(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 – $416,532
Fiscal year ended 2024 - $436,773
(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 $34,531 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 - $185,431
Fiscal year ended 2024 - $213,727
(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
Federated
Hermes SDG Engagement High Yield Credit Fund
A
Portfolio of Federated Hermes Adviser Series
Not FDIC Insured ▪ May
Lose Value ▪ No Bank Guarantee
Portfolio
of Investments
Foreign
Currency
Par
Amount,
Principal
Amount
or
Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energizer
Gamma Acquisition BV, Sr. Unsecd. Note, REGS, 3.500%, 6/30/2029 |
|
|
|
|
Ford
Motor Credit Co. LLC, Sr. Unsecd. Note, 4.000%, 11/13/2030 |
|
|
|
|
General
Motors Financial Co., Inc., Sr. Unsecd. Note, 2.350%, 1/8/2031 |
|
|
|
|
Nemak
SAB de CV, Sr. Unsecd. Note, REGS, 3.625%, 6/28/2031 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ABN
Amro Bank NV, Jr. Sub. Deb., 4.750%, 9/22/2027 |
|
|
|
|
Akbank
T.A.S., Sr. Unsecd. Note, REGS, 7.498%, 1/20/2030 |
|
|
|
|
Alpha
Bank AE, Sub., 5.500%, 6/11/2031 |
|
|
|
|
Alpha
Bank SA, Sr. Pfd., 2.500%, 3/23/2028 |
|
|
|
|
Australia
& New Zealand Banking Group Ltd., Sub., Series EMTN, 5.101%, 2/3/2033 |
|
|
|
|
Banco
Btg Pactual/Cayman, Sr. Unsecd. Note, REGS, 5.750%, 1/22/2030 |
|
|
|
|
Banco
Mercantil De Norte, Jr. Sub. Note, 144A, 8.750%, 5/20/2035 |
|
|
|
|
Banco
Mercantil De Norte, Jr. Sub. Note, REGS, 6.625%, 1/24/2032 |
|
|
|
|
Bank
of Ireland Group PLC, Sub. Note, Series EMTN, 1.375%, 8/11/2031 |
|
|
|
|
Bank
of Ireland Group PLC, Sub., Series EMTN, 7.594%, 12/6/2032 |
|
|
|
|
Barclays
PLC, Jr. Sub. Note, 4.375%, 3/15/2028 |
|
|
|
|
Barclays
PLC, Jr. Sub. Note, 8.500%, 6/15/2030 |
|
|
|
|
BNP
Paribas SA, Jr. Sub. Note, REGS, 4.625%, 2/25/2031 |
|
|
|
|
BNP
Paribas SA, Jr. Sub. Note, REGS, 7.375%, 9/10/2034 |
|
|
|
|
Cellnex
Finance Co. SA, Series EMTN, 2.000%, 2/15/2033 |
|
|
|
|
Commerzbank
AG, Jr. Sub. Note, 4.250%, 10/9/2027 |
|
|
|
|
Commerzbank
AG, Jr. Sub. Note, Series EMTN, 7.500%, 10/9/2030 |
|
|
|
|
Cooperatieve
Rabobank UA, Jr. Sub. Note, 3.250%, 12/29/2026 |
|
|
|
|
Cooperatieve
Rabobank UA, Jr. Sub. Note, 4.875%, 6/29/2029 |
|
|
|
|
Credit
Suisse Group AG, Jr. Sub. Note, 144A, 7.125%, 8/10/2034 |
|
|
|
|
Deutsche
Bank AG, Jr. Sub. Note, 4.500%, 11/30/2026 |
|
|
|
|
Deutsche
Bank AG, Sr. Unsecd. Note, Series EMTN, 5.625%, 5/19/2031 |
|
|
|
|
First
Citizens Bancshares, Inc., Jr. Sub. Note, Series B, 9.524%, 1/4/2027 |
|
|
|
|
ING
Groep N.V., Jr. Sub. Note, Series NC10, 4.250%, 5/16/2031 |
|
|
|
|
Intesa
Sanpaolo SpA, Jr. Sub. Note, 4.125%, 2/27/2030 |
|
|
|
|
Itau
Unibanco Holding SA, Sub., REGS, 3.875%, 4/15/2031 |
|
|
|
|
NatWest
Markets plc, Jr. Sub. Note, 4.600%, 6/28/2031 |
|
|
|
|
UBS
Group AG, Jr. Sub. Note, REGS, 4.375%, 2/10/2031 |
|
|
|
|
UBS
Group AG, Jr. Sub. Note, REGS, 4.875%, 2/12/2027 |
|
|
|
|
UniCredit
SpA, Jr. Sub. Note, Series EMTN, 3.875%, 6/3/2027 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alcoa
Nederland Holding B.V., Sr. Unsecd. Note, 144A, 4.125%, 3/31/2029 |
|
|
|
|
Anglo
American Capital PLC, Sr. Unsecd. Note, 144A, 2.875%, 3/17/2031 |
|
|
|
|
Anglo
American Capital PLC, Sr. Unsecd. Note, REGS, 5.500%, 5/2/2033 |
|
|
|
|
Ashland,
Inc., Sr. Unsecd. Note, 144A, 3.375%, 9/1/2031 |
|
|
|
|
Axalta
Coating Systems LLC, Sr. Unsecd. Note, 144A, 3.375%, 2/15/2029 |
|
|
|
|
Celanese
US Holdings LLC, Sr. Unsecd. Note, 5.000%, 4/15/2031 |
|
|
|
|
Celanese
US Holdings LLC, Sr. Unsecd. Note, 6.500%, 4/15/2030 |
|
Annual
Financial Statements and Additional Information
Foreign
Currency
Par
Amount,
Principal
Amount
or
Shares |
|
|
|
|
|
|
CORPORATE
BONDS—continued
|
|
|
|
|
Basic
Industries—continued |
|
|
|
|
Cemex
S.A.B. de C.V., REGS, 3.875%, 7/11/2031 |
|
|
|
|
Cemex
S.A.B. de C.V., Sub. Note, 144A, 7.200%, 6/10/2030 |
|
|
|
|
Cemex
S.A.B. de C.V., Sub., REGS, 5.125%, 6/8/2026 |
|
|
|
|
CF
Industries Holdings, Inc., Sr. Unsecd. Note, 4.950%, 6/1/2043 |
|
|
|
|
CF
Industries Holdings, Inc., Sr. Unsecd. Note, 5.150%, 3/15/2034 |
|
|
|
|
Cleveland-Cliffs,
Inc., Sr. Unsecd. Note, 144A, 4.625%, 3/1/2029 |
|
|
|
|
Cleveland-Cliffs,
Inc., Sr. Unsecd. Note, 144A, 7.000%, 3/15/2032 |
|
|
|
|
Cleveland-Cliffs,
Inc., Sr. Unsecd. Note, 144A, 7.375%, 5/1/2033 |
|
|
|
|
Cleveland-Cliffs,
Inc., Sr. Unsecd. Note, 7.000%, 3/15/2027 |
|
|
|
|
Edge
Finco PLC, Sec. Fac. Bond, 144A, 8.125%, 8/15/2031 |
|
|
|
|
FMG
resources, Sr. Unsecd. Note, 144A, 4.375%, 4/1/2031 |
|
|
|
|
FMG
resources, Sr. Unsecd. Note, 144A, 6.125%, 4/15/2032 |
|
|
|
|
Graphic
Packaging International, LLC, Sr. Unsecd. Note, 144A, 6.375%, 7/15/2032 |
|
|
|
|
Huntsman
International LLC, Sr. Unsecd. Note, 2.950%, 6/15/2031 |
|
|
|
|
Huntsman
International LLC, Sr. Unsecd. Note, 5.700%, 10/15/2034 |
|
|
|
|
IHS
Holding Ltd., Sr. Secd. Note, REGS, 7.875%, 5/29/2030 |
|
|
|
|
IHS
Holding Ltd., Sr. Unsecd. Note, 144A, 7.875%, 5/29/2030 |
|
|
|
|
KB
HOME, Sr. Unsecd. Note, 4.000%, 6/15/2031 |
|
|
|
|
KB
HOME, Sr. Unsecd. Note, 4.800%, 11/15/2029 |
|
|
|
|
Novelis
Corporation, Sr. Unsecd. Note, 144A, 3.875%, 8/15/2031 |
|
|
|
|
Novelis
Corporation, Sr. Unsecd. Note, 144A, 4.750%, 1/30/2030 |
|
|
|
|
Novelis
Sheet Ingot Gmbh, Sr. Unsecd. Note, REGS, 3.375%, 4/15/2029 |
|
|
|
|
Olympus
Water US Holding Corp., Sr. Unsecd. Note, REGS, 5.375%, 10/1/2029 |
|
|
|
|
Orbia
Advance Corp. SAB de CV, Sr. Unsecd. Note, 144A, 6.800%, 5/13/2030 |
|
|
|
|
Orbia
Advance Corp. SAB de CV, Sr. Unsecd. Note, REGS, 2.875%, 5/11/2031 |
|
|
|
|
PAPREC
HOLDING SA, Sec. Fac. Bond, 144A, 4.500%, 7/15/2032 |
|
|
|
|
PAPREC
HOLDING SA, Sr. Secd. Note, REGS, 4.500%, 7/15/2032 |
|
|
|
|
Sappi
Papier Holding GmbH, Sr. Unsecd. Note, REGS, 3.625%, 3/15/2028 |
|
|
|
|
Sappi
Papier Holding GmbH, Sr. Unsecd. Note, REGS, 4.500%, 3/15/2032 |
|
|
|
|
Sappi
Papier Holding GmbH, Sr. Unsecd. Note, REGS, 7.500%, 6/15/2032 |
|
|
|
|
SNF
Group SACA, Sr. Unsecd. Note, 144A, 3.375%, 3/15/2030 |
|
|
|
|
Solvay
S.A., Jr. Sub. Note, 2.500%, 12/2/2025 |
|
|
|
|
Standard
Industries, Inc., Sr. Unsecd. Note, 144A, 3.375%, 1/15/2031 |
|
|
|
|
Standard
Industries, Inc., Sr. Unsecd. Note, 144A, 6.250%, 8/1/2033 |
|
|
|
|
Summit
Digitel Infrastructure, 144A, 2.875%, 8/12/2031 |
|
|
|
|
Summit
Digitel Infrastructure, C Bond, REGS, 2.875%, 8/12/2031 |
|
|
|
|
Suzano
Austria GmbH, Sr. Unsecd. Note, Series DM3N, 3.125%, 1/15/2032 |
|
|
|
|
Taylor
Morrison Communities, Inc./Monarch Communities, Inc., Sr. Unsecd. Note, 144A, 5.125%, 8/1/2030 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ardagh
Metal Packaging, Sr. Unsecd. Note, REGS, 3.000%, 9/1/2029 |
|
|
|
|
Ball
Corp., Sr. Unsecd. Note, 2.875%, 8/15/2030 |
|
|
|
|
Ball
Corp., Sr. Unsecd. Note, 5.500%, 9/15/2033 |
|
|
|
|
Berry
Global, Inc., 1.650%, 1/15/2027 |
|
|
|
|
Berry
Global, Inc., Sec. Fac. Bond, 144A, 5.650%, 1/15/2034 |
|
|
|
|
Berry
Global, Inc., Sec. Fac. Bond, REGS, 1.500%, 1/15/2027 |
|
|
|
|
Crown
European Holdings SA, Sr. Unsecd. Note, 144A, 4.500%, 1/15/2030 |
|
|
|
|
Klabin
Austria Gmbh, Sr. Unsecd. Note, 144A, 3.200%, 1/12/2031 |
|
Annual
Financial Statements and Additional Information
Foreign
Currency
Par
Amount,
Principal
Amount
or
Shares |
|
|
|
|
|
|
CORPORATE
BONDS—continued
|
|
|
|
|
|
|
|
|
|
Klabin
Austria Gmbh, Sr. Unsecd. Note, REGS, 3.200%, 1/12/2031 |
|
|
|
|
Progroup
Ag, Sec. Fac. Bond, REGS, 5.375%, 4/15/2031 |
|
|
|
|
Rexel
S.A., Sr. Unsecd. Note, 2.125%, 12/15/2028 |
|
|
|
|
Sealed
Air Corp., Sr. Unsecd. Note, 144A, 4.000%, 12/1/2027 |
|
|
|
|
Sealed
Air Corp., Sr. Unsecd. Note, 144A, 5.000%, 4/15/2029 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adient
Global Holdings Ltd., Sr. Unsecd. Note, 144A, 7.500%, 2/15/2033 |
|
|
|
|
American
Axle & Manufacturing, Inc., Sr. Sub. Secd. Note, 5.000%, 10/1/2029 |
|
|
|
|
AZELIS
Finance Nv, Sr. Unsecd. Note, REGS, 4.750%, 9/25/2029 |
|
|
|
|
Boots
Group Finco LP, Sec. Fac. Bond, Series 144, 7.375%, 8/31/2032 |
|
|
|
|
Clarios
Global LP/Clarios US Finance Co, Sr. Secd. Note, 144A, 4.75%, 6/15/2031 |
|
|
|
|
ELIOR
Group Sa, Sr. Unsecd. Note, 5.625%, 3/15/2030 |
|
|
|
|
LKQ
Corp., Sr. Unsecd. Note, 6.250%, 6/15/2033 |
|
|
|
|
Lkq
Dutch Bond Bv, Sr. Unsecd. Note, 4.125%, 3/13/2031 |
|
|
|
|
LKQ
European Holdings B.V., Sr. Unsecd. Note, REGS, 4.125%, 4/1/2028 |
|
|
|
|
V.F.
Corp., Sr. Unsecd. Note, 0.625%, 2/25/2032 |
|
|
|
|
V.F.
Corp., Sr. Unsecd. Note, 2.950%, 4/23/2030 |
|
|
|
|
Whirlpool
Corp., Sr. Unsecd. Note, 6.500%, 6/15/2033 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arcelik
AS, Sr. Unsecd. Note, 3.000%, 5/27/2026 |
|
|
|
|
Kraft
Heinz Foods Co., Sr. Unsecd. Note, 4.375%, 6/1/2046 |
|
|
|
|
Post
Holdings, Inc., 144A, 6.375%, 3/1/2033 |
|
|
|
|
Post
Holdings, Inc., Sr. Unsecd. Note, 144A, 4.500%, 9/15/2031 |
|
|
|
|
Post
Holdings, Inc., Sr. Unsecd. Note, 144A, 4.625%, 4/15/2030 |
|
|
|
|
|
|
|
|
|
Consumer
Non-Cyclical—3.0% |
|
|
|
|
BCP
V Modular Services Finance PLC, Sr. Unsecd. Note, REGS, 6.750%, 11/30/2029 |
|
|
|
|
Froneri
Lux Finco Sarl, Sec. Fac. Bond, 144A, 4.750%, 8/1/2032 |
|
|
|
|
Irca
Spa, Sec. Fac. Bond, REGS, 5.725%, 12/15/2029 |
|
|
|
|
Opal
Bidco SAS, Sec. Fac. Bond, 144A, 5.500%, 3/31/2032 |
|
|
|
|
Opal
Bidco SAS, Sec. Fac. Bond, REGS, 5.500%, 3/31/2032 |
|
|
|
|
Schaeffler
AG, Sr. Unsecd. Note, Series EMTN, 4.500%, 3/28/2030 |
|
|
|
|
Techem
Verwaltungsgesell, Sec. Fac. Bond, 144A, 4.625%, 7/15/2032 |
|
|
|
|
Techem
Verwaltungsgesell, Sr. Secd. Note, REGS, 4.625%, 7/15/2032 |
|
|
|
|
US
Foods, Inc., Sr. Unsecd. Note, 144A, 5.750%, 4/15/2033 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aker
BP ASA, Sr. Unsecd. Note, 144A, 5.125%, 10/1/2034 |
|
|
|
|
Aker
BP ASA, Sr. Unsecd. Note, REGS, 3.750%, 1/15/2030 |
|
|
|
|
BP
Capital Markets PLC, Sr. Unsecd. Note, Series EMTN, 5.067%, 9/12/2036 |
|
|
|
|
BP
Capital Markets PLC, Sub., 4.250%, 3/22/2027 |
|
|
|
|
EQT
Corp., Sr. Unsecd. Note, 144A, 3.625%, 5/15/2031 |
|
|
|
|
Greenko
Wind Projects (Mauritius) Ltd., Sr. Unsecd. Note, 144A, 7.250%, 9/27/2028 |
|
|
|
|
Occidental
Petroleum Corp., Sr. Unsecd. Note, 3.200%, 8/15/2026 |
|
|
|
|
ONEOK,
Inc., Sr. Unsecd. Note, 5.05%, 4/1/2045 |
|
|
|
|
ONEOK,
Inc., Sr. Unsecd. Note, 5.45%, 6/1/2047 |
|
Annual
Financial Statements and Additional Information
Foreign
Currency
Par
Amount,
Principal
Amount
or
Shares |
|
|
|
|
|
|
CORPORATE
BONDS—continued
|
|
|
|
|
|
|
|
|
|
ONEOK,
Inc., Sr. Unsecd. Note, 5.60%, 4/1/2044 |
|
|
|
|
Range
Resources Corp., Sr. Unsecd. Note, 144A, 4.750%, 2/15/2030 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ING
Groep N.V., Jr. Sub. Note, 7.250%, 11/16/2034 |
|
|
|
|
Natwest
Group plc, Jr. Sub. Deb., 7.300%, 11/19/2034 |
|
|
|
|
Societe
Generale SA, Jr. Sub. Note, 144A, 8.125%, 11/21/2029 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Centene
Corp., 2.500%, 3/1/2031 |
|
|
|
|
Centene
Corp., Sr. Unsecd. Note, 2.625%, 8/1/2031 |
|
|
|
|
Eurofins
Scientific SE, Jr. Sub. Note, 3.250%, 11/13/2025 |
|
|
|
|
Eurofins
Scientific SE, Sr. Unsecd. Note, 0.875%, 5/19/2031 |
|
|
|
|
Fresenius
Medical Care US Finance III, Inc., Sr. Unsecd. Note, REGS, 2.375%, 2/16/2031 |
|
|
|
|
Grifols
Escrow Issuer SA, Sr. Unsecd. Note, REGS, 3.875%, 10/15/2028 |
|
|
|
|
HCA,
Inc., Sec. Fac. Bond, 3.500%, 7/15/2051 |
|
|
|
|
HCA,
Inc., Sr. Unsecd. Note, 2.375%, 7/15/2031 |
|
|
|
|
Iqvia,
Inc., Sr. Unsecd. Note, REGS, 2.250%, 3/15/2029 |
|
|
|
|
Medline
Borrower LP, Sr. Secd. Note, 144A, 3.875%, 4/1/2029 |
|
|
|
|
Medline
Borrower LP/Medline Co-Issuer Inc., 144A, 6.250%, 4/1/2029 |
|
|
|
|
Tenet
Healthcare Corp., 4.375%, 1/15/2030 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Phoenix
Group Holdings PLC, Jr. Sub. Deb., 5.750%, 4/26/2028 |
|
|
|
|
UnipolSai
Assicurazioni SpA, Sub., Series EMTN, 3.875%, 3/1/2028 |
|
|
|
|
Zurich
Finance Ireland, Sub. Note, Series EMTN, 3.000%, 4/19/2051 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CCO
Holdings LLC/Cap Corp., Sr. Unsecd. Note, 144A, 4.250%, 1/15/2034 |
|
|
|
|
CCO
Holdings LLC/Cap Corp., Sr. Unsecd. Note, 4.500%, 5/1/2032 |
|
|
|
|
Sunrise
FinCo I B.V., Sr. Note, 144A, 4.875%, 7/15/2031 |
|
|
|
|
Telenet
Finance Luxembourg, Sr. Secd. Note, 144A, 5.500%, 3/1/2028 |
|
|
|
|
Virgin
Media O2 V Dac, Sr. Secd. Note, 144A, 7.875%, 3/15/2032 |
|
|
|
|
Virgin
Media Secured Finance PLC, Sec. Fac. Bond, REGS, 4.250%, 1/15/2030 |
|
|
|
|
Ziggo
Bond Co. BV, Sr. Unsecd. Note, REGS, 3.375%, 2/28/2030 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clydesdale
Acquisition Holdings, Inc., Sr. Secd. Note, 144A, 6.750%, 4/15/2032 |
|
|
|
|
Crown
Americas LLC, Sr. Unsecd. Note, 144A, 5.875%, 6/1/2033 |
|
|
|
|
Crown
Americas LLC, Sr. Unsecd. Note, 4.250%, 9/30/2026 |
|
|
|
|
Graphic
Packaging International, LLC, Sr. Unsecd. Note, 144A, 3.750%, 2/1/2030 |
|
|
|
|
Owens-Brockway
Glass Container, Inc., Sr. Unsecd. Note, 144A, 7.375%, 6/1/2032 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CANPACK
SA and Eastern PA Land Investment Holding LLC, REGS, 2.375%, 11/1/2027 |
|
|
|
|
CANPACK
SA and Eastern PA Land Investment Holding LLC, Sr. Unsecd. Note, 144A, 3.875%, 11/15/2029 |
|
|
|
|
Iron
Mountain, Inc., Sr. Unsecd. Note, 144A, 4.500%, 2/15/2031 |
|
Annual
Financial Statements and Additional Information
Foreign
Currency
Par
Amount,
Principal
Amount
or
Shares |
|
|
|
|
|
|
CORPORATE
BONDS—continued
|
|
|
|
|
|
|
|
|
|
Iron
Mountain, Inc., Sr. Unsecd. Note, 144A, 5.250%, 7/15/2030 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1011778
BC Unltd. Liability Co./New Red Finance, Inc., 144A, 5.625%, 9/15/2029 |
|
|
|
|
Falabella
S.A., Sr. Unsecd. Note, REGS, 3.375%, 1/15/2032 |
|
|
|
|
|
|
|
|
|
Technology
& Electronics—2.5% |
|
|
|
|
Dell,
Inc., Sr. Unsecd. Note, 5.400%, 9/10/2040 |
|
|
|
|
Nokia
Oyj, Sr. Unsecd. Note, 4.375%, 6/12/2027 |
|
|
|
|
Nokia
Oyj, Sr. Unsecd. Note, 6.625%, 5/15/2039 |
|
|
|
|
Nokia
Oyj, Sr. Unsecd. Note, Series EMTN, 4.375%, 8/21/2031 |
|
|
|
|
NXP
BV / NXP Funding LLC / NXP USA Inc., Sr. Unsecd. Note, 2.500%, 5/11/2031 |
|
|
|
|
NXP
BV / NXP Funding LLC / NXP USA Inc., Sr. Unsecd. Note, 3.400%, 5/1/2030 |
|
|
|
|
OVH
Groupe SAS, Sr. Unsecd. Note, REGS, 4.750%, 2/5/2031 |
|
|
|
|
Seagate
Data Storage Technologh Pte. Ltd., Sr. Note, 4.125%, 1/15/2031 |
|
|
|
|
Seagate
Data Storage Technologh Pte. Ltd., Sr. Unsecd. Note, 144A, 4.091%, 6/1/2029 |
|
|
|
|
Xerox
Holdings Corp., Sr. Unsecd. Note, 144A, 8.875%, 11/30/2029 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cellnex
Telecom, SA, Conv. Bond, Series CLNX, 0.750%, 11/20/2031 |
|
|
|
|
Energizer
Holdings, Inc., Sr. Unsecd. Note, 144A, 4.375%, 3/31/2029 |
|
|
|
|
Fibercop
SPA, Sec. Fac. Bond, 144A, 6.000%, 9/30/2034 |
|
|
|
|
Fibercop
SPA, Series emtn, 2.375%, 10/12/2027 |
|
|
|
|
Iliad
Holding Sas, 144A, 7.000%, 4/15/2032 |
|
|
|
|
Iliad
SA, Sr. Secd. Note, 1.875%, 2/11/2028 |
|
|
|
|
Infrastrutture
Wireless Italiane SPA, Sr. Unsecd. Note, Series EMTN, 1.750%, 4/19/2031 |
|
|
|
|
Infrastrutture
Wireless Italiane SPA, Sr. Unsecd. Note, Series GMTN, 1.625%, 10/21/2028 |
|
|
|
|
LorcaTelecom
Bondco, Term Loan - 1st Lien, REGS, 4.000%, 9/18/2027 |
|
|
|
|
Millicom
International Cellular S.A., Sr. Unsecd. Note, 144A, 7.375%, 4/2/2032 |
|
|
|
|
Millicom
International Cellular S.A., Sr. Unsecd. Note, REGS, 4.500%, 4/27/2031 |
|
|
|
|
Network
i2i Ltd., Sub., REGS, 3.975%, 3/3/2026 |
|
|
|
|
Nexans
SA, Sr. Unsecd. Note, 4.125%, 5/29/2029 |
|
|
|
|
Odido
Group Holding B.V., Sr. Unsecd. Note, REGS, 5.500%, 1/15/2030 |
|
|
|
|
Summer
(BC) Holdco B S.a r.l., Sec. Fac. Bond, 144A, 5.875%, 2/15/2030 |
|
|
|
|
Summer
(BC) Holdco B S.a r.l., Secured Note, REGS, 5.875%, 2/15/2030 |
|
|
|
|
Telefonica
Europe BV, Jr. Sub. Note, 2.376%, 2/12/2029 |
|
|
|
|
T-Mobile
USA, Inc., 2.250%, 11/15/2031 |
|
|
|
|
T-Mobile
USA, Inc., 3.300%, 2/15/2051 |
|
|
|
|
T-Mobile
USA, Inc., Sr. Unsecd. Note, 4.700%, 1/15/2035 |
|
|
|
|
Turk
Telekomunikasyon AS, Sr. Unsecd. Note, 144A, 7.375%, 5/20/2029 |
|
|
|
|
Turk
Telekomunikasyon AS, Sr. Unsecd. Note, REGS, 7.375%, 5/20/2029 |
|
|
|
|
Virgin
Media O2 V Dac, Sec. Fac. Bond, REGS, 7.875%, 3/15/2032 |
|
|
|
|
Vmed
O2 UK Financing I PLC, Sec. Fac. Bond, REGS, 4.500%, 7/15/2031 |
|
|
|
|
VZ
Secured Financing B.V., Sr. Secd. Note, 144A, 5.000%, 1/15/2032 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AES
Corp., Sr. Unsecd. Note, 2.450%, 1/15/2031 |
|
|
|
|
Clearway
Energy Operating LLC, Sr. Unsecd. Note, 144A, 3.750%, 2/15/2031 |
|
Annual
Financial Statements and Additional Information
Foreign
Currency
Par
Amount,
Principal
Amount
or
Shares |
|
|
|
|
|
|
CORPORATE
BONDS—continued
|
|
|
|
|
|
|
|
|
|
Clearway
Energy Operating LLC, Sr. Unsecd. Note, 144A, 3.750%, 1/15/2032 |
|
|
|
|
ContourGlobal
Power Holdings SA, 144A, 5.000%, 2/28/2030 |
|
|
|
|
EDP,
S.A., Jr. Sub. Note, Series NC8, 1.875%, 3/14/2082 |
|
|
|
|
EDP,
S.A., Sr. Sub., 4.625%, 9/16/2054 |
|
|
|
|
Enel
SpA, Jr. Sub. Note, Series 9.5Y, 1.875%, 6/8/2030 |
|
|
|
|
Graphic
Packaging International, LLC, Sr. Unsecd. Note, REGS, 2.625%, 2/1/2029 |
|
|
|
|
Graphic
Packaging International, LLC, Unsecd. Note, 144A, 2.625%, 2/1/2029 |
|
|
|
|
Greenko
Power II Ltd., Sr. Unsecd. Note, REGS, 4.300%, 12/13/2028 |
|
|
|
|
Orsted
A/S, Sub., Series GBP, 2.500%, 2/18/2032 |
|
|
|
|
TerraForm
Power Operating LLC, Sr. Unsecd. Note, 144A, 4.750%, 1/15/2030 |
|
|
|
|
Veolia
Environnement SA, Jr. Sub. Note, 2.500%, 1/20/2029 |
|
|
|
|
Vistra
Operations Co., LLC, Sr. Unsecd. Note, 144A, 4.375%, 5/1/2029 |
|
|
|
|
XPLR
Infrastructure Operating Partners, LP, Sr. Unsecd. Note, 144A, 8.625%, 3/15/2033 |
|
|
|
|
|
|
|
|
|
TOTAL
CORPORATE BONDS
(IDENTIFIED
COST $97,929,199) |
|
|
|
|
|
|
|
|
|
United
States Treasury Bill, 0.000%, 9/25/2025 |
|
|
|
|
United
States Treasury Bill, 0.000%, 10/9/2025 |
|
|
|
|
United
States Treasury Note, 3.750%, 8/15/2027 |
|
|
|
|
TOTAL
U.S. TREASURIES
(IDENTIFIED
COST $23,813,755) |
|
|
|
|
FOREIGN
GOVERNMENT/AGENCY—2.9% |
|
|
|
|
|
|
|
|
|
United
Kingdom, Government of, Sr. Unsecd. Note, 3.500%, 10/22/2025
(IDENTIFIED
COST $3,834,599) |
|
|
|
|
EXCHANGE-TRADED
FUNDS—5.3% |
|
|
|
|
iShares
iBoxx High Yield Corporate Bond ETF |
|
|
|
|
SPDR
Bloomberg High Yield Bond ETF |
|
|
|
|
TOTAL
EXCHANGE-TRADED FUNDS
(IDENTIFIED
COST $7,370,857) |
|
|
|
|
TOTAL
INVESTMENT IN SECURITIES—97.0%
(IDENTIFIED
COST $132,948,410)5
|
|
|
|
|
OTHER
ASSETS AND LIABILITIES - NET—3.0%6
|
|
|
|
|
|
|
At August 31, 2025, the Fund had the following
outstanding futures contracts:
|
|
|
|
|
Value
and
Unrealized
Appreciation/
(Depreciation)
|
|
|
|
|
|
|
United
States Treasury Notes 2 Year Long Futures |
|
|
|
|
United
States Treasury Notes 10 Year Long Futures |
|
|
|
|
United
States Treasury Notes 5 Year Long Futures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United
Kingdom Long Gilt Short Futures |
|
|
|
|
NET
UNREALIZED APPRECIATION ON FUTURES CONTRACTS |
|
Annual
Financial Statements and Additional Information
At August 31, 2025,
the Fund had the following outstanding foreign exchange contracts:
|
|
|
Foreign
Currency
Units
to
Receive/Deliver
|
|
Unrealized
Appreciation/
(Depreciation)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
UNREALIZED DEPRECIATION ON FOREIGN EXCHANGE CONTRACTS |
|
At August 31, 2025, the Fund had the following
open swap contracts:
|
|
|
|
|
|
|
|
|
Upfront
Premiums
Paid/
(Received)
|
Unrealized
Appreciation/
(Depreciation)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodyear
Tire & Rubber Co. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Markit
CDX North America
High
Yield Index Series 44 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
CREDIT DEFAULT SWAPS |
|
|
|
Net Unrealized Appreciation (Depreciation)
on Futures Contracts, Foreign Exchange Contracts and the value of Swap Contracts are included
in “Other Assets and Liabilities—Net.”
|
|
Perpetual
Bond Security. The maturity date reflects the next call date. |
|
|
Denotes
a restricted security that either: (a) cannot be offered for public sale without first being registered, or availing of an exemption from
registration, under
the
Securities Act of 1933; or (b) is subject to a contractual restriction on public sales. At August 31, 2025, these restricted securities
amounted to $360,614,
which
represented 0.3% of net assets. |
|
|
Discount
rate at time of purchase. |
|
|
|
|
|
The
cost of investments for federal tax purposes amounts to $130,121,128. |
|
|
Assets,
other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
|
|
Implied
credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements serve as an
indicator of the
current
status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread
of a particular
referenced
entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement.
Wider credit
spreads
represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit
event occurring as defined
under
the terms of the agreement. A credit spread identified as “Defaulted” indicates a credit event has occurred for the referenced
entity or obligation. |
Note: The categories of investments are
shown as a percentage of net assets at August 31, 2025.
Annual
Financial Statements and Additional Information
Various inputs are used
in determining the value of the Fund’s investments. These inputs are summarized in the three broad levels listed
below:
Level 1—quoted prices in active markets
for identical securities.
Level 2—other significant observable
inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk,
etc.). Also includes securities valued at amortized cost.
Level 3—significant unobservable inputs
(including the Fund’s own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing
securities are not an indication of the risk associated with investing in those securities.
The following is a summary of the inputs
used, as of August 31, 2025, in valuing the Fund’s assets carried at fair value:
|
|
|
|
|
Level
2—
Other
Significant
Observable
Inputs
|
Level
3—
Significant
Unobservable
Inputs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
Government/Agency |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Financial Instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
Exchange Contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
Exchange Contracts |
|
|
|
|
TOTAL
OTHER FINANCIAL INSTRUMENTS |
|
|
|
|
The
following acronym(s) are used throughout this portfolio: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—Standard
& Poor’s Depositary Receipt |
See Notes which are an integral part of
the Financial Statements
Annual
Financial Statements and Additional Information
Financial
Highlights–Institutional
Shares
(For a Share Outstanding Throughout Each
Period)
|
|
|
|
|
|
|
|
|
|
Net Asset
Value, Beginning of Period |
|
|
|
|
|
Income
From Investment Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
Net
realized and unrealized gain (loss) |
|
|
|
|
|
TOTAL
FROM INVESTMENT OPERATIONS |
|
|
|
|
|
|
|
|
|
|
|
|
Distributions
from net investment income |
|
|
|
|
|
Distributions
from net realized gain |
|
|
|
|
|
|
|
|
|
|
|
|
Net
Asset Value, End of Period |
|
|
|
|
|
|
|
|
|
|
|
|
Ratios
to Average Net Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expense
waiver/reimbursement5
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
assets, end of period (000 omitted) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per
share numbers have been calculated using the average shares method. |
|
|
Based
on net asset value. |
|
|
Amount
does not reflect net expenses incurred by investment companies in which the Fund may invest. |
|
|
The
net expense ratios are calculated without reduction for expense offset arrangements. The net expense ratios are 0.62%, 0.61%, 0.62% and
0.62% for the
years
ended August 31, 2025, 2024, 2023 and 2021, respectively, after taking into account these expense reductions. |
|
|
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. |
|
|
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
Financial
Highlights–Class
R6 Shares
(For a Share Outstanding Throughout Each
Period)
|
|
|
Period
Ended
8/31/20211,2
|
|
|
|
|
|
|
Net Asset
Value, Beginning of Period |
|
|
|
|
|
Income
From Investment Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
Net
realized and unrealized gain (loss) |
|
|
|
|
|
TOTAL
FROM INVESTMENT OPERATIONS |
|
|
|
|
|
|
|
|
|
|
|
|
Distributions
from net investment income |
|
|
|
|
|
Distributions
from net realized gain |
|
|
|
|
|
|
|
|
|
|
|
|
Net
Asset Value, End of Period |
|
|
|
|
|
|
|
|
|
|
|
|
Ratios
to Average Net Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expense
waiver/reimbursement8
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
assets, end of period (000 omitted) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certain
ratios included in Ratios to Average Net Assets and per share amounts may be inflated or deflated as compared to the fee structure for
each respective
share
class as a result of daily systematic allocations being rounded to the nearest penny for fund level income, expense and realized gain/loss
amounts. Such
differences
are immaterial. |
|
|
Reflects
operations for the period from June 11, 2021 (commencement of operations) to August 31, 2021. |
|
|
Per
share numbers have been calculated using the average shares method. |
|
|
Based
on net asset value. Total returns for periods of less than one year are not annualized. |
|
|
Amount
does not reflect net expenses incurred by investment companies in which the Fund may invest. |
|
|
The
net expense ratios are calculated without reduction for expense offset arrangements. The net expense ratios are 0.57%, 0.57% and 0.57%
for the years
ended
August 31, 2025, 2024, and 2023, respectively, after taking into account these expense reductions. |
|
|
Computed
on an annualized basis. |
|
|
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. |
|
|
Represents
less than 0.01%. |
|
|
Represents
less than $1,000. |
|
|
Securities
that mature are considered sales for purposes of this calculation. |
|
|
Calculated
at the Fund level. Percentage indicated was calculated for the fiscal period ended August 31, 2021. |
See Notes which are an integral part of
the Financial Statements
Annual
Financial Statements and Additional Information
Statement
of Assets and Liabilities
August 31, 2025
|
|
|
Investment
in securities (identified
cost $132,948,410) |
|
Cash
collateral on swap contracts |
|
|
|
|
Cash
denominated in foreign currencies (identified cost $149,181) |
|
Swaps,
at value (premium paid $1,332,750) |
|
|
|
|
Receivable
for periodic payments from swap contracts |
|
|
|
|
Unrealized
appreciation on foreign exchange contracts |
|
Receivable
for shares sold |
|
Receivable
for variation margin on futures contracts |
|
Receivable
for investments sold |
|
|
|
|
|
|
|
Payable
for investments purchased |
|
Unrealized
depreciation on foreign exchange contracts |
|
Payable
for portfolio accounting fees |
|
Swaps,
at value (premium received $47,929) |
|
Payable
for auditing fees |
|
Payable
for investment adviser fee (Note 5)
|
|
Payable
for transfer agent fees (Note 2)
|
|
Payable
for administrative fee (Note 5)
|
|
Accrued
expenses (Note 5) |
|
|
|
|
Net
assets for 14,060,589 shares outstanding |
|
|
|
|
|
|
|
Total
distributable earnings (loss) |
|
|
|
|
Net Asset
Value, Offering Price and Redemption Proceeds Per Share: |
|
|
|
|
Net
asset value per share ($140,871,561 ÷ 14,059,348 shares outstanding), no par value, unlimited shares authorized
|
|
|
|
|
Net
asset value per share ($12,447 ÷ 1,241 shares outstanding), no par value, unlimited shares authorized |
|
See Notes which are an integral part of
the Financial Statements
Annual
Financial Statements and Additional Information
Statement
of Operations
Year Ended August
31, 2025
|
|
|
Interest
(net of foreign tax withheld of $3,083) |
|
|
|
|
|
|
|
|
|
|
Investment
adviser fee (Note 5)
|
|
Administrative
fee (Note 5)
|
|
|
|
|
Transfer
agent fees (Note 2) |
|
Directors’/Trustees’
fees (Note 5)
|
|
|
|
|
|
|
|
Portfolio
accounting fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
Waiver,
Reimbursement and Reduction: |
|
Waiver
of investment adviser fee (Note 5)
|
|
Reimbursement
of other operating expenses (Notes 2 and 5) |
|
Reduction
of custodian fees (Note 6)
|
|
TOTAL
WAIVER, REIMBURSEMENT AND REDUCTION |
|
|
|
|
|
|
|
Realized
and Unrealized Gain (Loss) on Investments, Foreign Exchange Contracts, Futures Contracts, Swap Contracts and Foreign
Currency
Transactions: |
|
Net
realized loss on investments and foreign currency transactions |
|
Net
realized loss on foreign exchange contracts |
|
Net
realized gain on futures contracts |
|
Net
realized gain on swap contracts |
|
Net
change in unrealized appreciation of investments and translation of assets and liabilities in foreign currency
|
|
Net
change in unrealized depreciation of foreign exchange contracts |
|
Net
change in unrealized depreciation of futures contracts |
|
Net
change in unrealized appreciation of swap contracts |
|
Net
realized and unrealized gain (loss) on investments, foreign exchange contracts, futures contracts, swap contracts and foreign currency
transactions
|
|
Change
in net assets resulting from operations |
|
See Notes which are an integral part of
the Financial Statements
Annual
Financial Statements and Additional Information
Statement
of Changes in Net Assets
|
|
|
|
Increase
(Decrease) in Net Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
change in unrealized appreciation/depreciation |
|
|
CHANGE
IN NET ASSETS RESULTING FROM OPERATIONS |
|
|
Distributions
to Shareholders: |
|
|
|
|
|
|
|
|
|
|
CHANGE
IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS |
|
|
|
|
|
|
Proceeds
from sale of shares |
|
|
Net
asset value of shares issued to shareholders in payment of distributions declared |
|
|
|
|
|
|
CHANGE
IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes which are an integral part of
the Financial Statements
Annual
Financial Statements and Additional Information
Notes to
Financial Statements
Federated Hermes Adviser Series (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 10 portfolios. The financial statements included herein are only those of
the Federated Hermes SDG Engagement High Yield Credit 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 two classes of shares: Institutional Shares and Class
R6 Shares. Class A Shares and Class C Shares are effective with the Securities and Exchange Commission (SEC), but are not yet offered
for sale. All shares of the Fund have equal rights with respect to voting, except on class-specific matters. The Fund’s investment
objective is to seek current income and long-term capital appreciation
alongside positive societal impact.
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).
In
calculating its net asset value (NAV), the Fund generally values investments as follows:
■
Fixed-income
securities are fair valued using price evaluations provided by a pricing service approved by Federated Investment Management
Company (the “Adviser”).
■
Equity
securities listed on an exchange or traded through a regulated market system are valued at their last reported sale price or official
closing price in their principal exchange or market.
■
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.
■
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.
■
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
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.
Investment Income, Gains and Losses, Expenses and Distributions
Investment
transactions are accounted for on a trade-date basis. Realized gains and losses from investment transactions are recorded on an
identified-cost basis. Interest income and expenses are accrued daily. Dividend income and distributions to shareholders are recorded
on the ex-dividend date. Foreign dividends are recorded on the
ex-dividend date or when the Fund is informed of the ex-dividend date. Distributions
of net investment income, if any, are declared and paid monthly. In addition, distributions of 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 and reduction of $495,710 is disclosed in this Note 2, Note 5 and Note 6.
For
the year ended August 31, 2025, transfer agent fees for the Fund were as follows:
|
|
Transfer
Agent
Fees
Incurred |
Transfer
Agent
Fees
Reimbursed |
|
|
|
|
The
Fund may pay other service fees up to 0.25% of the average daily net assets of the Fund’s Institutional 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 August 31, 2025, the
Fund’s Institutional Shares did not incur other service fees.
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 August 31, 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 August 31, 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 State of
Delaware.
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.
Annual
Financial Statements and Additional Information
Swap Contracts
Swap
contracts involve two parties that agree to exchange the returns (or the differential in rates of return) earned or realized on particular
predetermined investments, instruments, indices or other measures. The gross returns to be exchanged or “swapped” between
parties are generally calculated with respect to a “notional amount” for a determined period of time. The Fund may enter into
interest rate, total return, credit default, currency and other
swap agreements to seek to increase yield, income and return and to manage
country, currency, duration, security, market, sector/asset class and yield curve risks. Risks may arise upon entering into swap agreements
from the potential inability of the counterparties to meet the terms of their contract from unanticipated changes in the value of
the swap agreement. In connection with these agreements, securities or cash may be identified as collateral or margin in accordance with
the terms of the respective swap agreements to provide assets of value and recourse in the event of default.
The Fund is subject to
interest rate risk exposure in the normal course of pursuing its investment objectives. Because the Fund holds fixed
rate bonds, the value of these bonds may decrease if interest rates rise. Interest rate swap agreements generally involve the agreement
by the Fund to pay the counterparty a fixed or floating interest rate on a fixed notional amount and to receive a fixed or floating
rate on a fixed notional amount, but may also involve the agreement to pay or receive payments derived from changes in interest
rates. Periodic payments are generally made during the life of the swap agreement according to the terms and conditions of the agreement
and at termination or maturity. The Fund’s maximum risk of loss from counterparty credit risk is the discounted value of the net
cash flows to be received from/paid to the counterparty over the contract’s remaining life, to the extent the amount is positive.
This risk is mitigated by having a master netting arrangement
between the Fund and the counterparty and by the posting of collateral by the counterparty
to the Fund to cover the Fund’s exposure to the counterparty.
The “buyer”
in a credit default swap is obligated to pay the “seller” a periodic stream of payments over the term of the contract provided
that no event of default on an underlying reference obligation has occurred. If an event of default occurs, the seller must pay the
buyer the full notional value, or the “par value,” of the reference obligation in exchange for the reference obligation. In
connection with these agreements, securities may be identified
as collateral in accordance with the terms of the respective swap agreements to provide
assets of the value and recourse in the event of default or bankruptcy/solvency. Recovery values are assumed by market makers considering
either industry standard recovery rates or entity specific factors and considerations until a credit event occurs. If a credit event
has occurred, the recovery value is typically determined by a facilitated auction whereby a minimum number of allowable broker bids,
together with a specific valuation method, are used to calculate the settlement value. The maximum amount of the payment that may
occur, as a result of a credit event payable by the protection seller, is equal to the notional amount of the underlying index or security.
The Fund’s maximum exposure to loss of the notional value of credit default swaps outstanding at August 31, 2025, is $26,293,000.
The Fund’s maximum risk of loss from counterparty credit risk, either as the protection buyer or as the protection seller, is the
fair value of the contract. This risk is mitigated by having a master netting arrangement between the Fund and the counterparty and by
the posting of collateral by the counterparty to the Fund to cover the Fund’s exposure to the counterparty.
Upfront payments received
or paid by the Fund will be reflected as an asset or liability on the Statement of Assets and Liabilities. Changes
in the value of swap contracts are included in “Swaps, at value” on the Statement of Assets and Liabilities, and periodic
payments are reported as “Net realized gain (loss) on swap
contracts” in the Statement of Operations.
Certain swap contracts
are subject to Master Netting Agreements (MNAs) which are agreements between the Fund and its counterparties
that provides 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. The cash or securities deposited in a segregated account offsets the amount due to the broker reducing the
net settlement amount to zero.
Certain swap contracts
may be centrally cleared (“centrally cleared swaps”), whereby all payments made or received by the Fund pursuant
to the contract are with a central clearing party (the “CCP”) rather than the counterparty. The CCP guarantees the performance
of the parties to the contract. Upon entering into centrally cleared
swaps, the Fund is required to deposit with the CCP, either in cash or securities,
an amount of initial margin determined by the CCP, which is subject to adjustment. For centrally cleared swaps, the daily change
in valuation is recorded as a receivable or payable for variation margin and settled in cash with the CCP daily. In the case of centrally
cleared swaps, counterparty risk is minimal due to protections provided by the CCP.
Swaps, at value at period end, including
net unrealized appreciation/depreciation, are listed after the Fund’s Portfolio of Investments.
The average notional
amount of credit default swap contracts held by the Fund throughout the period was $23,925,023. This is based on
amounts held as of each month-end throughout the fiscal year.
Foreign Exchange Contracts
The
Fund may enter into foreign exchange contracts to manage currency risk. Purchased contracts are used to acquire exposure to foreign
currencies, whereas contracts to sell are used to hedge the Fund’s securities against currency fluctuations. Risks may arise upon
entering into these transactions from the potential inability
of counterparties to meet the terms of their commitments and from unanticipated
movements in security prices or foreign exchange rates. The foreign exchange contracts are adjusted by the daily exchange
rate of the underlying currency and any gains or losses are recorded for financial statement purposes as unrealized until the settlement
date.
Foreign exchange contracts
are subject to MNAs. Amounts presented on the Portfolio of Investments and Statement of Assets and Liabilities
are not net settlement amounts but gross.
Foreign exchange contracts
outstanding at period end, including net unrealized appreciation/depreciation or net settlement amounts, are
listed after the Fund’s Portfolio of Investments.
The average value at
settlement date payable and receivable of foreign exchange contracts purchased and sold by the Fund throughout
the period was $373,313 and $364,499, respectively. This is based on the amounts held as of each month-end throughout the
fiscal year.
Annual
Financial Statements and Additional Information
Foreign Currency Translation
The
accounting records of the Fund are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies are translated
into U.S. dollars based on the rates of exchange of such currencies against U.S. dollars on the date of valuation. Purchases and sales
of securities, income and expenses are translated at the rate of exchange quoted on the respective date that such transactions are recorded.
The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments
from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized
and unrealized gain or loss from investments.
Reported net realized
foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between
the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest and foreign
withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at
period end, resulting from changes in the exchange rate.
The
Fund purchases and sells financial futures contracts to manage currency and duration 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 the year
end are listed after the Fund’s Portfolio of Investments.
The average notional
value of long and short futures contracts held by the Fund throughout the period was $6,968,546 and $4,196,523,
respectively. This is based on amounts held as of each month-end throughout the period.
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.
|
|
|
|
|
Summit
Digitel Infrastructure, C Bond, REGS, 2.875%, 8/12/2031 |
|
|
|
Annual
Financial Statements and Additional Information
Additional Disclosure Related
to Derivative Instruments
Fair
Value of Derivative Instruments |
|
|
|
|
|
|
Statement
of
Assets
and
Liabilities
Location
|
|
Statement
of
Assets
and
Liabilities
Location
|
|
Derivatives
not accounted for as hedging instruments under ASC Topic 815 |
|
|
|
|
Foreign
exchange contracts |
Unrealized
appreciation
on
foreign
exchange
contracts
|
|
Unrealized
depreciation
on
foreign
exchange
contracts
|
|
|
|
Receivable
for
variation
margin
on
futures
contracts
|
|
|
|
|
|
|
|
|
|
Total
derivatives not
accounted
for as hedging
instruments
under ASC
Topic
815 |
|
|
|
|
|
|
Includes
cumulative net appreciation 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 August 31, 2025
Amount
of Realized Gain or (Loss) on Derivatives Recognized in Income |
|
|
Foreign
Exchange
Contracts
|
|
|
|
Credit
Default Swap Contracts |
|
|
|
|
Foreign
Exchange Contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income |
|
|
Foreign
Exchange
Contracts
|
|
|
|
|
|
|
|
|
|
Foreign
Exchange Contracts |
|
|
|
|
Credit
Default Swap Contracts |
|
|
|
|
|
|
|
|
|
|
Annual
Financial Statements and Additional Information
As indicated above,
certain derivative investments are transacted subject to MNAs. These agreements permit the Fund to offset with a counterparty
certain derivative payables and/or receivables with collateral held and create one single net payment in the event of default or
termination of the agreement by either the Fund or the counterparty. As of August 31, 2025, the impact of netting assets and liabilities
and the collateral pledged or received based on MNAs are detailed below:
Gross
Amounts Not Offset in the Statement of Assets and Liabilities |
|
|
Gross
Asset
Derivatives
Presented
in
Statement
of
Assets
and
Liabilities
|
|
|
|
|
|
|
|
|
|
Foreign
Exchange Contracts |
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Liability
Derivatives
Presented
in
Statement
of
Assets
and
Liabilities
|
|
|
|
|
|
|
|
|
|
Foreign
Exchange Contracts |
|
|
|
|
|
|
|
|
|
|
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued to shareholders in payment of distributions declared |
|
|
|
|
|
|
|
|
|
|
NET
CHANGE RESULTING FROM INSTITUTIONAL SHARE TRANSACTIONS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued to shareholders in payment of distributions declared |
|
|
|
|
|
|
|
|
|
|
NET
CHANGE RESULTING FROM CLASS R6 SHARE TRANSACTIONS |
|
|
|
|
NET
CHANGE RESULTING FROM TOTAL FUND SHARE TRANSACTIONS |
|
|
|
|
4. FEDERAL
TAX INFORMATION
The tax character of distributions as reported
on the Statement of Changes in Net Assets for the years ended August 31, 2025 and 2024,
was as follows:
Annual
Financial Statements and Additional Information
As of August 31, 2025,
the components of distributable earnings on a tax-basis were as follows:
Undistributed
ordinary income |
|
Net
unrealized appreciation |
|
Capital
loss carryforwards |
|
|
|
|
|
|
|
At August 31, 2025, the cost of investments
for federal tax purposes was $130,121,128. The net unrealized appreciation of investments for
federal tax purposes was $6,602,578. This consists of unrealized appreciation from investments for those securities having an excess of
value over cost of $7,046,144 and unrealized depreciation from investments for those securities having an excess of cost over value of
$443,566. The difference between book-basis and tax-basis net
unrealized appreciation is attributable to differing treatments for wash sales,
mark to market of derivative instruments and discount accretion/premium amortization on debt securities.
As of August 31, 2025,
the Fund had a capital loss carryforward of $4,199,127 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.
The following schedule summarizes the Fund’s
capital loss carryforwards:
5. INVESTMENT
ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The
advisory agreement between the Fund and the Adviser provides for an annual fee equal to 0.60% 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 August 31, 2025, the Adviser voluntarily waived $475,909 of
its fee and voluntarily reimbursed $14,860 of transfer agent fees.
Some or all of the Fund’s
assets are managed by Hermes Investment Management Limited (the “Sub-Adviser”). Under the terms of a sub-advisory
agreement between the Adviser and the Sub-Adviser, the Sub-Adviser receives an annual fee equal to 0.35% of the daily net
assets of the Fund. The fee is paid by the Adviser out of its resources and is not an incremental Fund expense. The Sub-Adviser may from
time to time and for such periods as it deems appropriate reduce its compensation. The Sub-Adviser agrees to share pro rata in any fee
waivers, or expense assumptions and reimbursements, imposed or made by the Adviser or its affiliates.
For the year ended August 31, 2025, the
Sub-Adviser earned a fee of $106,149.
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:
|
|
Average
Daily Net Assets
of
the Investment Complex |
|
|
on
assets up to $50 billion |
|
|
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
August 31, 2025, the annualized fee paid to FAS was 0.081% of average daily net assets of the Fund.
In addition, FAS may charge certain out-of-pocket
expenses to the Fund.
The
Adviser and certain of its affiliates (which may include FAS and FSSC) on their own initiative have agreed to waive certain amounts of
their respective fees and/or reimburse expenses. Effective November
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 Institutional
Shares and Class R6 Shares (after the voluntary waivers and/or reimbursements) will not exceed 0.60% and 0.55% (the “Fee Limit”),
respectively, up to but not including the later of (the “Termination Date”): (a) November 1, 2026; or (b) the date of the
Fund’s next effective Prospectus. Prior to November 1, 2025,
the Fee Limit for the Institutional Shares and Class R6 Shares was 0.62% and 0.57%,
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.
Annual
Financial Statements and Additional Information
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.
Through arrangements with the Fund’s
custodian, net credits realized as a result of uninvested cash balances were used to offset custody expenses.
For the year ended August 31, 2025, the Fund’s expenses were offset by $4,941 under these arrangements.
The Fund may place its cash on deposit with
financial institutions in the United States, which are insured by the Federal Deposit Insurance
Company (the “FDIC”) up to $250,000. The Fund’s credit risk in the event of failure of these financial institutions
is represented by the difference between the FDIC limit and the
total amounts on deposit. The Fund from time to time may have amounts on deposit in excess
of the insured limits.
8. INVESTMENT
TRANSACTIONS
Purchases and sales of investments, excluding
long-term U.S. government securities and short-term obligations, for the year ended August
31, 2025, were as follows:
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 August 31, 2025, the Fund had no
outstanding loans. During the year ended August 31, 2025, the
Fund did not utilize the LOC.
Pursuant to an Exemptive Order issued by
the SEC, the Fund, along with other funds advised by subsidiaries of Federated Hermes, Inc., may
participate in an interfund lending program. This program provides an alternative credit facility allowing the Fund to borrow from other
participating affiliated funds. As of August 31, 2025, there were no outstanding loans. During the year ended August 31, 2025, the program
was not utilized.
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.
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
Annual
Financial Statements and Additional Information
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.
13. FEDERAL
TAX INFORMATION (UNAUDITED)
For the year ended August 31, 2025, 87.4%
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
Report of
Independent Registered Public Accounting Firm
To the Board of Trustees of
Federated Hermes Adviser Series and the Shareholders of Federated
Hermes SDG Engagement High Yield Credit Fund:
Opinion on the Financial Statements
We have audited the accompanying
statement of assets and liabilities of Federated Hermes SDG Engagement High Yield Credit
Fund (the Fund), a portfolio of Federated Hermes Adviser Series, including the portfolio of investments, as of August
31, 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 or periods 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 August
31, 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 or periods in the five-year period then ended,
in conformity with U.S. generally accepted accounting principles.
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 August 31, 2025, by correspondence with the custodian 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
October 23, 2025
Annual
Financial Statements and Additional Information
Evaluation
and Approval of Advisory Contract–May
2025
Federated Hermes SDG Engagement
High Yield Credit 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 Investment Management Company (the “Adviser”) and the investment sub-advisory contract
between the Adviser and Hermes Investment Management Limited (the “Sub-Adviser” and together with the Adviser,
the “Advisers”) with respect to the Fund (together, the “Contracts”) for an additional one-year term. The Board’s
determination to approve the continuation of the Contracts
reflects the exercise of its business judgment after considering such
information deemed necessary to evaluate the terms of the Contracts and to approve the continuation of the existing arrangements.
The information, factors and conclusions that formed the basis for the Board’s approval are summarized
below.
Information Received
and Review Process
At the request
of the Independent Trustees, the Fund’s Chief Compliance Officer (the “CCO”) furnished to the Board in advance
of its May Meetings an independent written 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 Contracts.
In addition
to the CCO Management Fee Report, the Board considered information specifically prepared in connection with
the approval of the continuation of the Contracts that was presented at the May Meetings. In this regard, in the months
preceding the May Meetings, the Board requested and reviewed written responses and supporting materials prepared
by the Advisers and their affiliates (collectively, “Federated Hermes”) in response to requests posed to Federated Hermes
by independent legal counsel on behalf of the Independent Trustees encompassing a wide variety of topics, including
those summarized below. The Board also considered such additional matters as the Independent Trustees deemed
reasonably necessary to evaluate the Contracts, which included detailed information about the Fund and Federated Hermes
furnished to the Board at its meetings throughout the year.
The Board’s
consideration of the Contracts included review of materials and information covering the following matters,
among others: (1) copies of the Contracts; (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 Advisers’ 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 Contracts. 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 Contracts to the extent it
Annual
Financial Statements and Additional Information
considered
them to be appropriate and relevant, as discussed further below. The Board considered and weighed these factors
in light of its substantial accumulated experience in governing the Fund and working with Federated Hermes on matters
relating to the oversight of the other funds advised by Federated Hermes (each, a “Federated Hermes Fund” and, collectively,
the “Federated Hermes Funds”).
In addition,
the Board considered the preferences and expectations of Fund shareholders and the potential disruptions of the
Fund’s operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate
or not renew the Contracts. In particular, the Board recognized that many shareholders likely have invested in the
Fund based on the strength of Federated Hermes’ industry standing and reputation and with the expectation that Federated
Hermes will have a continuing role in providing advisory services to the Fund. Thus, the Board observed that there
are a range of investment options available to the Fund’s shareholders in the marketplace, and such shareholders, having
had the opportunity to consider other investment options, have effectively selected Federated Hermes by virtue of investing
in the Fund.
In determining
to approve the continuation of the Contracts, the members of the Board reviewed and evaluated information
and factors they believed to be relevant and appropriate through the exercise of their reasonable business judgment.
While individual members of the Board may have weighed certain factors differently, the Board’s determination
to approve the continuation of the Contracts was based on a comprehensive consideration of all information provided
to the Board throughout the year. 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 Contracts for the Fund
as part of its consideration of agreements for funds across the family of Federated Hermes Funds, but its approvals were
made on a fund-by-fund basis.
Nature, Extent and
Quality of Services
The Board
considered the nature, extent and quality of the services provided to the Fund by the Advisers and the resources
of Federated Hermes dedicated to the Fund. In this regard, the Board evaluated, among other things, the terms of the
Contracts and the full range of services provided to the Fund by Federated Hermes. The Board considered the Advisers’
personnel, investment philosophy and process, investment research capabilities and resources, trade operations capabilities,
experience and performance track record. The Board considered information about the Advisers’ capabilities and
resources with respect to environmental, social and governance (“ESG”) investing, noting that in managing the assets of
the Fund, the Advisers seek to invest in companies that, in their view, provide the potential for current income and long-term
capital appreciation while also contributing to positive societal impact aligned to the United Nations Sustainable Development
Goals. 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 Advisers, including the execution of portfolio transactions and the selection of brokers for those transactions. The Board
also considered the Advisers’ ability to deliver competitive investment performance for the Fund when compared to the
Fund’s Performance Peer Group (as defined below).
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.
Annual
Financial Statements and Additional Information
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.
The Board
considered Federated Hermes’ efforts to provide shareholders in the Federated Hermes Funds with a comprehensive
array of funds with different investment objectives, policies and strategies. The Board considered the expenses
that Federated Hermes had incurred, as well as the entrepreneurial and other risks assumed by Federated Hermes, in
sponsoring and providing on-going services to new funds to expand these opportunities for shareholders. The Board noted
the benefits to shareholders of being part of the family of Federated Hermes Funds, which include the general right to
exchange investments between the same class of shares without the incurrence of additional sales charges.
Based on
these considerations, the Board concluded that it was satisfied with the nature, extent and quality of the services
provided by the Advisers to the Fund.
Fund Investment Performance
The Board
considered the investment performance of the Fund. In evaluating the Fund’s investment performance, the Board
considered performance results in light of the Fund’s investment objective, strategies and risks. The Board also considered
information regarding how ESG investing may relate to the Fund’s investment performance. The Board considered
detailed investment reports on, and the Advisers’ analysis of, the Fund’s performance over different time periods
that were provided to the Board throughout the year and in connection with the May Meetings. These reports included,
among other items, information on the Fund’s gross and net returns, the Fund’s investment performance compared
to one or more relevant categories or groups of peer funds and the Fund’s 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 Advisers 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 the Fund’s performance fell below the median of the Performance Peer Group for the one-year,
three-year and five-year periods ended December 31, 2024. The Board discussed the Fund’s performance with the Advisers
and recognized the efforts being taken by the Advisers in the context of other factors considered relevant by the
Board.
Based on
these considerations, the Board concluded that it had continued confidence in the Advisers’ overall capabilities
to manage the Fund.
The Board
considered the advisory fee, sub-advisory fee, and overall expense structure of the Fund and the comparative fee
and expense information that had been provided in connection with the May Meetings. In this regard, the Board was presented
with, and considered, information regarding the contractual advisory fee rates, net advisory fee rates, total expense
ratios and each element of the Fund’s total expense ratio (i.e., gross and net advisory fees, administrative fees, custody
fees, portfolio accounting fees and transfer agency fees) relative to an appropriate group of peer funds compiled by
Federated Hermes from the 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.
Annual
Financial Statements and Additional Information
The Board
considered that other registered funds are the products most like the Fund, in that they are readily available to Fund
shareholders as alternative investment vehicles, and they are the type of investment vehicle, in fact, chosen and maintained
by the Fund’s shareholders. The Board noted that the range of such other registered funds’ fees and expenses, therefore,
appears to be a relevant indicator of what investors have found to be reasonable in the marketplace in which the Fund
competes.
The Board
reviewed the contractual advisory fee rate, net advisory fee rate and other expenses of the Fund and noted the position
of the Fund’s fee rates relative to its Expense Peer Group. In this regard, the Board noted that the contractual advisory
fee rate was above the median of the Expense Peer Group, but the Board noted the applicable waivers and reimbursements,
and that the overall expense structure of the Fund remained competitive in the context of other factors considered
by the Board.
The Board
also received and considered information about the nature and extent of services offered and fees charged by Federated
Hermes to other types of clients with investment strategies similar to those of the Federated Hermes Funds, including
non-registered fund clients (such as institutional separate accounts) and third-party unaffiliated registered funds for
which any of the Advisers or their affiliates serve as sub-adviser. The Board noted the CCO’s 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.
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 may 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 Contracts are consistent with the methodologies
previously reviewed by an independent consultant. The Board noted that the independent consultant had previously
conducted a review of the allocation methodologies and reported to the Board that, although there is no single best
method to allocate expenses, the methodologies used by Federated Hermes are reasonable. The Board 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.
Annual
Financial Statements and Additional Information
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 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.
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.
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 Contracts. The Board based its determination to approve the Contracts on the totality of the circumstances
and relevant factors and with a view of past and future long-term considerations. Not all of the factors and considerations
identified above were necessarily deemed to be relevant to the Fund, nor did the Board consider any one of them
to be determinative.
Annual
Financial Statements and Additional Information
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 SDG Engagement High Yield
Credit Fund
Federated Hermes Funds
4000
Ericsson Drive
Warrendale, PA 15086-7561
Contact us at
FederatedHermes.com/us
or
call 1-800-341-7400.
Federated Securities Corp., Distributor
CUSIP 31423A556
CUSIP
31423A549
©
2025 Federated Hermes, Inc.
|
Item 8. |
Changes in and Disagreements with Accountants for Open-End Management Investment Companies |
Federated Hermes SDG Engagement High Yield Credit Fund: Not
Applicable.
|
Item 9. |
Proxy Disclosures for Open-End Management Investment Companies. |
Federated Hermes SDG Engagement High Yield Credit Fund: Not
Applicable.
|
Item 10. |
Remuneration Paid to Directors, Officers, and Others of Open-End Management Investment Companies. |
Federated Hermes SDG Engagement High Yield Credit 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 SDG Engagement High Yield Credit 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
(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 Adviser Series
By: /s/ Jeremy D. Boughton
Jeremy D. Boughton, Principal Financial Officer
Date: October
23, 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: October
23, 2025
By: /s/ Jeremy D. Boughton
Jeremy D. Boughton, Principal Financial Officer
Date: October
23, 2025
