(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 2026 - $386,269
Fiscal year ended 2025 - $372,662
(b) Audit-Related
Fees billed to the registrant for the two most recent fiscal years:
Fiscal year ended 2026 - $0
Fiscal year ended 2025 - $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 2026 - $0
Fiscal year ended 2025 - $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 2026 - $0
Fiscal year ended 2025 - $0
Amount requiring approval of the registrant’s Audit
Committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, $0 and $0 respectively.
(e)(1) Audit Committee Policies regarding Pre-approval
of Services.
The Audit Committee is required to pre-approve
audit and non-audit services performed by the independent auditor in order to assure that the provision of such services do not impair
the auditor’s independence. 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 2026 – 0%
Fiscal year ended 2025 - 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 2026 – 0%
Fiscal year ended 2025 – 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 2026 – 0%
Fiscal year ended 2025 – 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 2026 - $952,883
Fiscal year ended 2025 - $178,882
(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 U.S. SMID Fund
A
Portfolio of Federated Hermes Adviser Series
Not FDIC Insured ▪ May
Lose Value ▪ No Bank Guarantee
Portfolio
of Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
Discretionary—8.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
Corp. International |
|
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|
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|
|
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|
|
|
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|
Oceaneering
International, Inc. |
|
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|
|
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|
Community
Financial System, Inc. |
|
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Reinsurance
Group of America, Inc. |
|
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|
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|
|
Neurocrine
Biosciences, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
West
Pharmaceutical Services, Inc. |
|
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Carpenter
Technology Corp. |
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Comfort
Systems USA, Inc. |
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Lincoln
Electric Holdings, Inc. |
|
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Simpson
Manufacturing Co., Inc. |
|
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|
Annual
Financial Statements and Additional Information
|
|
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|
|
Information
Technology—20.5% |
|
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MA-COM
Technology Solutions Holdings, Inc. |
|
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Mirion
Technologies, Inc. |
|
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|
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Monolithic
Power Systems, Inc. |
|
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Martin
Marietta Materials |
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|
TOTAL
INVESTMENT IN SECURITIES—99.1%
(IDENTIFIED
COST $3,854,845)2
|
|
|
|
|
OTHER
ASSETS AND LIABILITIES - NET—0.9%3
|
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|
|
Non-income-producing
security. |
|
|
The
cost of investments for federal tax purposes amounts to $3,859,307. |
|
|
Assets,
other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
Note: The categories of investments are
shown as a percentage of net assets at June 30, 2026.
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.
As of June 30, 2026, all investments of
the Fund utilized Level 1 inputs in valuing the Fund’s assets carried at fair value.
See Notes which are an integral part of
the Financial Statements
Annual
Financial Statements and Additional Information
Financial
Highlights–Institutional
Shares
(For a Share Outstanding Throughout Each
Period)
|
|
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|
|
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|
|
|
Net Asset
Value, Beginning of Period |
|
|
|
|
|
Income
From Investment Operations: |
|
|
|
|
|
Net
investment income (loss)1
|
|
|
|
|
|
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: |
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income (loss) |
|
|
|
|
|
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 ratio is calculated without reduction for expense offset arrangements. The net expense ratios are 0.83% and 0.83% for the
years ended
June
30, 2026 and 2025, respectively, after taking into account these expense reductions. |
|
|
The
expense decrease is reflected in both the net expense and the net investment income (loss) ratios shown above. Amount does not reflect
expense waiver/
reimbursement
recorded by investment companies in which the Fund may invest. |
|
|
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
Statement
of Assets and Liabilities
June 30, 2026
|
|
|
Investment
in securities, at value (identified
cost $3,854,845) |
|
|
|
|
|
|
|
|
|
|
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|
|
Payable
for portfolio accounting fees |
|
Payable
for auditing fees |
|
|
|
|
Payable
for share registration costs |
|
Payable
to adviser (Note 5)
|
|
Accrued
expenses (Note 5) |
|
|
|
|
Net
assets for 328,096 shares outstanding |
|
|
|
|
|
|
|
Total
distributable earnings (loss) |
|
|
|
|
Net Asset
Value, Offering Price and Redemption Proceeds Per Share: |
|
|
|
|
5,460,821
÷ 328,096 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 June 30,
2026
|
|
|
|
|
|
|
|
|
Investment
adviser fee (Note 5)
|
|
Administrative
fee (Note 5)
|
|
|
|
|
|
|
|
Directors’/Trustees’
fees (Note 5)
|
|
|
|
|
|
|
|
Portfolio
accounting fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
Waiver,
Reimbursements and Reduction: |
|
Waiver
of investment adviser fee (Note 5)
|
|
Reimbursements
of other operating expenses (Note 5) |
|
Reduction
of custodian fees (Note 6)
|
|
TOTAL
WAIVER, REIMBURSEMENTS AND REDUCTION |
|
|
|
|
Net
investment income (loss) |
|
Realized
and Unrealized Gain (Loss) on Investments: |
|
Net
realized gain on investments |
|
Net
change in unrealized appreciation of investments |
|
Net
realized and unrealized gain (loss) on investments |
|
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
investment income (loss) |
|
|
|
|
|
|
Net
change in unrealized appreciation/depreciation |
|
|
CHANGE
IN NET ASSETS RESULTING FROM OPERATIONS |
|
|
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 U.S. SMID 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 one class of shares: Institutional 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 provide long-term capital
appreciation.
2. SIGNIFICANT
ACCOUNTING POLICIES
The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of its financial statements.
These policies are in conformity with U.S. generally accepted accounting principles (GAAP).
In
calculating its net asset value (NAV), the Fund generally values investments as follows:
■
Equity
securities listed on an exchange or traded through a regulated market system are valued at their last reported sale price or official
closing price in their principal exchange or market.
■
Shares
of other mutual funds or non-exchange-traded investment companies are valued based upon their reported NAVs, or NAV per share
practical expedient, as applicable.
■
Derivative
contracts listed on exchanges are valued at their reported settlement or closing price, except that options are valued at the mean
of closing bid and ask quotations.
■
Over-the-counter
(OTC) derivative contracts are fair valued using price evaluations provided by a pricing service approved by Federated
Global Investment Management Corp. (the “Adviser”).
■
For
securities that are fair valued in accordance with procedures established by and under the general supervision of the Adviser, certain
factors may be considered, such as: the last traded or purchase price of the security, information obtained by contacting the issuer
or dealers, analysis of the issuer’s financial statements or other available documents, fundamental analytical data, the nature
and duration of restrictions on disposition, the movement of the
market in which the security is normally traded, public trading in similar securities
or derivative contracts of the issuer or comparable issuers, movement of a relevant index, or other factors including but not limited
to industry changes and relevant government actions.
If any price, quotation, price evaluation
or other pricing source is not readily available when the NAV is calculated, if the Fund cannot obtain
price evaluations from a pricing service or from more than one dealer for an investment within a reasonable period of time as set forth
in the Adviser’s valuation policies and procedures for the Fund, or if information furnished by a pricing service, in the opinion
of the Adviser’s valuation committee (“Valuation Committee”),
is deemed not representative of the fair value of such security, the Fund uses the
fair value of the investment determined in accordance with the procedures described below. There can be no assurance that the Fund
could obtain the fair value assigned to an investment if it sold the investment at approximately the time at which the Fund determines
its NAV per share, and the actual value obtained could be materially different.
Fair Valuation and Significant Events Procedures
Pursuant
to Rule 2a-5 under the Act, the Fund’s Board of Trustees (the “Trustees”) has designated the Adviser as the Fund’s
valuation designee to perform any fair value determinations for
securities and other assets held by the Fund. The Adviser is subject to the Trustees’
oversight and certain reporting and other requirements intended to provide the Trustees the information needed to oversee the
Adviser’s fair value determinations.
The Adviser, acting through
its Valuation Committee, is responsible for determining the fair value of investments for which market quotations
are not readily available. The Valuation Committee is comprised of officers of the Adviser and certain of the Adviser’s affiliated
companies and determines fair value and oversees the calculation of the NAV. The Valuation Committee is also authorized to use
pricing services to provide fair value evaluations of the current value of certain investments for purposes of calculating the NAV. The
Valuation Committee employs various methods for reviewing third-party
pricing-service evaluations including periodic reviews of third-party
pricing services’ policies, procedures and valuation methods (including key inputs, methods, models and assumptions), transactional
back-testing, comparisons of evaluations of different pricing services, and review of price challenges by the Adviser based on
recent market activity. In the event that market quotations and price evaluations are not available for an investment, the Valuation Committee
determines the fair value of the investment in accordance with procedures adopted by the Adviser. The Trustees periodically review
the fair valuations made by the Valuation Committee. The Trustees have also approved the Adviser’s fair valuation and significant
events procedures as part of the Fund’s compliance program
and will review any changes made to the procedures.
Factors considered by
pricing services in evaluating an investment include the yields or prices of investments of comparable quality, coupon,
maturity, call rights and other potential prepayments, terms and type, reported transactions, indications as to values from dealers
and general market conditions. Some pricing services provide a single price evaluation reflecting the bid-side of the market for an
investment (a “bid” evaluation). Other pricing services offer both bid evaluations and price evaluations indicative of a price
between
Annual
Financial Statements and Additional Information
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. Distributions of net investment income
and capital gains, if any, are declared and paid at least annually. Non-cash
dividends included in dividend income, if any, are recorded at fair value. Investment income, realized and unrealized gains and losses
and certain fund-level expenses are allocated to each class based on relative average daily net assets, except that select classes will
bear certain expenses unique to those classes. The detail of the total fund expense waiver, reimbursements and reduction of $248,039
is disclosed in Note 5 and Note 6.
It
is the Fund’s policy to comply with the Subchapter M provision of the Internal Revenue Code of 1986 and to distribute to shareholders
each year substantially all of its income. Accordingly, no provision
for federal income tax is necessary. As of and during the year ended June
30, 2026, 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 June 30, 2026, tax years 2023 through 2026 remain subject to
examination by the Fund’s major tax jurisdictions, which include the United States of America and the State of Delaware.
When-Issued and Delayed-Delivery Transactions
The
Fund may engage in when-issued or delayed-delivery transactions. The Fund records when-issued securities on the trade date and maintains
security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased
on a when-issued or delayed-delivery basis are marked to market daily and begin earning interest on the settlement date. Losses
may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the
contract.
Foreign Currency Translation
The
accounting records of the Fund are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies are translated
into U.S. dollars based on the rates of exchange of such currencies against U.S. dollars on the date of valuation. Purchases and sales
of securities, income and expenses are translated at the rate of exchange quoted on the respective date that such transactions are recorded.
The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments
from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized
and unrealized gain or loss from investments.
Reported net realized
foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between
the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest and foreign
withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at
period end, resulting from changes in the exchange rate.
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.
Annual
Financial Statements and Additional Information
3. SHARES
OF BENEFICIAL INTEREST
The following table summarizes share activity:
|
|
|
|
|
|
|
|
Shares
issued to shareholders in payment of distributions declared |
|
|
|
|
|
|
NET
CHANGE RESULTING FROM 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 June 30, 2026 and 2025
was as follows:
|
|
For
tax purposes, short-term capital gain distributions are considered ordinary income distributions. |
As of June 30, 2026, the components of distributable
earnings on a tax-basis were as follows:
Undistributed
ordinary income1
|
|
Undistributed
long-term capital gains |
|
Net
unrealized appreciation |
|
|
|
|
|
|
For
tax purposes, short-term capital gains are considered ordinary income in determining distributable earnings. |
At June 30, 2026, the cost of investments
for federal tax purposes was $3,859,307. The net unrealized appreciation of investments for federal
tax purposes was $1,553,857. This consists of unrealized appreciation from investments for those securities having an excess of value
over cost of $1,690,943 and unrealized depreciation from investments for those securities having an excess of cost over value of $137,086.
The difference between book-basis and tax-basis net unrealized appreciation/depreciation is attributable to differing treatments
for the deferral of losses on wash sales.
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 0.75% of the Fund’s average daily net assets.
Subject to the terms described in the Expense Limitation note, the Adviser may voluntarily choose to waive any portion of its fee and/or
reimburse certain operating expenses of the Fund for competitive reasons such as to maintain the Fund’s expense ratio, or as and
when appropriate, to maintain positive or zero net yields. For
the year ended June 30, 2026, the Adviser voluntarily waived its entire fee of
$35,944 and voluntarily reimbursed $449 of transfer agent fees and $211,490 of other operating expenses.
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 0.45% of the daily net
assets of the Fund which it advises. 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 June 30, 2026, the Sub-Adviser
waived all of its fee.
Federated
Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and
services. For purposes of determining the appropriate rate breakpoint, “Investment Complex” is defined as all of the Federated
Hermes Funds subject to a fee under the Administrative Services
Agreement. The fee paid to FAS is based on the average daily net assets
of the Investment Complex as specified below:
|
|
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
June 30, 2026, the annualized fee paid to FAS was 0.096% of average daily net assets of the Fund.
Annual
Financial Statements and Additional Information
In
addition, FAS may charge certain out-of-pocket expenses to the Fund.
The
Adviser and certain of its affiliates (which may include FAS) on their own initiative have agreed to waive certain amounts of their respective
fees and/or reimburse expenses. Total annual fund operating expenses (as shown in the financial highlights, excluding interest expense,
extraordinary expenses and proxy-related expenses, if any) paid by the Fund’s Institutional Shares (after the voluntary waivers
and/or reimbursements) will not exceed 0.83% (the “Fee Limit”),
up to but not including the later of (the “Termination Date”): (a)
September 1, 2027; or (b) the date of the Fund’s next effective Prospectus. While the Adviser and its applicable affiliates currently
do not anticipate terminating or increasing these arrangements
prior to the Termination Date, these arrangements may only be terminated or
the Fee Limit increased prior to the Termination Date with the approval of the Trustees.
Directors’/Trustees’ and Miscellaneous Fees
Certain
Officers and Trustees of the Fund are Officers and Directors or Trustees of certain of the above companies. To efficiently facilitate
payment, Independent Directors’/Trustees’ fees and
certain expenses related to conducting meetings of the Directors/Trustees and other
miscellaneous expenses are paid by an affiliate of the Adviser which in due course are reimbursed by the Fund. These expenses related
to conducting meetings of the Directors/Trustees and other miscellaneous expenses may be included in Accrued and Miscellaneous
Expenses on the Statement of Assets and Liabilities and Statement of Operations, respectively.
Affiliated Shares of Beneficial Interest
As
of June 30, 2026, a majority of the shares of beneficial interest outstanding are owned by an affiliate of the Adviser.
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 June 30, 2026, the Fund’s expenses were offset by $156 under these arrangements.
7. INVESTMENT
TRANSACTIONS
Purchases and sales of investments, excluding
long-term U.S. government securities and short-term obligations, for the year ended June
30, 2026, were as follows:
The Fund invests a portion of its assets
in securities of companies that are deemed by the Fund’s management to be classified in similar business
sectors. A substantial portion of the Fund’s portfolio may be comprised of entities in the Industrials and Information Technology
sectors. As a result, the Fund may be more susceptible to any
economic, business, political or other developments which generally affect these
entities.
The Fund participates with certain other
Federated Hermes Funds, on a several basis, in an up to $400,000,000 unsecured, 364-day, committed,
revolving line of credit (LOC) agreement dated June 16, 2026. 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 June 30, 2026, the Fund had no outstanding
loans. During the year ended June 30, 2026, the Fund did not utilize the LOC.
Pursuant to an Exemptive Order issued by
the Securities and Exchange Commission, the Fund, along with other funds advised by subsidiaries
of Federated Hermes, Inc., may participate in an interfund lending program. This program provides an alternative credit facility
allowing the Fund to borrow from other participating affiliated funds. As of June 30, 2026, there were no outstanding loans. During
the year ended June 30, 2026, the program was not utilized.
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
Annual
Financial Statements and Additional Information
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
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 June 30, 2026, the amount
of long-term capital gains designated by the Fund was $360,568.
On July 16, 2026, the Board approved a Plan
of Liquidation for the Fund pursuant to which the Fund will be liquidated on or about August
26, 2026.
Annual
Financial Statements and Additional Information
Report of
Independent Registered Public Accounting Firm
TO THE SHAREHOLDERS AND THE
BOARD OF TRUSTEES OF FEDERATED HERMES U.S. SMID FUND:
Opinion on the Financial Statements
We have audited the accompanying
statement of assets and liabilities of Federated Hermes U.S. SMID Fund (the “Fund”) (one
of the portfolios constituting Federated Hermes Adviser Series (the “Trust”)), including the portfolio of investments, as
of June 30, 2026, and the related statement of operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended
and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present
fairly, in all material respects, the financial position of the Fund (one of the portfolios constituting Federated Hermes
Adviser Series) at June 30, 2026, the results of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended,
in conformity with U.S. generally accepted accounting principles.
These financial statements are
the responsibility of the Trust’s management. Our responsibility is to express an opinion on the
Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audits in accordance
with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether
due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal
control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control
over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal
control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due
to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation
of securities owned as of June 30, 2026, by correspondence with the custodian, brokers, and others; when replies
were not received from brokers or others, we performed other auditing procedures. Our audits also included evaluating
the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation
of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor
of one or more Federated Hermes investment companies since 1979.
Boston, Massachusetts
August 24, 2026
Annual
Financial Statements and Additional Information
Evaluation
and Approval of Advisory Contract–May
2026
Federated Hermes U.S. SMID
Fund (the “Fund”)
At its meetings in May 2026 (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 Global Investment Management Corp. (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 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. 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
Annual
Financial Statements and Additional Information
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 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.
For the
periods ended December 31, 2025, the Fund’s performance fell below the Performance Peer Group median for the
one-year and three-year periods, and was above the Performance Peer Group median for the five-year period. The Board
discussed the Fund’s performance with the Advisers and recognized the efforts being taken by the Advisers in the context
of other factors considered relevant by the Board.
Based on
these considerations, the Board concluded that it had continued confidence in the Advisers’ overall capabilities
to manage the Fund.
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. The
Board considered that other registered funds are the products most like the Fund, in that they are readily available to Fund
shareholders as alternative investment vehicles, and they are the type of investment vehicle, in fact, chosen and maintained
by the Fund’s shareholders. The Board noted that the range of such other registered funds’ fees and expenses, therefore,
appears to be a relevant indicator of what investors have found to be reasonable in the marketplace in which the Fund
competes.
Annual
Financial Statements and Additional Information
The
Board noted that, for the year ended December 31, 2025, the Fund’s investment advisory fee was waived in its entirety.
The Board reviewed the contractual advisory fee rate, net advisory fee rate and other expenses of the Fund with the
Adviser 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 at the median of the Expense Peer Group, and the Board was satisfied that the
overall expense structure of the Fund remained competitive.
The Board
also received and considered information about the nature and extent of services offered and fees charged by Federated
Hermes to other types of clients with investment strategies similar to those of the Federated Hermes Funds, including
non-registered fund clients (such as institutional separate accounts) and third-party unaffiliated registered funds for
which any of the 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 lack 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.
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
Annual
Financial Statements and Additional Information
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
either not to 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 U.S. SMID 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
©
2026 Federated Hermes, Inc.
|
Item 8. |
Changes in and Disagreements with Accountants for Open-End Management Investment Companies |
Federated Hermes U.S. SMID Fund: Not Applicable.
|
Item 9. |
Proxy Disclosures for Open-End Management Investment Companies. |
Federated Hermes U.S. SMID Fund: Not Applicable.
|
Item 10. |
Remuneration Paid to Directors, Officers, and Others of Open-End Management Investment Companies. |
Federated Hermes U.S. SMID 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 U.S. SMID 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: August 24,
2026
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: August 24,
2026
By: /s/ Jeremy D. Boughton
Jeremy D. Boughton, Principal Financial Officer
Date: August 24,
2026
