorship positions throughout his career. Mr. Walsh previously served as Vice President, Walsh & Kelly, Inc. (paving contractors).

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OFFICERS 

Name Birth Date Address Positions Held with Trust Date Service Began	Principal Occupation(s) for Past Five Years and Previous Position(s)
Lori A. Hensler Birth Date: January 6, 1967 TREASURER Officer since: April 2013	Principal Occupations: Principal Financial Officer and Treasurer of the Federated Hermes Fund Family; Senior Vice President, Federated Administrative Services; Financial and Operations Principal for Federated Securities Corp.; and Assistant Treasurer, Federated Investors Trust Company. Ms. Hensler has received the Certified Public Accountant designation. Previous Positions: Controller of Federated Hermes, Inc.; Senior Vice President and Assistant Treasurer, Federated Investors Management Company; Treasurer, Federated Investors Trust Company; Assistant Treasurer, Federated Administrative Services, Federated Administrative Services, Inc., Federated Securities Corp., Edgewood Services, Inc., Federated Advisory Services Company, Federated Equity Management Company of Pennsylvania, Federated Global Investment Management Corp., Federated Investment Counseling, Federated Investment Management Company, Passport Research, Ltd., and Federated MDTA, LLC; Financial and Operations Principal for Federated Securities Corp., Edgewood Services, Inc. and Southpointe Distribution Services, Inc.
Peter J. Germain Birth Date: September 3, 1959 CHIEF LEGAL OFFICER, SECRETARY and EXECUTIVE VICE PRESIDENT Officer since: January 2005	Principal Occupations: Mr. Germain is Chief Legal Officer, Secretary and Executive Vice President of the Federated Hermes Fund Family. He is General Counsel, Chief Legal Officer, Secretary and Executive Vice President, Federated Hermes, Inc.; Trustee and Senior Vice President, Federated Investors Management Company; Trustee and President, Federated Administrative Services; Director and President, Federated Administrative Services, Inc.; Director and Vice President, Federated Securities Corp.; Director and Secretary, Federated Private Asset Management, Inc.; Secretary, Federated Shareholder Services Company; and Secretary, Retirement Plan Service Company of America. Mr. Germain joined Federated Hermes, Inc. in 1984 and is a member of the Pennsylvania Bar Association. Previous Positions: Deputy General Counsel, Special Counsel, Managing Director of Mutual Fund Services, Federated Hermes, Inc.; Senior Vice President, Federated Services Company; and Senior Corporate Counsel, Federated Hermes, Inc.
Stephen Van Meter Birth Date: June 5, 1975 CHIEF COMPLIANCE OFFICER AND SENIOR VICE PRESIDENT Officer since: July 2015	Principal Occupations: Senior Vice President and Chief Compliance Officer of the Federated Hermes Fund Family; Vice President and Chief Compliance Officer of Federated Hermes, Inc. and Chief Compliance Officer of certain of its subsidiaries. Mr. Van Meter joined Federated Hermes, Inc. in October 2011. He holds FINRA licenses under Series 3, 7, 24 and 66. Previous Positions: Mr. Van Meter previously held the position of Compliance Operating Officer, Federated Hermes, Inc. Prior to joining Federated Hermes, Inc., Mr. Van Meter served at the United States Securities and Exchange Commission in the positions of Senior Counsel, Office of Chief Counsel, Division of Investment Management and Senior Counsel, Division of Enforcement.

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Name Birth Date Address Positions Held with Trust Date Service Began

Principal Occupation(s) for Past Five Years and Previous Position(s)

Stephen F. Auth Birth Date: September 13, 1956 101 Park Avenue 41st Floor New York, NY 10178 CHIEF INVESTMENT OFFICER Officer since: November 2002

Principal Occupations: Stephen F. Auth is Chief Investment Officer of various Funds in the Federated Hermes Fund Family; Executive Vice President, Federated Investment Counseling, Federated Global Investment Management Corp. and Federated Equity Management Company of Pennsylvania. Previous Positions: Executive Vice President, Federated Investment Management Company and Passport Research, Ltd. (investment advisory subsidiary of Federated); Senior Vice President, Global Portfolio Management Services Division; Senior Vice President, Federated Investment Management Company and Passport Research, Ltd.; Senior Managing Director and Portfolio Manager, Prudential Investments.

 

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Evaluation and Approval of Advisory Contract–May 2023

Federated Hermes MDT Mid-Cap Growth Fund (the “Fund”)

At its meetings in May 2023 (the “May Meetings”), the Fund’s Board of Trustees (the “Board”), including those Trustees who are not “interested persons” of the Fund, as defined in the Investment Company Act of 1940 (the “Independent Trustees”), reviewed and unanimously approved the continuation of the investment advisory contract between the Fund and Federated MDTA LLC (the “Adviser”) with respect to the Fund (the “Contract”) for an additional one-year term. The Board’s determination to approve the continuation of the Contract reflects the exercise of its business judgment after considering all of the information and factors believed to be relevant and appropriate on whether to approve the continuation of the existing arrangement. The information, factors and conclusions that formed the basis for the Board’s approval are summarized below.

Information Received and Review Process

At the request of the Independent Trustees, the Fund’s Chief Compliance Officer (the “CCO”) furnished to the Board in advance of its May Meetings an independent written evaluation of the Fund’s management fee (the “CCO Fee Evaluation Report”). The Board considered the CCO Fee Evaluation Report, along with other information, in evaluating the reasonableness of the Fund’s management fee and in determining to approve the continuation of the Contract. The CCO, in preparing the CCO Fee Evaluation Report, has the authority to retain consultants, experts or staff as reasonably necessary to assist in the performance of his duties, reports directly to the Board, and can be terminated only with the approval of a majority of the Independent Trustees. At the request of the Independent Trustees, the CCO Fee Evaluation Report followed the same general approach and covered the same topics as that of the report that had previously been delivered by the CCO in his capacity as “Senior Officer” prior to the elimination of the Senior Officer position in December 2017.

In addition to the extensive materials that comprise and accompany the CCO Fee Evaluation Report, the Board considered information specifically prepared in connection with the approval of the continuation of the Contract that was presented at the May Meetings. In this regard, in the months preceding the May Meetings, the Board requested and reviewed written responses and supporting materials prepared by the Adviser and its affiliates (collectively, “Federated Hermes”) in response to requests posed to Federated Hermes by independent legal counsel on behalf of the Independent Trustees encompassing a wide variety of topics, including those summarized below. The Board also considered such additional matters as the Independent Trustees deemed

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reasonably necessary to evaluate the Contract, which included detailed information about the Fund and Federated Hermes furnished to the Board at its meetings throughout the year and in between regularly scheduled meetings on particular matters as the need arose.

The Board’s consideration of the Contract included review of materials and information covering the following matters, among others: the nature, quality and extent of the advisory and other services provided to the Fund by Federated Hermes; Federated Hermes’ business and operations; the Adviser’s investment philosophy, personnel and processes; the Fund’s investment objectives and strategies; the Fund’s short-term and long-term performance (in absolute terms, both on a gross basis and net of expenses, and relative to the Fund’s particular investment program and a group of its peer funds and/or its benchmark, as appropriate); the Fund’s fees and expenses, including the advisory fee and the overall expense structure of the Fund (both in absolute terms and relative to a group of its peer funds), with due regard for contractual or voluntary expense limitations (if any); the financial condition of Federated Hermes; the Adviser’s profitability with respect to managing the Fund; distribution and sales activity for the Fund; and the use and allocation of brokerage commissions derived from trading the Fund’s portfolio securities (if any).

The Board also considered judicial decisions allegedly excessive investment advisory fees charged to other registered funds in evaluating the Contract. Using these judicial decisions as a guide, the Board observed that the following factors may be relevant to an adviser’s fiduciary duty with respect to its receipt of compensation from a fund: (1) the nature and quality of the services provided by the adviser to the fund and its shareholders, including the performance of the fund, its benchmark and comparable funds; (2) the adviser’s cost of providing the services and the profitability to the adviser of providing advisory services to the fund; (3) the extent to which the adviser may realize “economies of scale” as the fund grows larger and, if such economies of scale exist, whether they have been appropriately shared with the fund and its shareholders or the family of funds; (4) any “fall-out” benefits that accrue to the adviser because of its relationship with the fund, including research services received from brokers that execute fund trades and any fees paid to affiliates of the adviser for services rendered to the fund; (5) comparative fee and expense structures, including a comparison of management fees paid to the adviser with those paid by similar funds managed by the same adviser or other advisers as well as management fees charged to institutional and other advisory clients of the same adviser for what might be viewed as like services; and (6) the extent of care, conscientiousness and independence with which the fund’s board members perform their duties and their expertise, including whether they are fully informed about all facts the board deems relevant to its consideration of the adviser’s services and fees. The Board noted that the Securities and Exchange Commission (“SEC”) disclosure requirements

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regarding the basis for a fund board’s approval of the fund’s investment advisory contract generally align with the factors listed above. The Board was guided by these factors in its review of the Contract to the extent it considered them to be appropriate and relevant, as discussed further below. The Board considered and weighed these factors in light of its substantial accumulated experience in governing the Fund and working with Federated Hermes on matters relating to the oversight of the other funds advised by Federated Hermes (each, a “Federated Hermes Fund” and, collectively, the “Federated Hermes Funds”).

In addition, the Board considered the preferences and expectations of Fund shareholders and the potential disruptions of the Fund’s operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew the Contract. In particular, the Board recognized that many shareholders likely have invested in the Fund based on the strength of Federated Hermes’ industry standing and reputation and with the expectation that Federated Hermes will have a continuing role in providing advisory services to the Fund. Thus, the Board observed that there are a range of investment options available to the Fund’s shareholders and such shareholders in the marketplace, having had the opportunity to consider other investment options, have effectively selected Federated Hermes by virtue of investing in the Fund.

In determining to approve the continuation of the Contract, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate through the exercise of their reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to approve the continuation of the Contract was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the continuation of the Contract. The Board recognized that its evaluation process is evolutionary and that the factors considered and emphasis placed on relevant factors may change in recognition of changing circumstances in the registered fund marketplace. The Independent Trustees were assisted throughout the evaluation process by independent legal counsel. In connection with their deliberations at the May Meetings, the Independent Trustees met separately in executive session with their independent legal counsel and without management present to review the relevant materials and consider their responsibilities under applicable laws. In addition, senior management representatives of Federated Hermes also met with the Independent Trustees and their independent legal counsel to discuss the materials and presentations furnished to the Board at the May Meetings. The Board considered the approval of the Contract for the Fund as part of its consideration of agreements for funds across the family of Federated Hermes Funds, but its approvals were made on a fund-by-fund basis.

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Nature, Extent and Quality of Services

The Board considered the nature, extent and quality of the services provided to the Fund by the Adviser and the resources of Federated Hermes dedicated to the Fund. In this regard, the Board evaluated, among other things, the terms of the Contract and the range of services provided to the Fund by Federated Hermes. The Board considered the Adviser’s personnel, investment philosophy and process, investment research capabilities and resources, trade operations capabilities, experience and performance track record. The Board reviewed the qualifications, backgrounds and responsibilities of the portfolio management team primarily responsible for the day-to-day management of the Fund and Federated Hermes’ ability and experience in attracting and retaining qualified personnel to service the Fund. The Board considered the trading operations by the Adviser, including the execution of portfolio transactions and the selection of brokers for those transactions. The Board also considered the Adviser’s ability to deliver competitive investment performance for the Fund when compared to the Fund’s Performance Peer Group (as defined below), which was deemed by the Board to be a useful indicator of how the Adviser is executing the Fund’s investment program.

In addition, the Board considered the financial resources and overall reputation of Federated Hermes and its willingness to consider and make investments in personnel, infrastructure, technology, cybersecurity, business continuity planning and operational enhancements that are designed to benefit the Federated Hermes Funds. The Board noted that the significant acquisition of Hermes Fund Managers Limited by Federated Hermes has deepened Federated Hermes’ investment management expertise and capabilities and expanded its access to analytical resources related to environmental, social and governance (“ESG”) factors and issuer engagement on ESG matters. The Board considered Federated Hermes’ oversight of the securities lending program for the Federated Hermes Funds that engage in securities lending and noted the income earned by the Federated Hermes Funds that participate in such program. In addition, the Board considered the quality of Federated Hermes’ communications with the Board and responsiveness to Board inquiries and requests made from time to time with respect to the Federated Hermes Funds. The Board also considered that Federated Hermes is responsible for providing the Federated Hermes Funds’ officers.

The Board received and evaluated information regarding Federated Hermes’ regulatory and compliance environment. The Board considered Federated Hermes’ compliance program and compliance history and reports from the CCO about Federated Hermes’ compliance with applicable laws and regulations, including responses to regulatory developments and any compliance or other issues raised by regulatory agencies. The Board also noted Federated Hermes’ support of the Federated Hermes Funds’ compliance control structure and the compliance-related resources devoted by Federated Hermes in support of the Fund’s obligations pursuant to Rule 38a-1 under the

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Investment Company Act of 1940, including Federated Hermes’ commitment to respond to rulemaking and other regulatory initiatives of the SEC. The Board considered Federated Hermes’ approach to internal audits and risk management with respect to the Federated Hermes Funds and its day-to-day oversight of the Federated Hermes Funds’ compliance with their investment objectives and policies as well as with applicable laws and regulations, noting that regulatory and other developments had over time led, and continue to lead, to an increase in the scope of Federated Hermes’ oversight in this regard, including in connection with the implementation of new rules on derivatives risk management and fair valuation.

The Board also considered the implementation of Federated Hermes’ business continuity plans. In addition, the Board noted Federated Hermes’ commitment to maintaining high quality systems and expending substantial resources to prepare for and respond to ongoing changes due to the market, regulatory and control environments in which the Fund and its service providers operate.

The Board considered Federated Hermes’ efforts to provide shareholders in the Federated Hermes Funds with a comprehensive array of funds with different investment objectives, policies and strategies. The Board considered the expenses that Federated Hermes had incurred, as well as the entrepreneurial and other risks assumed by Federated Hermes, in sponsoring and providing on-going services to new funds to expand these opportunities for shareholders. The Board noted the benefits to shareholders of being part of the family of Federated Hermes Funds, which include the general right to exchange investments between the same class of shares without the incurrence of additional sales charges.

Based on these considerations, the Board concluded that it was satisfied with the nature, extent and quality of the services provided by the Adviser to the Fund.

Fund Investment Performance

The Board considered the investment performance of the Fund. In evaluating the Fund’s investment performance, the Board considered performance results in light of the Fund’s investment objective, strategies and risks. The Board considered detailed investment reports on, and the Adviser’s analysis of, the Fund’s performance over different time periods that were provided to the Board throughout the year and in connection with the May Meetings. These reports included, among other items, information on the Fund’s gross and net returns, the Fund’s investment performance compared to one or more relevant categories or groups of peer funds and the Fund’s benchmark index, performance attribution information and commentary on the effect of market conditions. The Board considered that, in its evaluation of investment performance at meetings throughout the year, it focused particular attention on information indicating less favorable performance of certain

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Federated Hermes Funds for specific time periods and discussed with Federated Hermes the reasons for such performance as well as any specific actions Federated Hermes had taken, or had agreed to take, to seek to enhance Fund investment performance and the results of those actions.

The Board also reviewed comparative information regarding the performance of other registered funds in the category of peer funds selected by Morningstar, Inc. (the “Morningstar”), an independent fund ranking organization (the “Performance Peer Group”). The Board noted the CCO’s view that comparisons to fund peer groups may be helpful, though not conclusive, in evaluating the performance of the Adviser in managing the Fund. The Board considered the CCO’s view that, in evaluating such comparisons, in some cases there may be differences in the funds’ objectives or investment management techniques, or the costs to implement the funds, even within the same Performance Peer Group. In this connection, the Board considered that the quantitative focus of the management of the Fund makes fee and expense comparisons particularly difficult as the funds in the Performance Peer Group varied widely in terms of the complexity of their management, and the management of the Fund is among the more complex relative to its Performance Peer Group. The Board also considered a report comparing the performance of the Fund solely to other funds with a quantitative focus in the Performance Peer Group.

The Board considered that for the one-year, three-year and five-year periods ended December 31, 2022, the Fund’s performance was above the median of the Performance Peer Group. In addition, the Board was informed by the Adviser that, for the same periods, the Fund outperformed its benchmark index for the one-year, three-year and five-year periods.

Based on these considerations, the Board concluded that it had continued confidence in the Adviser’s overall capabilities to manage the Fund.

Fund Expenses

The Board considered the advisory fee, and overall expense structure of the Fund and the comparative fee and expense information that had been provided in connection with the May Meetings. In this regard, the Board was presented with, and considered, information regarding the contractual advisory fee rates, net advisory fee rates, total expense ratios and each element of the Fund’s total expense ratio (i.e., gross and net advisory fees, administrative fees, custody fees, portfolio accounting fees and transfer agency fees) relative to an appropriate group of peer funds compiled by Federated Hermes from the category of peer funds selected by Morningstar (the “Expense Peer Group”). The Board received a description of the methodology used to select the Expense Peer Group from the overall Morningstar category. The Board also reviewed comparative information regarding the fees and expenses of the broader group of funds in the overall Morningstar category.

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While mindful that courts have cautioned against giving too much weight to comparative information concerning fees charged to funds by other advisers, the use of comparisons between the Fund and its Expense Peer Group assisted the Board in its evaluation of the Fund’s fees and expenses. The Board focused on comparisons with other registered funds with comparable investment programs more heavily than non-registered fund products or services because such comparisons are believed to be more relevant. The Board considered that other registered funds are the products most like the Fund, in that they are readily available to Fund shareholders as alternative investment vehicles, and they are the type of investment vehicle, in fact, chosen and maintained by the Fund’s shareholders. The Board noted that the range of such other registered funds’ fees and expenses, therefore, appears to be a relevant indicator of what investors have found to be reasonable in the marketplace in which the Fund competes.

The Board reviewed the contractual advisory fee rate, net advisory fee rate and other expenses of the Fund and noted the position of the Fund’s fee rates relative to its Expense Peer Group. In this regard, the Board noted that the contractual advisory fee rate was below the median of the Expense Peer Group, and the Board was satisfied that the overall expense structure of the Fund remained competitive.

The Board also received and considered information about the nature and extent of services offered and fees charged by Federated Hermes to other types of clients with investment strategies similar to those of the Federated Hermes Funds, including non-registered fund clients (such as institutional separate accounts) and third-party unaffiliated registered funds for which any of the Adviser or its affiliates serve as sub-adviser. The Board noted the CCO’s conclusion that non-registered fund clients are inherently different products due to the following differences, among others: (i) different types of targeted investors; (ii) different applicable laws and regulations; (iii) different legal structures; (iv) different average account sizes and portfolio management techniques made necessary by different cash flows and different associated costs; (v) the time spent by portfolio managers and their teams (among other personnel across various departments, including legal, compliance and risk management) in reviewing securities pricing and fund liquidity; (vi) different administrative responsibilities; (vii) different degrees of risk associated with management; and (viii) a variety of different costs. The Board also considered information regarding the differences in the nature of the services required for Federated Hermes to manage its proprietary registered fund business versus managing a discrete pool of assets as a sub-adviser to another institution’s registered fund, noting the CCO’s view that Federated Hermes generally performs significant additional services and assumes substantially greater risks in managing the Fund and other Federated Hermes Funds than in its role as

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sub-adviser to an unaffiliated third-party registered fund. The Board noted that the CCO did not consider the fees for providing advisory services to other types of clients to be determinative in judging the appropriateness of the Federated Hermes Funds’ advisory fees.

Based on these considerations, the Board concluded that the fees and total operating expenses of the Fund, in conjunction with other matters considered, are reasonable in light of the services provided.

Profitability

The Board received and considered profitability information furnished by Federated Hermes Such profitability information included revenues reported on a fund-by-fund basis and estimates of the allocation of expenses made on a fund-by-fund basis, using allocation methodologies specified by the CCO and described to the Board. The Board considered the CCO’s view that, while these cost allocation reports apply consistent allocation processes, the inherent difficulties in allocating costs on a fund-by-fund basis continues to cause the CCO to question the precision of the process and to conclude that such reports may be unreliable because a single change in an allocation estimate may dramatically alter the resulting estimate of cost and/or profitability of a Federated Hermes Fund and may produce unintended consequences. In addition, the Board considered the CCO’s view that the allocation methodologies used by Federated Hermes in estimating profitability for purposes of reporting to the Board in connection with the continuation of the Contract are consistent with the methodologies previously reviewed by an independent consultant. The Board noted that the independent consultant had previously conducted a review of the allocation methodologies and reported to the Board that, although there is no single best method to allocate expenses, the methodologies used by Federated Hermes are reasonable. The Board considered the CCO’s view that the estimated profitability to the Adviser from its relationship with the Fund was not unreasonable in relation to the services provided.

The Board also reviewed information compiled by Federated Hermes comparing its profitability information to other publicly held fund management companies, including information regarding profitability trends over time. The Board recognized that profitability comparisons among fund management companies are difficult because of the variation in the type of comparative information that is publicly available, and the profitability of any fund management company is affected by numerous factors. The Board considered the CCO’s conclusion that, based on such profitability information, Federated Hermes’ profit margins did not appear to be excessive. The Board also considered the CCO’s view that Federated Hermes appeared financially sound, with the resources necessary to fulfill its obligations under its contracts with the Federated Hermes Funds.

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Economies of Scale

The Board received and considered information about the notion of possible realization of “economies of scale” as a fund grows larger, the difficulties of determining economies of scale at an individual fund level, and the extent to which potential scale benefits are shared with shareholders. In this regard, the Board considered that Federated Hermes has made significant and long-term investments in areas that support all of the Federated Hermes Funds, such as: portfolio management, investment research and trading operations; shareholder services; compliance; business continuity, cybersecurity and information security programs; internal audit and risk management functions; and technology and use of data. The Board noted that Federated Hermes’ investments in these areas are extensive and are designed to provide enhanced services to the Federated Hermes Funds and their shareholders. The Board considered that the benefits of these investments are likely to be shared with the family of Federated Hermes Funds as a whole. In addition, the Board considered that fee waivers and expense reimbursements are another means for potential economies of scale to be shared with shareholders and can provide protection from an increase in expenses if a Federated Hermes Fund’s assets decline. The Board considered that, in order for the Federated Hermes Funds to remain competitive in the marketplace, Federated Hermes has frequently waived fees and/or reimbursed expenses for the Federated Hermes Funds and has disclosed to shareholders and/or reported to the Board its intention to do so (or continue to do so) in the future. The Board also considered that Federated Hermes has been active in managing expenses of the Federated Hermes Funds in recent years, which has resulted in benefits being realized by shareholders.

The Board also received and considered information on adviser-paid fees (commonly referred to as “revenue sharing” payments) that was provided to the Board throughout the year and in connection with the May Meetings. The Board considered that Federated Hermes and the CCO believe that this information is relevant to considering whether Federated Hermes had an incentive to either not apply breakpoints, or to apply breakpoints at higher levels, but should not be considered when evaluating the reasonableness of advisory fees. The Board also noted the absence of any applicable regulatory or industry guidelines on economies of scale, which is compounded by the lack of any uniform methodology or pattern with respect to structuring fund advisory fees with breakpoints that serve to reduce the fees as a fund attains a certain size.

Other Benefits

The Board considered information regarding the compensation and other ancillary (or “fall-out”) benefits that Federated Hermes derived from its relationships with the Federated Hermes Funds. The Board noted that, in addition to receiving advisory fees under the Federated Hermes Funds’ investment advisory contracts, Federated Hermes’ affiliates also receive fees for providing other services to the Federated Hermes Funds under separate

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51

service contracts including for serving as the Federated Hermes Funds’ administrator and distributor. In this regard, the Board considered that certain of Federated Hermes’ affiliates provide distribution and shareholder services to the Federated Hermes Funds, for which they may be compensated through distribution and servicing fees paid pursuant to Rule 12b-1 plans or otherwise. The Board also received and considered information detailing the benefits, if any, that Federated Hermes may derive from its receipt of research services from brokers who execute portfolio trades for the Federated Hermes Funds.

Conclusions

The Board considered: (i) the CCO’s conclusion that his observations and the information accompanying the CCO Fee Evaluation Report show that the management fee for the Fund is reasonable; and (ii) the CCO’s recommendation that the Board approve the management fee. The Board noted that, under these circumstances, no changes were recommended to, and no objection was raised to the continuation of, the Contract by the CCO. The CCO also recognized that the Board’s evaluation of the Federated Hermes Funds’ advisory and sub-advisory arrangements is a continuing and ongoing process that is informed by the information that the Board requests and receives from management throughout the course of the year and, in this regard, the CCO noted certain items for future reporting to the Board or further consideration by management as the Board continues its ongoing oversight of the Federated Hermes Funds.

On the basis of the information and factors summarized above, among other information and factors deemed relevant by the Board, and the evaluation thereof, the Board, including the Independent Trustees, unanimously voted to approve the continuation of the Contract. The Board based its determination to approve the Contract on the totality of the circumstances and relevant factors and with a view of past and future long-term considerations. Not all of the factors and considerations identified above were necessarily deemed to be relevant to the Fund, nor did the Board consider any one of them to be determinative.

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Liquidity Risk Management Program–
Annual Evaluation of Adequacy and Effectiveness

In accordance with Rule 22e-4 under the Investment Company Act of 1940, as amended (the “Liquidity Rule”), Federated Hermes Equity Funds (the “Trust”) has adopted and implemented a liquidity risk management program (the “Program”) for Federated Hermes MDT Mid Cap Growth Fund (the “Fund” and, collectively with the other non-money market open-end funds advised by Federated Hermes, the “Federated Hermes Funds”). The Program seeks to assess and manage the Fund’s liquidity risk. “Liquidity risk” is defined under the Liquidity Rule as the risk that the Fund is unable to meet redemption requests without significantly diluting remaining investors’ interests in the Fund. The Board of Trustees of the Trust (the “Board”) has approved the designation of each Federated Hermes Fund’s investment adviser as the administrator for the Program (the “Administrator”) with respect to that Fund. The Administrator, in turn, has delegated day-to-day responsibility for the administration of the Program to multiple Liquidity Risk Management Committees, which are comprised of representatives from certain divisions within Federated Hermes.

The Program is comprised of various components designed to support the assessment and/or management of liquidity risk, including: (1) the periodic assessment (no less frequently than annually) of certain factors that influence the Fund’s liquidity risk; (2) the periodic classification (no less frequently than monthly) of the Fund’s investments into one of four liquidity categories that reflect an estimate of their liquidity under current market conditions; (3) a 15% limit on the acquisition of “illiquid investments” (as defined under the Liquidity Rule); (4) to the extent a Fund does not invest primarily in “highly liquid investments” (as defined under the Liquidity Rule), the determination of a minimum percentage of the Fund’s assets that generally will be invested in highly liquid investments (an “HLIM”); (5) if a Fund has established an HLIM, the periodic review (no less frequently than annually) of the HLIM and the adoption of policies and procedures for responding to a shortfall of the Fund’s highly liquid investments below its HLIM; and (6) periodic reporting to the Board.

At its meetings in May 2023, the Board received and reviewed a written report (the “Report”) from the Federated Hermes Funds’ Chief Compliance Officer and Chief Risk Officer, on behalf of the Administrator, concerning the operation of the Program for the period from April 1, 2022 through March 31, 2023 (the “Period”). The Report addressed the operation of the Program and assessed the adequacy and effectiveness of its implementation, including, where applicable, the operation of any HLIM established for a Federated Hermes Fund. There were no material changes to the Program during the Period. The Report summarized the operation of the Program and

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53

the information and factors considered by the Administrator in assessing whether the Program has been adequately and effectively implemented with respect to the Federated Hermes Funds. Such information and factors included, among other things:

◾ confirmation that it was not necessary for the Fund to utilize, and the Fund did not utilize, any alternative funding sources that were available to the Federated Hermes Funds during the Period, such as the Federated Hermes Funds’ interfund lending facility, redemptions in-kind, reverse repurchase agreement transactions, redemptions delayed beyond the normal T+1 settlement but within seven days of the redemption request, and committed lines of credit;

◾ the periodic classifications of the Fund’s investments into one of four liquidity categories and the methodologies and inputs used to classify the investments, including the Fund’s reasonably anticipated trade size;

◾ the analysis received from a third-party liquidity assessment vendor that is taken into account in the process of determining the liquidity classifications of the Fund’s investments, and the results of the Administrator’s evaluation of the services performed by the vendor in support of this process, including the Administrator’s view that the methodologies utilized by the vendor continue to be appropriate;

◾ the fact that the Fund invested primarily in highly liquid investments during the Period and, therefore, was not required to establish, and has not established, an HLIM and the operation of the procedures for monitoring the status of the Fund as investing primarily in highly liquid investments;

◾ the fact that the Fund invested no more than 15% of its assets in illiquid investments during the Period, and the operation of the procedures for monitoring this limit;

◾ the fact that there were no liquidity events during the Period that materially affected the Fund’s liquidity risk;

◾ the impact on liquidity and management of liquidity risk, if any, caused by extended non-U.S. market closures and confirmation that there were no issues for any of the affected Federated Hermes Funds in meeting shareholder redemptions at any time during these temporary non-U.S. market closures.

Based on this review, the Administrator concluded that the Program is operating effectively to assess and manage the Fund’s liquidity risk, and that the Program has been and continues to be adequately and effectively implemented to monitor and, as applicable, respond to the Fund’s liquidity developments.

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Voting Proxies on Fund Portfolio Securities

A description of the policies and procedures that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund’s portfolio is available, without charge and upon request, by calling 1-800-341-7400, Option #4. A report on “Form N-PX” of how the Fund voted any such proxies during the most recent 12-month period ended June 30 is available via the Proxy Voting Record (Form N-PX) link associated with the Fund and share class name at FederatedHermes.com/us/FundInformation. Form N-PX filings are also available at the SEC’s website at sec.gov.

Quarterly Portfolio Schedule

Each fiscal quarter, the Fund will file with the SEC a complete schedule of its monthly portfolio holdings on “Form N-PORT.” The Fund’s holdings as of the end of the third month of every fiscal quarter, as reported on Form N-PORT, will be publicly available on the SEC’s website at sec.gov within 60 days of the end of the fiscal quarter upon filing. You may also access this information via the link to the Fund and share class name at FederatedHermes.com/us.

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Mutual funds are not bank deposits or obligations, are not guaranteed by any bank and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal.

This Report is authorized for distribution to prospective investors only when preceded or accompanied by the Fund’s Prospectus, which contains facts concerning its objective and policies, management fees, expenses and other information.   

 

Federated Hermes MDT Mid Cap Growth Fund
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561

Contact us atFederatedHermes.com/us
or call 1-800-341-7400.

Federated Securities Corp., Distributor

CUSIP 314172107
CUSIP 314172305
CUSIP 314172198
CUSIP 314172529

G01228-08 (12/23)

© 2023 Federated Hermes, Inc.

Annual Shareholder Report

October 31, 2023

 

 

Share Class | Ticker A | SVAAX C | SVACX Institutional | SVAIX R6 | SVALX

Federated Hermes Strategic Value Dividend Fund

Fund Established 2005

A Portfolio of Federated Hermes Equity Funds

Dear Valued Shareholder,

We are pleased to present the Annual Shareholder Report for your fund covering the period from November 1, 2022 through October 31, 2023. This report includes Management’s Discussion of Fund Performance, a complete listing of your fund’s holdings, performance information and financial statements along with other important fund information.

As a global leader in active, responsible investment management, Federated Hermes is guided by our conviction that responsible investing is the best way to create wealth over the long term. The company provides capabilities across a wide range of asset classes to investors around the world.

In addition, FederatedHermes.com/us offers quick and easy access to valuable resources that include timely fund updates, economic and market insights from our investment strategists and financial planning tools. You can also access many of those insights by following us on Twitter (@FederatedHermes) and LinkedIn.

Thank you for investing with us. We hope you find this information useful and look forward to keeping you informed.

Sincerely,  

J. Christopher Donahue, President

Not FDIC Insured ▪ May Lose Value ▪ No Bank Guarantee

CONTENTS 

Management’s Discussion of Fund Performance	1
Portfolio of Investments Summary Table	5
Portfolio of Investments	6
Financial Highlights	10
Statement of Assets and Liabilities	14
Statement of Operations	16
Statement of Changes in Net Assets	17
Notes to Financial Statements	18
Report of Independent Registered Public Accounting Firm	30
Shareholder Expense Example	32
Board of Trustees and Trust Officers	34
Evaluation and Approval of Advisory Contract	41
Liquidity Risk Management Program– Annual Evaluation of Adequacy and Effectiveness	51
Voting Proxies on Fund Portfolio Securities	53
Quarterly Portfolio Schedule	53

Management’s Discussion of Fund Performance (unaudited)

The total return of Federated Hermes Strategic Value Dividend Fund (the “Fund”), based on net asset value for the 12-month reporting period ended October 31, 2023, was -7.67% for the Class A Shares, -8.38% for the Class C Shares, -7.57% for the Institutional Shares and -7.39% for the Class R6 Shares. The total return of the Standard and Poor’s 500 Index (S&P 500)1 was 10.14% for the same period. The Fund’s total return for the fiscal year reflects actual cash flows, transaction costs and expenses which are not reflected in the total return of the S&P 500.

The following discussion will focus on the performance of the Fund’s Class R6 Shares relative to the S&P 500.

MARKET OVERVIEW

The fiscal year started with the end of an Autumn rally as the markets were bolstered by Federal Reserve Chair Powell who reinforced market hopes for lower rate increases and an eventual end to tightening. In the midst of heightened volatility, a narrow mega-cap growth rally dominated in 2023 as the “Super 7” drove the performance of the S&P 500, accounting for 99% of the total year to date performance through the end of the reporting period. The fiscal year ended with the broad market in negative territory for the last three months, August through October, as surging treasury yields, and the possibility of a government shutdown weighed on the markets. In addition, concerns have not abated that the “higher for longer” interest rate environment could lead to an economic slowdown. Volatility was not limited to the U.S., as overseas economies faced similar dilemmas with interest rate concerns, weak economic data, elevated energy prices, and a disappointing China recovery.

For the fiscal year, low beta2 and high yield were notable laggards. This was evident in factor performance when observing the S&P 500 by quintile; lowest beta stocks underperformed highest beta stocks by -19.80% and high yield underperformed low yield by -20.31%. Contrarily, when noting the S&P 500 quality ratings, the highest quality stocks (rated A+) outperformed the lowest quality stocks (rated C & D) by 8.64%.

From a sector perspective, cyclical growth sectors that benefitted from increased demand for Artificial Intelligence drove performance, as Communication Services and Information Technology provided the largest total returns of 35.77% and 33.15%, respectively. In fact, the 28% weight in Information Technology accounted for 75% of the total performance of the S&P 500. Defensive sectors lagged as Utilities, REITs, Health Care, and Consumer Staples were the greatest underperformers as they posted declines of -7.72%, -6.57%, -4.53%, and -3.40%, respectively.

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1

DIVIDEND-BASED PERFORMANCE3

The Fund remained focused on its core objectives of delivering high dividend income from high quality assets as it ended the month with a 30-day SEC yield4 of 4.01% and a gross weighted average dividend yield5 of 5.19%. This notably eclipsed not only the S&P 500’s 1.66% yield but also surpassed the rising 10-year U.S. Treasury Note at 4.88%. For the 12-month period, 38 companies in the Fund raised their dividends, accounting for 39 increases overall. The most generous increases came courtesy of Amgen 9.8%, Morgan Stanley 9.7%, Zurich Insurance 9.1%, and National Grid 8.8%.

From an absolute total return perspective, the strongest positive contributors to performance were Information Technology and Energy which posted total returns of 31.70% and 7.97%, respectively. The top drivers of performance in these sectors were Broadcom, Total Energies, and Cisco Systems which generated total returns in the Fund of 73.55%, 31.12%, and 18.27%, respectively.

Contrarily, weakness was noted in the portfolio’s Financials, Consumer Staples, and Utilities sectors as they declined by -19.88%, -8.85%, and -6.33%, respectively. Notable underperformers in these sectors included Keycorp -40.24%, Dominion Energy -39.41%, Walgreens -37.79%, Truist Financial Corp -32.87%, and Huntington Bancshares -32.86%.

Due to its focus on high dividend income and growth in that income over time, the Fund’s strategy will tend to perform best when the markets prefer high-yield, high quality, low beta, large-cap stocks. Often, the strategy may also outperform in flat markets or periods of market distress. Conversely, the Fund may lag the broad market when investors prefer low-yield, low-quality, high-beta, small-cap stocks.

1

Please see the footnotes to the line graph below for definitions of, and further information about, the S&P 500.

2

Beta measures a security/fund’s volatility relative to the market. A beta less than 1.00 suggests the security/fund has historically had less volatility relative to the market.

3

There are no guarantees that dividend-paying stocks will continue to pay dividends. In addition, dividend-paying stocks may not experience the same capital appreciation potential as non-dividend-paying stocks.

4

Represents the 30-day SEC yield for the Fund’s R6 Shares. In the absence of temporary expense waivers or reimbursements, the 30-day SEC yield would have been 4.51% for the Fund’s R6 Shares. The dividend yield represents the average yield of the underlying securities within the portfolio.

5

The dividend yield represents the average yield of the underlying securities within the portfolio. The average yield is a weighted average calculated by assigning a weight to each of the underlying securities in the portfolio based upon the portion of total assets of the portfolio each underlying security represents.

Annual Shareholder Report

2

FUND PERFORMANCE AND GROWTH OF A $10,000 INVESTMENT

The graph below illustrates the hypothetical investment of $10,0001 in the Federated Hermes Strategic Value Dividend Fund (the “Fund”) from October 31, 2013 to October 31, 2023, compared to the Standard & Poor’s 500 Index (S&P 500).2 The Average Annual Total Return table below shows returns for each class averaged over the stated periods.

Growth of a $10,000 InvestmenT

Growth of $10,000 as of October 31, 2023  

◾ Total returns shown for Class C Shares include the maximum contingent deferred sales charge of 1.00% as applicable.

The Fund offers multiple share classes whose performance may be greater than or less than its other share class(es) due to differences in sales charges and expenses. See the Average Annual Total Return table below for the returns of additional classes not shown in the line graph above.

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Average Annual Total Returns for the Period Ended 10/31/2023

(returns reflect all applicable sales charges and contingent deferred sales charges as specified below in footnote #1) 

	1 Year	5 Years	10 Years
Class A Shares	-12.71%	2.71%	5.02%
Class C Shares	-9.22%	3.07%	5.00%
Institutional Shares	-7.57%	4.10%	5.87%
Class R6 Shares3	-7.39%	4.12%	5.86%
S&P 500	10.14%	11.01%	11.18%

Performance data quoted represents past performance which is no guarantee of future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Mutual fund performance changes over time and current performance may be lower or higher than what is stated. For current to the most recent month-end performance and after-tax returns, visit FederatedHermes.com/us or call 1-800-341-7400. Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Mutual funds are not obligations of or guaranteed by any bank and are not federally insured. 

1

Represents a hypothetical investment of $10,000 in the Fund after deducting applicable sales charges: For Class A Shares, the maximum sales charge of 5.50% ($10,000 investment minus $550 sales charge = $9,450); for Class C Shares, a 1.00% contingent deferred sales charge would be applied on any redemption less than one year from the purchase date. The Fund’s performance assumes the reinvestment of all dividends and distributions. The S&P 500 has been adjusted to reflect reinvestment of dividends on securities in the indexes.

2

The S&P 500 is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The S&P 500 is not adjusted to reflect sales loads, expenses or other fees that the Securities and Exchange Commission (SEC) requires to be reflected in the Fund’s performance. The index is unmanaged and, unlike the Fund, is not affected by cash flows. It is not possible to invest in an index.

3

The Fund’s R6 Shares commenced operations on June 29, 2016. For the period prior to the commencement of operations of the R6 Shares, the performance information shown is for Institutional Shares adjusted to remove any voluntary waiver of fund expenses related to the Institutional Shares that occurred during the period prior to commencement of the R6 Shares.

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4

Portfolio of Investments Summary Table (unaudited)

At October 31, 2023, the Fund’s sector composition1 was as follows: 

Sector Composition	Percentage of Total Net Assets
Utilities	21.3%
Consumer Staples	15.7%
Energy	14.7%
Health Care	14.1%
Financials	13.1%
Communication Services	7.3%
Materials	5.4%
Industrials	4.5%
Consumer Discretionary	1.6%
Real Estate	1.0%
Information Technology	0.6%
Other Assets and Liabilities—Net2	0.7%
TOTAL	100%

 

1	Except for Other Assets and Liabilities, sector classifications are based upon, and individual portfolio securities are assigned to, the classifications of the Global Industry Classification Standard (GICS) except that the Adviser assigns a classification to securities not classified by the GICS and to securities for which the Adviser does not have access to the classification made by the GICS.
2	Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities.

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Portfolio of Investments

October 31, 2023 

Shares		Dividend Yield (unaudited)	Value in U.S. Dollars
	Common Stocks—   99.3%
	Communication Services—   7.3%
8,780,334	AT&T, Inc.	7.21%	$  135,217,144
4,376,985	BCE, Inc.	6.39	162,485,803
7,847,347	Verizon Communications, Inc.	7.57	275,677,300
	TOTAL		573,380,247
	Consumer Discretionary—   1.6%
1,913,375	Best Buy Co., Inc.	5.51	127,851,718
	Consumer Staples—   15.7%
4,908,679	British American Tobacco PLC	9.41	146,492,641
4,542,675	Conagra Brands, Inc.	5.12	124,287,588
1,862,905	Kimberly-Clark Corp.	3.95	222,877,954
4,310,797	Philip Morris International, Inc.	5.83	384,350,661
2,131,300	The Coca-Cola Co.	3.26	120,397,137
5,062,775	Unilever PLC	3.82	239,876,729
	TOTAL		1,238,282,710
	Energy—   14.7%
303,275	Chevron Corp.	4.14	44,196,266
7,152,025	Enbridge, Inc.	6.79	229,194,874
4,970,219	TC Energy Corp.	6.62	171,175,525
6,779,870	TotalEnergies SE	4.68	454,071,282
7,660,650	Williams Cos., Inc.	4.27	263,526,360
	TOTAL		1,162,164,307
	Financials—   13.1%
371,425	Allianz SE	4.39	86,813,914
3,525,725	Canadian Imperial Bank of Commerce	6.05	124,350,611
18,217,210	Huntington Bancshares, Inc.	6.42	175,796,077
269,400	Morgan Stanley	4.80	19,078,908
1,601,150	PNC Financial Services Group, Inc.	5.42	183,283,640
6,718,811	Truist Financial Corp.	7.33	190,545,480
5,611,216	U.S. Bancorp	6.02	178,885,566
151,919	Zurich Insurance Group AG	5.57	71,980,391
	TOTAL		1,030,734,587
	Health Care—   14.1%
702,576	AbbVie, Inc.	4.39	99,189,680
1,432,475	Amgen, Inc.	3.33	366,283,857
1,747,996	Gilead Sciences, Inc.	3.82	137,287,606
1,078,750	Medtronic PLC	3.91	76,116,600

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6

Shares		Dividend Yield (unaudited)	Value in U.S. Dollars
	Common Stocks—   continued
	Health Care—   continued
7,061,545	Pfizer, Inc.	5.37%	$  215,800,815
2,415,860	Sanofi	4.15	220,487,363
	TOTAL		1,115,165,921
	Industrials—   4.5%
643,925	Paychex, Inc.	3.21	71,507,871
1,251,625	Stanley Black & Decker, Inc.	3.81	106,450,706
1,285,475	United Parcel Service, Inc.	4.59	181,573,344
	TOTAL		359,531,921
	Information Technology—   0.6%
935,325	Cisco Systems, Inc.	2.99	48,758,492
	Materials—   5.4%
12,849,400	Amcor PLC	5.62	114,231,166
3,464,750	LyondellBasell Industries N.V.	5.54	312,659,040
	TOTAL		426,890,206
	Real Estate—   1.0%
2,226,664	NNN REIT, Inc.	6.21	80,894,703
	Utilities—   21.3%
2,821,375	American Electric Power Co., Inc.	4.66	213,126,667
4,207,946	Dominion Energy, Inc.	6.62	169,664,383
3,578,829	Duke Energy Corp.	4.61	318,122,110
1,460,075	Entergy Corp.	4.73	139,568,569
1,959,650	Evergy, Inc.	4.99	96,297,201
17,540,690	National Grid-SP PLC	5.67	208,458,880
6,322,830	PPL Corp.	3.91	155,351,933
1,611,000	Public Service Enterprises Group, Inc.	3.70	99,318,150
4,154,052	Southern Co.	4.16	279,567,700
	TOTAL		1,679,475,593
	TOTAL INVESTMENT IN SECURITIES—99.3% (IDENTIFIED COST $8,437,826,277)1		7,843,130,405
	OTHER ASSETS AND LIABILITIES - NET—0.7%2		52,356,746
	TOTAL NET ASSETS—100%		$7,895,487,151

Annual Shareholder Report

7

Transactions with affiliated investment companies, which are funds managed by the Adviser or an affiliate of the Adviser, during the period ended October 31, 2023, were as follows: 

	Federated Hermes Institutional Prime Value Obligations Fund, Institutional Shares
Value as of 10/31/2022	$49,391,035
Purchases at Cost	$1,782,070,025
Proceeds from Sales	$(1,831,499,982)
Change in Unrealized Appreciation/Depreciation	$(2,656)
Net Realized Gain/(Loss)	$41,578
Value as of 10/31/2023	$—
Shares Held as of 10/31/2023	—
Dividend Income	$2,386,864

 

1	The cost of investments for federal tax purposes amounts to $8,438,597,228.
2	Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities.

Note: The categories of investments are shown as a percentage of total net assets at October 31, 2023.

Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three broad levels listed below:

Level 1—quoted prices in active markets for identical securities.

Level 2—other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Also includes securities valued at amortized cost.

Level 3—significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments).

The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.

The following is a summary of the inputs used, as of October 31, 2023, in valuing the Fund’s assets carried at fair value: 

Valuation Inputs
	Level 1— Quoted Prices	Level 2— Other Significant Observable Inputs	Level 3— Significant Unobservable Inputs	Total
Equity Securities:
Common Stocks
Domestic	$5,224,735,586	$—	$—	$5,224,735,586
International	1,190,213,619	1,428,181,200	—	2,618,394,819
TOTAL SECURITIES	$6,414,949,205	$1,428,181,200	$—	$7,843,130,405

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8

 

The following acronym(s) are used throughout this portfolio:
REIT	—Real Estate Investment Trust

See Notes which are an integral part of the Financial Statements

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9

Financial Highlights–Class A Shares

(For a Share Outstanding Throughout Each Period) 

	Year Ended October 31,
	2023	2022	2021	2020	2019
Net Asset Value, Beginning of Period	$5.89	$5.70	$4.49	$5.82	$5.73
Income From Investment Operations:
Net investment income1	0.22	0.23	0.20	0.21	0.21
Net realized and unrealized gain (loss)	(0.62)	0.19	1.21	(1.06)	0.31
TOTAL FROM INVESTMENT OPERATIONS	(0.40)	0.42	1.41	(0.85)	0.52
Less Distributions:
Distributions from net investment income	(0.22)	(0.23)	(0.20)	(0.21)	(0.21)
Distributions from net realized gain	(0.32)	—	—	(0.27)	(0.22)
TOTAL DISTRIBUTIONS	(0.54)	(0.23)	(0.20)	(0.48)	(0.43)
Net Asset Value, End of Period	$4.95	$5.89	$5.70	$4.49	$5.82
Total Return2	(7.67)%	7.41%	31.78%	(15.65)%	9.68%
Ratios to Average Net Assets:
Net expenses3	1.05%4	1.06%	1.05%	1.05%4	1.06%
Net investment income	3.91%	3.90%	3.64%	4.08%	3.75%
Expense waiver/reimbursement5	0.12%	0.12%	0.12%	0.13%	0.12%
Supplemental Data:
Net assets, end of period (000 omitted)	$1,411,880	$1,600,974	$1,366,960	$1,060,496	$1,456,023
Portfolio turnover6	35%	42%	23%	38%	33%

 

1	Per share numbers have been calculated using the average shares method.
2	Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable.
3	Amount does not reflect net expenses incurred by investment companies in which the Fund may invest.
4	The net expense ratios are calculated without reduction for expense offset arrangements. The net expense ratios are 1.05% and 1.05% for the years ended October 31, 2023 and 2020, respectively, after taking into account these expense reductions.
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	Securities that mature are considered sales for purposes of this calculation.

See Notes which are an integral part of the Financial Statements

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10

Financial Highlights–Class C Shares

(For a Share Outstanding Throughout Each Period) 

	Year Ended October 31,
	2023	2022	2021	2020	2019
Net Asset Value, Beginning of Period	$5.90	$5.72	$4.50	$5.84	$5.74
Income From Investment Operations:
Net investment income1	0.17	0.19	0.16	0.17	0.17
Net realized and unrealized gain (loss)	(0.61)	0.18	1.22	(1.07)	0.32
TOTAL FROM INVESTMENT OPERATIONS	(0.44)	0.37	1.38	(0.90)	0.49
Less Distributions:
Distributions from net investment income	(0.18)	(0.19)	(0.16)	(0.17)	(0.17)
Distributions from net realized gain	(0.32)	—	—	(0.27)	(0.22)
TOTAL DISTRIBUTIONS	(0.50)	(0.19)	(0.16)	(0.44)	(0.39)
Net Asset Value, End of Period	$4.96	$5.90	$5.72	$4.50	$5.84
Total Return2	(8.38)%	6.40%	30.94%	(16.41)%	9.02%
Ratios to Average Net Assets:
Net expenses3	1.82%4	1.81%	1.80%	1.80%4	1.81%
Net investment income	3.14%	3.16%	2.92%	3.34%	3.00%
Expense waiver/reimbursement5	0.12%	0.13%	0.13%	0.14%	0.13%
Supplemental Data:
Net assets, end of period (000 omitted)	$439,907	$628,173	$625,041	$693,876	$1,217,811
Portfolio turnover6	35%	42%	23%	38%	33%

 

1	Per share numbers have been calculated using the average shares method.
2	Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable.
3	Amount does not reflect net expenses incurred by investment companies in which the Fund may invest.
4	The net expense ratios are calculated without reduction for expense offset arrangements. The net expense ratios are 1.82% and 1.80% for the years ended October 31, 2023 and 2020, respectively, after taking into account these expense reductions.
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	Securities that mature are considered sales for purposes of this calculation.

See Notes which are an integral part of the Financial Statements

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11

Financial Highlights–Institutional Shares

(For a Share Outstanding Throughout Each Period) 

	Year Ended October 31,
	2023	2022	2021	2020	2019
Net Asset Value, Beginning of Period	$5.93	$5.74	$4.52	$5.86	$5.76
Income From Investment Operations:
Net investment income1	0.23	0.25	0.21	0.22	0.23
Net realized and unrealized gain (loss)	(0.63)	0.19	1.22	(1.07)	0.32
TOTAL FROM INVESTMENT OPERATIONS	(0.40)	0.44	1.43	(0.85)	0.55
Less Distributions:
Distributions from net investment income	(0.23)	(0.25)	(0.21)	(0.22)	(0.23)
Distributions from net realized gain	(0.32)	—	—	(0.27)	(0.22)
TOTAL DISTRIBUTIONS	(0.55)	(0.25)	(0.21)	(0.49)	(0.45)
Net Asset Value, End of Period	$4.98	$5.93	$5.74	$4.52	$5.86
Total Return2	(7.57)%	7.62%	32.12%	(15.49)%	10.09%
Ratios to Average Net Assets:
Net expenses3	0.80%4	0.81%	0.80%	0.80%4	0.81%
Net investment income	4.16%	4.14%	3.91%	4.34%	3.99%
Expense waiver/reimbursement5	0.13%	0.13%	0.13%	0.13%	0.12%
Supplemental Data:
Net assets, end of period (000 omitted)	$4,796,767	$6,193,024	$4,589,179	$4,214,131	$6,632,015
Portfolio turnover6	35%	42%	23%	38%	33%

 

1	Per share numbers have been calculated using the average shares method.
2	Based on net asset value.
3	Amount does not reflect net expenses incurred by investment companies in which the Fund may invest.
4	The net expense ratios are calculated without reduction for expense offset arrangements. The net expense ratios are 0.80% and 0.80% for the years ended October 31, 2023 and 2020, respectively, after taking into account these expense reductions.
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	Securities that mature are considered sales for purposes of this calculation.

See Notes which are an integral part of the Financial Statements

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12

Financial Highlights–Class R6 Shares

(For a Share Outstanding Throughout Each Period) 

	Year Ended October 31,
	2023	2022	2021	2020	2019
Net Asset Value, Beginning of Period	$5.92	$5.74	$4.52	$5.86	$5.76
Income From Investment Operations:
Net investment income1	0.23	0.26	0.21	0.22	0.23
Net realized and unrealized gain (loss)	(0.61)	0.17	1.22	(1.07)	0.32
TOTAL FROM INVESTMENT OPERATIONS	(0.38)	0.43	1.43	(0.85)	0.55
Less Distributions:
Distributions from net investment income	(0.24)	(0.25)	(0.21)	(0.22)	(0.23)
Distributions from net realized gain	(0.32)	—	—	(0.27)	(0.22)
TOTAL DISTRIBUTIONS	(0.56)	(0.25)	(0.21)	(0.49)	(0.45)
Net Asset Value, End of Period	$4.98	$5.92	$5.74	$4.52	$5.86
Total Return2	(7.39)%	7.46%	32.14%	(15.48)%	10.11%
Ratios to Average Net Assets:
Net expenses3	0.78%4	0.79%	0.78%	0.78%4	0.79%
Net investment income	4.18%	4.14%	3.85%	4.35%	4.00%
Expense waiver/reimbursement5	0.07%	0.07%	0.07%	0.07%	0.07%
Supplemental Data:
Net assets, end of period (000 omitted)	$1,246,934	$1,697,532	$1,019,551	$575,195	$500,119
Portfolio turnover6	35%	42%	23%	38%	33%

 

1	Per share numbers have been calculated using the average shares method.
2	Based on net asset value.
3	Amount does not reflect net expenses incurred by investment companies in which the Fund may invest.
4	The net expense ratios are calculated without reduction for expense offset arrangements. The net expense ratios are 0.78% and 0.78% for the years ended October 31, 2023 and 2020, respectively, after taking into account these expense reductions.
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	Securities that mature are considered sales for purposes of this calculation.

See Notes which are an integral part of the Financial Statements

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13

Statement of Assets and Liabilities

October 31, 2023

 

Assets:
Investment in securities, at value (identified cost $8,437,826,277)	$7,843,130,405
Cash denominated in foreign currencies (identified cost $851,626)	851,290
Receivable for investments sold	43,522,990
Income receivable	33,363,628
Receivable for shares sold	7,523,721
Income receivable from an affiliated holding	59,707
Total Assets	7,928,451,741
Liabilities:
Payable for shares redeemed	22,575,612
Payable to bank	7,797,761
Payable for other service fees (Notes 2 and 5)	771,533
Payable for distribution services fee (Note 5)	290,855
Payable for investment adviser fee (Note 5)	157,963
Payable for administrative fee (Note 5)	16,453
Accrued expenses (Note 5)	1,354,413
TOTAL LIABILITIES	32,964,590
Net assets for 1,587,096,995 shares outstanding	$7,895,487,151
Net Assets Consist of:
Paid-in capital	$8,610,396,046
Total distributable earnings (loss)	(714,908,895)
TOTAL NET ASSETS	$7,895,487,151

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14

Statement of Assets and Liabilities–continued

Net Asset Value, Offering Price and Redemption Proceeds Per Share:
Class A Shares:
Net asset value per share ($1,411,880,279 ÷ 285,468,983 shares outstanding) no par value, unlimited shares authorized	$4.95
Offering price per share (100/94.50 of $4.95)	$5.24
Redemption proceeds per share	$4.95
Class C Shares:
Net asset value per share ($439,906,507 ÷ 88,685,841 shares outstanding) no par value, unlimited shares authorized	$4.96
Offering price per share	$4.96
Redemption proceeds per share (99.00/100 of $4.96)	$4.91
Institutional Shares:
Net asset value per share ($4,796,766,532 ÷ 962,651,403 shares outstanding) no par value, unlimited shares authorized	$4.98
Offering price per share	$4.98
Redemption proceeds per share	$4.98
Class R6 Shares:
Net asset value per share ($1,246,933,833 ÷ 250,290,768 shares outstanding) no par value, unlimited shares authorized	$4.98
Offering price per share	$4.98
Redemption proceeds per share	$4.98

See Notes which are an integral part of the Financial Statements

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15

Statement of Operations

Year Ended October 31, 2023

 

Investment Income:
Dividends (including $2,386,864 received from an affiliated holding* and net of foreign taxes withheld of $11,936,663)	$491,185,032
Expenses:
Investment adviser fee (Note 5)	74,287,841
Administrative fee (Note 5)	7,730,243
Custodian fees	604,824
Transfer agent fees (Note 2)	7,767,560
Directors’/Trustees’ fees (Note 5)	57,911
Auditing fees	30,228
Legal fees	11,261
Distribution services fee (Note 5)	4,329,950
Other service fees (Notes 2 and 5)	5,465,466
Portfolio accounting fees	211,663
Share registration costs	329,206
Printing and postage	405,532
Miscellaneous (Note 5)	77,764
TOTAL EXPENSES	101,309,449
Waiver, Reimbursements and Reduction:
Waiver/reimbursement of investment adviser fee (Note 5)	(7,138,319)
Reimbursement of other operating expenses (Notes 2 and 5)	(4,872,793)
Reduction of custodian fees (Note 6)	(10,591)
TOTAL WAIVER, REIMBURSEMENTS AND REDUCTION	(12,021,703)
Net expenses	89,287,746
Net investment income	401,897,286
Realized and Unrealized Gain (Loss) on Investments and Foreign Currency Transactions:
Net realized loss on investments and foreign currency transactions (including net realized gain of $41,578 on sales of investments in an affiliated holding*)	(136,111,422)
Net change in unrealized appreciation of investments and translation of assets and liabilities in foreign currency (including net change in unrealized appreciation of $(2,656) of investments in an affiliated holding*)	(966,196,951)
Net realized and unrealized gain (loss) on investments and foreign currency transactions	(1,102,308,373)
Change in net assets resulting from operations	$(700,411,087)

 

* See information listed after the Fund’s Portfolio of Investments.

See Notes which are an integral part of the Financial Statements

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16

Statement of Changes in Net Assets

 

 

Year Ended October 31	2023	2022
Increase (Decrease) in Net Assets
Operations:
Net investment income	$401,897,286	$356,631,629
Net realized gain (loss)	(136,111,422)	741,278,486
Net change in unrealized appreciation/depreciation	(966,196,951)	(591,219,934)
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS	(700,411,087)	506,690,181
Distributions to Shareholders:
Class A Shares	(152,469,096)	(58,325,217)
Class C Shares	(52,564,763)	(19,765,070)
Institutional Shares	(594,730,697)	(217,912,952)
Class R6 Shares	(162,658,651)	(53,570,436)
CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS	(962,423,207)	(349,573,675)
Share Transactions:
Proceeds from sale of shares	2,720,145,519	4,668,965,602
Net asset value of shares issued to shareholders in payment of distributions declared	837,488,235	301,745,827
Cost of shares redeemed	(4,119,015,663)	(2,608,855,615)
CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS	(561,381,909)	2,361,855,814
Change in net assets	(2,224,216,203)	2,518,972,320
Net Assets:
Beginning of period	10,119,703,354	7,600,731,034
End of period	$7,895,487,151	$10,119,703,354

See Notes which are an integral part of the Financial Statements

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17

Notes to Financial Statements

October 31, 2023

1. ORGANIZATION

Federated Hermes Equity Funds (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Trust consists of eight portfolios. The financial statements included herein are only those of Federated Hermes Strategic Value Dividend Fund (the “Fund”), a diversified portfolio. The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder’s interest is limited to the portfolio in which shares are held. Each portfolio pays its own expenses. The Fund offers four classes of shares: Class A Shares, Class C Shares, Institutional Shares and Class R6 Shares. All shares of the Fund have equal rights with respect to voting, except on class-specific matters. The investment objective of the Fund is to provide income and long-term capital appreciation.

2. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with U.S. generally accepted accounting principles (GAAP).

Investment Valuation

In calculating its net asset value (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.

◾

Shares of other mutual funds or non-exchange-traded investment companies are valued based upon their reported NAVs, or NAV per share practical expedient, as applicable.

◾

Derivative contracts listed on exchanges are valued at their reported settlement or closing price, except that options are valued at the mean of closing bid and ask quotations.

◾

Over-the-counter (OTC) derivative contracts are fair valued using price evaluations provided by a pricing service approved by Federated Equity Management Company of Pennsylvania (the “Adviser”).

◾

For securities that are fair valued in accordance with procedures established by and under the general supervision of the Adviser, certain factors may be considered, such as: the last traded or purchase price of the security, information obtained by contacting the issuer or dealers, analysis of the issuer’s financial statements or other available documents, fundamental analytical data, the nature and duration of restrictions on disposition, the movement of the market in which the security is normally traded, public trading in similar securities or derivative contracts of the issuer or comparable issuers, movement of a relevant index, or other factors including but not limited to industry changes and relevant government actions.

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 for the Fund, or if

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information furnished by a pricing service, in the opinion of the Adviser’s valuation committee (“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 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, and the actual value obtained could be materially different.

Fair Valuation and Significant Events Procedures

Pursuant to Rule 2a-5 under the Act, the Fund’s Board of Trustees (the “Trustees”) has designated the Adviser as the Fund’s valuation designee to perform any fair value determinations for securities and other assets held by the Fund. The Adviser is subject to the Trustees’ oversight and certain reporting and other requirements intended to provide the Trustees the information needed to oversee the Adviser’s fair value determinations.

The Adviser, acting through its Valuation Committee, is responsible for determining the fair value of investments for which market quotations are not readily available. The Valuation Committee is comprised of officers of the Adviser and certain of the Adviser’s affiliated companies and determines fair value and oversees the calculation of the NAV. The Valuation Committee is also authorized to use pricing services to provide fair value evaluations of the current value of certain investments for purposes of calculating the NAV. The Valuation Committee employs various methods for reviewing third-party pricing-service evaluations including periodic reviews of third-party pricing services’ policies, procedures and valuation methods (including key inputs, methods, models and assumptions), transactional back-testing, comparisons of evaluations of different pricing services, and review of price challenges by the Adviser based on recent market activity. 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. The Trustees periodically review the fair valuations made by the Valuation Committee. The Trustees have 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.

Factors considered by pricing services in evaluating an investment include the yields or prices of investments of comparable quality, coupon, maturity, call rights and other potential prepayments, terms and type, reported transactions, indications as to values from dealers and general market conditions. Some pricing services provide a single price evaluation reflecting the bid-side of the market for an investment (a “bid” evaluation). Other pricing services offer both bid evaluations and price evaluations indicative of a price between the prices bid and ask for the investment (a “mid” evaluation). The Fund normally uses bid evaluations for any U.S. Treasury and Agency securities, mortgage-backed securities and municipal securities. The Fund normally uses mid evaluations for any other types of fixed-income securities and any OTC derivative contracts. In the event that market quotations and price evaluations are not available for an investment, the fair value of the investment is determined in accordance with procedures adopted by the Adviser.

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The Adviser has also adopted procedures requiring an investment to be priced at its fair value whenever the Valuation Committee determines that a significant event affecting the value of the investment has occurred between the time as of which the price of the investment would otherwise be determined and the time as of which the NAV is computed. An event is considered significant if there is both an affirmative expectation that the investment’s value will change in response to the event and a reasonable basis for quantifying the resulting change in value. Examples of significant events that may occur after the close of the principal market on which a security is traded, or after the time of a price evaluation provided by a pricing service or a dealer, include:

◾

With respect to securities traded principally in foreign markets, significant trends in U.S. equity markets or in the trading of foreign securities index futures contracts;

◾

Political or other developments affecting the economy or markets in which an issuer conducts its operations or its securities are traded;

◾

Announcements concerning matters such as acquisitions, recapitalizations, litigation developments, or a natural disaster affecting the issuer’s operations or regulatory changes or market developments affecting the issuer’s industry.

The Adviser has adopted procedures whereby the Valuation Committee uses a pricing service to provide factors to update the fair value of equity securities traded principally in foreign markets from the time of the close of their respective foreign stock exchanges to the pricing time of the Fund. For other significant events, the Fund may seek to obtain more current quotations or price evaluations from alternative pricing sources. If a reliable alternative pricing source is not available, the Valuation Committee will determine the fair value of the investment in accordance with the fair valuation procedures approved by the Adviser. The Trustees periodically review fair valuations made in response to significant events.

Repurchase Agreements

The Fund may invest in repurchase agreements for short-term liquidity purposes. It is the policy of the Fund to require the other party to a repurchase agreement to transfer to the Fund’s custodian or sub-custodian eligible securities or cash with a market value (after transaction costs) at least equal to the repurchase price to be paid under the repurchase agreement. The eligible securities are transferred to accounts with the custodian or sub-custodian in which the Fund holds a “securities entitlement” and exercises “control” as those terms are defined in the Uniform Commercial Code. The Fund has established procedures for monitoring the market value of the transferred securities and requiring the transfer of additional eligible securities if necessary to equal at least the repurchase price. These procedures also allow the other party to require securities to be transferred from the account to the extent that their market value exceeds the repurchase price or in exchange for other eligible securities of equivalent market value.

The insolvency of the other party or other failure to repurchase the securities may delay the disposition of the underlying securities or cause the Fund to receive less than the full repurchase price. Under the terms of the repurchase agreement, any amounts received by the Fund in excess of the repurchase price and related transaction costs must be remitted to the other party.

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The Fund may enter into repurchase agreements in which eligible securities are transferred into joint trading accounts maintained by the custodian or sub-custodian for investment companies and other clients advised by the Fund’s Adviser and its affiliates. The Fund will participate on a pro rata basis with the other investment companies and clients in its share of the securities transferred under such repurchase agreements and in its share of proceeds from any repurchase or other disposition of such securities.

Investment Income, Gains and Losses, Expenses and Distributions

Investment transactions are accounted for on a trade-date basis. Realized gains and losses from investment transactions are recorded on an identified-cost basis. Interest income and expenses are accrued daily. Dividend income and distributions to shareholders are recorded on the ex-dividend date. Foreign dividends are recorded on the ex-dividend date or when the Fund is informed of the ex-dividend date. Distributions of net investment income, if any, are declared and paid monthly. Non-cash dividends included in dividend income, if any, are recorded at fair value. Amortization/accretion of premium and discount is included in investment income. Investment income, realized and unrealized gains and losses, and certain fund-level expenses are allocated to each class based on relative average daily net assets, except that select classes will bear certain expenses unique to those classes. The detail of the total fund expense waiver, reimbursements and reduction of $12,021,703 is disclosed in this Note 2, Note 5 and Note 6. Dividends are declared separately for each class. No class has preferential dividend rights; differences in per share dividend rates are generally due to differences in separate class expenses.

Transfer Agent Fees

For the year ended October 31, 2023, transfer agent fees for the Fund were as follows: 

	Transfer Agent Fees Incurred	Transfer Agent Fees Reimbursed
Class A Shares	$1,367,668	$(859,139)
Class C Shares	537,593	(261,515)
Institutional Shares	5,672,827	(3,752,139)
Class R6 Shares	189,472	—
TOTAL	$7,767,560	$(4,872,793)

Other Service Fees

The Fund may pay other service fees up to 0.25% of the average daily net assets of the Fund’s Class A Shares and Class C Shares to financial intermediaries or to Federated Shareholder Services Company (FSSC) for providing services to shareholders and maintaining shareholder accounts. Subject to the terms described in the Expense Limitation note, FSSC may voluntarily reimburse the Fund for other service fees. For the year ended October 31, 2023, other service fees for the Fund were as follows: 

	Other Service Fees Incurred
Class A Shares	$4,022,149
Class C Shares	1,443,317
TOTAL	$5,465,466

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21

Federal Taxes

It is the Fund’s policy to comply with the Subchapter M provision of the Internal Revenue Code of 1986 (the “Code”) and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal income tax is necessary. As of and during the year ended October 31, 2023, the Fund did not have a liability for any uncertain tax positions. The Fund recognizes interest and penalties, if any, related to tax liabilities as income tax expense in the Statement of Operations. As of October 31, 2023, tax years 2020 through 2023 remain subject to examination by the Fund’s major tax jurisdictions, which include the United States of America and the Commonwealth of Massachusetts.

The Fund may be subject to taxes imposed by governments of countries in which it invests. Such taxes are generally based on either income or gains earned or repatriated. The Fund accrues and applies such taxes to net investment income, net realized gains and net unrealized gains as income and/or gains are earned.

When-Issued and Delayed-Delivery Transactions

The Fund may engage in when-issued or delayed-delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed-delivery basis are marked to market daily and begin earning interest on the settlement date. Losses may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the contract.

Foreign Currency Translation

The accounting records of the Fund are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the rates of exchange of such currencies against U.S. dollars on the date of valuation. Purchases and sales of securities, income and expenses are translated at the rate of exchange quoted on the respective date that such transactions are recorded. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.

Reported net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund’s books, and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at period end, resulting from changes in the exchange rate.

Other

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ materially from those estimated. The Fund applies investment company accounting and reporting guidance.

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3. SHARES OF BENEFICIAL INTEREST

The following tables summarize share activity: 

	Year Ended 10/31/2023		Year Ended 10/31/2022
Class A Shares:	Shares	Amount	Shares	Amount
Shares sold	52,205,886	$292,964,140	68,285,523	$411,604,034
Shares issued to shareholders in payment of distributions declared	24,754,471	140,468,550	8,952,853	53,244,018
Shares redeemed	(63,505,515)	(348,426,430)	(45,000,360)	(267,042,477)
NET CHANGE RESULTING FROM CLASS A SHARE TRANSACTIONS	13,454,842	$85,006,260	32,238,016	$197,805,575
	Year Ended 10/31/2023		Year Ended 10/31/2022
Class C Shares:	Shares	Amount	Shares	Amount
Shares sold	14,278,197	$81,447,497	23,299,942	$141,388,870
Shares issued to shareholders in payment of distributions declared	8,763,916	50,109,087	3,185,587	18,966,842
Shares redeemed	(40,809,676)	(224,604,338)	(29,396,446)	(176,426,524)
NET CHANGE RESULTING FROM CLASS C SHARE TRANSACTIONS	(17,767,563)	$(93,047,754)	(2,910,917)	$(16,070,812)
	Year Ended 10/31/2023		Year Ended 10/31/2022
Institutional Shares:	Shares	Amount	Shares	Amount
Shares sold	329,102,921	$1,870,908,819	510,740,710	$3,109,476,548
Shares issued to shareholders in payment of distributions declared	94,110,743	537,914,051	32,651,918	195,621,215
Shares redeemed	(505,655,558)	(2,787,080,470)	(298,077,271)	(1,789,821,164)
NET CHANGE RESULTING FROM INSTITUTIONAL SHARE TRANSACTIONS	(82,441,894)	$(378,257,600)	245,315,357	$1,515,276,599
	Year Ended 10/31/2023		Year Ended 10/31/2022
Class R6 Shares:	Shares	Amount	Shares	Amount
Shares sold	83,396,334	$474,825,063	165,678,921	$1,006,496,150
Shares issued to shareholders in payment of distributions declared	19,056,585	108,996,547	5,664,637	33,913,752
Shares redeemed	(138,668,566)	(758,904,425)	(62,538,991)	(375,565,450)
NET CHANGE RESULTING FROM CLASS R6 SHARE TRANSACTIONS	(36,215,647)	$(175,082,815)	108,804,567	$664,844,452
NET CHANGE RESULTING FROM TOTAL FUND SHARE TRANSACTIONS	(122,970,262)	$(561,381,909)	383,447,023	$2,361,855,814

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4. FEDERAL TAX INFORMATION

The accounting treatment of certain items in accordance with income tax regulations may differ from the accounting treatment in accordance with GAAP which may result in permanent differences. In the case of the Fund, such differences primarily result from a fair fund payment.

For the year ended October 31, 2023, permanent differences identified and reclassified among the components of net assets were as follows: 

Increase (Decrease)
Paid-In Capital	Total Distributable Earnings (Loss)
$(6,670)	$6,670

Net assets were not affected by this reclassification.

The tax character of distributions as reported on the Statement of Changes in Net Assets for the years ended October 31, 2023 and 2022, was as follows: 

	2023	2022
Ordinary income	$405,741,456	$349,573,675
Long-term capital gains	$556,681,751	$—

As of October 31, 2023, the components of distributable earnings on a tax-basis were as follows: 

Other timing differences	$(290,669)
Undistributed ordinary income	$17,263,565
Net unrealized depreciation	$(595,466,823)
Capital loss carryforwards	$(136,414,968)
TOTAL	$(714,908,895)

At October 31, 2023, the cost of investments for federal tax purposes was $8,438,597,228. The net unrealized depreciation of investments for federal tax purposes was $595,466,823. This consists of unrealized appreciation from investments for those securities having an excess of value over cost of $507,676,166 and unrealized depreciation from investments for those securities having an excess of cost over value of $1,103,142,989. The difference between book-basis and tax-basis unrealized depreciation is attributable to differing treatments for the deferral of losses on wash sales and litigation payment.

As of October 31, 2023, the Fund had a capital loss carryforward of $136,414,968 which will reduce the Fund’s taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Code, thereby reducing the amount of distributions to shareholders which would otherwise be necessary to relieve the Fund of any liability for federal income tax. Pursuant to the Code, these net capital losses retain their character as either short-term or long-term and do not expire.

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The following schedule summarizes the Fund’s capital loss carryforwards: 

Short-Term	Long-Term	Total
$—	$136,414,968	$136,414,968

5. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

Investment Adviser Fee

The advisory agreement between the Fund and the Adviser provides for an annual fee equal to 0.75%average daily net assets. Subject to the terms described in the Expense Limitation note, the Adviser may voluntarily choose to waive any portion of its fee and/or reimburse certain operating expenses of the Fund for competitive reasons such as to maintain the Fund’s expense ratio, or as and when appropriate, to maintain positive or zero net yields. For the year ended October 31, 2023, the Adviser voluntarily waived $7,085,325 of its fee and voluntarily reimbursed $4,872,793 of transfer agent fees.

The Adviser has agreed to reimburse the Fund for certain investment adviser fees as a result of transactions in other affiliated investment companies. For the year ended October 31, 2023, the Adviser reimbursed $52,994.

Administrative Fee

Federated Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. For purposes of determining the appropriate rate breakpoint, “Investment Complex” is defined as all of the Federated Hermes Funds subject to a fee under the Administrative Services Agreement. The fee paid to FAS is based on the average daily net assets of the Investment Complex as specified below: 

Administrative Fee	Average Daily Net Assets of the Investment Complex
0.100%	on assets up to $50 billion
0.075%	on assets over $50 billion

Subject to the terms described in the Expense Limitation note, FAS may voluntarily choose to waive any portion of its fee. For the year ended October 31, 2023, the annualized fee paid to FAS was 0.078% of average daily net assets of the Fund.

In addition, FAS may charge certain out-of-pocket expenses to the Fund.

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Distribution Services Fee

The Fund has adopted a Distribution Plan (the “Plan”) pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will compensate Federated Securities Corp. (FSC), the principal distributor, from the daily net assets of the Fund’s Class A Shares and Class C Shares to finance activities intended to result in the sale of these shares. The Plan provides that the Fund may incur and pay distribution expenses at the following percentages of average daily net assets annually to compensate FSC: 

Share Class Name	Percentage of Average Daily Net Assets of Class
Class A Shares	0.05%
Class C Shares	0.75%

Subject to the terms described in the Expense Limitation note, FSC may voluntarily choose to waive any portion of its fee. For the year ended October 31, 2023, distribution services fees for the Fund were as follows: 

	Distribution Services Fees Incurred
Class C Shares	$4,329,950

When FSC receives fees, it may pay some or all of them to financial intermediaries whose customers purchase shares. For the year ended October 31, 2023, FSC retained $775,975 of fees paid by the Fund. For the year ended October 31, 2023, the Fund’s Class A Shares did not incur a distribution services fee; however, it may begin to incur this fee upon approval of the Trustees.

Sales Charges

Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Fund. They are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. For the year ended October 31, 2023, FSC retained $282,632 in sales charges from the sale of Class A Shares. FSC also retained $45,041 and $79,086 of CDSC relating to redemptions of Class A Shares and Class C Shares, respectively.

Other Service Fees

For the year ended October 31, 2023, FSSC received $27,591 of other service fees disclosed in Note 2.

Expense Limitation

The Adviser and certain of its affiliates (which may include FSC, FAS and FSSC) on their own initiative have agreed to waive certain amounts of their respective fees and/or reimburse expenses. Effective January 1, 2024, total annual fund operating expenses (as shown in the financial highlights, excluding tax reclaim recovery expenses, interest expense, extraordinary expenses and proxy-related expenses paid by the Fund, if any) paid by the Fund’s Class A Shares, Class C Shares, Institutional Shares and Class R6 Shares (after the voluntary waivers and/or reimbursements) will not exceed 1.05%, 1.86%, 0.80% and 0.78% (the “Fee Limit”), respectively, up to but not including the later of (the “Termination Date”): (a) January 1, 2025; or (b) the date of the Fund’s next effective Prospectus. Prior to January 1, 2024, the Fee Limit for the Class C Shares was

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1.82%. While the Adviser and its applicable affiliates currently do not anticipate terminating or increasing these arrangements prior to the Termination Date, these arrangements may only be terminated or the Fee Limit increased prior to the Termination Date with the agreement of the Trustees.

Directors’/Trustees’ and Miscellaneous Fees

Certain Officers and Trustees of the Fund are Officers and Directors or Trustees of certain of the above companies. To efficiently facilitate payment, Independent Directors’/Trustees’ fees and certain expenses related to conducting meetings of the Directors/Trustees and other miscellaneous expenses are paid by an affiliate of the Adviser which in due course are reimbursed by the Fund. These expenses related to conducting meetings of the Directors/Trustees and other miscellaneous expenses may be included in Accrued and Miscellaneous Expenses on the Statement of Assets and Liabilities and Statement of Operations, respectively.

6. EXPENSE REDUCTION

Through arrangements with the Fund’s custodian, net credits realized as a result of uninvested cash balances were used to offset custody expenses. For the year ended October 31, 2023, the Fund’s expenses were offset by $10,591 under these arrangements.

7. CREDIT RISK

The Fund may place its cash on deposit with financial institutions in the United States, which are insured by the Federal Deposit Insurance Company (FDIC) up to $250,000. The Fund’s credit risk in the event of failure of these financial institutions is represented by the difference between the FDIC limit and the total amounts on deposit. The Fund from time to time may have amounts on deposit in excess of the insured limits.

8. INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding long-term U.S. government securities and short-term obligations, for the year ended October 31, 2023, were as follows: 

Purchases	$3,412,227,664
Sales	$4,512,129,713

9. 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 dated June 21, 2023. The LOC was made available to temporarily finance the repurchase or redemption of shares of the Fund, 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. The Fund’s ability to borrow under the LOC also is subject to the limitations of the Act and various conditions precedent that must be satisfied before the Fund can borrow. Loans under the LOC are charged interest at a fluctuating rate per annum equal to (a) the highest, on any day, of (i) the federal funds effective rate, (ii) the published secured overnight financing rate plus an assigned percentage, and (iii) 0.0%,

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plus (b) a margin. Any fund eligible to borrow under the LOC pays its pro rata share of a commitment fee based on the amount of the lenders’ commitment that has not been utilized, quarterly in arrears and at maturity. As of October 31, 2023, the Fund had no outstanding loans. During the year ended October 31, 2023, the Fund did not utilize the LOC.

10. INTERFUND LENDING

Pursuant to an Exemptive Order issued by the SEC, the Fund, along with other funds advised by subsidiaries of Federated Hermes, Inc., may participate in an interfund lending program. This program provides an alternative credit facility allowing the Fund to borrow from other participating affiliated funds. As of October 31, 2023, there were no outstanding loans. During the year ended October 31, 2023, the program was not utilized.

11. INDEMNIFICATIONS

Under the Fund’s organizational documents, its Officers and Directors/Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund (other than liabilities arising out of their willful misfeasance, bad faith, gross negligence or reckless disregard of their duties to the Fund). In addition, in the normal course of business, the Fund provides certain indemnifications under arrangements with third parties. Typically, obligations to indemnify a third party arise in the context of an arrangement entered into by the Fund under which the Fund agrees to indemnify such third party for certain liabilities arising out of actions taken pursuant to the arrangement, provided the third party’s actions are not deemed to have breached an agreed-upon standard of care (such as willful misfeasance, bad faith, gross negligence or reckless disregard of their duties under the contract). The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet arisen. The Fund does not anticipate any material claims or losses pursuant to these arrangements at this time, and accordingly expects the risk of loss to be remote.

12. OTHER MATTERS

An outbreak of respiratory disease caused by a novel coronavirus was first detected in China in late 2019 and subsequently spread globally. As of the date of the issuance of these financial statements, this coronavirus has resulted in, and may continue to result in, closed borders, enhanced health screenings, disruptions to healthcare service preparation and delivery, quarantines, cancellations, and disruptions to supply chains, workflow operations and consumer activity, as well as general concern and uncertainty. The impact of this coronavirus has resulted in substantial economic volatility. Health crises caused by outbreaks, such as the coronavirus outbreak, may exacerbate other pre-existing political, social and economic risks. The impact of this outbreak, and other epidemics and pandemics that may arise in the future, could continue to negatively affect the worldwide economy, as well as the economies of individual countries, individual companies (including certain Fund service providers and issuers of the Fund’s investments) and the markets in general in significant and unforeseen ways. In addition, governments, their regulatory agencies, or self-regulatory organizations may take actions in response to the pandemic, including significant fiscal and monetary policy changes, that may affect the instruments in which the Fund invests or the issuers of such investments. Any such impact could adversely affect the Fund’s performance.

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13. FEDERAL TAX INFORMATION (UNAUDITED)

For the year ended October 31, 2023, 100.00% of total ordinary income distributions made by the Fund are qualifying dividends which may be subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth Tax Relief Act of 2003. Complete information is reported in conjunction with the reporting of your distributions on Form 1099-DIV.

Of the ordinary income distributions made by the Fund during the year ended October 31, 2023, 74.83% qualify for the dividend received deduction available to corporate shareholders.

For the year ended October 31, 2023, the amount of long-term capital gains designated by the Fund was $556,681,751.

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Report of Independent Registered Public Accounting Firm

TO THE BOARD OF TRUSTEES OF FEDERATED HERMES EQUITY FUNDS AND SHAREHOLDERS OF FEDERATED HERMES STRATEGIC VALUE DIVIDEND FUND:

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities of Federated Hermes Strategic Value Dividend Fund (the “Fund”) (one of the portfolios constituting Federated Hermes Equity Funds (the “Trust”)), including the portfolio of investments, as of October 31, 2023, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the portfolios constituting Federated Hermes Equity Funds) at October 31, 2023, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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We conducted our audits in accordance with standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2023, by correspondence with the custodian, brokers, and others; when replies were not received from brokers or others, we performed other auditing procedures. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

We have served as the auditor of one or more Federated Hermes investment companies since 1979.

Boston, Massachusetts
December 22, 2023

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Shareholder Expense Example (unaudited)

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase or redemption payments; and (2) ongoing costs, including management fees and to the extent applicable, distribution (12b-1) fees and/or other service fees and other Fund expenses. This Example is intended to help you to understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. It is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from May 1, 2023 to October 31, 2023.

ACTUAL EXPENSES

The first section of the table below provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you incurred over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses attributable to your investment during this period.

HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES

The second section of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. Thus, you should not use the hypothetical account values and expenses to estimate the actual ending account balance or your expenses for the period. Rather, these figures are required to be provided to enable you to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

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Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase or redemption payments. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. 

	Beginning Account Value 5/1/2023	Ending Account Value 10/31/2023	Expenses Paid During Period1
Actual:
Class A Shares	$1,000.00	$894.20	$5.01
Class C Shares	$1,000.00	$889.30	$8.67
Institutional Shares	$1,000.00	$894.30	$3.82
Class R6 Shares	$1,000.00	$894.40	$3.72
Hypothetical (assuming a 5% return before expenses):
Class A Shares	$1,000.00	$1,019.91	$5.35
Class C Shares	$1,000.00	$1,016.03	$9.25
Institutional Shares	$1,000.00	$1,021.17	$4.08
Class R6 Shares	$1,000.00	$1,021.27	$3.97

 

1 Expenses are equal to the Fund’s annualized net expense ratios, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half-year period). The annualized net expense ratios are as follows:

 

Class A Shares	1.05%
Class C Shares	1.82%
Institutional Shares	0.80%
Class R6 Shares	0.78%

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Board of Trustees and Trust Officers

The Board of Trustees is responsible for managing the Trust’s business affairs and for exercising all the Trust’s powers except those reserved for the shareholders. The following tables give information about each Trustee and the senior officers of the Fund. Where required, the tables separately list Trustees who are “interested persons” of the Fund (i.e., “Interested” Trustees) and those who are not (i.e., “Independent” Trustees). Unless otherwise noted, the address of each person listed is 1001 Liberty Avenue, Pittsburgh, PA 15222-3779. The address of all Independent Trustees listed is 4000 Ericsson Drive, Warrendale, PA 15086-7561; Attention: Mutual Fund Board. As of December 31, 2022, the Trust comprised 8 portfolio(s), and the Federated Hermes Fund Family consisted of 33 investment companies (comprising 102 portfolios). Unless otherwise noted, each Officer is elected annually. Unless otherwise noted, each Trustee oversees all portfolios in the Federated Hermes Fund Family and serves for an indefinite term. The Fund’s Statement of Additional Information includes additional information about Trust Trustees and is available, without charge and upon request, by calling 1-800-341-7400, Option #4.

Interested TRUSTEES Background 

Name Birth Date Positions Held with Trust Date Service Began

Principal Occupation(s) for Past Five Years, Other Directorships Held and Previous Position(s)

J. Christopher Donahue* Birth Date: April 11, 1949 President and Trustee Indefinite Term Began serving: September 1999

Principal Occupations: Principal Executive Officer and President of certain of the Funds in the Federated Hermes Fund Family; Director or Trustee of the Funds in the Federated Hermes Fund Family; President, Chief Executive Officer and Director, Federated Hermes, Inc.; Chairman and Trustee, Federated Investment Management Company; Trustee, Federated Investment Counseling; Chairman and Director, Federated Global Investment Management Corp.; Chairman and Trustee, Federated Equity Management Company of Pennsylvania; Trustee, Federated Shareholder Services Company; Director, Federated Services Company. Previous Positions: President, Federated Investment Counseling; President and Chief Executive Officer, Federated Investment Management Company, Federated Global Investment Management Corp. and Passport Research, Ltd; Chairman, Passport Research, Ltd.

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Name Birth Date Positions Held with Trust Date Service Began

Principal Occupation(s) for Past Five Years, Other Directorships Held and Previous Position(s)

John B. Fisher* Birth Date: May 16, 1956 Trustee Indefinite Term Began serving: May 2016

Principal Occupations: Principal Executive Officer and President of certain of the Funds in the Federated Hermes Fund Family; Director or Trustee of certain of the Funds in the Federated Hermes Fund Family; Director and Vice President, Federated Hermes, Inc.; President, Director/Trustee and CEO, Federated Advisory Services Company, Federated Equity Management Company of Pennsylvania, Federated Global Investment Management Corp., Federated Investment Counseling, Federated Investment Management Company, and Federated MDTA LLC; Director, Federated Investors Trust Company. Previous Positions: President and Director of the Institutional Sales Division of Federated Securities Corp.; President and CEO of Passport Research, Ltd.; Director and President, Technology, Federated Services Company.

*

Reasons for “interested” status: J. Christopher Donahue and John B. Fisher are interested due to their beneficial ownership of shares of Federated Hermes, Inc. and due to positions they hold with Federated Hermes, Inc. and its subsidiaries.

INDEPENDENT TRUSTEES Background 

Name Birth Date Positions Held with Trust Date Service Began

Principal Occupation(s) for Past Five Years, Other Directorships Held, Previous Position(s) and Qualifications

John T. Collins Birth Date: January 24, 1947 Trustee Indefinite Term Began serving: October 2013

Principal Occupations: Director or Trustee, and Chair of the Board of Directors or Trustees, of the Federated Hermes Fund Family; formerly, Chairman and CEO, The Collins Group, Inc. (a private equity firm) (Retired). Other Directorships Held: Director, KLX Energy Services Holdings, Inc. (oilfield services); former Director of KLX Corp. (aerospace). Qualifications: Mr. Collins has served in several business and financial management roles and directorship positions throughout his career. Mr. Collins previously served as Chairman and CEO of The Collins Group, Inc. (a private equity firm) and as a Director of KLX Corp. Mr. Collins serves as Chairman Emeriti, Bentley University. Mr. Collins previously served as Director and Audit Committee Member, Bank of America Corp.; Director, FleetBoston Financial Corp.; and Director, Beth Israel Deaconess Medical Center (Harvard University Affiliate Hospital).

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Name Birth Date Positions Held with Trust Date Service Began	Principal Occupation(s) for Past Five Years, Other Directorships Held, Previous Position(s) and Qualifications
G. Thomas Hough Birth Date: February 28, 1955 Trustee Indefinite Term Began serving: August 2015	Principal Occupations: Director or Trustee, Chair of the Audit Committee of the Federated Hermes Fund Family; formerly, Vice Chair, Ernst & Young LLP (public accounting firm) (Retired). Other Directorships Held: Director, Chair of the Audit Committee, Equifax, Inc.; Lead Director, Member of the Audit and Nominating and Corporate Governance Committees, Haverty Furniture Companies, Inc.; formerly, Director, Member of Governance and Compensation Committees, Publix Super Markets, Inc. Qualifications: Mr. Hough has served in accounting, business management and directorship positions throughout his career. Mr. Hough most recently held the position of Americas Vice Chair of Assurance with Ernst & Young LLP (public accounting firm). Mr. Hough serves on the President’s Cabinet and Business School Board of Visitors for the University of Alabama. Mr. Hough previously served on the Business School Board of Visitors for Wake Forest University, and he previously served as an Executive Committee member of the United States Golf Association.
Maureen Lally-Green Birth Date: July 5, 1949 Trustee Indefinite Term Began serving: August 2009	Principal Occupations: Director or Trustee of the Federated Hermes Fund Family; Adjunct Professor Emerita of Law, Duquesne University School of Law; formerly, Dean of the Duquesne University School of Law and Professor of Law and Interim Dean of the Duquesne University School of Law; formerly, Associate General Secretary and Director, Office of Church Relations, Diocese of Pittsburgh. Other Directorships Held: Director, CNX Resources Corporation (natural gas). Qualifications: Judge Lally-Green has served in various legal and business roles and directorship positions throughout her career. Judge Lally-Green previously held the position of Dean of the School of Law of Duquesne University (as well as Interim Dean). Judge Lally-Green previously served as Associate General Secretary of the Diocese of Pittsburgh, a member of the Superior Court of Pennsylvania and as a Professor of Law, Duquesne University School of Law. Judge Lally- Green was appointed by the Supreme Court of Pennsylvania to serve on the Supreme Court’s Board of Continuing Judicial Education and the Supreme Court’s Appellate Court Procedural Rules Committee. Judge Lally-Green also currently holds the positions on not for profit or for profit boards of directors as follows: Director and Chair, UPMC Mercy Hospital; Regent, Saint Vincent Seminary; Member, Pennsylvania State Board of Education (public); Director, Catholic Charities, Pittsburgh; and Director CNX Resources Corporation (natural gas). Judge Lally-Green has held the positions of: Director, Auberle; Director, Epilepsy Foundation of Western and Central Pennsylvania; Director, Ireland Institute of Pittsburgh; Director, Saint Thomas More Society; Director and Chair, Catholic High Schools of the Diocese of Pittsburgh, Inc.; Director, Pennsylvania Bar Institute; Director, St. Vincent College; Director and Chair, North Catholic High School, Inc.; Director and Vice Chair, Our Campaign for the Church Alive!, Inc.; and Director and Vice Chair, Saint Francis University.

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Name Birth Date Positions Held with Trust Date Service Began	Principal Occupation(s) for Past Five Years, Other Directorships Held, Previous Position(s) and Qualifications
Thomas M. O’Neill Birth Date: June 14, 1951 Trustee Indefinite Term Began serving: August 2006	Principal Occupations: Director or Trustee of the Federated Hermes Fund Family; Sole Proprietor, Navigator Management Company (investment and strategic consulting). Other Directorships Held: None. Qualifications: Mr. O’Neill has served in several business, mutual fund and financial management roles and directorship positions throughout his career. Mr. O’Neill serves as Director, Medicines for Humanity. Mr. O’Neill previously served as Chief Executive Officer and President, Managing Director and Chief Investment Officer, Fleet Investment Advisors; President and Chief Executive Officer, Aeltus Investment Management, Inc.; General Partner, Hellman, Jordan Management Co., Boston, MA; Chief Investment Officer, The Putnam Companies, Boston, MA; Credit Analyst and Lending Officer, Fleet Bank; Director and Consultant, EZE Castle Software (investment order management software); Director, Midway Pacific (lumber); and Director, The Golisano Children’s Museum of Naples, Florida.
Madelyn A. Reilly Birth Date: February 2, 1956 Trustee Indefinite Term Began serving: November 2020	Principal Occupations: Director or Trustee of the Federated Hermes Fund Family; formerly, Senior Vice President for Legal Affairs, General Counsel and Secretary of Board of Directors, Duquesne University (Retired). Other Directorships Held: None. Qualifications: Ms. Reilly has served in various business and legal management roles throughout her career. Ms. Reilly previously served as Senior Vice President for Legal Affairs, General Counsel and Secretary of Board of Directors and Director of Risk Management and Associate General Counsel, Duquesne University. Prior to her work at Duquesne University, Ms. Reilly served as Assistant General Counsel of Compliance and Enterprise Risk as well as Senior Counsel of Environment, Health and Safety, PPG Industries. Ms. Reilly currently serves as a member of the Board of Directors of UPMC Mercy Hospital.

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Name Birth Date Positions Held with Trust Date Service Began	Principal Occupation(s) for Past Five Years, Other Directorships Held, Previous Position(s) and Qualifications
P. Jerome Richey Birth Date: February 23, 1949 Trustee Indefinite Term Began serving: October 2013	Principal Occupations: Director or Trustee of the Federated Hermes Fund Family; Retired; formerly, Senior Vice Chancellor and Chief Legal Officer, University of Pittsburgh and Executive Vice President and Chief Legal Officer, CONSOL Energy Inc. (now split into two separate publicly traded companies known as CONSOL Energy Inc. and CNX Resources Corp.). Other Directorships Held: None. Qualifications: Mr. Richey has served in several business and legal management roles and directorship positions throughout his career. Mr. Richey most recently held the positions of Senior Vice Chancellor and Chief Legal Officer, University of Pittsburgh. Mr. Richey previously served as Chairman of the Board, Epilepsy Foundation of Western Pennsylvania and Chairman of the Board, World Affairs Council of Pittsburgh. Mr. Richey previously served as Chief Legal Officer and Executive Vice President, CONSOL Energy Inc. and CNX Gas Company; and Board Member, Ethics Counsel and Shareholder, Buchanan Ingersoll & Rooney PC (a law firm).
John S. Walsh Birth Date: November 28, 1957 Trustee Indefinite Term Began serving: January 1999	Principal Occupations: Director or Trustee of the Federated Hermes Fund Family; President and Director, Heat Wagon, Inc. (manufacturer of construction temporary heaters); President and Director, Manufacturers Products, Inc. (distributor of portable construction heaters); President, Portable Heater Parts, a division of Manufacturers Products, Inc. Other Directorships Held: None. Qualifications: Mr. Walsh has served in several business management roles and directorship positions throughout his career. Mr. Walsh previously served as Vice President, Walsh & Kelly, Inc. (paving contractors).

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OFFICERS 

Name Birth Date Address Positions Held with Trust Date Service Began	Principal Occupation(s) for Past Five Years and Previous Position(s)
Lori A. Hensler Birth Date: January 6, 1967 TREASURER Officer since: April 2013	Principal Occupations: Principal Financial Officer and Treasurer of the Federated Hermes Fund Family; Senior Vice President, Federated Administrative Services; Financial and Operations Principal for Federated Securities Corp.; and Assistant Treasurer, Federated Investors Trust Company. Ms. Hensler has received the Certified Public Accountant designation. Previous Positions: Controller of Federated Hermes, Inc.; Senior Vice President and Assistant Treasurer, Federated Investors Management Company; Treasurer, Federated Investors Trust Company; Assistant Treasurer, Federated Administrative Services, Federated Administrative Services, Inc., Federated Securities Corp., Edgewood Services, Inc., Federated Advisory Services Company, Federated Equity Management Company of Pennsylvania, Federated Global Investment Management Corp., Federated Investment Counseling, Federated Investment Management Company, Passport Research, Ltd., and Federated MDTA, LLC; Financial and Operations Principal for Federated Securities Corp., Edgewood Services, Inc. and Southpointe Distribution Services, Inc.
Peter J. Germain Birth Date: September 3, 1959 CHIEF LEGAL OFFICER, SECRETARY and EXECUTIVE VICE PRESIDENT Officer since: January 2005	Principal Occupations: Mr. Germain is Chief Legal Officer, Secretary and Executive Vice President of the Federated Hermes Fund Family. He is General Counsel, Chief Legal Officer, Secretary and Executive Vice President, Federated Hermes, Inc.; Trustee and Senior Vice President, Federated Investors Management Company; Trustee and President, Federated Administrative Services; Director and President, Federated Administrative Services, Inc.; Director and Vice President, Federated Securities Corp.; Director and Secretary, Federated Private Asset Management, Inc.; Secretary, Federated Shareholder Services Company; and Secretary, Retirement Plan Service Company of America. Mr. Germain joined Federated Hermes, Inc. in 1984 and is a member of the Pennsylvania Bar Association. Previous Positions: Deputy General Counsel, Special Counsel, Managing Director of Mutual Fund Services, Federated Hermes, Inc.; Senior Vice President, Federated Services Company; and Senior Corporate Counsel, Federated Hermes, Inc.
Stephen Van Meter Birth Date: June 5, 1975 CHIEF COMPLIANCE OFFICER AND SENIOR VICE PRESIDENT Officer since: July 2015	Principal Occupations: Senior Vice President and Chief Compliance Officer of the Federated Hermes Fund Family; Vice President and Chief Compliance Officer of Federated Hermes, Inc. and Chief Compliance Officer of certain of its subsidiaries. Mr. Van Meter joined Federated Hermes, Inc. in October 2011. He holds FINRA licenses under Series 3, 7, 24 and 66. Previous Positions: Mr. Van Meter previously held the position of Compliance Operating Officer, Federated Hermes, Inc. Prior to joining Federated Hermes, Inc., Mr. Van Meter served at the United States Securities and Exchange Commission in the positions of Senior Counsel, Office of Chief Counsel, Division of Investment Management and Senior Counsel, Division of Enforcement.

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Name Birth Date Address Positions Held with Trust Date Service Began

Principal Occupation(s) for Past Five Years and Previous Position(s)

Stephen F. Auth Birth Date: September 13, 1956 101 Park Avenue 41st Floor New York, NY 10178 CHIEF INVESTMENT OFFICER Officer since: November 2002

Principal Occupations: Stephen F. Auth is Chief Investment Officer of various Funds in the Federated Hermes Fund Family; Executive Vice President, Federated Investment Counseling, Federated Global Investment Management Corp. and Federated Equity Management Company of Pennsylvania. Previous Positions: Executive Vice President, Federated Investment Management Company and Passport Research, Ltd. (investment advisory subsidiary of Federated); Senior Vice President, Global Portfolio Management Services Division; Senior Vice President, Federated Investment Management Company and Passport Research, Ltd.; Senior Managing Director and Portfolio Manager, Prudential Investments.

 

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Evaluation and Approval of Advisory Contract–May 2023

Federated Hermes Strategic Value Dividend Fund (the “Fund”)

At its meetings in May 2023 (the “May Meetings”), the Fund’s Board of Trustees (the “Board”), including those Trustees who are not “interested persons” of the Fund, as defined in the Investment Company Act of 1940 (the “Independent Trustees”), reviewed and unanimously approved the continuation of the investment advisory contract between the Fund and Federated Equity Management Company of Pennsylvania (the “Adviser”) (the “Contract”) for an additional one-year term. The Board’s determination to approve the continuation of the Contract reflects the exercise of its business judgment after considering all of the information and factors believed to be relevant and appropriate on whether to approve the continuation of the existing arrangement. The information, factors and conclusions that formed the basis for the Board’s approval are summarized below.

Information Received and Review Process

At the request of the Independent Trustees, the Fund’s Chief Compliance Officer (the “CCO”) furnished to the Board in advance of its May Meetings an independent written evaluation of the Fund’s management fee (the “CCO Fee Evaluation Report”). The Board considered the CCO Fee Evaluation Report, along with other information, in evaluating the reasonableness of the Fund’s management fee and in determining to approve the continuation of the Contract. The CCO, in preparing the CCO Fee Evaluation Report, has the authority to retain consultants, experts or staff as reasonably necessary to assist in the performance of his duties, reports directly to the Board, and can be terminated only with the approval of a majority of the Independent Trustees. At the request of the Independent Trustees, the CCO Fee Evaluation Report followed the same general approach and covered the same topics as that of the report that had previously been delivered by the CCO in his capacity as “Senior Officer” prior to the elimination of the Senior Officer position in December 2017.

In addition to the extensive materials that comprise and accompany the CCO Fee Evaluation Report, the Board considered information specifically prepared in connection with the approval of the continuation of the Contract that was presented at the May Meetings. In this regard, in the months preceding the May Meetings, the Board requested and reviewed written responses and supporting materials prepared by the Adviser and its affiliates (collectively, “Federated Hermes”) in response to requests posed to Federated Hermes by independent legal counsel on behalf of the Independent Trustees encompassing a wide variety of topics, including those summarized below. The Board also considered such additional matters as the Independent Trustees deemed

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reasonably necessary to evaluate the Contract, which included detailed information about the Fund and Federated Hermes furnished to the Board at its meetings throughout the year and in between regularly scheduled meetings on particular matters as the need arose.

The Board’s consideration of the Contract included review of materials and information covering the following matters, among others: the nature, quality and extent of the advisory and other services provided to the Fund by Federated Hermes; Federated Hermes’ business and operations; the Adviser’s investment philosophy, personnel and processes; the Fund’s investment objectives and strategies; the Fund’s short-term and long-term performance (in absolute terms, both on a gross basis and net of expenses, and relative to the Fund’s particular investment program and a group of its peer funds and/or its benchmark, as appropriate); the Fund’s fees and expenses, including the advisory fee and the overall expense structure of the Fund (both in absolute terms and relative to a group of its peer funds), with due regard for contractual or voluntary expense limitations (if any); the financial condition of Federated Hermes; the Adviser’s profitability with respect to managing the Fund; distribution and sales activity for the Fund; and the use and allocation of brokerage commissions derived from trading the Fund’s portfolio securities (if any).

The Board also considered judicial decisions concerning allegedly excessive investment advisory fees charged to other registered funds in evaluating the Contract. Using these judicial decisions as a guide, the Board observed that the following factors may be relevant to an adviser’s fiduciary duty with respect to its receipt of compensation from a fund: (1) the nature and quality of the services provided by the adviser to the fund and its shareholders, including the performance of the fund, its benchmark and comparable funds; (2) the adviser’s cost of providing the services and the profitability to the adviser of providing advisory services to the fund; (3) the extent to which the adviser may realize “economies of scale” as the fund grows larger and, if such economies of scale exist, whether they have been appropriately shared with the fund and its shareholders or the family of funds; (4) any “fall-out” benefits that accrue to the adviser because of its relationship with the fund, including research services received from brokers that execute fund trades and any fees paid to affiliates of the adviser for services rendered to the fund; (5) comparative fee and expense structures, including a comparison of management fees paid to the adviser with those paid by similar funds managed by the same adviser or other advisers as well as management fees charged to institutional and other advisory clients of the same adviser for what might be viewed as like services; and (6) the extent of care, conscientiousness and independence with which the fund’s board members perform their duties and their expertise, including whether they are fully informed about all facts the board deems relevant to its consideration of the adviser’s services and fees. The Board noted that the Securities and Exchange Commission (“SEC”) disclosure requirements

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regarding the basis for a fund board’s approval of the fund’s investment advisory contract generally align with the factors listed above. The Board was guided by these factors in its evaluation of the Contract to the extent it considered them to be appropriate and relevant, as discussed further below. The Board considered and weighed these factors in light of its substantial accumulated experience in governing the Fund and working with Federated Hermes on matters relating to the oversight of the other funds advised by Federated Hermes (each, a “Federated Hermes Fund” and, collectively, the “Federated Hermes Funds”).

In addition, the Board considered the preferences and expectations of Fund shareholders and the potential disruptions of the Fund’s operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew the Contract. In particular, the Board recognized that many shareholders likely have invested in the Fund based on the strength of Federated Hermes’ industry standing and reputation and with the expectation that Federated Hermes will have a continuing role in providing advisory services to the Fund. Thus, the Board observed that there are a range of investment options available to the Fund’s shareholders and such shareholders in the marketplace, having had the opportunity to consider other investment options, have effectively selected Federated Hermes by virtue of investing in the Fund.

In determining to approve the continuation of the Contract, the members of the Board reviewed and evaluated information and factors they believed to be relevant and appropriate through the exercise of their reasonable business judgment. While individual members of the Board may have weighed certain factors differently, the Board’s determination to approve the continuation of the Contract was based on a comprehensive consideration of all information provided to the Board throughout the year and specifically with respect to the continuation of the Contract. The Board recognized that its evaluation process is evolutionary and that the factors considered and emphasis placed on relevant factors may change in recognition of changing circumstances in the registered fund marketplace. The Independent Trustees were assisted throughout the evaluation process by independent legal counsel. In connection with their deliberations at the May Meetings, the Independent Trustees met separately in executive session with their independent legal counsel and without management present to review the relevant materials and consider their responsibilities under applicable laws. In addition, senior management representatives of Federated Hermes also met with the Independent Trustees and their independent legal counsel to discuss the materials and presentations furnished to the Board at the May Meetings. The Board considered the approval of the Contract for the Fund as part of its consideration of agreements for funds across the family of Federated Hermes Funds, but its approvals were made on a fund-by-fund basis.

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Nature, Extent and Quality of Services

The Board considered the nature, extent and quality of the services provided to the Fund by the Adviser and the resources of Federated Hermes dedicated to the Fund. In this regard, the Board evaluated, among other things, the terms of the Contract and the range of services provided to the Fund by Federated Hermes. The Board considered the Adviser’s personnel, investment philosophy and process, investment research capabilities and resources, trade operations capabilities, experience and performance track record. The Board reviewed the qualifications, backgrounds and responsibilities of the portfolio management team primarily responsible for the day-to-day management of the Fund and Federated Hermes’ ability and experience in attracting and retaining qualified personnel to service the Fund. The Board considered the trading operations by the Advisers, including the execution of portfolio transactions and the selection of brokers for those transactions. The Board also considered the Adviser’s ability to deliver competitive investment performance for the Fund when compared to the Fund’s Performance Peer Group (as defined below), which was deemed by the Board to be a useful indicator of how the Adviser is executing the Fund’s investment program.

In addition, the Board considered the financial resources and overall reputation of Federated Hermes and its willingness to consider and make investments in personnel, infrastructure, technology, cybersecurity, business continuity planning and operational enhancements that are designed to benefit the Federated Hermes Funds. The Board noted that the significant acquisition of Hermes Fund Managers Limited by Federated Hermes has deepened Federated Hermes’ investment management expertise and capabilities and its access to analytical resources related to environmental, social and governance (“ESG”) factors and issuer engagement on ESG matters. The Board considered Federated Hermes’ oversight of the securities lending program for the Federated Hermes Funds that engage in securities lending and noted the income earned by the Federated Hermes Funds that participate in such program. In addition, the Board considered the quality of Federated Hermes’ communications with the Board and responsiveness to Board inquiries and requests made from time to time with respect to the Federated Hermes Funds. The Board also considered that Federated Hermes is responsible for providing the Federated Hermes Funds’ officers.

The Board received and evaluated information regarding Federated Hermes’ regulatory and compliance environment. The Board considered Federated Hermes’ compliance program and compliance history and reports from the CCO about Federated Hermes’ compliance with applicable laws and regulations, including responses to regulatory developments and any compliance or other issues raised by regulatory agencies. The Board also noted Federated Hermes’ support of the Federated Hermes Funds’ compliance control structure and the compliance-related resources devoted by Federated Hermes in support of the Fund’s obligations pursuant to Rule 38a-1 under the

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Investment Company Act of 1940, including Federated Hermes’ commitment to respond to rulemaking and other regulatory initiatives of the SEC. The Board considered Federated Hermes’ approach to internal audits and risk management with respect to the Federated Hermes Funds and its day-to-day oversight of the Federated Hermes Funds’ compliance with their investment objectives and policies as well as with applicable laws and regulations, noting that regulatory and other developments had over time led, and continue to lead, to an increase in the scope of Federated Hermes’ oversight in this regard, including in connection with the implementation of new rules on derivatives risk management and fair valuation.

The Board also considered the implementation of Federated Hermes’ business continuity plans. In addition, the Board noted Federated Hermes’ commitment to maintaining high quality systems and expending substantial resources to prepare for and respond to ongoing changes due to the market, regulatory and control environments in which the Fund and its service providers operate.

The Board considered Federated Hermes’ efforts to provide shareholders in the Federated Hermes Funds with a comprehensive array of funds with different investment objectives, policies and strategies. The Board considered the expenses that Federated Hermes had incurred, as well as the entrepreneurial and other risks assumed by Federated Hermes, in sponsoring and providing on-going services to new funds to expand these opportunities for shareholders. The Board noted the benefits to shareholders of being part of the family of Federated Hermes Funds, which include the general right to exchange investments between the same class of shares without the incurrence of additional sales charges.

Based on these considerations, the Board concluded that it was satisfied with the nature, extent and quality of the services provided by the Adviser to the Fund.

Fund Investment Performance

The Board considered the investment performance of the Fund. In evaluating the Fund’s investment performance, the Board considered performance results in light of the Fund’s investment objective, strategies and risks. The Board considered detailed investment reports on, and the Adviser’s analysis of, the Fund’s performance over different time periods that were provided to the Board throughout the year and in connection with the May Meetings. These reports included, among other items, information on the Fund’s gross and net returns, the Fund’s investment performance compared to one or more relevant categories or groups of peer funds and the Fund’s benchmark index, performance attribution information and commentary on the effect of market conditions. The Board considered that, in its evaluation of investment performance at meetings throughout the year, it focused particular attention on information indicating less favorable performance of certain

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Federated Hermes Funds for specific time periods and discussed with Federated Hermes the reasons for such performance as well as any specific actions Federated Hermes had taken, or had agreed to take, to seek to enhance Fund investment performance and the results of those actions.

The Board also reviewed comparative information regarding the performance of other registered funds in the category of peer funds selected by Morningstar, Inc. (the “Morningstar”), an independent fund ranking organization (the “Performance Peer Group”). The Board noted the CCO’s view that comparisons to fund peer groups may be helpful, though not conclusive, in evaluating the performance of the Adviser in managing the Fund. The Board considered in the CCO’s view that, in evaluating such comparisons, in some cases there may be differences in the funds’ objectives or investment management techniques, or the costs to implement the funds, even within the same Performance Peer Group.

For the periods ended December 31, 2022, the Fund’s performance fell below the Performance Peer Group median for the three-year and five-year periods, and was above the Performance Peer Group median for the one-year period. The Board discussed the Fund’s performance with the Adviser and recognized the efforts being taken by the Adviser in the context of other factors considered relevant by the Board. The Board noted that, effective December 31, 2021, the Fund changed its benchmark from the Dow Jones U.S. Select Dividend Index to the S&P 500 Index. Although the Board considered information comparing the Fund’s performance to that of the Performance Peer Group, the Board concluded that, in light of the recent changes to the Fund, additional time is required to evaluate the Adviser’s performance in managing the Fund under its new mandate.

Based on these considerations, the Board concluded that it had continued confidence in the Adviser’s overall capabilities to manage the Fund.

Fund Expenses

The Board considered the advisory fee and overall expense structure of the Fund and the comparative fee and expense information that had been provided in connection with the May Meetings. In this regard, the Board was presented with, and considered, information regarding the contractual advisory fee rates, net advisory fee rates, total expense ratios and each element of the Fund’s total expense ratio (i.e., gross and net advisory fees, administrative fees, custody fees, portfolio accounting fees and transfer agency fees) relative to an appropriate group of peer funds compiled by Federated Hermes from the category of peer funds selected by Morningstar (the “Expense Peer Group”). The Board received a description of the methodology used to select the Expense Peer Group from the overall Morningstar category. The Board also reviewed comparative information regarding the fees and expenses of the broader group of funds in the overall Morningstar category.

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While mindful that courts have cautioned against giving too much weight to comparative information concerning fees charged to funds by other advisers, the use of comparisons between the Fund and its Expense Peer Group assisted the Board in its evaluation of the Fund’s fees and expenses. The Board focused on comparisons with other registered funds with comparable investment programs more heavily than non-registered fund products or services because such comparisons are believed to be more relevant. The Board considered that other registered funds are the products most like the Fund, in that they are readily available to Fund shareholders as alternative investment vehicles, and they are the type of investment vehicle, in fact, chosen and maintained by the Fund’s shareholders. The Board noted that the range of such other registered funds’ fees and expenses, therefore, appears to be a relevant indicator of what investors have found to be reasonable in the marketplace in which the Fund competes.

The Board reviewed the contractual advisory fee rate, net advisory fee rate and other expenses of the Fund and noted the position of the Fund’s fee rates relative to its Expense Peer Group. In this regard, the Board noted that the contractual advisory fee rate was above the median of the Expense Peer Group, but the Board noted the applicable waivers and reimbursements, and that the overall expense structure of the Fund remained competitive in the context of other factors considered by the Board.

The Board also received and considered information about the nature and extent of services offered and fees charged by Federated Hermes to other types of clients with investment strategies similar to those of the Federated Hermes Funds, including non-registered fund clients (such as institutional separate accounts) and third-party unaffiliated registered funds for which the Adviser or its affiliates serve as sub-adviser. The Board noted the CCO’s conclusion that non-registered fund clients are inherently different products due to the following differences, among others: (i) different types of targeted investors; (ii) different applicable laws and regulations; (iii) different legal structures; (iv) different average account sizes and portfolio management techniques made necessary by different cash flows and different associated costs; (v) the time spent by portfolio managers and their teams (among other personnel across various departments, including legal, compliance and risk management) in reviewing securities pricing and fund liquidity; (vi) different administrative responsibilities; (vii) different degrees of risk associated with management; and (viii) a variety of different costs. The Board also considered information regarding the differences in the nature of the services required for Federated Hermes to manage its proprietary registered fund business versus managing a discrete pool of assets as a sub-adviser to another institution’s registered fund, noting the CCO’s view that Federated Hermes generally performs significant additional services and assumes substantially greater risks in managing the Fund and other Federated Hermes Funds than in its role as sub-adviser to an

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unaffiliated third-party registered fund. The Board noted that the CCO did not consider the fees for providing advisory services to other types of clients to be determinative in judging the appropriateness of the Federated Hermes Funds’ advisory fees.

Based on these considerations, the Board concluded that the fees and total operating expenses of the Fund, in conjunction with other matters considered, are reasonable in light of the services provided.

Profitability

The Board received and considered profitability information furnished by Federated Hermes, as requested by the CCO. Such profitability information included revenues reported on a fund-by-fund basis and estimates of the allocation of expenses made on a fund-by-fund basis, using allocation methodologies specified by the CCO and described to the Board. The Board considered the CCO’s view that, while these cost allocation reports apply consistent allocation processes, the inherent difficulties in allocating costs on a fund-by-fund basis continues to cause the CCO to question the precision of the process and to conclude that such reports may be unreliable because a single change in an allocation estimate may dramatically alter the resulting estimate of cost and/or profitability of a Federated Hermes Fund and may produce unintended consequences. In addition, the Board considered the CCO’s view that the allocation methodologies used by Federated Hermes in estimating profitability for purposes of reporting to the Board in connection with the continuation of the Contract are consistent with the methodologies previously reviewed by an independent consultant. The Board noted that the independent consultant had previously conducted a review of the allocation methodologies and reported to the Board that, although there is no single best method to allocate expenses, the methodologies used by Federated Hermes are reasonable. The Board considered the CCO’s view that the estimated profitability to the Adviser from its relationship with the Fund was not unreasonable in relation to the services provided.

The Board also reviewed information compiled by Federated Hermes comparing its profitability information to other publicly held fund management companies, including information regarding profitability trends over time. The Board recognized that profitability comparisons among fund management companies are difficult because of the variation in the type of comparative information that is publicly available, and the profitability of any fund management company is affected by numerous factors. The Board considered the CCO’s conclusion that, based on such profitability information, Federated Hermes’ profit margins did not appear to be excessive. The Board also considered the CCO’s view that Federated Hermes appeared financially sound, with the resources necessary to fulfill its obligations under its contracts with the Federated Hermes Funds.

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Economies of Scale

The Board received and considered information about the notion of possible realization of “economies of scale” as a fund grows larger, the difficulties of determining economies of scale at an individual fund level, and the extent to which potential scale benefits are shared with shareholders. In this regard, the Board considered that Federated Hermes has made significant and long-term investments in areas that support all of the Federated Hermes Funds, such as: portfolio management, investment research and trading operations; shareholder services; compliance; business continuity, cybersecurity and information security programs; internal audit and risk management functions; and technology and use of data. The Board noted that Federated Hermes’ investments in these areas are extensive and are designed to provide enhanced services to the Federated Hermes Funds and their shareholders. The Board considered that the benefits of these investments are likely to be shared with the family of Federated Hermes Funds as a whole. In addition, the Board considered that fee waivers and expense reimbursements are another means for potential economies of scale to be shared with shareholders and can provide protection from an increase in expenses if a Federated Hermes Fund’s assets decline. The Board considered that, in order for the Federated Hermes Funds to remain competitive in the marketplace, Federated Hermes has frequently waived fees and/or reimbursed expenses for the Federated Hermes Funds and has disclosed to shareholders and/or reported to the Board its intention to do so (or continue to do so) in the future. The Board also considered that Federated Hermes has been active in managing expenses of the Federated Hermes Funds in recent years, which has resulted in benefits being realized by shareholders.

The Board also received and considered information on adviser-paid fees (commonly referred to as “revenue sharing” payments) that was provided to the Board throughout the year and in connection with the May Meetings. The Board considered that Federated Hermes and the CCO believe that this information is relevant to considering whether Federated Hermes had an incentive to either not apply breakpoints, or to apply breakpoints at higher levels, but should not be considered when evaluating the reasonableness of advisory fees. The Board also noted the absence of any applicable regulatory or industry guidelines economies of scale, which is compounded by the lack of any uniform methodology or pattern with respect to structuring fund advisory fees with breakpoints that serve to reduce the fees as a fund attains a certain size.

Other Benefits

The Board considered information regarding the compensation and other ancillary (or “fall-out”) benefits that Federated Hermes derived from its relationships with the Federated Hermes Funds. The Board noted that, in addition to receiving advisory fees under the Federated Hermes Funds’ investment advisory contracts, Federated Hermes’ affiliates also receive fees for providing other services to the Federated Hermes Funds under separate

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service contracts including for serving as the Federated Hermes Funds’ administrator and distributor. In this regard, the Board considered that certain of Federated Hermes’ affiliates provide distribution and shareholder services to the Federated Hermes Funds, for which they may be compensated through distribution and servicing fees paid pursuant to Rule 12b-1 plans or otherwise. The Board also received and considered information detailing the benefits, if any, that Federated Hermes may derive from its receipt of research services from brokers who execute portfolio trades for the Federated Hermes Funds.

Conclusions

The Board considered: (i) the CCO’s conclusion that his observations and the information accompanying the CCO Fee Evaluation Report show that the management fee for the Fund is reasonable; and (ii) the CCO’s recommendation that the Board approve the management fee. The Board noted that, under these circumstances, no changes were recommended to, and no objection was raised to the continuation of, the Contract by the CCO. The CCO also recognized that the Board’s evaluation of the Federated Hermes Funds’ advisory and sub-advisory arrangements is a continuing and ongoing process that is informed by the information that the Board requests and receives from management throughout the course of the year and, in this regard, the CCO noted certain items for future reporting to the Board or further consideration by management as the Board continues its ongoing oversight of the Federated Hermes Funds.

On the basis of the information and factors summarized above, among other information and factors deemed relevant by the Board, and the evaluation thereof, the Board, including the Independent Trustees, unanimously voted to approve the continuation of the Contract. The Board based its determination to approve the Contract on the totality of the circumstances and relevant factors and with a view of past and future long-term considerations. Not all of the factors and considerations identified above were necessarily deemed to be relevant to the Fund, nor did the Board consider any one of them to be determinative.

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Liquidity Risk Management Program–
Annual Evaluation of Adequacy and Effectiveness

In accordance with Rule 22e-4 under the Investment Company Act of 1940, as amended (the “Liquidity Rule”), Federated Hermes Equity Funds (the “Trust”) has adopted and implemented a liquidity risk management program (the “Program”) for Federated Hermes Strategic Value Dividend Fund (the “Fund” and, collectively with the other non-money market open-end funds advised by Federated Hermes, the “Federated Hermes Funds”). The Program seeks to assess and manage the Fund’s liquidity risk. “Liquidity risk” is defined under the Liquidity Rule as the risk that the Fund is unable to meet redemption requests without significantly diluting remaining investors’ interests in the Fund. The Board of Trustees of the Trust (the “Board”) has approved the designation of each Federated Hermes Fund’s investment adviser as the administrator for the Program (the “Administrator”) with respect to that Fund. The Administrator, in turn, has delegated day-to-day responsibility for the administration of the Program to multiple Liquidity Risk Management Committees, which are comprised of representatives from certain divisions within Federated Hermes.

The Program is comprised of various components designed to support the assessment and/or management of liquidity risk, including: (1) the periodic assessment (no less frequently than annually) of certain factors that influence the Fund’s liquidity risk; (2) the periodic classification (no less frequently than monthly) of the Fund’s investments into one of four liquidity categories that reflect an estimate of their liquidity under current market conditions; (3) a 15% limit on the acquisition of “illiquid investments” (as defined under the Liquidity Rule); (4) to the extent a Fund does not invest primarily in “highly liquid investments” (as defined under the Liquidity Rule), the determination of a minimum percentage of the Fund’s assets that generally will be invested in highly liquid investments (an “HLIM”); (5) if a Fund has established an HLIM, the periodic review (no less frequently than annually) of the HLIM and the adoption of policies and procedures for responding to a shortfall of the Fund’s highly liquid investments below its HLIM; and (6) periodic reporting to the Board.

At its meetings in May 2023, the Board received and reviewed a written report (the “Report”) from the Federated Hermes Funds’ Chief Compliance Officer and Chief Risk Officer, on behalf of the Administrator, concerning the operation of the Program for the period from April 1, 2022 through March 31, 2023 (the “Period”). The Report addressed the operation of the Program and assessed the adequacy and effectiveness of its implementation, including, where applicable, the operation of any HLIM established for a Federated Hermes Fund. There were no material changes to the Program during the Period. The Report summarized the operation of the Program and

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the information and factors considered by the Administrator in assessing whether the Program has been adequately and effectively implemented with respect to the Federated Hermes Funds. Such information and factors included, among other things:

◾ confirmation that it was not necessary for the Fund to utilize, and the Fund did not utilize, any alternative funding sources that were available to the Federated Hermes Funds during the Period, such as the Federated Hermes Funds’ interfund lending facility, redemptions in-kind, reverse repurchase agreement transactions, redemptions delayed beyond the normal T+1 settlement but within seven days of the redemption request, and committed lines of credit;

◾ the periodic classifications of the Fund’s investments into one of four liquidity categories and the methodologies and inputs used to classify the investments, including the Fund’s reasonably anticipated trade size;

◾ the analysis received from a third-party liquidity assessment vendor that is taken into account in the process of determining the liquidity classifications of the Fund’s investments, and the results of the Administrator’s evaluation of the services performed by the vendor in support of this process, including the Administrator’s view that the methodologies utilized by the vendor continue to be appropriate;

◾ the fact that the Fund invested primarily in highly liquid investments during the Period and, therefore, was not required to establish, and has not established, an HLIM and the operation of the procedures for monitoring the status of the Fund as investing primarily in highly liquid investments;

◾ the fact that the Fund invested no more than 15% of its assets in illiquid investments during the Period, and the operation of the procedures for monitoring this limit;

◾ the fact that there were no liquidity events during the Period that materially affected the Fund’s liquidity risk;

◾ the impact on liquidity and management of liquidity risk, if any, caused by extended non-U.S. market closures and confirmation that there were no issues for any of the affected Federated Hermes Funds in meeting shareholder redemptions at any time during these temporary non-U.S. market closures.

Based on this review, the Administrator concluded that the Program is operating effectively to assess and manage the Fund’s liquidity risk, and that the Program has been and continues to be adequately and effectively implemented to monitor and, as applicable, respond to the Fund’s liquidity developments.

Annual Shareholder Report

52

Voting Proxies on Fund Portfolio Securities

A description of the policies and procedures that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund’s portfolio is available, without charge and upon request, by calling 1-800-341-7400, Option #4. A report on “Form N-PX” of how the Fund voted any such proxies during the most recent 12-month period ended June 30 is available via the Proxy Voting Record (Form N-PX) link associated with the Fund and share class name at FederatedHermes.com/us/FundInformation. Form N-PX filings are also available at the SEC’s website at sec.gov.

Quarterly Portfolio Schedule

Each fiscal quarter, the Fund will file with the SEC a complete schedule of its monthly portfolio holdings on “Form N-PORT.” The Fund’s holdings as of the end of the third month of every fiscal quarter, as reported on Form N-PORT, will be publicly available on the SEC’s website at sec.gov within 60 days of the end of the fiscal quarter upon filing. You may also access this information via the link to the Fund and share class name at FederatedHermes.com/us.

Annual Shareholder Report

53

Mutual funds are not bank deposits or obligations, are not guaranteed by any bank and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal.

This Report is authorized for distribution to prospective investors only when preceded or accompanied by the Fund’s Prospectus, which contains facts concerning its objective and policies, management fees, expenses and other information.   

 

Federated Hermes Strategic Value Dividend Fund
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561

Contact us atFederatedHermes.com/us
or call 1-800-341-7400.

Federated Securities Corp., Distributor

CUSIP 314172586
CUSIP 314172578
CUSIP 314172560
CUSIP 31421N881

33982 (12/23)

© 2023 Federated Hermes, Inc.

Item 2. Code of Ethics

(a) As of the end of the period covered by this report, the registrant has adopted a code of ethics (the "Section 406 Standards for Investment Companies - Ethical Standards for Principal Executive and Financial Officers") that applies to the registrant's Principal Executive Officer and Principal Financial Officer; the registrant's Principal Financial Officer also serves as the Principal Accounting Officer.

(c) There was no amendment to the registrant’s code of ethics described in Item 2(a) above during the period covered by the report.

(d) There was no waiver granted, either actual or implicit, from a provision to the registrant’s code of ethics described in Item 2(a) above during the period covered by the report.

(e) Not Applicable

(f)(3) The registrant hereby undertakes to provide any person, without charge, upon request, a copy of the code of ethics. To request a copy of the code of ethics, contact the registrant at 1-800-341-7400, and ask for a copy of the Section 406 Standards for Investment Companies - Ethical Standards for Principal Executive and Financial Officers.

Item 3. Audit Committee Financial Expert

The registrant's Board has determined that each of the following members of the Board's Audit Committee is an “audit committee financial expert,” and is "independent," for purposes of this Item:   G. Thomas Hough and Thomas M. O'Neill.

Item 4. Principal Accountant Fees and Services

(a)       Audit Fees billed to the registrant for the two most recent fiscal years:

Fiscal year ended 2023 – $328,128

Fiscal year ended 2022 - $314,130

(b)       Audit-Related Fees billed to the registrant for the two most recent fiscal years:

Fiscal year ended 2023 - $0

Fiscal year ended 2022 - $0

Amount requiring approval of the registrant’s Audit Committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, $0 and $0 respectively.

(c)        Tax Fees billed to the registrant for the two most recent fiscal years:

Fiscal year ended 2023 - $0

Fiscal year ended 2022 - $0

Amount requiring approval of the registrant’s Audit Committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, $0 and $0 respectively.

(d)       All Other Fees billed to the registrant for the two most recent fiscal years:

Fiscal year ended 2023 - $0

Fiscal year ended 2022 - $0

Amount requiring approval of the registrant’s Audit Committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, $64,383 and $75,581 respectively. Fiscal year ended 2023- Service fees for analysis of potential Passive Foreign Investment Company holdings. Fiscal year ended 2022- Service fees for analysis of potential Passive Foreign Investment Company holdings.

(e)(1) Audit Committee Policies regarding Pre-approval of Services.

The Audit Committee is required to pre-approve audit and non-audit services performed by the independent auditor in order to assure that the provision of such services do not impair the auditor’s independence. Unless a type of service to be provided by the independent auditor has received general pre-approval, it will require specific pre-approval by the Audit Committee. Any proposed services exceeding pre-approved cost levels will require specific pre-approval by the Audit Committee.

Certain services have the general pre-approval of the Audit Committee. The term of the general pre-approval is 12 months from the date of pre-approval, unless the Audit Committee specifically provides for a different period. The Audit Committee will annually review the services that may be provided by the independent auditor without obtaining specific pre-approval from the Audit Committee and may grant general pre-approval for such services. The Audit Committee will revise the list of general pre-approved services from time to time, based on subsequent determinations. The Audit Committee will not delegate to management its responsibilities to pre-approve services performed by the independent auditor.

The Audit Committee has delegated pre-approval authority to its chairman (the “Chairman”) for services that do not exceed a specified dollar threshold. The Chairman or Chief Audit Executive will report any such pre-approval decisions to the Audit Committee at its next scheduled meeting. The Committee will designate another member with such pre-approval authority when the Chairman is unavailable.

AUDIT SERVICES

The annual audit services engagement terms and fees will be subject to the specific pre-approval of the Audit Committee. The Audit Committee will approve, if necessary, any changes in terms, conditions and fees resulting from changes in audit scope, registered investment company (RIC) structure or other matters.

In addition to the annual audit services engagement specifically approved by the Audit Committee, the Audit Committee may grant general pre-approval for other audit services, which are those services that only the independent auditor reasonably can provide. The Audit Committee has pre-approved certain audit services; with limited exception, all other audit services must be specifically pre-approved by the Audit Committee.

AUDIT-RELATED SERVICES

Audit-related services are assurance and related services that are reasonably related to the performance of the audit or review of the RIC’s financial statements or that are traditionally performed by the independent auditor. The Audit Committee believes that the provision of audit-related services does not impair the independence of the auditor, and has pre-approved certain audit-related services; all other audit-related services must be specifically pre-approved by the Audit Committee.

TAX SERVICES

The Audit Committee believes that the independent auditor can provide tax services to the RIC such as tax compliance, tax planning and tax advice without impairing the auditor’s independence. However, the Audit Committee will not permit the retention of the independent auditor in connection with a transaction initially recommended by the independent auditor, the purpose of which may be tax avoidance and the tax treatment of which may not be supported in the Internal Revenue Code and related regulations. The Audit Committee has pre-approved certain tax services; with limited exception, all tax services involving large and complex transactions must be specifically pre-approved by the Audit Committee.

ALL OTHER SERVICES

With respect to the provision of permissible services other than audit, review or attest services the pre-approval requirement is waived if:

(1)With respect to such services rendered to the Funds, the aggregate amount of all such services provided constitutes no more than five percent of the total amount of revenues paid by the audit client to its accountant during the fiscal year in which the services are provided; and,

(2)With respect to such services rendered to the Fund’s investment adviser ( the “Adviser”)and any entity controlling, controlled by to under common control with the Adviser such as affiliated non-U.S. and U.S. funds not under the Audit Committee’s purview and which do not fall within a category of service which has been determined by the Audit Committee not to have a direct impact on the operations or financial reporting of the RIC, the aggregate amount of all services provided constitutes no more than five percent of the total amount of revenues paid to the RIC’s auditor by the RIC, its Adviser and any entity controlling, controlled by, or under common control with the Adviser during the fiscal year in which the services are provided; and

(3)Such services were not recognized by the issuer or RIC at the time of the engagement to be non-audit services; and

(4)Such services are promptly brought to the attention of the Audit Committee and approved prior to the completion of the audit by the Audit Committee or by one or more members of the Audit Committee who are members of the Board of Directors to whom authority to grant such approvals has been delegated by the Audit Committee.

The Audit Committee may grant general pre-approval to those permissible non-audit services which qualify for pre-approval and which it believes are routine and recurring services, and would not impair the independence of the auditor.

The Securities and Exchange Commission’s (the “SEC”) rules and relevant guidance should be consulted to determine the precise definitions of these services and applicability of exceptions to certain of the prohibitions.

PRE-APPROVAL FEE LEVELS

Pre-approval fee levels for all services to be provided by the independent auditor will be established annually by the Audit Committee. Any proposed services exceeding these levels will require specific pre-approval by the Audit Committee.

PROCEDURES

Requests or applications to provide services that require specific approval by the Audit Committee will be submitted to the Audit Committee by the Fund’s Principal Accounting Officer and/or the Chief Audit Executive of Federated Hermes, Inc., only after those individuals have determined that the request or application is consistent with the SEC’s rules on auditor independence.

(e)(2) Percentage of services identified in items 4(b) through 4(d) that were approved by the registrant’s Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X:

4(b)

Fiscal year ended 2023 – 0%

Fiscal year ended 2022 - 0%

Percentage of services provided to the registrant’s Adviser and any entity controlling, controlled by, or under common control with the Adviser that provides ongoing services to the registrant that were approved by the registrant’s Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X, 0% and 0% respectively.

4(c)

Fiscal year ended 2023 – 0%

Fiscal year ended 2022 – 0%

Percentage of services provided to the registrant’s Adviser and any entity controlling, controlled by, or under common control with the Adviser that provides ongoing services to the registrant that were approved by the registrant’s Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X, 0% and 0% respectively.

4(d)

Fiscal year ended 2023 – 0%

Fiscal year ended 2022 – 0%

Percentage of services provided to the registrant’s Adviser and any entity controlling, controlled by, or under common control with the Adviser that provides ongoing services to the registrant that were approved by the registrant’s Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X, 0% and 0% respectively.

(f)NA

(g)Non-Audit Fees billed to the registrant, the registrant’s Adviser, and certain entities controlling, controlled by or under common control with the Adviser:

Fiscal year ended 2023 - $272,108

Fiscal year ended 2022 - $237,466

(h)       The registrant’s Audit Committee has considered that the provision of non-audit services that were rendered to the registrant’s Adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the Adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.

Item 5. Audit Committee of Listed Registrants

Not Applicable

Item 6. Schedule of Investments

(a) The registrant’s Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this form.

(b) Not Applicable; Fund had no divestments during the reporting period covered since the previous Form N-CSR filing.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies

Not Applicable

Item 8. Portfolio Managers of Closed-End Management Investment Companies

Not Applicable

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers

Not Applicable

Item 10. Submission of Matters to a Vote of Security Holders

No Changes to Report

Item 11. Controls and Procedures

(a) The registrant’s President and Treasurer have concluded that the

registrant’s disclosure controls and procedures (as defined in rule 30a-3(c) under the Act) are effective in design and operation and are sufficient to form the basis of the certifications required by Rule 30a-(2) under the Act, based on their evaluation of these disclosure controls and procedures within 90 days of the filing date of this report on Form N-CSR.

(b) There were no changes in the registrant’s internal control over financial reporting (as defined in rule 30a-3(d) under the Act) during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies

Not Applicable

Item 13. Exhibits

(a)(1) Code of Ethics- Not Applicable to this Report.

(a)(2) Certifications of Principal Executive Officer and Principal Financial Officer.

(a)(3) Not Applicable.

(b) Certifications pursuant to 18 U.S.C. Section 1350.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Registrant Federated Hermes Equity Funds

By /S/ Lori A. Hensler

Lori A. Hensler, Principal Financial Officer

Date December 22, 2023

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By /S/ J. Christopher Donahue

J. Christopher Donahue, Principal Executive Officer

Date December 22, 2023

By /S/ Lori A. Hensler

Lori A. Hensler, Principal Financial Officer

Date December 22, 2023