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Item 4. |
Principal Accountant Fees and Services |
(a) Audit Fees billed
to the registrant for the two most recent fiscal years:
Fiscal year ended 2022 – $42,600
Fiscal year ended 2021 - $39,200
(b) Audit-Related
Fees billed to the registrant for the two most recent fiscal years:
Fiscal year ended 2022 - $0
Fiscal year ended 2021 - $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 2022 - $0
Fiscal year ended 2021 - $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 2022 - $0
Fiscal year ended 2021 - $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.
(e)(1) Audit Committee Policies regarding Pre-approval
of Services.
The Audit Committee is required to pre-approve
audit and non-audit services performed by the independent auditor in order to assure that the provision of such services do not impair
the auditor’s independence. Unless a type of service to be provided by the independent auditor has received general pre-approval,
it will require specific pre-approval by the Audit Committee. Any proposed services exceeding pre-approved cost levels will require specific
pre-approval by the Audit Committee.
Certain services have the general pre-approval
of the Audit Committee. The term of the general pre-approval is 12 months from the date of pre-approval, unless the Audit Committee specifically
provides for a different period. The Audit Committee will annually review the services that may be provided by the independent auditor
without obtaining specific pre-approval from the Audit Committee and may grant general pre-approval for such services. The Audit Committee
will revise the list of general pre-approved services from time to time, based on subsequent determinations. The Audit Committee will
not delegate to management its responsibilities to pre-approve services performed by the independent auditor.
The Audit Committee has delegated pre-approval
authority to its chairman (the “Chairman”) for services that do not exceed a specified dollar threshold. The Chairman or Chief
Audit Executive will report any such pre-approval decisions to the Audit Committee at its next scheduled meeting. The Committee will designate
another member with such pre-approval authority when the Chairman is unavailable.
AUDIT SERVICES
The annual audit services engagement
terms and fees will be subject to the specific pre-approval of the Audit Committee. The Audit Committee will approve, if necessary, any
changes in terms, conditions and fees resulting from changes in audit scope, registered investment company (RIC) structure or other matters.
In addition to the annual audit services
engagement specifically approved by the Audit Committee, the Audit Committee may grant general pre-approval for other audit services,
which are those services that only the independent auditor reasonably can provide. The Audit Committee has pre-approved certain audit
services; with limited exception, all other audit services must be specifically pre-approved by the Audit Committee.
AUDIT-RELATED SERVICES
Audit-related services are assurance
and related services that are reasonably related to the performance of the audit or review of the RIC’s financial statements or
that are traditionally performed by the independent auditor. The Audit Committee believes that the provision of audit-related services
does not impair the independence of the auditor, and has pre-approved certain audit-related services; all other audit-related services
must be specifically pre-approved by the Audit Committee.
TAX SERVICES
The Audit Committee believes that the
independent auditor can provide tax services to the RIC such as tax compliance, tax planning and tax advice without impairing the auditor’s
independence. However, the Audit Committee will not permit the retention of the independent auditor in connection with a transaction initially
recommended by the independent auditor, the purpose of which may be tax avoidance and the tax treatment of which may not be supported
in the Internal Revenue Code and related regulations. The Audit Committee has pre-approved certain tax services; with limited exception,
all tax services involving large and complex transactions must be specifically pre-approved by the Audit Committee.
ALL OTHER SERVICES
With respect to the provision of permissible
services other than audit, review or attest services the pre-approval requirement is waived if:
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(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, |
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(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 |
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(3) |
Such services were not recognized by the issuer or RIC at the time of the engagement to be non-audit services; and |
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(4) |
Such services are promptly brought to the attention of the Audit Committee and approved prior to the completion of the audit by the Audit Committee or by one or more members of the Audit Committee who are members of the Board of Directors to whom authority to grant such approvals has been delegated by the Audit Committee. |
The Audit Committee may grant general
pre-approval to those permissible non-audit services which qualify for pre-approval and which it believes are routine and recurring services,
and would not impair the independence of the auditor.
The Securities and Exchange Commission’s
(the “SEC”) rules and relevant guidance should be consulted to determine the precise definitions of these services and applicability
of exceptions to certain of the prohibitions.
PRE-APPROVAL FEE LEVELS
Pre-approval fee levels for all services
to be provided by the independent auditor will be established annually by the Audit Committee. Any proposed services exceeding these levels
will require specific pre-approval by the Audit Committee.
PROCEDURES
Requests or applications to provide services
that require specific approval by the Audit Committee will be submitted to the Audit Committee by the Fund’s Principal Accounting
Officer and/or the Chief Audit Executive of Federated Hermes, Inc., only after those individuals have determined that the request or application
is consistent with the SEC’s rules on auditor independence.
(e)(2) Percentage of services identified in items 4(b)
through 4(d) that were approved by the registrant’s Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation
S-X:
4(b)
Fiscal year ended 2022 – 0%
Fiscal year ended 2021 - 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 2022 –
0%
Fiscal year ended 2021 – 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 2022 –
0%
Fiscal year ended 2021 – 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.
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(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 2022 - $156,701
Fiscal year ended 2021 - $63,970
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(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. |
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Item 7. |
Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies |
Voting
Proxies On Fund Portfolio Securities
The Board has delegated to
the Adviser authority to vote proxies on the securities held in the Fund's portfolio. The Board has also approved the Adviser's policies
and procedures for voting the proxies, which are described below.
Proxy Voting Policies
As an investment adviser with
a fiduciary duty to the Fund and its shareholders, the Adviser's general policy is to cast proxy votes in favor of management proposals
and shareholder proposals that the Adviser anticipates will enhance the long-term value of the securities being voted in a manner that
is consistent with the investment objectives of the Fund. Generally, this will mean voting for proposals that the Adviser believes will
improve the management of a company, increase the rights or preferences of the voted securities, or increase the chance that a premium
offer would be made for the company or for the voted securities. This approach to voting proxy proposals will be referred to hereafter
as the “General Policy.”
The Adviser generally votes
consistently on the same matter when securities of an issuer are held by multiple client portfolios. However, the Adviser may vote differently
if a client’s investment objectives differ from those of other clients or if a client explicitly instructs the Adviser to vote differently.
The following examples illustrate
how the General Policy may apply to the most common management proposals and shareholder proposals. However, whether the Adviser supports
or opposes a proposal will always depend on a thorough understanding of the registrant’s investment objectives and the specific
circumstances described in the proxy statement and other available information.
On matters related to the
board of directors, generally the Adviser will vote to elect nominees to the board in uncontested elections except in certain circumstances,
such as where the director: (1) had not attended at least 75% of the board meetings during the previous year; (2) serves as the company’s
chief financial officer unless the company is headquartered in the UK where this is market practice; (3) has become over-boarded (more
than five boards for retired executives and more than two boards for CEOs); (4) is the chair of the nominating or governance committee
when the roles of chairman of the board and CEO are combined and there is no lead independent director; (5) served on the compensation
committee during a period in which compensation appears excessive relative to performance and peers; or (6) served on a board that did
not implement a shareholder proposal that the Adviser supported and received more than 50% shareholder support the previous year. In addition,
the Adviser will generally vote in favor of (7) a full slate of directors, where the directors are elected as a group and not individually,
unless more than half of the nominees are not independent; (8) shareholder proposals to declassify the board of directors; (9) shareholder
proposals to require a majority voting standard in the election of directors; (10) shareholder proposals to separate the roles of chairman
of the board and CEO; (11) a proposal to require a company’s audit committee to be comprised entirely of independent directors;
and (12) shareholder proposals to eliminate supermajority voting requirements in company bylaws.
On other matters of corporate
governance, generally the Adviser will vote: (1) in favor of proposals to grant shareholders the right to call a special meeting if owners
of at least 15% of the outstanding stock agree; (2) against proposals to allow shareholders to act by written consent; (3) on a case-by-case
basis for proposals to adopt or amend shareholder rights plans (also known as “poison pills”); (4) in favor of shareholder
proposals to eliminate supermajority requirements in company bylaws; and (5) in favor of shareholder proposals calling for “Proxy
Access,” that is, a bylaw change allowing shareholders owning at least 3% of the outstanding common stock for at least three years
to nominate candidates for election to the board of directors.
Generally, the Adviser will
vote every shareholder proposal of an environmental or social nature on a case-by-case basis. The quality of these shareholder proposals
varies widely across markets. Similarly, company disclosures of their business practices related to environmental and social risks are
not always adequate for investors to make risk assessments. Thus, the Adviser places great importance on company-specific analyses to
determine how to vote. Above all, the Adviser will vote in a manner that would enhance the long-term value of the investment within the
framework of the client’s investment objectives.
The Adviser’s general
approach to analyzing these proposals calls for considering the literal meaning of the written proposal, the financial materiality of
the proposal’s objective, and the practices followed by industry peers. This analysis utilizes research reports from the Adviser’s
proxy advisors, company filings, as well as reports published by the company and other outside organizations.
On matters of capital structure,
generally, the Adviser will vote proxies for U.S. issuers on a case-by-case basis for proposals to authorize the issuance of new shares
if not connected to an M&A transaction and the potential dilution is more than 10%, against proposals to create multiple-class voting
structures where one class has superior voting rights to the other classes, in favor of proposals to authorize reverse stock splits unless
the amount of authorized shares is not also reduced proportionately. Generally, the Adviser will vote proxies for non-U.S. issuers in
favor of proposals to authorize issuance of shares with and without pre-emptive rights unless the size of the authorities would threaten
to unreasonably dilute existing shareholders.
Votes on executive compensation
come in many forms, including advisory votes on U.S. executive compensation plans (“Say On Pay”), advisory and binding votes
on the design or implementation of non-U.S. executive remuneration plans, and votes to approve new equity plans or amendments to existing
plans. Generally, the Adviser will support compensation arrangements that are aligned with the client’s long-term investment objectives.
With respect to Say On Pay proposals, the Adviser will generally vote in favor unless the compensation plan has failed to align executive
compensation with corporate performance or the design of the plan is likely to lead to misalignment in the future. The Adviser supports
the principle of an annual shareholder vote on executive pay and will generally vote accordingly on proposals which set the frequency
of the Say On Pay vote.
In some markets, especially
Europe, shareholders are provided a vote on the remuneration policy, which sets out the structural elements of a company’s executive
remuneration plan on a forward-looking basis. The Adviser will generally support these proposals unless the design of the remuneration
policy fails to appropriately link executive compensation with corporate performance, total compensation appears excessive relative to
the company’s industry peer group, with local market dynamics also taken into account; or there is insufficient disclosure to enable
an informed judgment, particularly as it relates to the disclosure of the maximum amounts of compensation that may be awarded.
The Adviser will generally
vote in favor of equity plan proposals unless they result in unreasonable dilution to existing shareholders, permit replacement of “underwater”
options with new options on more favorable terms for the recipient, or omit the criteria for determining the granting or vesting of awards.
On matters relating to corporate
transactions, the Adviser will generally vote in favor of mergers, acquisitions, and sales of assets if the Adviser’s analysis of
the proposed business strategy and the transaction price would have a positive impact on the total return for shareholders.
If a shareholders meeting is
contested, that is, shareholders are presented with a set of director candidates nominated by company management and a set of director
candidates nominated by a dissident shareholder, the Adviser will study the proposed business strategies of both groups and vote in a
way that maximizes expected total return for the registrant.
In addition, the Adviser will
not vote any proxy if it determines that the consequences or costs of voting outweigh the potential benefit of voting. For example, if
a foreign market requires shareholders voting proxies to retain the voted shares until the meeting date (thereby rendering the shares
“illiquid” for some period of time), the Adviser will not vote proxies for such shares. In addition, the Adviser is not obligated
to incur any expense to send a representative to a shareholder meeting or to translate proxy materials into English.
To the extent that the Adviser
is permitted to loan securities, the Adviser does not have the right to vote on securities while they are on loan. However, the Adviser
will take all reasonable steps to recall shares prior to the record date when the meeting raises issues that the Adviser believes materially
affect shareholder value, provided that the Adviser considers that the benefits of voting on the securities are greater than the associated
costs, including the opportunity cost of the lost revenue that would otherwise be generated by the loan. However, there can be no assurance
that the Adviser will have sufficient notice of such matters to be able to terminate the loan in time to vote thereon.
The Adviser will take into
account feedback from issuers on the voting recommendations of the Adviser’s proxy advisory firm if the feedback is provided at
least five days before the voting cut-off date. In certain circumstances, primarily those where the Adviser’s voting policy is absolute
and without exception, issuer feedback will not be part of the voting decision. For example, it is the Adviser’s policy to always
support a shareholder proposal to separate the roles of chairman of the board and CEO. Thus, any comments from the issuer opposing this
proposal would not be considered.
If proxies are not delivered in a timely or
otherwise appropriate basis, the Adviser may not be able to vote a particular proxy.
For an Adviser that employs
a quantitative investment strategy for certain funds or accounts that does not make use of qualitative research (“Non-Qualitative
Accounts”), the Adviser may not have the kind of research to make decisions about how to vote proxies for them. Therefore, the Adviser
will vote the proxies of these Non-Qualitative Accounts as follows: (a) in accordance with the Standard Voting Instructions (defined below);
(b) if the Adviser is casting votes for the same proxy on behalf of a regular qualitative account and a Non-Qualitative Account, the Non-Qualitative
Account would vote in the same manner as the regular qualitative account; (c) if neither of the first two conditions apply, as the proxy
advisory firm is recommending; and (d) if none of the previous conditions apply, as recommended by the Proxy Voting Committee.
Proxy Voting Procedures
The Adviser has established a
Proxy Voting Committee (“Proxy Committee”), to exercise all voting discretion granted to the Adviser by the Board in accordance
with the proxy voting policies. To assist it in carrying out the day-to-day operations related to proxy voting, the Proxy Committee has
created the Proxy Voting Management Group (PVMG). The day-to-day operations related to proxy voting are carried out by the Proxy Voting
Operations Team (PVOT) and overseen by the PVMG. Besides voting the proxies, this work includes engaging with investee companies on corporate
governance matters, managing the proxy advisory firm, soliciting voting recommendations from the Adviser's investment professionals, bringing
voting recommendations to the Proxy Committee for approval, filing with regulatory agencies any required proxy voting reports, providing
proxy voting reports to clients and investment companies as they are requested from time to time, and keeping the Proxy Committee informed
of any issues related to corporate governance, and proxy voting.
The Adviser has compiled a list
of specific voting instructions based on the General Policy (the “Standard Voting Instructions”). The Standard Voting Instructions
and any modifications to them are approved by the Proxy Committee. The Standard Voting Instructions sometimes call for an investment professional
to review the ballot question and provide a voting recommendation to the Proxy Committee (a “case-by-case vote”). The foregoing
notwithstanding, the Proxy Committee always has the authority to determine a final voting decision.
The Adviser has hired a proxy
advisory firm to perform various proxy voting related administrative services such as ballot reconciliation, vote processing, and recordkeeping
functions. Currently this service is provided by Glass Lewis & Co. LLC. The Proxy Committee has supplied the proxy advisory firms
with the Standard Voting Instructions. The Proxy Committee retains the right to modify the Standard Voting Instructions at any time or
to vote contrary to them at any time in order to cast proxy votes in a manner that the Proxy Committee believes is in accordance with
the General Policy. The proxy advisory firm may vote any proxy as directed in the Standard Voting Instructions without further direction
from the Proxy Committee. However, if the Standard Voting Instructions require case-by-case handling for a proposal, the PVOT will work
with the investment professionals and the proxy advisory firm to develop a voting recommendation for the Proxy Committee and to communicate
the Proxy Committee's final voting decision to the proxy advisory firm. Further, if the Standard Voting Instructions require the PVOT
to analyze a ballot question and make the final voting decision, the PVOT will report such votes to the Proxy Committee on a quarterly
basis for review.
Conflicts of Interest
The Adviser has adopted procedures
to address situations where a matter on which a proxy is sought may present a potential conflict between the interests of the registrant
(and its shareholders) and those of the Adviser or the Distributor. This may occur where a significant business relationship exists between
the Adviser (or its affiliates) and a company involved with a proxy vote.
A company that is a proponent,
opponent or the subject of a proxy vote, and which to the knowledge of the Proxy Committee has this type of significant business relationship,
is referred to below as an “Interested Company.”
The Adviser has implemented
the following procedures in order to avoid concerns that the conflicting interests of the Adviser or its affiliates have influenced proxy
votes. Any employee of the Adviser or its affiliates who is contacted by an Interested Company regarding proxies to be voted by the Adviser
must refer the Interested Company to a member of the Proxy Committee, and must inform the Interested Company that the Proxy Committee
has exclusive authority to determine how the proxy will be voted. Any Proxy Committee member contacted by an Interested Company must report
it to the full Proxy Committee and provide a written summary of the communication. This requirement includes engagement meetings with
investee companies and does not include communications with proxy solicitation firms. Under no circumstances will the Proxy Committee
or any member of the Proxy Committee make a commitment to an Interested Company regarding the voting of proxies or disclose to an Interested
Company how the Proxy Committee has directed such proxies to be voted. If the Standard Voting Instructions already provide specific direction
on the proposal in question, the Proxy Committee shall not alter or amend such directions. If the Standard Voting Instructions require
the Proxy Committee to provide further direction, the Proxy Committee shall do so in accordance with the proxy voting policies, without
regard for the interests of the Adviser with respect to the Interested Company. If the Proxy Committee provides any direction as to the
voting of proxies relating to a proposal affecting an Interested Company, it must disclose annually to the Fund's Board information regarding:
the significant business relationship; any material communication with the Interested Company; the matter(s) voted on; and how, and why,
the Adviser voted as it did. In certain circumstances it may be appropriate for the Adviser to vote in the same proportion as all other
shareholders, so as to not affect the outcome beyond helping to establish a quorum at the shareholders' meeting. This is referred to as
“proportional voting.” If the registrant owns shares of another Federated Hermes mutual fund, generally the Adviser will proportionally
vote the client's proxies for that fund or seek direction from the Board or the client on how the proposal should be voted. If the registrant
owns shares of an unaffiliated mutual fund, the Adviser may proportionally vote the registrant's proxies for that fund depending on the
size of the position. If the registrant owns shares of an unaffiliated exchange-traded fund, the Adviser will proportionally vote the
registrant's proxies for that fund.
Downstream Affiliates
If the Proxy Committee gives
further direction, or seeks to vote contrary to the Standard Voting Instructions, for a proxy relating to a portfolio company in which
the registrant owns more than 10% of the portfolio company's outstanding voting securities at the time of the vote (“Downstream
Affiliate”), the Proxy Committee must first receive guidance from counsel to the Proxy Committee as to whether any relationship
between the Adviser and the portfolio company, other than such ownership of the portfolio company's securities, gives rise to an actual
conflict of interest. If counsel determines that an actual conflict exists, the Proxy Committee must address any such conflict with the
executive committee of the board of directors or trustees of any investment company client prior to taking any action on the proxy at
issue.
Proxy Advisers' Conflicts of Interest
Proxy advisory firms may have
significant business relationships with the subjects of their research and voting recommendations. For example, a proxy advisory board
member also sits on the board of a public company for which the proxy advisory firm will write a research report. This and similar situations
give rise to an actual or apparent conflict of interest.
In order to avoid concerns
that the conflicting interests of the engaged proxy advisory firm have influenced proxy voting recommendations, the Adviser will take
the following steps:
| 1. |
A due diligence team made up of employees of the Adviser and/or its affiliates will meet with the proxy advisory firm on an annual basis and determine through a review of their policies and procedures and through inquiry that the proxy advisory firm has established a system of internal controls that provide reasonable assurance that their voting recommendations are not influenced by the business relationships they have with the subjects of their research. |
| 2. |
Whenever the standard voting guidelines call for voting a proposal in accordance with the proxy advisory firm recommendation and the proxy advisory firm has disclosed that they have a conflict of interest with respect to that issuer, the PVOT will take the following steps: (a) the PVOT will obtain a copy of the research report and recommendations published by another proxy advisory firm for that issuer; (b) the Director of Proxy Voting, or his designee, will review both the engaged proxy advisory firm research report and the research report of the other proxy advisory firm and determine what vote will be cast. The PVOT will report all proxies voted in this manner to the Proxy Committee on a quarterly basis. Alternatively, the PVOT may seek direction from the Committee on how the proposal shall be voted. |
Proxy Voting Report
A report on “Form N-PX”
of how the registrant voted any proxies during the most recent 12-month period ended June 30 is available via the Proxy Voting Record
(Form N-PX) link associated with the registrant at www.FederatedInvestors.com/FundInformation. Form N-PX filings are also available at
the SEC's website at www.sec.gov.
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Item 8. |
Portfolio Managers of Closed-End Management Investment Companies |
As of the date of filing of the report, the Portfolio Managers listed
below are jointly and primarily responsible for managing the registrant’s assets.
R.J. Gallo
R.J. Gallo, CFA, Senior Portfolio Manager, has been the registrant’s
portfolio manager since its inception in December of 2002.
Mr. Gallo is Head of the Municipal Bond Investment Group and Head of
the Duration Committee. He is responsible for day to day management of the Fund focusing on asset allocation, interest rate strategy and
security selection. He has been with the Adviser or an affiliate since 2000; has worked in investment management since 1996; has managed
investment portfolios since 2002. Education: B.A., University of Michigan; M.P.A., Princeton University.
Portfolio Manager Information
The following information about the registrant’s portfolio manager
is provided as of the end of the registrant's most recently completed fiscal year.
| Other Accounts Managed by Richard J. Gallo |
Total Number of Other Accounts Managed / Total Assets* |
| Registered Investment Companies |
9/$12.9 billion |
| Other Pooled Investment Vehicles |
0/$0 |
| Other Accounts |
4/$74.8 million |
* None of the Accounts has an advisory fee that is based on the performance
of the account.
Dollar value range of shares owned in the Fund: None.
Richard J. Gallo is paid a fixed base salary and a variable annual incentive.
Base salary is determined within a market competitive, position-specific salary range, based on the portfolio manager’s experience
and performance. The annual incentive amount is determined based primarily on Investment Product Performance (IPP) and may also include
a discretionary component based on a variety of factors deemed relevant, such as financial measures and performance, and may be paid entirely
in cash, or in a combination of cash and restricted stock of Federated Hermes, Inc. (Federated Hermes). The total combined annual incentive
opportunity is intended to be competitive in the market for this portfolio manager role.
IPP is measured on a rolling one, three and five calendar year pre-tax
gross total return basis versus the Fund’s benchmark (i.e. S&P, custom 70% A & up/20% BBB/10% HY/3yr+/Non AMT) and versus
the Fund’s designated peer group of comparable accounts. Performance periods are adjusted if a portfolio manager has been managing
an account for less than five years; accounts with less than one year of performance history under a portfolio manager may be excluded.
As noted above, Mr. Gallo is also the portfolio manager for other accounts
in addition to the Fund. Such other accounts may have different benchmarks and performance measures. The allocation or weighting given
to the performance of the Fund or other accounts or activities for which Mr. Gallo is responsible when his compensation is calculated
may be equal or can vary.
In addition, Mr. Gallo has oversight responsibility for other portfolios
that he does not personally manage and serves on one or more Investment Teams that establish guidelines on various performance drivers
(e.g., currency, duration, sector, volatility and/or yield curve) for taxable, fixed-income accounts. A portion of the IPP score is based
on Federated Hermes senior management’s assessment of team contributions.
For purposes of calculating the annual incentive amount, each account
managed by the portfolio manager currently is categorized into one of three IPP groups (which may be adjusted periodically). Within each
performance measurement period and IPP group, IPP currently is calculated on the basis of an assigned weighting to each account managed
or activity engaged in by the portfolio manager and included in the IPP groups. At the account level, the weighting assigned to the Fund
is greater than or equal to the weighting assigned to certain other accounts or activities used to determine IPP (but can be adjusted
periodically). A portion of the bonus tied to the IPP score may be adjusted based on management's assessment of overall contributions
to account performance and any other factors as deemed relevant.
Any individual allocations from the discretionary pool may be determined,
by executive management on a discretionary basis using various factors, such as, for example, on a product, strategy or asset class basis,
and considering overall contributions and any other factors deemed relevant (and may be adjusted periodically).
In addition, Mr. Gallo was awarded a grant of restricted Federated Hermes
stock. Awards of restricted stock are discretionary and are made in variable amounts based on the subjective judgment of Federated Hermes’
senior management.
As a general matter, certain conflicts of interest may arise in connection
with a portfolio manager’s management of a fund’s investments, on the one hand, and the investments of other funds/pooled
investment vehicles or accounts (collectively, including the Fund, as applicable, “accounts”) for which the portfolio manager
is responsible, on the other. For example, it is possible that the various accounts managed could have different investment strategies
that, at times, might conflict with one another to the possible detriment of the Fund. Alternatively, to the extent that the same investment
opportunities might be desirable for more than one account, possible conflicts could arise in determining how to allocate them. Other
potential conflicts can include, for example, conflicts created by specific portfolio manager compensation arrangements (including, for
example, the allocation or weighting given to the performance of the Fund or other accounts or activities for which the portfolio manager
is responsible in calculating the portfolio manager’s compensation), and conflicts relating to selection of brokers or dealers to
execute Fund portfolio trades and/or specific uses of commissions from Fund portfolio trades (for example, research, or “soft dollars”).
The Adviser has adopted policies and procedures and has structured the portfolio managers’ compensation in a manner reasonably designed
to safeguard the Fund from being negatively affected as a result of any such potential conflicts.
Lee R. Cunningham II
Lee R. Cunningham II, Senior Portfolio Manager,
has been the registrant’s portfolio manager since its inception in December of 2002.
Mr. Cunningham is responsible for day to day management
of the Fund focusing on asset allocation, interest rate strategy and security selection. He has been with the Adviser or an affiliate
since 1995; has worked in investment management since 1995; has managed investment portfolios since 1998. Education: B.S., University
of Pennsylvania; M.B.A., University of Pittsburgh.
Portfolio Manager Information
The following information about the registrant’s portfolio manager
is provided as of the end of the registrant's most recently completed fiscal year.
| Other Accounts Managed by Lee Cunningham |
Total Number of Additional Accounts Managed / Total Assets* |
| Registered Investment Companies |
4/$927.1 million |
| Other Pooled Investment Vehicles |
0/$0 |
| Other Accounts |
0/$0 |
* None of the Accounts has an advisory fee that is based on the performance
of the account.
Dollar value range of shares owned in the Fund: None.
Lee Cunningham is paid a fixed base salary and a variable annual incentive.
Base salary is determined within a market competitive, position-specific salary range, based on the portfolio manager’s experience
and performance. The annual incentive amount is determined based primarily on Investment Product Performance (IPP) and may also include
a discretionary component based on a variety of factors deemed relevant, such as financial measures and performance, and may be paid entirely
in cash, or in a combination of cash and restricted stock of Federated Hermes, Inc. (Federated Hermes). The total combined annual incentive
opportunity is intended to be competitive in the market for this portfolio manager role.
IPP is measured on a rolling one, three and five calendar year pre-tax
gross total return basis versus the Fund’s benchmark (i.e. S&P, custom 70% A & up/20% BBB/10% HY/3yr+/Non AMT) and versus
the designated peer group of comparable accounts. Performance periods are adjusted if a portfolio manager has been managing an account
for less than five years; accounts with less than one-year of performance history under a portfolio manager may be excluded.
As noted above, Mr. Cunningham is also the portfolio manager for other
accounts in addition to the Fund. Such other accounts may have different benchmarks and performance measures. The allocation or weighting
given to the performance of the Fund or other accounts for which Mr. Cunningham is responsible when his compensation is calculated may
be equal or can vary.
For purposes of calculating the annual incentive amount, each account
managed by the portfolio manager currently is categorized into one of three IPP groups (which may be adjusted periodically). Within each
performance measurement period and IPP group, IPP currently is calculated on the basis of an assigned weighting to each account managed
by the portfolio manager and included in the IPP groups. At the account level, the weighting assigned to the Fund is greater than or equal
to the weighting assigned to certain other accounts used to determine IPP (but can be adjusted periodically). A portion of the bonus tied
to the IPP score may be adjusted based on management's assessment of overall contributions to account performance and any other factors
as deemed relevant.
Any individual allocations from the discretionary pool may be determined,
by executive management on a discretionary basis using various factors, such as, for example, on a product, strategy or asset class basis,
and considering overall contributions and any other factors deemed relevant (and may be adjusted periodically).
As a general matter, certain conflicts of interest may arise in connection
with a portfolio manager’s management of a fund’s investments, on the one hand, and the investments of other funds/pooled
investment vehicles or accounts (collectively, including the Fund, as applicable, “accounts”) for which the portfolio manager
is responsible, on the other. For example, it is possible that the various products managed could have different investment strategies
that, at times, might conflict with one another to the possible detriment of the Fund. Alternatively, to the extent that the same investment
opportunities might be desirable for more than one account, possible conflicts could arise in determining how to allocate them. Other
potential conflicts can include, for example, conflicts created by specific portfolio manager compensation arrangements (including, for
example, the allocation or weighting given to the performance of the Fund or other accounts or activities for which the portfolio manager
is responsible in calculating the portfolio manager’s compensation), and conflicts relating to selection of brokers or dealers to
execute Fund portfolio trades and/or specific uses of commissions from Fund portfolio trades (for example, research, or “soft dollars”).
The Adviser has adopted policies and procedures and has structured the portfolio managers’ compensation in a manner reasonably designed
to safeguard the Fund from being negatively affected as a result of any such potential conflicts.
| |
Item 9. |
Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers |
No such purchases this period.
| |
Item 10. |
Submission of Matters to a Vote of Security Holders |
No changes to report.