United States
Securities and Exchange Commission
Washington, D.C. 20549
Form
Certified Shareholder Report
of Registered Management Investment Companies
811-4017
(Investment Company Act File Number)
(Exact Name of Registrant as Specified in Charter)
Federated Hermes Funds
4000 Ericsson
Drive
Warrendale, PA 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: 2025-09-30
Date of Reporting Period:
| Item 1. | Reports to Stockholders |
| 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 3: John G. Carson, Thomas M. O’Neill and John S. Walsh.
| Item 4. | Principal Accountant Fees and Services |
(a) Audit Fees billed to the registrant for the two most recent fiscal years:
Fiscal year ended 2025 – $360,185
Fiscal year ended 2024 – $341,495
(b) Audit-Related Fees billed to the registrant for the two most recent fiscal years:
Fiscal year ended 2025 - $0
Fiscal year ended 2024 - $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 2025 - $0
Fiscal year ended 2024 - $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 2025 - $0
Fiscal year ended 2024 - $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 $28,653 respectively. Fiscal year ended 2024- 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. The Audit Committee is required to pre-concur with independence conclusions made by the independent auditor regarding non-audit services to be provided by the independent auditor to the Funds, the Funds Board of Directors, or any entity that is controlled directly or indirectly by the Funds. Unless a type of service to be provided by the independent auditor has received general pre-approval, it will require specific pre-approval(and pre-concurrence for non-audit services) 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/pre-concurrence 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/pre-concurrence decisions to the Audit Committee at its next scheduled meeting. The Committee will designate another member with such pre-approval/pre-concurrence 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/pre-concurred certain tax services; with limited exception, all tax services involving large and complex transactions must be specifically pre-approved/pre-concurred 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/pre-concurrence 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/pre-concurrence 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/concurrence 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 2025 – 0%
Fiscal year ended 2024 - 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 2025 – 0%
Fiscal year ended 2024 – 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 2025 – 0%
Fiscal year ended 2024 – 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 2025 - $135,279
Fiscal year ended 2024 - $224,402
(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.
(i) Not Applicable
(j) Not Applicable
| 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 Financial Statements filed under Item 7 of this form.
(b) Not Applicable
| Item 7. | Financial Statements and Financial Highlights for Open-End Management Companies |
Annual Financial Statements
and Additional Information
and Additional Information
September 30, 2025
|
Share
Class | Ticker
|
A | VSFAX
|
C | VSFCX
|
R | VSFRX
|
Institutional | VSFIX
|
R6 | VSFSX
|
Federated Hermes Clover Small Value Fund
(Effective November 26, 2025, the fund’s name
will be Federated Hermes MDT Small Cap Value Fund.)
A Portfolio of Federated Hermes Equity Funds
Not FDIC Insured ▪ May
Lose Value ▪ No Bank Guarantee
CONTENTS
Portfolio
of Investments
September 30, 2025
|
Shares
|
|
|
Value
|
|
|
|
COMMON
STOCKS—97.7% |
|
|
|
|
Consumer
Discretionary—8.2% |
|
|
51,404
|
|
Academy
Sports and Outdoors, Inc. |
$ 2,571,228
|
|
9,176
|
1
|
Asbury
Automotive Group, Inc. |
2,243,073
|
|
24,690
|
|
Bath
& Body Works, Inc. |
636,014
|
|
19,139
|
|
Meritage
Homes Corp. |
1,386,238
|
|
7,456
|
1
|
Ollie’s
Bargain Outlet Holdings, Inc. |
957,350
|
|
93,952
|
1
|
PENN
Entertaintment, Inc. |
1,809,516
|
|
12,432
|
|
Signet
Jewelers Ltd. |
1,192,478
|
|
47,476
|
|
The
Wendy’s Co. |
434,880
|
|
55,425
|
1
|
Tri
Pointe Homes, Inc. |
1,882,787
|
|
|
|
TOTAL
|
13,113,564
|
|
|
|
Consumer
Staples—2.1% |
|
|
17,446
|
|
PriceSmart,
Inc. |
2,114,281
|
|
21,060
|
|
Universal
Corp. |
1,176,622
|
|
|
|
TOTAL
|
3,290,903
|
|
|
|
Energy—5.7%
|
|
|
61,479
|
|
Antero
Midstream Corp. |
1,195,152
|
|
20,022
|
|
Civitas
Resources, Inc. |
650,715
|
|
37,771
|
1
|
CNX
Resources Corp. |
1,213,204
|
|
14,681
|
|
Core
Natural Resources, Inc. |
1,225,570
|
|
71,024
|
|
Magnolia
Oil & Gas Corp. |
1,695,343
|
|
20,021
|
|
Northern
Oil and Gas, Inc. |
496,521
|
|
50,006
|
|
PBF
Energy, Inc. |
1,508,681
|
|
19,668
|
|
Scorpio
Tankers, Inc. |
1,102,391
|
|
|
|
TOTAL
|
9,087,577
|
|
|
|
Financials—28.8%
|
|
|
117,806
|
2
|
AGNC
Investment Corp. |
1,153,321
|
|
12,300
|
|
Axis
Capital Holdings Ltd. |
1,178,340
|
|
77,268
|
|
Cadence
Bank |
2,900,641
|
|
41,011
|
|
CNO
Financial Group, Inc. |
1,621,985
|
|
36,988
|
|
Columbia
Banking Systems, Inc. |
952,071
|
|
70,518
|
|
First
Commonwealth Financial Corp. |
1,202,332
|
|
248,041
|
|
FNB
Corp. (PA) |
3,995,941
|
|
23,363
|
|
Jackson
Financial, Inc. |
2,365,036
|
|
24,224
|
|
Kemper
Corp. |
1,248,747
|
|
109,797
|
|
OceanFirst
Financial Corp. |
1,929,133
|
|
180,721
|
|
Old
National Bancorp |
3,966,826
|
|
7,302
|
|
Pennymac
Financial Services, Inc. |
904,572
|
|
17,425
|
|
Prosperity
Bancshares, Inc. |
1,156,149
|
|
46,627
|
|
Radian
Group, Inc. |
1,688,830
|
|
130,937
|
|
Rithm
Capital Corp. |
1,491,372
|
|
35,972
|
|
South
State Corp. |
3,556,552
|
|
25,145
|
|
Stifel
Financial Corp. |
2,853,203
|
|
34,422
|
|
UMB
Financial Corp. |
4,073,844
|
|
363,232
|
|
Valley
National Bancorp |
3,850,259
|
|
30,494
|
|
Wintrust
Financial Corp. |
4,038,625
|
|
|
|
TOTAL
|
46,127,779
|
|
|
|
Health
Care—6.5% |
|
|
103,150
|
1
|
ADMA
Biologics, Inc. |
1,512,179
|
|
101,431
|
1
|
Arcutis
Biotherapeutics, Inc. |
1,911,974
|
Annual
Financial Statements and Additional Information
1
|
Shares
|
|
|
Value
|
|
|
|
COMMON
STOCKS—continued |
|
|
|
|
Health
Care—continued |
|
|
25,611
|
1,2
|
Beam
Therapeutics, Inc. |
$ 621,579
|
|
15,121
|
1,2
|
CRISPR
Therapeutics AG |
979,992
|
|
15,200
|
1
|
Cytokinetics,
Inc. |
835,392
|
|
35,488
|
1,2
|
Establishment
Labs Holdings, Inc. |
1,454,653
|
|
5,879
|
1
|
Haemonetics
Corp. |
286,543
|
|
14,541
|
1
|
Halozyme
Therapeutics, Inc. |
1,066,437
|
|
41,073
|
1
|
Harmony
Biosciences Holdings, Inc. |
1,131,972
|
|
15,868
|
1
|
Vaxcyte,
Inc. |
571,565
|
|
|
|
TOTAL
|
10,372,286
|
|
|
|
Industrials—14.2%
|
|
|
28,558
|
|
Enerpac
Tool Group Corp. |
1,170,878
|
|
10,407
|
|
EnPro,
Inc. |
2,351,982
|
|
19,765
|
|
Federal
Signal Corp. |
2,351,837
|
|
14,372
|
1
|
Fluor
Corp. |
604,630
|
|
112,464
|
1
|
Gates
Industrial Corp. PLC |
2,791,357
|
|
18,010
|
1
|
Gibraltar
Industries, Inc. |
1,131,028
|
|
11,747
|
|
Herc
Holdings, Inc. |
1,370,405
|
|
46,317
|
|
Hub
Group, Inc. |
1,595,158
|
|
11,008
|
|
MOOG,
Inc., Class A |
2,286,031
|
|
8,408
|
|
Powell
Industries, Inc. |
2,562,843
|
|
38,833
|
|
REV
Group, Inc. |
2,200,666
|
|
193,995
|
1
|
Sun
Country Airlines Holdings, Inc. |
2,291,081
|
|
|
|
TOTAL
|
22,707,896
|
|
|
|
Information
Technology—10.2% |
|
|
28,921
|
|
Avnet,
Inc. |
1,511,990
|
|
34,865
|
1
|
Cleanspark,
Inc. |
505,542
|
|
27,945
|
|
Crane
NXT Co. |
1,874,271
|
|
89,518
|
1
|
Daktronics,
Inc. |
1,872,717
|
|
21,559
|
1
|
Diodes,
Inc. |
1,147,154
|
|
26,010
|
1
|
ePlus,
Inc. |
1,846,970
|
|
22,950
|
1,2
|
Hut
8 Mining Corp. |
798,889
|
|
38,369
|
1
|
I3
Verticals, Inc. |
1,245,458
|
|
42,955
|
1
|
Ichor
Holdings Ltd. |
752,572
|
|
44,747
|
1
|
LiveRamp
Holdings, Inc. |
1,214,434
|
|
22,528
|
1
|
Netgear,
Inc. |
729,682
|
|
71,375
|
1
|
NetScout
Systems, Inc. |
1,843,616
|
|
117,396
|
1
|
Yext,
Inc. |
1,000,214
|
|
|
|
TOTAL
|
16,343,509
|
|
|
|
Materials—5.9%
|
|
|
63,640
|
|
Alcoa
Corp. |
2,093,119
|
|
13,871
|
|
Ashland,
Inc. |
664,560
|
|
35,641
|
|
Avient
Corp. |
1,174,371
|
|
31,507
|
|
Commercial
Metals Corp. |
1,804,721
|
|
259,575
|
1,3
|
Ferroglobe
Representation & Warranty Insurance Trust |
0
|
|
113,740
|
|
HudBay
Minerals, Inc. |
1,724,298
|
|
26,625
|
1
|
Knife
River Corp. |
2,046,664
|
|
|
|
TOTAL
|
9,507,733
|
|
|
|
Real
Estate—10.5% |
|
|
75,554
|
|
Cousins
Properties, Inc. |
2,186,533
|
|
149,681
|
1
|
Cushman
& Wakefield PLC |
2,382,921
|
|
26,554
|
|
EPR
Properties |
1,540,398
|
|
55,615
|
|
Independence
Realty Trust, Inc. |
911,530
|
Annual
Financial Statements and Additional Information
2
|
Shares
|
|
|
Value
|
|
|
|
COMMON
STOCKS—continued |
|
|
|
|
Real
Estate—continued |
|
|
131,804
|
|
Kite
Realty Group Trust |
$ 2,939,229
|
|
113,537
|
|
Macerich
Co. (The) |
2,066,373
|
|
85,679
|
2
|
NetSTREIT
Corp. |
1,547,363
|
|
169,413
|
|
Park
Hotels & Resorts, Inc. |
1,877,096
|
|
40,111
|
|
STAG
Industrial, Inc. |
1,415,517
|
|
|
|
TOTAL
|
16,866,960
|
|
|
|
Utilities—5.6%
|
|
|
33,612
|
|
Idacorp,
Inc. |
4,441,826
|
|
59,220
|
|
Northwestern
Energy Group, Inc. |
3,470,884
|
|
14,028
|
|
Southwest
Gas Holdings, Inc. |
1,098,954
|
|
|
|
TOTAL
|
9,011,664
|
|
|
|
TOTAL
COMMON STOCKS
(IDENTIFIED
COST $128,478,401) |
156,429,871
|
|
|
|
INVESTMENT
COMPANY—5.5% |
|
|
8,749,162
|
|
Federated
Hermes Government Obligations Fund, Premier Shares, 4.06%4
(IDENTIFIED
COST $8,749,162) |
8,749,162
|
|
|
|
TOTAL
INVESTMENT IN SECURITIES—103.2%
(IDENTIFIED
COST $137,227,563)5
|
165,179,033
|
|
|
|
OTHER
ASSETS AND LIABILITIES - NET—(3.2)%6
|
(5,096,109)
|
|
|
|
NET
ASSETS—100% |
$160,082,924
|
Transactions with affiliated investment
companies, which are funds managed by the Adviser or an affiliate of the Adviser, during the period
ended September 30, 2025, were as follows:
|
|
Federated
Hermes
Government
Obligations
Fund,
Premier
Shares* |
|
Value
as of 9/30/2024 |
$6,862,211
|
|
Purchases
at Cost |
$86,495,099
|
|
Proceeds
from Sales |
$(84,608,148)
|
|
Change
in Unrealized Appreciation/Depreciation |
$—
|
|
Net
Realized Gain/(Loss) |
$—
|
|
Value
as of 9/30/2025 |
$8,749,162
|
|
Shares
Held as of 9/30/2025 |
8,749,162
|
|
Dividend
Income |
$291,117
|
|
*
|
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 evaluations are not available. Fair value determined using significant unobservable inputs in accordance with procedures
established
by
and under the general supervision of the Fund’s Adviser acting through its Valuation Committee. |
|
4
|
7-day
net yield. |
|
5
|
The
cost of investments for federal tax purposes amounts to $138,334,792. |
|
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 net assets at September 30, 2025.
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
Financial Statements and Additional Information
3
The following is a summary of the inputs used, as of September 30, 2025, 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
|
$142,870,869
|
$—
|
$0
|
$142,870,869
|
|
International
|
13,559,002
|
—
|
—
|
13,559,002
|
|
Investment
Company |
8,749,162
|
—
|
—
|
8,749,162
|
|
TOTAL
SECURITIES |
$165,179,033
|
$—
|
$0
|
$165,179,033
|
See Notes which are an integral part of
the Financial Statements
Annual
Financial Statements and Additional Information
4
Financial
Highlights–Class
A Shares
(For a Share Outstanding Throughout Each
Period)
|
|
Year Ended September 30,
| ||||
|
|
2025
|
2024
|
2023
|
2022
|
2021
|
|
Net Asset
Value, Beginning of Period |
$27.00
|
$22.30
|
$22.63
|
$28.03
|
$17.10
|
|
Income
From Investment Operations: |
|
|
|
|
|
|
Net
investment income (loss)1
|
0.25
|
0.27
|
0.26
|
0.16
|
0.10
|
|
Net
realized and unrealized gain (loss) |
0.68
|
5.14
|
1.48
|
(3.23)
|
10.86
|
|
Total
From Investment Operations |
0.93
|
5.41
|
1.74
|
(3.07)
|
10.96
|
|
Less Distributions:
|
|
|
|
|
|
|
Distributions
from net investment income |
(0.25)
|
(0.28)
|
(0.04)
|
(0.08)
|
(0.03)
|
|
Distributions
from net realized gain |
(2.34)
|
(0.43)
|
(2.03)
|
(2.25)
|
—
|
|
Total
Distributions |
(2.59)
|
(0.71)
|
(2.07)
|
(2.33)
|
(0.03)
|
|
Net
Asset Value, End of Period |
$25.34
|
$27.00
|
$22.30
|
$22.63
|
$28.03
|
|
Total
Return2
|
3.42%
|
24.74%
|
7.33%
|
(12.29)%
|
64.10%
|
|
Ratios
to Average Net Assets: |
|
|
|
|
|
|
Net
expenses3
|
1.13%
|
1.13%
|
1.13%
|
1.13%
|
1.23%
|
|
Net
investment income |
1.00%
|
1.10%
|
1.09%
|
0.62%
|
0.38%
|
|
Expense
waiver/reimbursement4
|
0.39%
|
0.34%
|
0.32%
|
0.33%
|
0.30%
|
|
Supplemental
Data: |
|
|
|
|
|
|
Net
assets, end of period (000 omitted) |
$53,305
|
$57,842
|
$55,009
|
$58,331
|
$70,636
|
|
Portfolio
turnover5
|
59%
|
76%
|
92%
|
94%
|
86%
|
|
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 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
Financial Statements and Additional Information
5
Financial
Highlights–Class
C Shares
(For a Share Outstanding Throughout Each
Period)
|
|
Year Ended September 30,
| ||||
|
|
2025
|
2024
|
2023
|
2022
|
2021
|
|
Net Asset
Value, Beginning of Period |
$24.04
|
$19.93
|
$20.53
|
$25.75
|
$15.81
|
|
Income
From Investment Operations: |
|
|
|
|
|
|
Net
investment income (loss)1
|
0.05
|
0.07
|
0.06
|
(0.04)
|
(0.09)
|
|
Net
realized and unrealized gain (loss) |
0.61
|
4.58
|
1.37
|
(2.93)
|
10.03
|
|
Total
From Investment Operations |
0.66
|
4.65
|
1.43
|
(2.97)
|
9.94
|
|
Less Distributions:
|
|
|
|
|
|
|
Distributions
from net investment income |
(0.08)
|
(0.11)
|
—
|
—
|
—
|
|
Distributions
from net realized gain |
(2.34)
|
(0.43)
|
(2.03)
|
(2.25)
|
—
|
|
Total
Distributions |
(2.42)
|
(0.54)
|
(2.03)
|
(2.25)
|
—
|
|
Net
Asset Value, End of Period |
$22.28
|
$24.04
|
$19.93
|
$20.53
|
$25.75
|
|
Total
Return2
|
2.58%
|
23.79%
|
6.50%
|
(13.00)%
|
62.87%
|
|
Ratios
to Average Net Assets: |
|
|
|
|
|
|
Net
expenses3
|
1.92%
|
1.91%
|
1.92%
|
1.92%
|
2.00%
|
|
Net
investment income (loss) |
0.21%
|
0.33%
|
0.31%
|
(0.16)%
|
(0.40)%
|
|
Expense
waiver/reimbursement4
|
0.35%
|
0.32%
|
0.30%
|
0.31%
|
0.28%
|
|
Supplemental
Data: |
|
|
|
|
|
|
Net
assets, end of period (000 omitted) |
$4,950
|
$6,032
|
$6,253
|
$6,498
|
$8,074
|
|
Portfolio
turnover5
|
59%
|
76%
|
92%
|
94%
|
86%
|
|
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
Financial Statements and Additional Information
6
Financial
Highlights–Class
R Shares
(For a Share Outstanding Throughout Each
Period)
|
|
Year Ended September 30,
| ||||
|
|
2025
|
2024
|
2023
|
2022
|
2021
|
|
Net Asset
Value, Beginning of Period |
$26.27
|
$21.73
|
$22.10
|
$27.44
|
$16.74
|
|
Income
From Investment Operations: |
|
|
|
|
|
|
Net
investment income (loss)1
|
0.22
|
0.24
|
0.23
|
0.14
|
0.09
|
|
Net
realized and unrealized gain (loss) |
0.67
|
4.99
|
1.45
|
(3.15)
|
10.64
|
|
Total
From Investment Operations |
0.89
|
5.23
|
1.68
|
(3.01)
|
10.73
|
|
Less Distributions:
|
|
|
|
|
|
|
Distributions
from net investment income |
(0.23)
|
(0.26)
|
(0.02)
|
(0.08)
|
(0.03)
|
|
Distributions
from net realized gain |
(2.34)
|
(0.43)
|
(2.03)
|
(2.25)
|
—
|
|
Total
Distributions |
(2.57)
|
(0.69)
|
(2.05)
|
(2.33)
|
(0.03)
|
|
Net
Asset Value, End of Period |
$24.59
|
$26.27
|
$21.73
|
$22.10
|
$27.44
|
|
Total
Return2
|
3.33%
|
24.58%
|
7.23%
|
(12.36)%
|
64.12%
|
|
Ratios
to Average Net Assets: |
|
|
|
|
|
|
Net
expenses3
|
1.22%
|
1.22%
|
1.22%
|
1.22%
|
1.25%
|
|
Net
investment income |
0.90%
|
1.02%
|
1.01%
|
0.53%
|
0.38%
|
|
Expense
waiver/reimbursement4
|
0.54%
|
0.49%
|
0.46%
|
0.46%
|
0.51%
|
|
Supplemental
Data: |
|
|
|
|
|
|
Net
assets, end of period (000 omitted) |
$12,401
|
$13,548
|
$12,179
|
$11,898
|
$14,260
|
|
Portfolio
turnover5
|
59%
|
76%
|
92%
|
94%
|
86%
|
|
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 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
Financial Statements and Additional Information
7
Financial
Highlights–Institutional
Shares
(For a Share Outstanding Throughout Each
Period)
|
|
Year Ended September 30,
| ||||
|
|
2025
|
2024
|
2023
|
2022
|
2021
|
|
Net Asset
Value, Beginning of Period |
$27.08
|
$22.37
|
$22.69
|
$28.11
|
$17.13
|
|
Income
From Investment Operations: |
|
|
|
|
|
|
Net
investment income (loss)1
|
0.31
|
0.33
|
0.32
|
0.23
|
0.16
|
|
Net
realized and unrealized gain (loss) |
0.69
|
5.15
|
1.49
|
(3.24)
|
10.89
|
|
Total
From Investment Operations |
1.00
|
5.48
|
1.81
|
(3.01)
|
11.05
|
|
Less Distributions:
|
|
|
|
|
|
|
Distributions
from net investment income |
(0.32)
|
(0.34)
|
(0.10)
|
(0.16)
|
(0.07)
|
|
Distributions
from net realized gain |
(2.34)
|
(0.43)
|
(2.03)
|
(2.25)
|
—
|
|
Total
Distributions |
(2.66)
|
(0.77)
|
(2.13)
|
(2.41)
|
(0.07)
|
|
Net
Asset Value, End of Period |
$25.42
|
$27.08
|
$22.37
|
$22.69
|
$28.11
|
|
Total
Return2
|
3.67%
|
25.03%
|
7.64%
|
(12.10)%
|
64.63%
|
|
Ratios
to Average Net Assets: |
|
|
|
|
|
|
Net
expenses3
|
0.88%
|
0.88%
|
0.88%
|
0.88%
|
0.96%
|
|
Net
investment income |
1.25%
|
1.36%
|
1.36%
|
0.89%
|
0.64%
|
|
Expense
waiver/reimbursement4
|
0.38%
|
0.35%
|
0.33%
|
0.33%
|
0.31%
|
|
Supplemental
Data: |
|
|
|
|
|
|
Net
assets, end of period (000 omitted) |
$78,573
|
$96,974
|
$105,927
|
$88,206
|
$97,317
|
|
Portfolio
turnover5
|
59%
|
76%
|
92%
|
94%
|
86%
|
|
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 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
Financial Statements and Additional Information
8
Financial
Highlights–Class
R6 Shares
(For a Share Outstanding Throughout Each
Period)
|
|
Year Ended September 30,
| ||||
|
|
2025
|
2024
|
2023
|
2022
|
2021
|
|
Net Asset
Value, Beginning of Period |
$27.12
|
$22.40
|
$22.72
|
$28.13
|
$17.15
|
|
Income
From Investment Operations: |
|
|
|
|
|
|
Net
investment income (loss)1
|
0.33
|
0.35
|
0.35
|
0.24
|
0.18
|
|
Net
realized and unrealized gain (loss) |
0.68
|
5.16
|
1.47
|
(3.23)
|
10.89
|
|
Total
From Investment Operations |
1.01
|
5.51
|
1.82
|
(2.99)
|
11.07
|
|
Less Distributions:
|
|
|
|
|
|
|
Distributions
from net investment income |
(0.33)
|
(0.36)
|
(0.11)
|
(0.17)
|
(0.09)
|
|
Distributions
from net realized gain |
(2.34)
|
(0.43)
|
(2.03)
|
(2.25)
|
—
|
|
Total
Distributions |
(2.67)
|
(0.79)
|
(2.14)
|
(2.42)
|
(0.09)
|
|
Net
Asset Value, End of Period |
$25.46
|
$27.12
|
$22.40
|
$22.72
|
$28.13
|
|
Total
Return2
|
3.73%
|
25.12%
|
7.67%
|
(12.00)%
|
64.64%
|
|
Ratios
to Average Net Assets: |
|
|
|
|
|
|
Net
expenses3
|
0.81%
|
0.81%
|
0.81%
|
0.81%
|
0.91%
|
|
Net
investment income |
1.33%
|
1.42%
|
1.51%
|
0.91%
|
0.70%
|
|
Expense
waiver/reimbursement4
|
0.35%
|
0.32%
|
0.30%
|
0.30%
|
0.28%
|
|
Supplemental
Data: |
|
|
|
|
|
|
Net
assets, end of period (000 omitted) |
$10,854
|
$10,485
|
$8,744
|
$5,200
|
$6,924
|
|
Portfolio
turnover5
|
59%
|
76%
|
92%
|
94%
|
86%
|
|
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 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
Financial Statements and Additional Information
9
Statement
of Assets and Liabilities
September 30, 2025
|
Assets:
|
|
|
Investment
in securities, at value including $5,017,750 of securities loaned and $8,749,162 of investments in affiliated holdings* (identified
cost
$137,227,563,
including $8,749,162 of identified cost in affiliated holdings) |
$165,179,033
|
|
Income
receivable |
200,610
|
|
Income
receivable from affiliated holdings |
11,939
|
|
Receivable
for shares sold |
80,982
|
|
Total
Assets |
165,472,564
|
|
Liabilities:
|
|
|
Payable
for shares redeemed |
85,046
|
|
Payable
for collateral due to broker for securities lending (Note 2) |
5,159,422
|
|
Payable
for investment adviser fee (Note 5)
|
2,075
|
|
Payable
for administrative fee (Note 5)
|
339
|
|
Payable
for distribution services fee (Note 5)
|
6,687
|
|
Payable
for other service fees (Notes 2 and 5)
|
10,541
|
|
Accrued
expenses (Note 5)
|
125,530
|
|
Total
Liabilities |
5,389,640
|
|
Net
assets for 6,347,738 shares outstanding |
$160,082,924
|
|
Net Assets
Consist of: |
|
|
Paid-in
capital |
$128,315,969
|
|
Total
distributable earnings (loss) |
31,766,955
|
|
Net
Assets |
$160,082,924
|
|
Net Asset
Value, Offering Price and Redemption Proceeds Per Share: |
|
|
Class A
Shares: |
|
|
Net
asset value per share ($53,305,072 ÷ 2,103,785 shares outstanding), no par value, unlimited shares authorized |
$25.34
|
|
Offering
price per share (100/94.50 of $25.34) |
$26.81
|
|
Redemption
proceeds per share |
$25.34
|
|
Class C
Shares: |
|
|
Net
asset value per share ($4,950,273 ÷ 222,154 shares outstanding), no par value, unlimited shares authorized |
$22.28
|
|
Offering
price per share |
$22.28
|
|
Redemption
proceeds per share (99.00/100 of $22.28) |
$22.06
|
|
Class R
Shares: |
|
|
Net
asset value per share ($12,400,705 ÷ 504,281 shares outstanding), no par value, unlimited shares authorized |
$24.59
|
|
Offering
price per share |
$24.59
|
|
Redemption
proceeds per share |
$24.59
|
|
Institutional
Shares: |
|
|
Net
asset value per share ($78,572,966 ÷ 3,091,287 shares outstanding), no par value, unlimited shares authorized |
$25.42
|
|
Offering
price per share |
$25.42
|
|
Redemption
proceeds per share |
$25.42
|
|
Class R6
Shares: |
|
|
Net
asset value per share ($10,853,908 ÷ 426,231 shares outstanding), no par value, unlimited shares authorized |
$25.46
|
|
Offering
price per share |
$25.46
|
|
Redemption
proceeds per share |
$25.46
|
|
*
|
See
information listed after the Fund’s Portfolio of Investments. |
See Notes which are an integral part of
the Financial Statements
Annual
Financial Statements and Additional Information
10
Statement
of Operations
Year Ended September
30, 2025
|
Investment
Income: |
|
|
Dividends
(including $187,429 received from affiliated holdings* and net of foreign taxes withheld of $209) |
$3,526,917
|
|
Net
income on securities loaned (includes $103,688 earned from affiliated holdings related to cash collateral balances) (Note 2)
|
9,212
|
|
TOTAL
INCOME |
3,536,129
|
|
Expenses:
|
|
|
Investment
adviser fee (Note 5)
|
1,408,005
|
|
Administrative
fee (Note 5)
|
129,854
|
|
Custodian
fees |
17,404
|
|
Transfer
agent fees (Note 2) |
222,466
|
|
Directors’/Trustees’
fees (Note 5)
|
1,815
|
|
Auditing
fees |
40,314
|
|
Legal
fees |
13,162
|
|
Portfolio
accounting fees |
103,343
|
|
Distribution
services fee (Note 5)
|
99,535
|
|
Other
service fees (Notes 2 and 5)
|
146,141
|
|
Share
registration costs |
78,432
|
|
Printing
and postage |
49,948
|
|
Miscellaneous
(Note 5)
|
27,492
|
|
TOTAL
EXPENSES |
2,337,911
|
|
Waivers
and Reimbursements: |
|
|
Waiver/reimbursement
of investment adviser fee (Note 5)
|
(582,514)
|
|
Waiver/reimbursement
of other operating expenses (Notes 2 and 5) |
(68,532)
|
|
TOTAL
WAIVERS AND REIMBURSEMENTS |
(651,046)
|
|
Net
expenses |
1,686,865
|
|
Net
investment income |
1,849,264
|
|
Realized
and Unrealized Gain (Loss) on Investments: |
|
|
Net
realized gain on investments |
5,725,644
|
|
Net
change in unrealized appreciation of investments |
(2,335,655)
|
|
Net
realized and unrealized gain (loss) on investments |
3,389,989
|
|
Change
in net assets resulting from operations |
$5,239,253
|
|
*
|
See
information listed after the Fund’s Portfolio of Investments. |
See Notes which are an integral part of
the Financial Statements
Annual
Financial Statements and Additional Information
11
Statement
of Changes in Net Assets
|
Year
Ended September 30 |
2025
|
2024
|
|
Increase
(Decrease) in Net Assets |
|
|
|
Operations:
|
|
|
|
Net
investment income |
$1,849,264
|
$2,251,941
|
|
Net
realized gain (loss) |
5,725,644
|
13,182,821
|
|
Net
change in unrealized appreciation/depreciation |
(2,335,655)
|
25,528,665
|
|
CHANGE
IN NET ASSETS RESULTING FROM OPERATIONS |
5,239,253
|
40,963,427
|
|
Distributions
to Shareholders: |
|
|
|
Class
A Shares |
(5,499,147)
|
(1,601,594)
|
|
Class
C Shares |
(597,616)
|
(167,582)
|
|
Class
R Shares |
(1,204,597)
|
(389,091)
|
|
Institutional
Shares |
(9,222,580)
|
(3,543,561)
|
|
Class
R6 Shares |
(1,048,016)
|
(323,180)
|
|
CHANGE
IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS |
(17,571,956)
|
(6,025,008)
|
|
Share Transactions:
|
|
|
|
Proceeds
from sale of shares |
18,704,676
|
22,883,658
|
|
Net
asset value of shares issued to shareholders in payment of distributions declared |
16,877,570
|
5,815,873
|
|
Cost
of shares redeemed |
(48,047,509)
|
(66,869,353)
|
|
CHANGE
IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS |
(12,465,263)
|
(38,169,822)
|
|
Change
in net assets |
(24,797,966)
|
(3,231,403)
|
|
Net Assets:
|
|
|
|
Beginning
of period |
184,880,890
|
188,112,293
|
|
End
of period |
$160,082,924
|
$184,880,890
|
See Notes which are an integral part of
the Financial Statements
Annual
Financial Statements and Additional Information
12
Notes to
Financial Statements
September 30, 2025
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 Clover Small Value 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 seek 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 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.
Annual
Financial Statements and Additional Information
13
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.
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 and capital gains, if any, are declared and paid at least 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 $651,046 is disclosed in various
locations in this Note 2 and Note 5.
Transfer Agent Fees
For
the year ended September 30, 2025, transfer agent fees for the Fund were as follows:
|
|
Transfer
Agent
Fees
Incurred |
Transfer
Agent
Fees
Reimbursed |
|
Class
A Shares |
$75,597
|
$(18,239)
|
|
Class
C Shares |
7,727
|
—
|
|
Class
R Shares |
16,076
|
(4,337)
|
|
Institutional
Shares |
119,018
|
(27,950)
|
|
Class
R6 Shares |
4,048
|
—
|
|
TOTAL
|
$222,466
|
$(50,526)
|
Annual
Financial Statements and Additional Information
14
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 September 30, 2025, other service fees for the Fund were as follows:
|
|
Other
Service
Fees
Incurred |
|
Class
A Shares |
$132,999
|
|
Class
C Shares |
13,142
|
|
TOTAL
|
$146,141
|
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 September
30, 2025, 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 September 30, 2025, tax years 2022 through 2025
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
fiscal 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 receives
cash collateral for securities loaned, which generally is invested in an affiliated
money market fund. 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.
Annual
Financial Statements and Additional Information
15
As
of September 30, 2025, securities subject to this type of arrangement and related collateral were as follows:
|
Fair
Value of
Securities
Loaned |
Collateral
Received
|
|
$5,017,750
|
$5,159,422
|
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
9/30/2025
|
Year
Ended
9/30/2024
| ||
|
Class
A Shares: |
Shares
|
Amount
|
Shares
|
Amount
|
|
Shares
sold |
126,591
|
$3,098,023
|
153,645
|
$3,738,640
|
|
Shares
issued to shareholders in payment of distributions declared |
210,600
|
5,410,394
|
66,838
|
1,576,272
|
|
Shares
redeemed |
(375,684)
|
(9,128,617)
|
(544,620)
|
(12,899,035)
|
|
NET
CHANGE RESULTING FROM CLASS A SHARE TRANSACTIONS |
(38,493)
|
$(620,200)
|
(324,137)
|
$(7,584,123)
|
|
|
Year
Ended
9/30/2025
|
Year
Ended
9/30/2024
| ||
|
Class
C Shares: |
Shares
|
Amount
|
Shares
|
Amount
|
|
Shares
sold |
25,069
|
$558,014
|
25,031
|
$539,808
|
|
Shares
issued to shareholders in payment of distributions declared |
25,283
|
573,788
|
7,711
|
160,801
|
|
Shares
redeemed |
(79,115)
|
(1,705,808)
|
(95,535)
|
(2,079,857)
|
|
NET
CHANGE RESULTING FROM CLASS C SHARE TRANSACTIONS |
(28,763)
|
$(574,006)
|
(62,793)
|
$(1,379,248)
|
|
|
Year
Ended
9/30/2025
|
Year
Ended
9/30/2024
| ||
|
Class
R Shares: |
Shares
|
Amount
|
Shares
|
Amount
|
|
Shares
sold |
116,269
|
$2,677,426
|
107,205
|
$2,511,596
|
|
Shares
issued to shareholders in payment of distributions declared |
48,277
|
1,204,597
|
16,950
|
389,091
|
|
Shares
redeemed |
(175,912)
|
(4,331,440)
|
(168,986)
|
(4,025,620)
|
|
NET
CHANGE RESULTING FROM CLASS R SHARE TRANSACTIONS |
(11,366)
|
$(449,417)
|
(44,831)
|
$(1,124,933)
|
|
|
Year
Ended
9/30/2025
|
Year
Ended
9/30/2024
| ||
|
Institutional
Shares: |
Shares
|
Amount
|
Shares
|
Amount
|
|
Shares
sold |
371,792
|
$9,106,289
|
516,894
|
$12,507,272
|
|
Shares
issued to shareholders in payment of distributions declared |
339,198
|
8,732,916
|
143,445
|
3,398,500
|
|
Shares
redeemed |
(1,200,976)
|
(29,678,330)
|
(1,814,736)
|
(43,822,956)
|
|
NET
CHANGE RESULTING FROM INSTITUTIONAL SHARE TRANSACTIONS |
(489,986)
|
$(11,839,125)
|
(1,154,397)
|
$(27,917,184)
|
|
|
Year
Ended
9/30/2025
|
Year
Ended
9/30/2024
| ||
|
Class
R6 Shares: |
Shares
|
Amount
|
Shares
|
Amount
|
|
Shares
sold |
131,664
|
$3,264,924
|
146,808
|
$3,586,342
|
|
Shares
issued to shareholders in payment of distributions declared |
37,083
|
955,875
|
12,265
|
291,209
|
|
Shares
redeemed |
(129,081)
|
(3,203,314)
|
(162,838)
|
(4,041,885)
|
|
NET
CHANGE RESULTING FROM CLASS R6 SHARE TRANSACTIONS |
39,666
|
$1,017,485
|
(3,765)
|
$(164,334)
|
|
NET
CHANGE RESULTING FROM TOTAL FUND SHARE TRANSACTIONS |
(528,942)
|
$(12,465,263)
|
(1,589,923)
|
$(38,169,822)
|
Annual
Financial Statements and Additional Information
16
4. FEDERAL
TAX INFORMATION
The tax character of distributions as reported
on the Statement of Changes in Net Assets for the years ended September 30, 2025 and 2024,
was as follows:
|
|
2025
|
2024
|
|
Ordinary
income1
|
$3,869,488
|
$2,538,006
|
|
Long-term
capital gains |
$13,702,468
|
$3,487,002
|
|
1
|
For
tax purposes, short-term capital gain distributions are considered ordinary income distributions. |
As of September 30, 2025, the components
of distributable earnings on a tax-basis were as follows:
|
Undistributed
ordinary income |
$1,277,107
|
|
Net
unrealized appreciation |
$26,844,241
|
|
Undistributed
long-term capital gains |
$3,645,607
|
|
TOTAL
|
$31,766,955
|
At September 30, 2025, the cost of investments
for federal tax purposes was $138,334,792. The net unrealized appreciation of investments
for federal tax purposes was $26,844,241. This consists of unrealized appreciation from investments for those securities having
an excess of value over cost of $31,081,222 and unrealized depreciation from investments for those securities having an excess of cost
over value of $4,236,981. The difference between book-basis and tax-basis net unrealized appreciation is attributable to differing treatments
for the deferral of losses on wash sales and passive foreign investment company adjustments.
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 0.85% 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 September 30, 2025, the Adviser voluntarily waived $577,514
of its fee and voluntarily reimbursed $50,526 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 September 30, 2025, the Adviser reimbursed $5,000.
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
September 30, 2025, 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 |
0.05%
|
|
Class
C Shares |
0.75%
|
|
Class
R Shares |
0.50%
|
Annual
Financial Statements and Additional Information
17
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
September 30, 2025, distribution services fees for the Fund were as follows:
|
|
Distribution
Services
Fees
Incurred |
Distribution
Services
Fees
Waived |
|
Class
C Shares |
$39,514
|
$—
|
|
Class
R Shares |
60,021
|
(18,006)
|
|
TOTAL
|
$99,535
|
$(18,006)
|
When FSC receives fees, it may pay some
or all of them to financial intermediaries whose customers purchase shares. For the year ended September
30, 2025, FSC retained $15,086 of fees paid by the Fund. For the year ended September 30, 2025, 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
September 30, 2025, FSC retained $706 in sales charges from the sale of Class A Shares. FSC also retained $379 of CDSC relating to
redemptions of Class C Shares.
Other Service Fees
For
the year ended September 30, 2025, FSSC received $11,185 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. Effective December 1, 2025, total annual fund operating expenses (as shown
in the financial highlights, excluding interest expense, extraordinary expenses and proxy-related expenses, 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 1.14%, 1.96%, 1.23%, 0.89% and 0.82% (the “Fee Limit”), respectively, up to but not including the later of
(the “Termination Date”): (a) December 1, 2026; or (b) the date of the Fund’s next effective Prospectus. Prior to December
1, 2025, the Fee Limit for the Fund’s Class A Shares, Class
C Shares, Class R Shares, Institutional Shares and Class R6 Shares was 1.13%, 1.95%, 1.22%,
0.88% and 0.81%, respectively. 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 approval 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 September
30, 2025, were as follows:
|
Purchases
|
$95,758,503
|
|
Sales
|
$123,048,422
|
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 part of
the Fund’s portfolio may be comprised of entities in the financials 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 17, 2025. 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,
Annual
Financial Statements and Additional Information
18
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 September 30, 2025, the Fund had
no outstanding loans. During the year ended September 30, 2025,
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 September 30, 2025, there were no outstanding loans. During
the year ended September 30, 2025, the program was not utilized.
10. OPERATING
SEGMENTS
In this reporting period, the Fund adopted
FASB Accounting Standards Update 2023-07, Segment Reporting (Topic 280) - Improvements to
Reportable Segment Disclosures. Adoption of the new standard impacted financial statement disclosures only and did not affect the Fund’s
financial position or the results of its operations. An operating segment is defined as a component of a public entity that engages in
business activities from which it may recognize revenues and incur expenses, has operating results that are regularly reviewed by the
public entity’s chief operating decision maker (CODM) to
make decisions about resources to be allocated to the segment and assess its performance,
and has discrete financial information available. A management committee of the Adviser acts as the CODM. The Fund represents
a single operating segment, as the CODM monitors the operating results of the Fund as a whole and the strategic asset allocation
is determined based on the investment objective of the Fund and executed by the Fund’s portfolio management team. The financial
information in the form of the Fund’s portfolio composition, total returns, expense ratios and changes in net assets (i.e., changes
in net assets resulting from operations, subscriptions and redemptions)
which is reviewed by the CODM to assess the Fund’s performance
in comparison to the Fund’s benchmarks and to make resource allocation decisions for the Fund’s single segment is consistent
with the information presented in these financial statements. Segment assets are reflected on the accompanying Statement of Assets
and Liabilities as “total assets” and significant segment expenses are listed on the accompanying Statement of Operations.
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. SUBSEQUENT
EVENT
On August 15th, the Board approved the name
change of the Fund from Federated Hermes Clover Small Value Fund to Federated Hermes
MDT Small Value Fund. The name change is effective November 26, 2025. Also, effective November 26, 2025, the Fund will change
it’s Adviser from Federated Equity Management Company of Pennsylvania to Federated MDTA LLC.
13. FEDERAL
TAX INFORMATION (UNAUDITED)
For the fiscal year ended September 30,
2025, 84.6% of total ordinary income (including short-term capital gain) 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 September 30, 2025, 83.9% qualify for the dividend received
deduction available to corporate shareholders.
For the year ended September
30, 2025, 4.0% of total ordinary income distributions qualified as business interest income for purposes
of 163(j) and the regulations thereunder.
For the year ended September 30, 2025, the
amount of long-term capital gains designated by the Fund was $13,702,468.
Annual
Financial Statements and Additional Information
19
Report of
Independent Registered Public Accounting Firm
To the SHAREHOLDERS of FEDERATED
HERMES CLOVER SMALL VALUE Fund and the BOARD of TRUSTEES OF
FEDERATED HERMES EQUITY FundS:
Opinion on the Financial Statements
We have audited the accompanying
statement of assets and liabilities of Federated Hermes Clover Small Value Fund (the Fund),
a portfolio of Federated Hermes Equity Funds, including the portfolio of investments, as of September 30, 2025, 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 September 30, 2025, 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.
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 September 30, 2025, by correspondence with the custodian and transfer agent of the underlying fund.
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
November 21, 2025
November 21, 2025
Annual
Financial Statements and Additional Information
20
Evaluation
and Approval of Advisory Contract–May
2025
Federated Hermes Clover Small
Value Fund (the “Fund”)
At its meetings in May 2025 (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, as amended (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 such information deemed necessary to evaluate the terms of the Contract and 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 report regarding data related to the Fund’s management fee (the
“CCO Management Fee Report”). The Board considered the CCO Management Fee 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.
In addition
to the CCO Management Fee 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 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.
The Board’s
consideration of the Contract included review of materials and information covering the following matters, among
others: (1) copies of the Contract; (2) the nature, quality and extent of the advisory and other services provided to the
Fund by Federated Hermes; (3) Federated Hermes’ business and operations; (4) the Adviser’s investment philosophy, personnel
and processes; (5) the Fund’s investment objective and strategies; (6) the Fund’s short-term and long-term performance
- in absolute terms (both on a gross basis and net of expenses) and relative to an appropriate group of peer funds
and its benchmark; (7) the Fund’s fees and expenses, including the advisory fee and the overall expense structure of the
Fund - in absolute terms and relative to an appropriate group of peer funds, with due regard for contractual or voluntary
expense limitations (if any); (8) the financial condition of Federated Hermes; (9) the Adviser’s profitability with respect
to managing the Fund; (10) distribution and sales activity for the Fund; and (11) 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 considered several factors it
deemed relevant to an adviser’s fiduciary duty with respect to its receipt of compensation from a fund, including: (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 fees and expenses, 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 considered 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 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”).
Annual
Financial Statements and Additional Information
21
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 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 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. The Board recognized that its evaluation process is evolutionary and that the factors
considered and the 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.
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 full 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 evaluated
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).
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 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 Investment Company Act of 1940, as amended,
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. 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.
Annual
Financial Statements and Additional Information
22
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, performance attribution information
and commentary on the effect of market conditions. The Board noted that it evaluated investment performance at
meetings throughout the year and received reports from Federated Hermes regarding the performance of certain Federated
Hermes Funds as well as Federated Hermes’ explanations for less favorable performance and any specific actions
Federated Hermes had taken, or had determined 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. (“Morningstar”), an independent fund ranking organization (the “Performance
Peer Group”). The Board noted the CCO’s
statement 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
also considered comparative performance data from Lipper, Inc. that was included in reports provided to the Board
throughout the year. The Board noted that differences may exist between the Performance Peer Group and Lipper peers
and that the results of these performance comparisons may vary.
For the
periods ended December 31, 2024, the Fund’s performance fell below the Performance Peer Group median for the
three-year period, and was above the Performance Peer Group median for the one-year and five-year periods. 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.
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 overall 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.
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 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.
Annual
Financial Statements and Additional Information
23
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 statement that non-registered fund clients
are inherently different products due to the following differences, among others: (i) types of targeted investors; (ii)
applicable laws and regulations; (iii) legal structures; (iv) average account sizes; (v) portfolio management techniques made
necessary by different cash flows and different associated costs; (vi) 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; (vii) SEC mandated risk management programs with respect to fund liquidity and use of derivatives; (viii)
questions on regulatory reporting; (ix) a variety of different administrative responsibilities; and (x) degrees of risk associated
with management. 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 statement 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 emphasized
that differences in fees for providing advisory services to other types of clients may not be appropriate when judging
the appropriateness of the Federated Hermes Funds’ advisory fees because of the different services provided.
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 statement that, while the cost allocation report applies consistent allocation processes for purposes of
general comparison of funds, the inherent difficulties in arbitrarily allocating costs lacks precision and can cause the report
to be unreliable because a single change in an allocation estimate can 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 statement 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
statement 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 statement that, based on such profitability information, Federated
Hermes’ profit margins did not appear to be excessive and that Federated Hermes appeared financially sound, with
the resources available to fulfill its contractual obligations.
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 isolating and quantifying 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, systems capabilities
and use of data. The Board noted that Federated Hermes’ investments in these areas are extensive and are designed
to provide enhanced or expanded 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
Annual
Financial Statements and Additional Information
24
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 believes that this information is relevant to consider 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 considered that Federated Hermes may
derive a benefit to its reputation as an adviser to the Fund, which may help in attracting other clients and investment personnel.
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 the CCO’s presentation and statements and the information accompanying the CCO Management Fee
Report. The Board recognized that its 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.
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.
Annual
Financial Statements and Additional Information
25
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 information 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 Clover Small Value Fund
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us at
FederatedHermes.com/us
or call 1-800-341-7400.
or call 1-800-341-7400.
Federated Securities Corp., Distributor
CUSIP 314172289
CUSIP 314172271
CUSIP 314172172
CUSIP 314172263
CUSIP 31421N808
CUSIP 314172271
CUSIP 314172172
CUSIP 314172263
CUSIP 31421N808
41198 (11/25)
©
2025 Federated Hermes, Inc.
Annual Financial Statements
and Additional Information
and Additional Information
September 30, 2025
|
Share
Class | Ticker
|
A | BEARX
|
C | PBRCX
|
Institutional | PBRIX
|
|
Federated Hermes Prudent Bear Fund
A Portfolio of Federated Hermes Equity Funds
Not FDIC Insured ▪ May
Lose Value ▪ No Bank Guarantee
CONTENTS
Portfolio
of Investments
September 30, 2025
|
Shares,
Principal
Amount
or
Contracts |
|
|
Value
|
|
|
|
U.S.
TREASURIES—82.1% |
|
|
|
1
|
U.S.
Treasury Bills—82.1% |
|
|
$32,000,000
|
|
United
States Treasury Bill, 3.812%, 1/20/2026 |
$ 31,623,066
|
|
50,000,000
|
2
|
United
States Treasury Bill, 4.035%, 10/9/2025 |
49,955,085
|
|
|
|
TOTAL
U.S. TREASURIES
(IDENTIFIED
COST $81,579,000) |
81,578,151
|
|
|
|
COMMON
STOCKS—10.7% |
|
|
|
|
Communication
Services—0.5% |
|
|
600
|
|
Alphabet,
Inc., Class A |
145,860
|
|
6,000
|
3
|
Criteo
S.A., ADR |
135,600
|
|
10,000
|
3
|
DoubleVerify
Holdings, Inc. |
119,800
|
|
2,500
|
3
|
Match
Group Holdings II LLC |
88,300
|
|
|
|
TOTAL
|
489,560
|
|
|
|
Consumer
Discretionary—1.0% |
|
|
1,000
|
3
|
Airbnb,
Inc. |
121,420
|
|
3,000
|
3
|
Chipotle
Mexican Grill, Inc. |
117,570
|
|
8,000
|
3
|
Cirsa
Enterprises S.A. |
145,748
|
|
4,000
|
3
|
DraftKings,
Inc. |
149,600
|
|
20,000
|
3
|
HBX
Group International PLC |
169,597
|
|
3,000
|
|
JD.com,
Inc., ADR |
104,940
|
|
10,000
|
3
|
KinderCare
Learning Cos., Inc. |
66,400
|
|
8,000
|
3
|
Savers
Value Village, Inc. |
106,000
|
|
|
|
TOTAL
|
981,275
|
|
|
|
Consumer
Staples—0.3% |
|
|
29,356
|
3
|
Hain
Celestial Group, Inc. |
46,382
|
|
1,000
|
|
Kimberly-Clark
Corp. |
124,340
|
|
1,000
|
|
Philip
Morris International, Inc. |
162,200
|
|
|
|
TOTAL
|
332,922
|
|
|
|
Energy—0.4%
|
|
|
4,000
|
|
Civitas
Resources, Inc. |
130,000
|
|
1,400
|
|
ConocoPhillips
|
132,426
|
|
8,000
|
3
|
Infinity
Natural Resources, Inc. |
104,880
|
|
|
|
TOTAL
|
367,306
|
|
|
|
Financials—1.9%
|
|
|
300
|
|
American
Express Co. |
99,648
|
|
4,603
|
3
|
American
Integrity Insurance Group, Inc. |
102,693
|
|
150
|
|
BlackRock,
Inc. |
174,880
|
|
300
|
|
Cboe
Global Markets, Inc. |
73,575
|
|
1,400
|
|
Citizens
Financial Group, Inc. |
74,424
|
|
1,800
|
3
|
Fiserv,
Inc. |
232,074
|
|
200
|
|
Goldman
Sachs Group, Inc. |
159,270
|
|
600
|
|
JPMorgan
Chase & Co. |
189,258
|
|
600
|
|
M&T
Bank Corp. |
118,572
|
|
3,750
|
|
Neptune
Insurance Holdings, Inc., Class A |
75,000
|
|
10,000
|
3
|
Oportun
Financial Corp. |
61,700
|
|
3,000
|
3
|
PayPal
Holdings, Inc. |
201,180
|
|
1,200
|
|
State
Street Corp. |
139,212
|
|
500
|
|
The
Hartford Insurance Group, Inc. |
66,695
|
|
500
|
|
Visa,
Inc., Class A |
170,690
|
|
|
|
TOTAL
|
1,938,871
|
Annual
Financial Statements and Additional Information
1
|
Shares,
Principal
Amount
or
Contracts |
|
|
Value
|
|
|
|
COMMON
STOCKS—continued |
|
|
|
|
Health
Care—2.4% |
|
|
600
|
|
AbbVie,
Inc. |
$ 138,924
|
|
1,396
|
3
|
AbCellera
Biologics, Inc. |
7,022
|
|
2,800
|
3
|
BioMarin
Pharmaceutical, Inc. |
151,648
|
|
2,600
|
|
Bristol-Myers
Squibb Co. |
117,260
|
|
3,000
|
3
|
CG
Oncology, Inc. |
120,840
|
|
3,500
|
|
Concentra
Group Holdings Parent, Inc. |
73,255
|
|
4,000
|
3
|
Dynavax
Technologies Corp. |
39,720
|
|
130
|
|
Eli
Lilly & Co. |
99,190
|
|
800
|
3
|
Illumina,
Inc. |
75,976
|
|
4,000
|
3
|
Inmode
Ltd. |
59,600
|
|
650
|
3
|
IQVIA
Holdings, Inc. |
123,461
|
|
6,000
|
3
|
Kyverna
Therapeutics, Inc. |
36,000
|
|
4,000
|
3
|
LB
Pharmaceuticals, Inc. |
63,160
|
|
4,400
|
3
|
Legend
Biotech Corp., ADR |
143,484
|
|
1,200
|
|
Merck
& Co., Inc. |
100,716
|
|
1,000
|
3
|
Neurocrine
Biosciences, Inc. |
140,380
|
|
16,000
|
3
|
Relay
Therapeutics, Inc. |
83,520
|
|
3,500
|
|
Royalty
Pharma PLC |
123,480
|
|
3,000
|
3
|
Schrodinger,
Inc. |
60,180
|
|
8,000
|
|
Simulations
Plus, Inc. |
120,560
|
|
95,000
|
3
|
Sophia
Genetics S.A. |
452,200
|
|
2,000
|
3
|
Structure
Therapeutics, Inc., ADR |
56,000
|
|
|
|
TOTAL
|
2,386,576
|
|
|
|
Industrials—0.9%
|
|
|
25,000
|
3
|
Astroscale
Holdings, Inc. |
112,603
|
|
400
|
|
Lockheed
Martin Corp. |
199,684
|
|
5,800
|
3
|
Lyft,
Inc. |
127,658
|
|
5,000
|
3
|
Sun
Country Airlines Holdings, Inc. |
59,050
|
|
10,000
|
3
|
Timee,
Inc. |
99,788
|
|
1,700
|
3
|
Uber
Technologies, Inc. |
166,549
|
|
1,100
|
|
Vertiv
Holdings Co. |
165,946
|
|
|
|
TOTAL
|
931,278
|
|
|
|
Information
Technology—2.2% |
|
|
400
|
3
|
Adobe,
Inc. |
141,100
|
|
10,000
|
3
|
Arteris,
Inc. |
101,000
|
|
5,600
|
3
|
Innoscripta
SE |
773,570
|
|
500
|
|
Micron
Technology, Inc. |
83,660
|
|
8,000
|
3
|
Pattern
Group, Inc. |
109,600
|
|
15,000
|
3
|
Qualco
Group S.A. |
96,858
|
|
500
|
|
Qualcomm,
Inc. |
83,180
|
|
16,000
|
3
|
Rigaku
Holdings Corp. |
97,061
|
|
80,000
|
3
|
Silvaco
Group, Inc. |
432,800
|
|
14,000
|
3
|
SimilarWeb
Ltd. |
130,200
|
|
10,000
|
3
|
UiPath,
Inc. |
133,800
|
|
|
|
TOTAL
|
2,182,829
|
|
|
|
Materials—0.2%
|
|
|
800
|
|
Aptargroup,
Inc. |
106,928
|
|
15,000
|
3
|
Lithium
Royalty Corp. |
66,394
|
|
|
|
TOTAL
|
173,322
|
|
|
|
Real
Estate—0.6% |
|
|
600
|
|
American
Tower Corp. |
115,392
|
|
4,000
|
|
Americold
Realty Trust, Inc. |
48,960
|
Annual
Financial Statements and Additional Information
2
|
Shares,
Principal
Amount
or
Contracts |
|
|
Value
|
|
|
|
COMMON
STOCKS—continued |
|
|
|
|
Real
Estate—continued |
|
|
1,700
|
|
Crown
Castle, Inc. |
$ 164,033
|
|
6,000
|
|
Host
Hotels & Resorts, Inc. |
102,120
|
|
500
|
|
Public
Storage |
144,425
|
|
|
|
TOTAL
|
574,930
|
|
|
|
Utilities—0.3%
|
|
|
1,000
|
|
Duke
Energy Corp. |
123,750
|
|
1,000
|
|
National
Fuel Gas Co. |
92,370
|
|
3,000
|
|
UGI
Corp. |
99,780
|
|
|
|
TOTAL
|
315,900
|
|
|
|
TOTAL
COMMON STOCKS
(IDENTIFIED
COST $11,239,258) |
10,674,769
|
|
|
|
PURCHASED
PUT OPTIONS—0.1% |
|
|
200
|
|
SPDR
S&P 500 ETF Trust (PUT-Option), Notional Amount $13,323,600, Exercise Price $635, Expiration Date 10/17/2025 |
29,000
|
|
300
|
|
SPDR
S&P 500 ETF Trust (PUT-Option), Notional Amount $19,985,400, Exercise Price $640, Expiration Date 10/10/2025 |
25,050
|
|
400
|
|
SPDR
S&P 500 ETF Trust (PUT-Option), Notional Amount $26,647,200, Exercise Price $650, Expiration Date 10/3/2025 |
19,400
|
|
|
|
TOTAL
PURCHASED PUT OPTIONS
(IDENTIFIED
COST $109,266) |
73,450
|
|
|
|
INVESTMENT
COMPANY—8.1% |
|
|
8,029,553
|
|
Federated
Hermes Government Obligations Fund, Premier Shares, 4.06%4
(IDENTIFIED
COST $8,029,553) |
8,029,553
|
|
|
|
TOTAL
INVESTMENT IN SECURITIES—101.0%
(IDENTIFIED
COST $100,957,077)5
|
100,355,923
|
|
|
|
OTHER
ASSETS AND LIABILITIES - NET—(1.0)%6
|
(1,021,015)
|
|
|
|
NET
ASSETS—100% |
$99,334,908
|
SECURITIES SOLD SHORT—(71.6)%
|
Shares
|
|
|
Value
|
|
|
|
Broad
Equity Index—(62.5)% |
|
|
2,000
|
|
ARK
Fintech Innovation ETF |
$ 113,840
|
|
600
|
|
Invesco
QQQ Trust Series 1 |
360,222
|
|
3,000
|
|
iShares
Russell 2000 ETF |
725,880
|
|
90,200
|
|
S&P
Depositary Receipts Trust |
60,089,436
|
|
1,600
|
|
SPDR
Dow Jones Industrial Average ETF Trust |
741,984
|
|
|
|
TOTAL
|
62,031,362
|
|
|
|
Communication
Services—(0.4)% |
|
|
750
|
3
|
AST
SpaceMobile, Inc. |
36,810
|
|
200
|
|
Communication
Services Select Sector SPDR |
23,674
|
|
800
|
3
|
GCI
Liberty, Inc. |
30,044
|
|
280
|
3
|
Live
Nation Entertainment, Inc. |
45,752
|
|
320
|
3
|
Madison
Square Garden Sports Corp. |
72,640
|
|
600
|
|
Omnicom
Group, Inc. |
48,918
|
|
220
|
3
|
Take-Two
Interactive Software, Inc. |
56,839
|
|
620
|
3
|
Trade
Desk, Inc./The |
30,386
|
|
1,080
|
|
Verizon
Communications, Inc. |
47,466
|
|
3,000
|
3
|
ZoomInfo
Technologies, Inc. |
32,730
|
|
|
|
TOTAL
|
425,259
|
|
|
|
Consumer
Discretionary—(0.9)% |
|
|
1,300
|
3
|
Amer
Sports, Inc. |
45,175
|
|
800
|
|
Choice
Hotels International, Inc. |
85,528
|
|
100
|
|
Consumer
Discretionary Select Sector SPDR Fund |
23,964
|
|
250
|
|
Dick’s
Sporting Goods, Inc. |
55,555
|
|
850
|
|
Genuine
Parts Co. |
117,810
|
Annual
Financial Statements and Additional Information
3
|
Shares
|
|
|
Value
|
|
|
|
Consumer
Discretionary—continued |
|
|
700
|
|
Hyatt
Hotels Corp. |
$ 99,351
|
|
2,600
|
|
LKQ
Corp. |
79,404
|
|
2,900
|
3
|
Millrose
Properties, Inc. |
97,469
|
|
12,900
|
|
Newell
Brands, Inc. |
67,596
|
|
1,290
|
|
Restaurant
Brands International, Inc. |
82,741
|
|
500
|
3
|
SharkNinja,
Inc. |
51,575
|
|
2,600
|
3
|
Valvoline,
Inc. |
93,366
|
|
|
|
TOTAL
|
899,534
|
|
|
|
Consumer
Staples—(0.7)% |
|
|
1,200
|
|
Bunge
Global S.A. |
97,500
|
|
3,000
|
|
Consumer
Staples Select Sector SPDR Fund |
235,110
|
|
1,450
|
|
McCormick
& Co., Inc. |
97,019
|
|
1,400
|
|
Mondelez
International, Inc. |
87,458
|
|
4,300
|
|
Reynolds
Consumer Products, Inc. |
105,221
|
|
1,500
|
|
The
Coca-Cola Co. |
99,480
|
|
|
|
TOTAL
|
721,788
|
|
|
|
Energy—(0.8)%
|
|
|
730
|
|
Diamondback
Energy, Inc. |
104,463
|
|
800
|
|
DT
Midstream, Inc. |
90,448
|
|
2,700
|
|
Energy
Select Sector SPDR Fund |
241,218
|
|
3,200
|
|
Kinder
Morgan, Inc. |
90,592
|
|
2,600
|
|
Viper
Energy, Inc. |
99,372
|
|
1,700
|
|
Williams
Cos., Inc. |
107,695
|
|
|
|
TOTAL
|
733,788
|
|
|
|
Financials—(1.1)%
|
|
|
10,000
|
|
AGNC
Investment Corp. |
97,900
|
|
3,000
|
|
Ally
Financial, Inc. |
117,600
|
|
4,800
|
|
Blue
Owl Capital, Inc. |
81,264
|
|
700
|
|
Brown
& Brown |
65,653
|
|
5,000
|
|
KeyCorp
|
93,450
|
|
1,200
|
|
Ryan
Specialty Group Holdings, Inc. |
67,632
|
|
800
|
|
South
State Corp. |
79,096
|
|
6,200
|
|
Starwood
Property Trust, Inc. |
120,094
|
|
1,700
|
|
TPG,
Inc. |
97,665
|
|
18,000
|
|
UWM
Holdings Corp. |
109,620
|
|
50
|
|
White
Mountains Insurance Group, Inc. |
83,576
|
|
300
|
|
Willis
Towers Watson PLC |
103,635
|
|
|
|
TOTAL
|
1,117,185
|
|
|
|
Health
Care—(1.1)% |
|
|
3,000
|
3
|
Acadia
Healthcare Co., Inc. |
74,280
|
|
400
|
|
Becton
Dickinson & Co. |
74,868
|
|
1,700
|
|
Bruker
Corp. |
55,233
|
|
900
|
3
|
Cooper
Cos., Inc. |
61,704
|
|
5,000
|
3
|
Elanco
Animal Health, Inc. |
100,700
|
|
1,000
|
|
GE
HealthCare Technologies, Inc. |
75,100
|
|
1,500
|
|
Health
Care Select Sector SPDR Fund |
208,755
|
|
120
|
3
|
Regeneron
Pharmaceuticals, Inc. |
67,472
|
|
700
|
|
Revvity,
Inc. |
61,355
|
|
1,200
|
|
SPDR
S&P Biotech ETF |
120,240
|
|
3,000
|
3
|
Summit
Therapeutics, Inc. |
61,980
|
|
170
|
|
Thermo
Fisher Scientific, Inc. |
82,454
|
|
|
|
TOTAL
|
1,044,141
|
|
|
|
Industrials—(1.1)%
|
|
|
600
|
|
3M
Co. |
93,108
|
|
1,200
|
|
Aaon,
Inc. |
112,128
|
Annual
Financial Statements and Additional Information
4
|
Shares
|
|
|
Value
|
|
|
|
Industrials—continued
|
|
|
500
|
3
|
Boeing
Co. |
$ 107,915
|
|
300
|
|
Cummins,
Inc. |
126,711
|
|
1,500
|
3
|
Everus
Construction Group, Inc. |
128,625
|
|
500
|
3
|
FTI
Consulting, Inc. |
80,825
|
|
1,100
|
|
Ingersoll-Rand,
Inc. |
90,882
|
|
500
|
|
Nordson
Corp. |
113,475
|
|
800
|
|
Simpson
Manufacturing Co., Inc. |
133,968
|
|
1,700
|
3
|
Trex
Co., Inc. |
87,839
|
|
|
|
TOTAL
|
1,075,476
|
|
|
|
Information
Technology—(1.2)% |
|
|
220
|
|
Accenture
PLC |
54,252
|
|
260
|
|
Analog
Devices, Inc. |
63,882
|
|
1,130
|
|
Bentley
Systems, Inc. |
58,172
|
|
2,500
|
3
|
CCC
Intelligent Solutions Holdings, Inc. |
22,775
|
|
310
|
|
CDW
Corp. |
49,377
|
|
550
|
3
|
Coherent
Corp. |
59,246
|
|
920
|
|
Crane
NXT Co. |
61,704
|
|
480
|
|
Dell
Technologies, Inc. |
68,050
|
|
1,000
|
3
|
Dynatrace
Holdings LLC |
48,450
|
|
500
|
|
Entegris,
Inc. |
46,230
|
|
150
|
3
|
First
Solar, Inc. |
33,080
|
|
1,200
|
|
Hewlett
Packard Enterprise Co. |
29,472
|
|
1,500
|
|
HP,
Inc. |
40,845
|
|
2,800
|
3
|
Ingram
Micro Holding Corp. |
60,172
|
|
600
|
|
MKS,
Inc. |
74,262
|
|
120
|
|
Roper
Technologies, Inc. |
59,843
|
|
100
|
3
|
Synopsys,
Inc. |
49,339
|
|
270
|
|
TD
SYNNEX Corp. |
44,213
|
|
500
|
|
Technology
Select Sector SPDR Fund |
140,930
|
|
80
|
3
|
Teledyne
Technologies, Inc. |
46,883
|
|
700
|
3
|
Trimble,
Inc. |
57,155
|
|
380
|
|
Universal
Display Corp. |
54,579
|
|
|
|
TOTAL
|
1,222,911
|
|
|
|
Materials—(0.5)%
|
|
|
290
|
|
Air
Products & Chemicals, Inc. |
79,089
|
|
3,000
|
|
Dow,
Inc. |
68,790
|
|
3,900
|
|
Graphic
Packaging Holding Co. |
76,323
|
|
150
|
|
Martin
Marietta Materials |
94,542
|
|
1,500
|
|
Materials
Select Sector SPDR Fund |
134,430
|
|
1,800
|
|
Smurfit
WestRock PLC |
76,626
|
|
|
|
TOTAL
|
529,800
|
|
|
|
Real
Estate—(0.7)% |
|
|
2,800
|
|
Cousins
Properties, Inc. |
81,032
|
|
310
|
|
Essex
Property Trust, Inc. |
82,975
|
|
7,500
|
|
Real
Estate Select Sector SPDR Fund |
315,975
|
|
2,300
|
|
Rexford
Industrial Realty, Inc. |
94,553
|
|
500
|
|
Welltower,
Inc. |
89,070
|
|
|
|
TOTAL
|
663,605
|
|
|
|
Utilities—(0.6)%
|
|
|
1,000
|
|
Alliant
Energy Corp. |
67,410
|
|
1,700
|
|
CenterPoint
Energy, Inc. |
65,960
|
|
250
|
|
Constellation
Energy Corp. |
82,267
|
|
1,100
|
|
Dominion
Energy, Inc. |
67,287
|
|
1,500
|
|
Essential
Utilities, Inc. |
59,850
|
|
700
|
|
Sempra
Energy |
62,986
|
Annual
Financial Statements and Additional Information
5
|
Shares
|
|
|
Value
|
|
|
|
Utilities—continued
|
|
|
2,500
|
|
Utilities
Select Sector SPDR Fund |
$ 218,025
|
|
|
|
TOTAL
|
623,785
|
|
|
|
Total
Securities Sold Short
(PROCEEDS
$32,943,293) |
$71,088,634
|
At September 30, 2025, the Fund had the
following outstanding futures contracts:
|
Description
|
Number
of
Contracts
|
Notional
Value
|
Expiration
Date
|
Value
and
Unrealized
(Depreciation)
|
|
Short
Futures: |
|
|
|
|
|
S&P
500 E-Mini Short Futures |
95
|
$32,009,063
|
December
2025 |
$(426,108)
|
Net Unrealized Depreciation on Futures Contracts
and on the Value of Securities Sold Short is included in “Other Assets and Liabilities—Net.”
Transactions with affiliated investment
companies, which are funds managed by the Adviser or an affiliate of the Adviser, during the period
ended September 30, 2025, were as follows:
|
|
Federated
Hermes
Government
Obligations
Fund,
Premier
Shares |
|
Value
as of 9/30/2024 |
$20,167,456
|
|
Purchases
at Cost |
$338,200,908
|
|
Proceeds
from Sales |
$(350,338,811)
|
|
Change
in Unrealized Appreciation/Depreciation |
$—
|
|
Net
Realized Gain/(Loss) |
$—
|
|
Value
as of 9/30/2025 |
$8,029,553
|
|
Shares
Held as of 9/30/2025 |
8,029,553
|
|
Dividend
Income |
$1,331,437
|
|
1
|
Discount
rate(s) at time of purchase. |
|
2
|
All
or a portion of this security is pledged as collateral to ensure the Fund is able to satisfy the obligations of its outstanding short
futures and securities sold short
contracts.
|
|
3
|
Non-income-producing
security. |
|
4
|
7-day
net yield. |
|
5
|
The
cost of investments for federal tax purposes amounts to $101,735,879. |
|
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 net assets at September 30, 2025.
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
Financial Statements and Additional Information
6
The following is a summary of the inputs used, as of September 30, 2025, 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
|
|
Debt
Securities: |
|
|
|
|
|
U.S.
Treasuries |
$—
|
$81,578,151
|
$—
|
$81,578,151
|
|
Equity
Securities: |
|
|
|
|
|
Common
Stocks |
|
|
|
|
|
Domestic
|
7,900,624
|
—
|
—
|
7,900,624
|
|
International
|
1,278,920
|
1,495,225
|
—
|
2,774,145
|
|
Purchased
Put Options |
73,450
|
—
|
—
|
73,450
|
|
Investment
Company |
8,029,553
|
—
|
—
|
8,029,553
|
|
TOTAL
SECURITIES |
$17,282,547
|
$83,073,376
|
$—
|
$100,355,923
|
|
Other
Financial Instruments: |
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Securities
Sold Short |
$(71,088,634)
|
$—
|
$—
|
$(71,088,634)
|
|
Futures
Contracts |
(426,108)
|
—
|
—
|
(426,108)
|
|
TOTAL
OTHER FINANCIAL INSTRUMENTS |
$(71,514,742)
|
$—
|
$—
|
$(71,514,742)
|
|
The
following acronym(s) are used throughout this portfolio: |
| |
|
ADR
|
—American
Depositary Receipt | |
|
ETF
|
—Exchange-Traded
Fund | |
|
SPDR
|
—Standard
& Poor’s Depositary Receipt | |
See Notes which are an integral part of
the Financial Statements
Annual
Financial Statements and Additional Information
7
Financial
Highlights–Class
A Shares
(For a Share Outstanding Throughout Each
Period)
|
|
Year Ended September 30,
| ||||
|
|
2025
|
2024
|
2023
|
2022
|
2021
|
|
Net Asset
Value, Beginning of Period |
$5.12
|
$7.13
|
$8.68
|
$7.79
|
$10.11
|
|
Income
From Investment Operations: |
|
|
|
|
|
|
Net
investment income (loss)1
|
0.19
|
0.30
|
0.31
|
(0.09)
|
(0.23)
|
|
Net
realized and unrealized gain (loss) |
(0.74)
|
(1.54)
|
(1.86)
|
0.98
|
(2.09)
|
|
Total
From Investment Operations |
(0.55)
|
(1.24)
|
(1.55)
|
0.89
|
(2.32)
|
|
Less Distributions:
|
|
|
|
|
|
|
Distributions
from net investment income |
(0.46)
|
(0.77)
|
—
|
—
|
—
|
|
Net
Asset Value, End of Period |
$4.11
|
$5.12
|
$7.13
|
$8.68
|
$7.79
|
|
Total
Return2
|
(11.64)%
|
(18.63)%
|
(17.86)%
|
11.42%
|
(22.95)%
|
|
Ratios
to Average Net Assets: |
|
|
|
|
|
|
Net
expenses3
|
2.68%
|
2.60%
|
2.67%
|
2.65%
|
3.02%
|
|
Net
expenses excluding dividends and other expenses related to short sales |
1.78%
|
1.78%
|
1.77%
|
1.78%
|
1.78%
|
|
Net
investment income (loss) |
4.15%
|
5.12%
|
4.11%
|
(1.16)%
|
(2.68)%
|
|
Expense
waiver/reimbursement4
|
0.24%
|
0.10%
|
0.03%
|
0.04%
|
0.11%
|
|
Supplemental
Data: |
|
|
|
|
|
|
Net
assets, end of period (000 omitted) |
$29,341
|
$36,415
|
$62,984
|
$77,378
|
$40,185
|
|
Portfolio
turnover5
|
249%
|
140%
|
137%
|
201%
|
148%
|
|
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
Financial Statements and Additional Information
8
Financial
Highlights–Class
C Shares
(For a Share Outstanding Throughout Each
Period)
|
|
Year Ended September 30,
| ||||
|
|
2025
|
2024
|
2023
|
2022
|
2021
|
|
Net Asset
Value, Beginning of Period |
$4.27
|
$6.08
|
$7.46
|
$6.74
|
$8.81
|
|
Income
From Investment Operations: |
|
|
|
|
|
|
Net
investment income (loss)1
|
0.13
|
0.21
|
0.22
|
(0.12)
|
(0.25)
|
|
Net
realized and unrealized gain (loss) |
(0.61)
|
(1.29)
|
(1.60)
|
0.84
|
(1.82)
|
|
Total
From Investment Operations |
(0.48)
|
(1.08)
|
(1.38)
|
0.72
|
(2.07)
|
|
Less Distributions:
|
|
|
|
|
|
|
Distributions
from net investment income |
(0.43)
|
(0.73)
|
—
|
—
|
—
|
|
Net
Asset Value, End of Period |
$3.36
|
$4.27
|
$6.08
|
$7.46
|
$6.74
|
|
Total
Return2
|
(12.37)%
|
(19.19)%
|
(18.50)%
|
10.68%
|
(23.50)%
|
|
Ratios
to Average Net Assets: |
|
|
|
|
|
|
Net
expenses3
|
3.42%
|
3.35%
|
3.45%
|
3.42%
|
3.77%
|
|
Net
expenses excluding dividends and other expenses related to short sales |
2.53%
|
2.53%
|
2.52%
|
2.53%
|
2.53%
|
|
Net
investment income (loss) |
3.41%
|
4.37%
|
3.36%
|
(1.89)%
|
(3.44)%
|
|
Expense
waiver/reimbursement4
|
0.24%
|
0.10%
|
0.03%
|
0.04%
|
0.11%
|
|
Supplemental
Data: |
|
|
|
|
|
|
Net
assets, end of period (000 omitted) |
$8,714
|
$11,788
|
$16,981
|
$17,104
|
$8,018
|
|
Portfolio
turnover5
|
249%
|
140%
|
137%
|
201%
|
148%
|
|
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
Financial Statements and Additional Information
9
Financial
Highlights–Institutional
Shares
(For a Share Outstanding Throughout Each
Period)
|
|
Year Ended September 30,
| ||||
|
|
2025
|
2024
|
2023
|
2022
|
2021
|
|
Net Asset
Value, Beginning of Period |
$5.32
|
$7.37
|
$8.95
|
$8.02
|
$10.38
|
|
Income
From Investment Operations: |
|
|
|
|
|
|
Net
investment income (loss)1
|
0.22
|
0.34
|
0.34
|
(0.06)
|
(0.21)
|
|
Net
realized and unrealized gain (loss) |
(0.78)
|
(1.60)
|
(1.92)
|
0.99
|
(2.15)
|
|
Total
From Investment Operations |
(0.56)
|
(1.26)
|
(1.58)
|
0.93
|
(2.36)
|
|
Less Distributions:
|
|
|
|
|
|
|
Distributions
from net investment income |
(0.48)
|
(0.79)
|
—
|
—
|
—
|
|
Net
Asset Value, End of Period |
$4.28
|
$5.32
|
$7.37
|
$8.95
|
$8.02
|
|
Total
Return2
|
(11.49)%
|
(18.31)%
|
(17.65)%
|
11.60%
|
(22.74)%
|
|
Ratios
to Average Net Assets: |
|
|
|
|
|
|
Net
expenses3
|
2.40%
|
2.24%
|
2.43%
|
2.42%
|
2.69%
|
|
Net
expenses excluding dividends and other expenses related to short sales |
1.53%
|
1.53%
|
1.52%
|
1.53%
|
1.53%
|
|
Net
investment income (loss) |
4.45%
|
5.48%
|
4.37%
|
(0.76)%
|
(2.38)%
|
|
Expense
waiver/reimbursement4
|
0.24%
|
0.10%
|
0.03%
|
0.03%
|
0.11%
|
|
Supplemental
Data: |
|
|
|
|
|
|
Net
assets, end of period (000 omitted) |
$61,280
|
$104,027
|
$362,247
|
$406,207
|
$116,071
|
|
Portfolio
turnover5
|
249%
|
140%
|
137%
|
201%
|
148%
|
|
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
Financial Statements and Additional Information
10
Statement
of Assets and Liabilities
September 30, 2025
|
Assets:
|
|
|
Investment
in securities, at value including $8,029,553 of investments in affiliated holdings* (identified
cost $100,957,077, including
$8,029,553
of identified cost in affiliated holdings) |
$100,355,923
|
|
Deposit
at broker for short sales |
71,096,786
|
|
Income
receivable |
11,513
|
|
Income
receivable from affiliated holdings |
115,641
|
|
Interest
receivable on short positions |
61,995
|
|
Receivable
for investments sold |
145,380
|
|
Receivable
for shares sold |
1,625,416
|
|
Total
Assets |
173,412,654
|
|
Liabilities:
|
|
|
Securities
sold short, at value (proceeds $32,943,293) |
71,088,634
|
|
Dividends
payable on short positions |
184,601
|
|
Payable
for investments purchased |
470,255
|
|
Payable
for shares redeemed |
1,860,250
|
|
Foreign
currency payable to bank (identified cost $21,460) |
21,458
|
|
Payable
to bank |
171,000
|
|
Payable
for variation margin on futures contracts |
119,921
|
|
Payable
for investment adviser fee (Note 5)
|
2,506
|
|
Payable
for administrative fee (Note 5)
|
212
|
|
Payable
for distribution services fee (Note 5)
|
5,405
|
|
Payable
for other service fees (Notes 2 and 5)
|
10,524
|
|
Accrued
expenses (Note 5)
|
142,980
|
|
Total
Liabilities |
74,077,746
|
|
Net
assets for 24,053,165 shares outstanding |
$99,334,908
|
|
Net Assets
Consist of: |
|
|
Paid-in
capital |
$1,217,348,680
|
|
Total
distributable earnings (loss) |
(1,118,013,772)
|
|
Net
Assets |
$99,334,908
|
|
Net Asset
Value, Offering Price and Redemption Proceeds Per Share: |
|
|
Class A
Shares: |
|
|
Net
asset value per share ($29,340,804 ÷ 7,136,792 shares outstanding), no par value, unlimited shares authorized |
$4.11
|
|
Offering
price per share (100/94.50 of $4.11) |
$4.35
|
|
Redemption
proceeds per share |
$4.11
|
|
Class C
Shares: |
|
|
Net
asset value per share ($8,714,450 ÷ 2,593,802 shares outstanding), no par value, unlimited shares authorized |
$3.36
|
|
Offering
price per share |
$3.36
|
|
Redemption
proceeds per share (99.00/100 of $3.36) |
$3.33
|
|
Institutional
Shares: |
|
|
Net
asset value per share ($61,279,654 ÷ 14,322,571 shares outstanding), no par value, unlimited shares authorized |
$4.28
|
|
Offering
price per share |
$4.28
|
|
Redemption
proceeds per share |
$4.28
|
|
*
|
See
information listed after the Fund’s Portfolio of Investments. |
See Notes which are an integral part of
the Financial Statements
Annual
Financial Statements and Additional Information
11
Statement
of Operations
Year Ended September
30, 2025
|
Investment
Income: |
|
|
Interest
and rebate |
$6,513,704
|
|
Dividends
(including $1,331,437 received from affiliated holdings* and net of foreign taxes withheld of $524) |
1,481,589
|
|
TOTAL
INCOME |
7,995,293
|
|
Expenses:
|
|
|
Investment
adviser fee (Note 5)
|
1,459,650
|
|
Administrative
fee (Note 5)
|
93,396
|
|
Custodian
fees |
70,024
|
|
Transfer
agent fees |
175,268
|
|
Directors’/Trustees’
fees (Note 5)
|
1,612
|
|
Auditing
fees |
44,271
|
|
Legal
fees |
13,375
|
|
Portfolio
accounting fees |
74,895
|
|
Distribution
services fee (Note 5)
|
76,027
|
|
Other
service fees (Notes 2 and 5)
|
104,317
|
|
Share
registration costs |
61,132
|
|
Printing
and postage |
50,935
|
|
Miscellaneous
(Note 5)
|
25,576
|
|
Expenses
related to short positions |
1,023,479
|
|
TOTAL
EXPENSES |
3,273,957
|
|
Waiver/reimbursement
of investment adviser fee (Note 5)
|
(277,178)
|
|
Net
expenses |
2,996,779
|
|
Net
investment income |
4,998,514
|
|
Realized
and Unrealized Gain (Loss) on Investments, Foreign Currency Transactions, Futures Contracts and Short Sales: |
|
|
Net
realized gain on investments |
971,446
|
|
Net
realized loss on foreign currency transactions |
(12,654)
|
|
Net
realized loss on futures contracts |
(6,033,154)
|
|
Net
realized loss on short sales |
(20,293,496)
|
|
Net
change in unrealized depreciation of investments |
41,122
|
|
Net
change in unrealized appreciation of translation of assets and liabilities in foreign currency |
(652)
|
|
Net
change in unrealized depreciation of futures contracts |
898,905
|
|
Net
change in unrealized depreciation of securities sold short |
3,228,136
|
|
Net
realized and unrealized gain (loss) on investments, foreign currency transactions, futures contracts and short sales |
(21,200,347)
|
|
Change
in net assets resulting from operations |
$(16,201,833)
|
|
*
|
See
information listed after the Fund’s Portfolio of Investments. |
See Notes which are an integral part of
the Financial Statements
Annual
Financial Statements and Additional Information
12
Statement
of Changes in Net Assets
|
Year
Ended September 30 |
2025
|
2024
|
|
Increase
(Decrease) in Net Assets |
|
|
|
Operations:
|
|
|
|
Net
investment income |
$4,998,514
|
$10,525,729
|
|
Net
realized gain (loss) |
(25,367,858)
|
(41,256,311)
|
|
Net
change in unrealized appreciation/depreciation |
4,167,511
|
(13,045,833)
|
|
CHANGE
IN NET ASSETS RESULTING FROM OPERATIONS |
(16,201,833)
|
(43,776,415)
|
|
Distributions
to Shareholders: |
|
|
|
Class
A Shares |
(2,871,775)
|
(6,384,663)
|
|
Class
C Shares |
(1,080,704)
|
(2,034,326)
|
|
Institutional
Shares |
(6,216,984)
|
(14,389,390)
|
|
CHANGE
IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS |
(10,169,463)
|
(22,808,379)
|
|
Share Transactions:
|
|
|
|
Proceeds
from sale of shares |
153,442,216
|
169,701,338
|
|
Net
asset value of shares issued to shareholders in payment of distributions declared |
10,078,793
|
22,639,352
|
|
Cost
of shares redeemed |
(190,044,100)
|
(415,738,538)
|
|
CHANGE
IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS |
(26,523,091)
|
(223,397,848)
|
|
Change
in net assets |
(52,894,387)
|
(289,982,642)
|
|
Net Assets:
|
|
|
|
Beginning
of period |
152,229,295
|
442,211,937
|
|
End
of period |
$99,334,908
|
$152,229,295
|
See Notes which are an integral part of
the Financial Statements
Annual
Financial Statements and Additional Information
13
Notes to
Financial Statements
September 30, 2025
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 Prudent Bear 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 three classes of shares: Class A Shares, Class C 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 seek 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 including shares of exchange-traded funds 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.
■
Fixed-income
securities are fair valued using price evaluations provided by a pricing service approved by Federated Equity Management
Company of Pennsylvania (the “Adviser”).
■
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 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 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
Annual
Financial Statements and Additional Information
14
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.
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 and capital gains, if any, are declared and paid at least 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 waiver/reimbursement of $277,178 is disclosed in Note 5.
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 September 30, 2025, other
service fees for the Fund were as follows:
|
|
Other
Service
Fees
Incurred |
|
Class
A Shares |
$78,974
|
|
Class
C Shares |
25,343
|
|
TOTAL
|
$104,317
|
Annual
Financial Statements and Additional Information
15
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 September 30, 2025, 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 September 30, 2025, tax years 2022
through 2025 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 seek to increase return and to manage market and sector/asset class risks. 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 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 clearinghouse, as counterparty to all exchange-traded futures contracts, guarantees the futures contracts
against default.
Futures contracts outstanding at period
end are listed after the Fund’s Portfolio of Investments.
The average notional
value of short futures contracts held by the Fund throughout the period was $41,850,894. This is based on amounts
held as of each month-end throughout the fiscal period.
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.
Option Contracts
The
Fund buys or sells put and call options to seek to increase returns and to manage individual security, market and sector/asset class risks.
The seller (“writer”) of an option receives a payment or premium, from the buyer, which the writer keeps regardless of whether
the buyer exercises the option. When the Fund writes a put or
call option, an amount equal to the premium received is recorded as a liability and
subsequently marked to market to reflect the current value of the option written. Premiums received from writing options which expire
are treated as realized gains. The Fund, as a writer of an option, bears the market risk of an unfavorable change in the price of the
underlying reference instrument. When the Fund purchases a put
or call option, an amount equal to the premium paid is recorded as an increase
to the cost of the investment and subsequently marked to market to reflect the current value of the option purchased. Premiums
paid for purchasing options which expire are treated as realized losses. Premiums received/paid for writing/purchasing options which
are exercised or closed are added to the proceeds or offset against amounts paid on the underlying reference instrument to determine
the realized gain or loss. The risk associated with purchasing put and call options is limited to the premium paid. Options can trade
on securities or commodities exchanges. In this case, the exchange sets all the terms of the contract except for the price. Most exchanges
require investors to maintain margin accounts through their brokers to cover their potential obligations to the exchange. This protects
investors against potential defaults by the counterparty.
Purchased option contracts outstanding at
period-end are listed in the Fund’s Portfolio of Investments.
The average market value
of purchased put and call options held by the Fund throughout the period was $163,213 and $8,781, respectively.
This is based on amounts held as of each month-end throughout the fiscal period.
Annual
Financial Statements and Additional Information
16
Short Sales
In
a short sale, the Fund sells a security it does not own in anticipation of a decline in the fair market value of the security. When the
Fund sells a security short, it must borrow the security in order
to deliver it at the completion of the sale. A gain, limited to the price at which
the Fund sold the security short, or a loss, unlimited in size, will be recognized upon the termination of the short sale.
The Fund has an obligation
to replace the borrowed security (e.g., to purchase the security at a future date and deliver it to the lender of
the security). While the security is borrowed, the proceeds from the sale are deposited with the lender (“Prime Broker”).
The Fund may incur two types of expenses from short sales: borrowing
expenses and dividend expenses. Borrowing expenses may occur because the
Fund may be obligated to pay fees to the Prime Broker on borrowed securities. This fee is normally based upon the market value of the
borrowed security and is dependent upon the availability of the security. Dividend expenses may occur because the Fund has to pay the
Prime Broker the equivalent of any dividends earned on the borrowed security.
For the year ended September
30, 2025, the net realized gain (loss) and the net change in unrealized appreciation/(depreciation) on short
sales was $(20,293,496) and $3,228,136, respectively.
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 Disclosure Related to Derivative Instruments
|
Fair
Value of Derivative Instruments | ||||
|
|
Assets
|
Liabilities
| ||
|
|
Statement
of
Assets
and
Liabilities
Location
|
Fair
Value
|
Statement
of
Assets
and
Liabilities
Location
|
Fair
Value
|
|
Derivatives
not accounted for as hedging
instruments
under ASC Topic 815 |
|
|
|
|
|
Equity
contracts |
|
$—
|
Payable
for variation margin
on
futures contracts |
$426,108*
|
|
Equity
contracts |
Purchased
options, within
Investment
in securities, at value |
73,450
|
|
—
|
|
Total
derivatives not accounted for as hedging instruments
under
ASC Topic 815 |
|
$73,450
|
|
$426,108
|
|
*
|
Includes
cumulative depreciation of futures contracts as reported in the footnotes to the Portfolio of Investments. Only the current day’s
variation margin is
reported
within the Statement of Assets and Liabilities. |
The Effect of Derivative Instruments on the Statement
of Operations for the Year Ended September 30, 2025
|
Amount
of Realized Gain or (Loss) on Derivatives Recognized in Income | |||
|
|
Futures
Contracts
|
Purchased
Options
Contracts1
|
Total
|
|
Equity
contracts |
$(6,033,154)
|
$(3,045,031)
|
$(9,078,185)
|
|
1
|
The
net realized loss on Purchased Options Contracts is found within the Net realized loss on investments on the Statement of Operations.
|
|
Change
in Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income | |||
|
|
Futures
Contracts
|
Purchased
Options
Contracts1
|
Total
|
|
Equity
contracts |
$898,905
|
$72,853
|
$971,758
|
|
1
|
The
net change in unrealized appreciation of Purchased Options Contracts is found within the Net change in unrealized depreciation of investments
on the
Statement
of Operations. |
Annual
Financial Statements and Additional Information
17
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
9/30/2025
|
Year
Ended
9/30/2024
| ||
|
Class
A Shares: |
Shares
|
Amount
|
Shares
|
Amount
|
|
Shares
sold |
4,271,389
|
$20,104,968
|
3,070,320
|
$17,788,780
|
|
Shares
issued to shareholders in payment of distributions declared |
612,826
|
2,794,487
|
1,076,084
|
6,241,286
|
|
Shares
redeemed |
(4,857,266)
|
(22,977,951)
|
(5,871,962)
|
(34,153,237)
|
|
NET
CHANGE RESULTING FROM CLASS A SHARE TRANSACTIONS |
26,949
|
$(78,496)
|
(1,725,558)
|
$(10,123,171)
|
|
|
Year
Ended
9/30/2025
|
Year
Ended
9/30/2024
| ||
|
Class
C Shares: |
Shares
|
Amount
|
Shares
|
Amount
|
|
Shares
sold |
286,544
|
$1,095,425
|
380,477
|
$1,991,510
|
|
Shares
issued to shareholders in payment of distributions declared |
288,185
|
1,080,694
|
418,586
|
2,034,326
|
|
Shares
redeemed |
(743,531)
|
(2,909,414)
|
(831,296)
|
(4,045,758)
|
|
NET
CHANGE RESULTING FROM CLASS C SHARE TRANSACTIONS |
(168,802)
|
$(733,295)
|
(32,233)
|
$(19,922)
|
|
|
Year
Ended
9/30/2025
|
Year
Ended
9/30/2024
| ||
|
Institutional
Shares: |
Shares
|
Amount
|
Shares
|
Amount
|
|
Shares
sold |
26,536,361
|
$132,241,823
|
24,462,651
|
$149,921,048
|
|
Shares
issued to shareholders in payment of distributions declared |
1,308,779
|
6,203,612
|
2,389,973
|
14,363,740
|
|
Shares
redeemed |
(33,082,623)
|
(164,156,735)
|
(56,443,485)
|
(377,539,543)
|
|
NET
CHANGE RESULTING FROM INSTITUTIONAL SHARE TRANSACTIONS |
(5,237,483)
|
$(25,711,300)
|
(29,590,861)
|
$(213,254,755)
|
|
NET
CHANGE RESULTING FROM TOTAL FUND SHARE TRANSACTIONS |
(5,379,336)
|
$(26,523,091)
|
(31,348,652)
|
$(223,397,848)
|
4. FEDERAL
TAX INFORMATION
The tax character of distributions as reported
on the Statement of Changes in Net Assets for the years ended September 30, 2025 and 2024,
was as follows:
|
|
2025
|
2024
|
|
Ordinary
income |
$10,169,463
|
$22,808,379
|
As of September 30, 2025, the components
of distributable earnings on a tax-basis were as follows:
|
Undistributed
ordinary income |
$5,418,301
|
|
Net
unrealized depreciation |
$(39,525,297)
|
|
Capital
loss carryforwards |
$(1,083,906,644)
|
|
Other
temporary differences |
$(132)
|
|
TOTAL
|
$(1,118,013,772)
|
At September 30, 2025, the cost of investments
for federal tax purposes was $101,735,879. The net unrealized depreciation of all investments,
including securities sold short for federal tax purposes was $39,525,297. This consists of unrealized appreciation from investments
for those securities having an excess of value over cost of $774,014 and unrealized depreciation from investments for those securities
having an excess of cost over value of $40,299,311. The amounts presented are inclusive of derivative contracts. The difference between
book-basis and tax-basis net unrealized depreciation is attributable to differing treatments for the deferral of losses on wash sales,
mark to market of futures contracts and passive foreign investment company adjustments.
As of September 30, 2025,
the Fund had a capital loss carryforward of $1,083,906,644 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.
Annual
Financial Statements and Additional Information
18
The
following schedule summarizes the Fund’s capital loss carryforwards:
|
Short-Term
|
Long-Term
|
Total
|
|
$819,400,450
|
$264,506,194
|
$1,083,906,644
|
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 1.25% 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 September 30, 2025, the Adviser voluntarily waived $255,553
of its fee.
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 September 30, 2025, the Adviser reimbursed $21,625.
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
September 30, 2025, the annualized fee paid to FAS was 0.080% 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 and 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 the following percentages of average daily net assets annually,
to compensate FSC:
|
|
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
September 30, 2025, distribution services fees for the Fund were as follows:
|
|
Distribution
Services
Fees
Incurred |
|
Class
C Shares |
$76,027
|
When FSC receives fees, it may pay some
or all of them to financial intermediaries whose customers purchase shares. For the year ended September
30, 2025, FSC retained $5,713 of fees paid by the Fund.
For the year ended September
30, 2025, 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
September 30, 2025, FSC retained $4,335 in sales charges from the sale of Class A Shares. FSC also retained $766 of CDSC relating
to redemptions of Class C Shares.
Other Service Fees
For
the year ended September 30, 2025, FSSC received $8,037 of the other service fees disclosed in Note 2.
Annual
Financial Statements and Additional Information
19
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, if any)
paid by the Fund’s Class A Shares, Class C Shares and Institutional Shares (after the voluntary waivers and/or reimbursements) will
not exceed 1.78%, 2.53% and 1.53% (the “Fee Limit”),
respectively, up to but not including the later of (the “Termination Date”): (a)
December 1, 2026 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 approval 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 September
30, 2025, were as follows:
|
Purchases
|
$33,434,841
|
|
Sales
|
$39,008,665
|
7. CONCENTRATION
OF RISK
A substantial portion of the Fund’s
portfolio may be comprised of securities deemed by the Adviser to be in similar 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 17, 2025. 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 September 30, 2025, the Fund had
no outstanding loans. During the year ended September 30, 2025,
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 September 30, 2025, there were no outstanding loans. During
the year ended September 30, 2025, the program was not utilized.
10. OPERATING
SEGMENTS
In this reporting period, the Fund adopted
FASB Accounting Standards Update 2023-07, Segment Reporting (Topic 280) - Improvements to
Reportable Segment Disclosures. Adoption of the new standard impacted financial statement disclosures only and did not affect the Fund’s
financial position or the results of its operations. An operating segment is defined as a component of a public entity that engages in
business activities from which it may recognize revenues and incur expenses, has operating results that are regularly reviewed by the
public entity’s chief operating decision maker (CODM) to
make decisions about resources to be allocated to the segment and assess its performance,
and has discrete financial information available. A management committee of the Adviser acts as the CODM. The Fund represents
a single operating segment, as the CODM monitors the operating results of the Fund as a whole and the strategic asset allocation
is determined based on the investment objective of the Fund and executed by the Fund’s portfolio management team. The financial
information in the form of the Fund’s portfolio composition, total returns, expense ratios and changes in net assets (i.e., changes
in net assets resulting from operations, subscriptions and redemptions)
which is reviewed by the CODM to assess the Fund’s performance
in comparison to the Fund’s benchmarks and to make resource allocation decisions for the Fund’s single segment is consistent
with the information presented in these financial statements. Segment assets are reflected on the accompanying Statement of Assets
and Liabilities as “total assets” and significant segment expenses are listed on the accompanying Statement of Operations.
Annual
Financial Statements and Additional Information
20
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. FEDERAL
TAX INFORMATION (UNAUDITED)
For the fiscal year ended September 30,
2025, 88.3% of total ordinary income distributions qualified as business interest income for purposes
of 163(j) and the regulations thereunder.
Annual
Financial Statements and Additional Information
21
Report of
Independent Registered Public Accounting Firm
To the SHAREHOLDERS OF FEDERATED
HERMES PRUDENT BEAR FUND AND THE BOARD OF TRUSTEES OF FEDERATED
HERMES EQUITY FUNDS:
Opinion on the Financial Statements
We have audited the accompanying
statement of assets and liabilities of Federated Hermes Prudent Bear Fund (the Fund), a
portfolio of Federated Hermes Equity Funds, including the portfolio of investments, as of September 30, 2025, 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 September 30, 2025, 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.
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 September 30, 2025, by correspondence with the custodian, transfer agent of the underlying fund 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
November 21, 2025
November 21, 2025
Annual
Financial Statements and Additional Information
22
Evaluation
and Approval of Advisory Contract–May
2025
Federated Hermes Prudent Bear
Fund (the “Fund”)
At its meetings in May 2025 (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, as amended (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 such information deemed necessary to evaluate the terms of the Contract and 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 report regarding data related to the Fund’s management fee (the
“CCO Management Fee Report”). The Board considered the CCO Management Fee 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.
In addition
to the CCO Management Fee 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 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.
The Board’s
consideration of the Contract included review of materials and information covering the following matters, among
others: (1) copies of the Contract; (2) the nature, quality and extent of the advisory and other services provided to the
Fund by Federated Hermes; (3) Federated Hermes’ business and operations; (4) the Adviser’s investment philosophy, personnel
and processes; (5) the Fund’s investment objective and strategies; (6) the Fund’s short-term and long-term performance
- in absolute terms (both on a gross basis and net of expenses) and relative to an appropriate group of peer funds
and its benchmark; (7) the Fund’s fees and expenses, including the advisory fee and the overall expense structure of the
Fund - in absolute terms and relative to an appropriate group of peer funds, with due regard for contractual or voluntary
expense limitations (if any); (8) the financial condition of Federated Hermes; (9) the Adviser’s profitability with respect
to managing the Fund; (10) distribution and sales activity for the Fund; and (11) 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 considered several factors it
deemed relevant to an adviser’s fiduciary duty with respect to its receipt of compensation from a fund, including: (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 fees and expenses, 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 considered 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 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”).
Annual
Financial Statements and Additional Information
23
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 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 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. The Board recognized that its evaluation process is evolutionary and that the factors
considered and the 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.
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 full 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 evaluated
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).
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 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 Investment Company Act of 1940, as amended,
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. 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.
Annual
Financial Statements and Additional Information
24
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, performance attribution information
and commentary on the effect of market conditions. The Board noted that it evaluated investment performance at
meetings throughout the year and received reports from Federated Hermes regarding the performance of certain Federated
Hermes Funds as well as Federated Hermes’ explanations for less favorable performance and any specific actions
Federated Hermes had taken, or had determined to take, to seek to enhance Fund investment performance and the results
of those actions.
The Board
also reviewed comparative information compiled by Federated Hermes regarding the performance of other registered
funds in the category of peer funds selected by Morningstar, Inc. (“Morningstar”), an independent fund ranking organization
(the “Performance Peer Group”). The Board noted the CCO’s statement 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
also considered comparative performance data from Lipper, Inc. that was included in reports provided to the Board
throughout the year. The Board noted that differences may exist between the Performance Peer Group and Lipper peers
and that the results of these performance comparisons may vary.
The Board
considered that for the one-year, three-year and five-year periods ended December 31, 2024, the Fund’s performance
was above the median of the Performance Peer Group.
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 overall 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.
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 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.
Annual
Financial Statements and Additional Information
25
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 statement that non-registered fund clients
are inherently different products due to the following differences, among others: (i) types of targeted investors; (ii)
applicable laws and regulations; (iii) legal structures; (iv) average account sizes; (v) portfolio management techniques made
necessary by different cash flows and different associated costs; (vi) 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; (vii) SEC mandated risk management programs with respect to fund liquidity and use of derivatives; (viii)
questions on regulatory reporting; (ix) a variety of different administrative responsibilities; and (x) degrees of risk associated
with management. 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 statement 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 emphasized
that differences in fees for providing advisory services to other types of clients may not be appropriate when judging
the appropriateness of the Federated Hermes Funds’ advisory fees because of the different services provided.
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 statement that, while the cost allocation report applies consistent allocation processes for purposes of
general comparison of funds, the inherent difficulties in arbitrarily allocating costs lacks precision and can cause the report
to be unreliable because a single change in an allocation estimate can 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 statement 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
statement 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 statement that, based on such profitability information, Federated
Hermes’ profit margins did not appear to be excessive and that Federated Hermes appeared financially sound, with
the resources available to fulfill its contractual obligations.
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 isolating and quantifying 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, systems capabilities
and use of data. The Board noted that Federated Hermes’ investments in these areas are extensive and are designed
to provide enhanced or expanded 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
Annual
Financial Statements and Additional Information
26
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 believes that this information is relevant to consider 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 considered that Federated Hermes may
derive a benefit to its reputation as an adviser to the Fund, which may help in attracting other clients and investment personnel.
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 the CCO’s presentation and statements and the information accompanying the CCO Management Fee
Report. The Board recognized that its 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.
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.
Annual
Financial Statements and Additional Information
27
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 information 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 Prudent Bear Fund
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us at
FederatedHermes.com/us
or call 1-800-341-7400.
or call 1-800-341-7400.
Federated Securities Corp., Distributor
CUSIP 31421N709
CUSIP 31421N600
CUSIP 31421N501
CUSIP 31421N600
CUSIP 31421N501
41202 (11/25)
©
2025 Federated Hermes, Inc.
| Item 8. | Changes in and Disagreements with Accountants for Open-End Management Investment Companies |
Federated Hermes Clover Small Value Fund: Not Applicable.
Federated Hermes Prudent Bear Fund: Not Applicable.
| Item 9. | Proxy Disclosures for Open-End Management Investment Companies. |
Federated Hermes Clover Small Value Fund: Not Applicable.
Federated Hermes Prudent Bear Fund: Not Applicable.
| Item 10. | Remuneration Paid to Directors, Officers, and Others of Open-End Management Investment Companies. |
Federated Hermes Clover Small Value Fund: The Fund’s disclosure of remuneration items is included as part of the Financial Statements filed under Item 7 of this form.
Federated Hermes Prudent Bear Fund: The Fund’s disclosure of remuneration items is included as part of the Financial Statements filed under Item 7 of this form.
| Item 11. | Statement Regarding Basis for Approval of Investment Advisory Contract. |
Federated Hermes Clover Small Value Fund: The Fund’s Evaluation and Approval of Advisory Contract summary by fund appear in the Financial Statements filed under Item 7 of this form.
Federated Hermes Prudent Bear Fund: The Fund’s Evaluation and Approval of Advisory Contract summary by fund appear in the Financial Statements filed under Item 7 of this form.
| Item 12. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies |
Not Applicable
| Item 13. | Portfolio Managers of Closed-End Management Investment Companies. |
Not Applicable
| Item 14. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
Not Applicable
| Item 15. | Submission of Matters to a Vote of Security Holders. |
No Changes to Report
| Item 16. | Controls and Procedures. |
(a) The registrant’s Principal Executive Officer and Principal Financial Officer 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 as of a date 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 17. | Disclosure of Securities Lending Activities for Closed-End Management Investment Companies. |
Not Applicable
| Item 18. | Recovery of Erroneously Awarded Compensation |
(a) Not Applicable
(b) Not Applicable
| Item 19. | Exhibits |
(a)(1) Not Applicable.
(a)(2) Not Applicable.
(a)(3) Certifications of Principal Executive Officer and Principal Financial Officer.
(a)(4) Not Applicable.
(a)(5) 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/ Jeremy D. Boughton
Jeremy D. Boughton, Principal Financial Officer
Date: November 21, 2025
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: November 21, 2025
By: /s/ Jeremy D. Boughton
Jeremy D. Boughton, Principal Financial Officer
Date: November 21, 2025