United States
Securities and Exchange Commission
Washington, D.C. 20549
Form
Certified Shareholder Report
of Registered Management Investment Companies
811-23259
(Investment Company Act File Number)
(Exact Name of Registrant as Specified in Charter)
Federated Hermes Funds
4000 Ericsson
Drive
Warrendale, PA 15086-7561
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant’s Telephone
Number)
Peter J. Germain, Esquire
1001 Liberty
Avenue
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
(Notices should be sent to the Agent
for Service)
Date of Fiscal Year End: 2026-08-31
Date of Reporting Period:
| Item 1. | Reports to Stockholders |
| Item 2. | Code of Ethics |
(a) As of the end of the period covered by this report, the registrant has adopted a code of ethics (the “Section 406 Standards for Investment Companies - Ethical Standards for Principal Executive and Financial Officers”) that applies to the registrant’s Principal Executive Officer and Principal Financial Officer; the registrant’s Principal Financial Officer also serves as the Principal Accounting Officer.
(c) There was no amendment to the registrant’s code of ethics described in Item 2(a) above during the period covered by the report.
(d) There was no waiver granted, either actual or implicit, from a provision to the registrant’s code of ethics described in Item 2(a) above during the period covered by the report.
(e) Not Applicable
(f)(3) The registrant hereby undertakes to provide any person, without charge, upon request, a copy of the code of ethics. To request a copy of the code of ethics, contact the registrant at 1-800-341-7400, and ask for a copy of the Section 406 Standards for Investment Companies - Ethical Standards for Principal Executive and Financial Officers.
| Item 3. | Audit Committee Financial Expert |
The registrant’s Board has determined that each of the following members of the Board’s Audit Committee is an “audit committee financial expert,” and is “independent,” for purposes of this Item 3: John G. Carson, Thomas M. O’Neill and John S. Walsh.
| Item 4. | Principal Accountant Fees and Services |
(a) Audit Fees billed to the registrant for the two most recent fiscal years:
Fiscal year ended 2026 – $426,744
Fiscal year ended 2025 – $416,532
(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 - $1,158,278
Fiscal year ended 2025 - $185,431
(h) The registrant’s Audit Committee has considered that the provision of non-audit services that were rendered to the registrant’s Adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the Adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.
(i) Not Applicable
(j) Not Applicable
| Item 5. | Audit Committee of Listed Registrants |
Not Applicable
| Item 6. | Schedule of Investments |
(a) The registrant’s Schedule of Investments is included as part of the Financial Statements filed under Item 7 of this form.
(b) Not Applicable
| Item 7. | Financial Statements and Financial Highlights for Open-End Management Companies |
Annual Financial Statements
and Additional Information
and Additional Information
August 31, 2026
|
Share
Class | Ticker
|
A | FHCBX
|
Institutional
| FHCOX |
|
|
Federated Hermes Conservative Microshort Fund
A Portfolio of Federated Hermes Adviser Series
Not FDIC Insured ▪ May
Lose Value ▪ No Bank Guarantee
Portfolio
of Investments
August 31, 2026
|
Principal
Amount
|
|
|
Value
|
|
|
|
CORPORATE
BONDS—33.7% |
|
|
|
|
Aerospace/Auto—0.5%
|
|
|
$ 1,580,000
|
1
|
Honeywell
Aerospace, Inc., Sr. Unsecd. Note, Series WI, 4.278% (SOFR - SOFR Compounded +0.630%), 3/16/2029 |
$ 1,583,646
|
|
|
|
Banking—11.0%
|
|
|
2,000,000
|
1
|
Australia
& New Zealand Banking Group Ltd., Sr. Unsecd. Note, 144A, 4.119% (SOFR +0.470%), 12/16/2026 |
2,001,330
|
|
2,000,000
|
1
|
Bank
of New York Mellon, Sr. Unsecd. Note, 4.176% (SOFR +0.510%), 8/24/2029 |
2,000,885
|
|
2,000,000
|
1
|
Canadian
Imperial Bank of Commerce, Sr. Unsecd. Note, 4.373% (SOFR +0.720%), 1/13/2028 |
2,002,556
|
|
1,615,000
|
1
|
Citibank,
N.A., Sr. Unsecd. Note, 4.243% (SOFR +0.595%), 6/18/2029 |
1,615,628
|
|
1,175,000
|
1
|
Fifth
Third Bank, Inc., Sr. Unsecd. Note, 4.473% (SOFR +0.810%), 1/28/2028 |
1,176,498
|
|
2,000,000
|
1
|
Goldman
Sachs Bank USA, Sr. Unsecd. Note, 4.364% (SOFR - SOFR Compounded +0.720%), 6/3/2029 |
2,004,541
|
|
3,000,000
|
1
|
Morgan
Stanley Bank, N.A., Sr. Unsecd. Note, 4.343% (SOFR +0.685%), 10/15/2027 |
3,001,401
|
|
1,155,000
|
1
|
National
Australia Bank Ltd., Sr. Unsecd. Note, 144A, 4.184% (SOFR +0.540%), 6/4/2029 |
1,156,674
|
|
3,000,000
|
1
|
NatWest
Markets PLC, Sr. Unsecd. Note, 144A, 4.463% (SOFR +0.800%), 11/6/2028 |
3,005,937
|
|
3,000,000
|
1
|
PNC
Financial Services Group, Inc., Sr. Unsecd. Note, 4.282% (SOFR +0.620%), 1/26/2029 |
2,999,829
|
|
3,000,000
|
1
|
Royal
Bank of Canada, Sr. Unsecd. Note, Series 1, 4.363% (SOFR +0.700%), 11/3/2028 |
3,006,510
|
|
570,000
|
1
|
State
Street Corp., Sr. Unsecd. Note, 4.612% (SOFR +0.950%), 4/24/2028 |
571,967
|
|
1,000,000
|
1
|
Sumitomo
Mitsui Trust Bank Ltd., Sr. Unsecd. Note, 144A, 4.376% (SOFR +0.710%), 9/4/2029 |
1,000,557
|
|
2,000,000
|
1
|
Toronto
Dominion Bank, Sr. Unsecd. Note, 4.268% (SOFR +0.620%), 12/17/2026 |
2,002,271
|
|
3,000,000
|
1
|
Truist
Bank, Sr. Unsecd. Note, 4.432% (SOFR +0.770%), 7/24/2028 |
3,006,189
|
|
3,000,000
|
1
|
U.S.
Bank, N.A., Sr. Unsecd. Note, 4.574% (SOFR +0.910%), 5/15/2028 |
3,010,360
|
|
1,955,000
|
1
|
Wells
Fargo & Co., Sr. Unsecd. Note, 4.442% (SOFR +0.780%), 1/24/2028 |
1,958,609
|
|
|
|
TOTAL
|
35,521,742
|
|
|
|
Consumer
Products—0.5% |
|
|
1,665,000
|
1
|
Philip
Morris International, Inc., Sr. Unsecd. Note, 4.322% (SOFR +0.660%), 10/27/2028 |
1,668,294
|
|
|
|
Electric
Power—0.9% |
|
|
3,000,000
|
|
NextEra
Energy Capital Holdings, Inc., Sr. Unsecd. Note, 4.685%, 9/1/2027 |
3,007,792
|
|
|
|
Finance
- Automotive—8.0% |
|
|
2,905,000
|
|
American
Honda Finance Corp., Sr. Unsecd. Note, 4.550%, 7/9/2027 |
2,908,012
|
|
3,000,000
|
1
|
American
Honda Finance Corp., Sr. Unsecd. Note, 4.566% (SOFR +0.900%), 9/1/2028 |
3,008,156
|
|
2,500,000
|
1
|
Daimler
Trucks Financial NA, Sr. Unsecd. Note, 144A, 4.493% (SOFR +0.840%), 1/13/2028 |
2,508,216
|
|
3,000,000
|
1
|
Ford
Motor Credit Co. LLC, Sr. Unsecd. Note, 5.113% (SOFR +1.450%), 11/5/2026 |
3,005,391
|
|
3,000,000
|
1
|
General
Motors Financial Co., Inc., Sr. Unsecd. Note, 4.708% (SOFR +1.050%), 7/15/2027 |
3,009,244
|
|
3,000,000
|
1
|
Hyundai
Capital America, Sr. Unsecd. Note, 144A, 4.542% (SOFR +0.890%), 1/8/2029 |
2,997,762
|
|
2,070,000
|
1
|
Mercedes-Benz
Finance NA LLC, Sr. Unsecd. Note, 144A, 4.514% (SOFR +0.850%), 11/15/2027 |
2,079,350
|
|
2,000,000
|
|
Mercedes-Benz
Finance NA LLC, Sr. Unsecd. Note, 144A, 4.750%, 8/4/2028 |
1,996,488
|
|
1,500,000
|
1
|
Nissan
Motor Acceptance Co. LLC., Sr. Unsecd. Note, 144A, 5.697% (SOFR +2.050%), 9/13/2027 |
1,495,807
|
|
3,000,000
|
1
|
Toyota
Motor Credit Corp., Sr. Unsecd. Note, Series MTN, 4.298% (SOFR +0.650%), 3/19/2027 |
3,007,060
|
|
|
|
TOTAL
|
26,015,486
|
|
|
|
Finance
- Retail—0.9% |
|
|
2,985,000
|
1
|
American
Express Co., Sr. Unsecd. Note, 4.252% (SOFR +0.590%), 2/9/2029 |
2,987,066
|
|
|
|
Health
Care—1.4% |
|
|
3,000,000
|
|
Augusta
SpinCo Corp., Sr. Unsecd. Note, 4.321%, 9/23/2027 |
2,991,400
|
|
1,615,000
|
1
|
HCA,
Inc., Sr. Unsecd. Note, 4.536% (SOFR +0.870%), 3/1/2028 |
1,621,318
|
|
|
|
TOTAL
|
4,612,718
|
|
|
|
Insurance—1.9%
|
|
|
885,000
|
1
|
Marsh
& McLennan Cos., Inc., Sr. Unsecd. Note, 4.362% (SOFR +0.700%), 11/8/2027 |
888,418
|
|
2,310,000
|
1
|
Metropolitan
Life Global Funding I, Sec. Fac. Bond, 144A, 4.346% (SOFR +0.700%), 6/11/2027 |
2,315,086
|
|
3,000,000
|
1
|
New
York Life Global Funding, Sec. Fac. Bond, 144A, 4.542% (SOFR +0.880%), 4/25/2028 |
3,018,617
|
|
|
|
TOTAL
|
6,222,121
|
Annual
Financial Statements and Additional Information
1
|
Principal
Amount
|
|
|
Value
|
|
|
|
CORPORATE
BONDS—continued |
|
|
|
|
Mining—0.9%
|
|
|
$ 3,000,000
|
1
|
Glencore
Funding LLC, Sr. Unsecd. Note, 144A, 4.401% (SOFR - SOFR Compounded +0.750%), 10/1/2026 |
$ 3,001,010
|
|
|
|
Pharmaceuticals
and Health Care—2.3% |
|
|
2,500,000
|
|
AbbVie,
Inc., Sr. Unsecd. Note, 4.500%, 8/18/2028 |
2,494,446
|
|
2,000,000
|
1
|
Eli
Lilly & Co., Sr. Unsecd. Note, 4.126% (SOFR - SOFR Compounded +0.460%), 5/20/2029 |
2,000,407
|
|
2,000,000
|
1
|
Merck
& Co., Inc., Sr. Unsecd. Note, 4.036% (SOFR +0.370%), 5/22/2028 |
2,004,266
|
|
790,000
|
1
|
Pfizer,
Inc., Sr. Unsecd. Note, 4.164% (SOFR +0.500%), 11/15/2027 |
792,139
|
|
|
|
TOTAL
|
7,291,258
|
|
|
|
Retail—0.9%
|
|
|
3,000,000
|
1
|
Amazon.com,
Inc., Sr. Unsecd. Note, 4.237% (SOFR +0.590%), 3/13/2029 |
3,008,376
|
|
|
|
Software—0.9%
|
|
|
3,000,000
|
|
Synopsys,
Inc., Sr. Unsecd. Note, 4.550%, 4/1/2027 |
3,002,948
|
|
|
|
Technology—3.1%
|
|
|
3,000,000
|
|
Alphabet,
Inc., Sr. Unsecd. Note, 4.500%, 8/10/2028 |
3,000,284
|
|
2,610,000
|
|
Fidelity
National Information Services, Inc., Sr. Unsecd. Note, 4.450%, 3/10/2028 |
2,595,599
|
|
1,370,000
|
|
Global
Payments, Inc., Sr. Unsecd. Note, 4.550%, 3/15/2028 |
1,360,073
|
|
3,000,000
|
1
|
Oracle
Corp., Sr. Unsecd. Note, 4.773% (SOFR - SOFR Compounded +1.110%), 2/4/2029 |
2,973,893
|
|
|
|
TOTAL
|
9,929,849
|
|
|
|
Utility
- Electric—0.5% |
|
|
445,000
|
1
|
Constellation
Energy Generation LLC, Sr. Unsecd. Note, 4.252% (SOFR +0.600%), 1/8/2028 |
445,384
|
|
965,000
|
1
|
NextEra
Energy Capital Holdings, Inc., Sr. Unsecd. Note, 4.463% (SOFR +0.800%), 2/4/2028 |
968,895
|
|
|
|
TOTAL
|
1,414,279
|
|
|
|
TOTAL
CORPORATE BONDS
(IDENTIFIED
COST $109,160,874) |
109,266,585
|
|
|
|
ASSET-BACKED
SECURITIES—28.7% |
|
|
|
|
Auto
Receivables—21.3% |
|
|
642,067
|
|
Ally
Bank Auto Credit-Linked Notes 2024-A, Class B, 5.827%, 5/17/2032 |
648,180
|
|
1,340,783
|
|
Ally
Bank Auto Credit-Linked Notes 2025-A, Class D, 4.991%, 6/15/2033 |
1,335,598
|
|
1,179,001
|
|
Ally
Bank Auto Credit-Linked Notes 2025-B, Class D, 4.942%, 9/15/2033 |
1,176,703
|
|
542,125
|
|
ARI
Fleet Lease Trust 2024-B, Class A2, 5.540%, 4/15/2033 |
543,772
|
|
978,571
|
|
Bank
of America Auto Trust 2025-1A, Class A3, 4.350%, 11/20/2029 |
978,566
|
|
626,693
|
|
Chase
Auto Credit Linked Notes 2025-1, Class C, 4.851%, 2/25/2033 |
624,627
|
|
515,562
|
|
Chase
Auto Credit Linked Notes 2026-1, Class C, 5.085%, 7/25/2034 |
515,756
|
|
4,000,000
|
|
Drive
Auto Receivables Trust 2025-2, Class B, 4.140%, 9/15/2032 |
3,981,783
|
|
536,772
|
|
Enterprise
Fleet Financing LLC 2024-4, Class A2, 4.690%, 7/20/2027 |
537,366
|
|
1,901,774
|
|
Enterprise
Fleet Financing LLC 2025-2, Class A2, 4.510%, 2/22/2028 |
1,903,927
|
|
793,211
|
|
Enterprise
Fleet Financing LLC 2025-3, Class A2, 4.500%, 4/20/2028 |
794,139
|
|
1,345,000
|
|
Ford
Credit Auto Lease Trust 2025-A, Class A4, 4.780%, 2/15/2029 |
1,347,913
|
|
2,450,000
|
1
|
Ford
Credit Floorplan Master Owner Trust 2024-3, Class A2, 4.406% (30-DAY AVERAGE SOFR +0.770%), 9/15/2029 |
2,460,697
|
|
3,000,000
|
1
|
General
Motors 2024-1A, Class A2, 4.386% (30-DAY AVERAGE SOFR +0.750%), 3/15/2029 |
3,007,537
|
|
2,000,000
|
|
GM
Financial Automobile Leasing Trust 2025-2, Class C, 5.040%, 10/22/2029 |
2,006,934
|
|
2,000,000
|
|
GM
Financial Consumer Automobile Receivables Trust 2025-3, Class A3, 4.180%, 8/16/2030 |
1,994,698
|
|
2,460,000
|
|
Hyundai
Auto Lease Securitization Trust 2024-A, Class B, 5.560%, 8/15/2028 |
2,464,923
|
|
1,460,000
|
|
Hyundai
Auto Lease Securitization Trust 2025-A, Class B, 5.150%, 6/15/2029 |
1,467,522
|
|
1,250,000
|
|
Hyundai
Auto Lease Securitization Trust 2025-B, Class B, 4.940%, 8/15/2029 |
1,254,783
|
|
1,000,000
|
|
Navistar
Financial Dealer Note 2025-1 B, Class B, 4.420%, 9/25/2030 |
976,524
|
|
3,000,000
|
1
|
NextGear
Floorplan Master Owner Trust 2024-1A, Class A1, 4.536% (30-DAY AVERAGE SOFR +0.900%), 3/15/2029 |
3,008,336
|
|
2,000,000
|
1
|
NextGear
Floorplan Master Owner Trust 2024-2A, Class A1, 4.516% (30-DAY AVERAGE SOFR +0.880%), 9/15/2029 |
2,011,070
|
|
3,000,000
|
1
|
NextGear
Floorplan Master Owner Trust 2025-2A, Class A1, 4.316% (30-DAY AVERAGE SOFR +0.680%), 10/15/2030 |
3,011,105
|
|
2,800,000
|
|
PenFed
Auto Receivables Owner Trust 2025-A, Class A3, 4.030%, 7/15/2030 |
2,782,930
|
|
431,824
|
|
Porsche
Innovative Lease Owner Trust 2024-1A, Class A3, 4.670%, 11/22/2027 |
432,194
|
|
1,428,000
|
|
Santander
Bank Auto Credit-Linked Notes 2025-A, Class D, 5.150%, 1/16/2034 |
1,426,708
|
Annual
Financial Statements and Additional Information
2
|
Principal
Amount
|
|
|
Value
|
|
|
|
ASSET-BACKED
SECURITIES—continued
|
|
|
|
|
Auto
Receivables—continued |
|
|
$ 200,265
|
|
Santander
Drive Auto Receivables Trust 2024-4, Class A3, 4.850%, 1/16/2029 |
$ 200,350
|
|
2,610,000
|
|
Santander
Drive Auto Receivables Trust 2025-1, Class B, 4.880%, 3/17/2031 |
2,616,275
|
|
1,250,000
|
|
SBNA
Auto Lease Trust 2024-B, Class A4, 5.550%, 12/20/2028 |
1,253,192
|
|
1,000,000
|
|
SBNA
Auto Receivables Trust 2025-SF1, Class D, 5.340%, 9/15/2031 |
998,373
|
|
841,091
|
|
Securitized
Term Auto Receivables Trust 2025-A, Class B, 5.038%, 7/25/2031 |
844,747
|
|
1,492,936
|
|
Securitized
Term Auto Receivables Trust 2025-A, Class D, 6.746%, 7/25/2031 |
1,511,439
|
|
804,250
|
|
Securitized
Term Auto Receivables Trust 2025-B, Class C, 5.121%, 12/29/2032 |
805,423
|
|
804,250
|
|
Securitized
Term Auto Receivables Trust 2025-B, Class D, 5.463%, 12/29/2032 |
804,558
|
|
1,874,524
|
|
Securitized
Term Auto Receivables Trust 2026-A, Class B, 4.284%, 3/25/2033 |
1,858,072
|
|
547,701
|
|
Stellantis
Financial Underwritten Enhanced Lease Trust 2025-AA, Class A2, 4.630%, 7/20/2027 |
548,204
|
|
1,587,524
|
|
The
Huntington National Bank 2025-1, Class B, 4.957%, 3/21/2033 |
1,584,772
|
|
2,464,999
|
|
The
Huntington National Bank 2026-1, Class B1, 4.503%, 2/20/2034 |
2,445,375
|
|
2,250,000
|
|
Toyota
Lease Owner Trust 2025-A, Class A4, 4.810%, 6/20/2029 |
2,257,092
|
|
1,737,452
|
|
Truist
Bank Auto Credit-Linked Notes Series 2025-1, Class B, 4.728%, 9/26/2033 |
1,732,398
|
|
1,616,917
|
|
Truist
Bank Auto Credit-Linked Notes Series 2026-1, Class B, 5.082%, 6/26/2034 |
1,614,095
|
|
2,293,999
|
1
|
Wheels
Fleet Lease Funding LLC 2025-1A, Class A2, 4.308% (CME Term SOFR 1 Month +0.670%), 1/18/2040 |
2,298,842
|
|
1,730,000
|
|
Wheels
Fleet Lease Funding LLC 2025-3A, Class A1, 4.080%, 9/18/2040 |
1,717,124
|
|
1,207,685
|
|
World
OMNI Select Auto Trust 2025-A, Class A2A, 4.140%, 5/15/2030 |
1,206,564
|
|
|
|
TOTAL
|
68,991,186
|
|
|
|
Credit
Card—2.6% |
|
|
2,000,000
|
|
Cards
II Trust 2026, Class B, 4.580%, 4/15/2028 |
1,994,927
|
|
1,500,000
|
|
Evergreen
Credit Card Trust 2024-CRT4, Class C, 5.640%, 10/15/2028 |
1,501,359
|
|
2,000,000
|
|
Evergreen
Credit Card Trust Series 2025-1A, Class B, 4.240%, 10/15/2029 |
1,986,634
|
|
1,500,000
|
|
Trillium
Credit Card Trust II 2025-1A, Class C, 4.700%, 9/26/2030 |
1,492,423
|
|
1,500,000
|
|
Trillium
Credit Card Trust II 2026-1A, Class C, 4.901%, 3/26/2031 |
1,491,427
|
|
|
|
TOTAL
|
8,466,770
|
|
|
|
Equipment
Lease—2.5% |
|
|
496,939
|
|
Daimler
Trucks Retail Trust 2024-1, Class A3, 5.490%, 12/15/2027 |
498,610
|
|
680,000
|
|
Dell
Equipment Finance Trust 2025-2, Class A3, 4.120%, 3/24/2031 |
676,866
|
|
1,000,000
|
|
DLLMT
LLC 2026, Class A2, 4.030%, 7/20/2028 |
998,327
|
|
8,195
|
|
Great
America Leasing Receivables 2024-2, Class A2, 5.280%, 3/15/2027 |
8,198
|
|
2,530,000
|
|
HPEFS
Equipment Trust 2024-2A, Class B, 5.350%, 10/20/2031 |
2,538,823
|
|
500,000
|
|
HPEFS
Equipment Trust 2024-2A, Class C, 5.520%, 10/20/2031 |
502,663
|
|
1,000,000
|
|
HPEFS
Equipment Trust 2025-1A, Class B, 4.510%, 9/20/2032 |
998,334
|
|
1,513,975
|
|
M&T
Equipment Notes 2025-1A, Class A2, 4.700%, 12/16/2027 |
1,516,470
|
|
491,929
|
|
MMAF
Equipment Finance LLC 2025-A, Class A2, 4.640%, 10/13/2028 |
492,751
|
|
|
|
TOTAL
|
8,231,042
|
|
|
|
Other—2.3%
|
|
|
2,500,000
|
1
|
PFS
Financing Corp. 2025-C, Class A, 4.586% (30-DAY AVERAGE SOFR +0.950%), 4/16/2029 |
2,514,400
|
|
2,000,000
|
|
PFS
Financing Corp. 2025-E, Class B, 4.610%, 7/16/2029 |
2,000,676
|
|
800,000
|
|
Verizon
Master Trust 2025-3, Class C, 4.900%, 3/20/2030 |
798,347
|
|
1,000,000
|
|
Verizon
Master Trust 2025-9, Class C, 4.410%, 10/21/2030 |
989,407
|
|
1,000,000
|
|
Verizon
Master Trust 2026-1, Class C, 4.430%, 2/20/2031 |
989,342
|
|
|
|
TOTAL
|
7,292,172
|
|
|
|
TOTAL
ASSET-BACKED SECURITIES
(IDENTIFIED
COST $93,028,674) |
92,981,170
|
|
|
|
OTHER
REPURCHASE AGREEMENTS—24.9% |
|
|
16,181,000
|
|
BNP
Paribas S.A., 3.69%, dated 8/31/2026, interest in a $2,100,000,000 joint collateralized loan agreement will repurchase
securities
provided as collateral for $2,100,215,250 on 9/1/2026, in which asset-backed securities, collateralized mortgage
obligations,
corporate bonds, medium-term notes, sovereign debt securities, U.S. Government Agency securities and
treasury
bonds with a market value of $2,142,819,072 have been received as collateral and held with BNY Mellon as tri-party
agent.
|
16,181,000
|
Annual
Financial Statements and Additional Information
3
|
Principal
Amount
|
|
|
Value
|
|
|
|
OTHER
REPURCHASE AGREEMENTS—continued
|
|
|
$16,181,000
|
|
ING
Financial Markets LLC, 3.73%, dated 8/31/2026, interest in a $1,300,000,000 joint collateralized loan agreement will
repurchase
securities provided as collateral for $1,300,134,694 on 9/1/2026, in which American depositary receipts, common
stocks
and exchange-traded funds with a market value of $1,326,137,475 have been received as collateral and held with
BNY
Mellon as tri-party agent. |
$ 16,181,000
|
|
16,181,000
|
|
MUFG
Securities Americas Inc., 3.78%, dated 8/31/2026, interest in a $400,000,000 joint collateralized loan agreement will
repurchase
securities provided as collateral for $400,042,000 on 9/1/2026, in which American depositary receipts, common
stocks,
convertible bonds, exchange-traded funds and mutual funds with a market value of $408,043,072 have been
received
as collateral and held with BNY Mellon as tri-party agent. |
16,181,000
|
|
16,181,000
|
|
Societe
Generale, Paris, 3.75%, dated 8/31/2026, interest in a $800,000,000 joint collateralized loan agreement will
repurchase
securities provided as collateral for $800,083,333 on 9/1/2026, in which asset-backed securities, collateralized
mortgage
obligations, corporate bonds, medium-term notes, sovereign debt securities, treasury bills, treasury bonds and
treasury
notes with a market value of $816,085,252 have been received as collateral and held with BNY Mellon as tri-party
agent.
|
16,181,000
|
|
16,181,000
|
|
Standard
Chartered Bank, 3.73%, dated 8/31/2026, interest in a $175,000,000 joint collateralized loan agreement will
repurchase
securities provided as collateral for $175,018,132 on 9/1/2026, in which U.S. Government Agency securities and
treasury
notes with a market value of $178,518,495 have been received as collateral and held with BNY Mellon as tri-party
agent.
|
16,181,000
|
|
|
|
TOTAL
OTHER REPURCHASE AGREEMENTS
(IDENTIFIED
COST $80,905,000) |
80,905,000
|
|
|
|
REPURCHASE
AGREEMENT—9.8% |
|
|
31,712,000
|
|
Interest
in $1,250,000,000 joint repurchase agreement 3.68%, dated 8/31/2026 under which Standard Chartered Bank will
repurchase
securities provided as collateral for $1,250,127,778 on 9/1/2026. The securities provided as collateral at the end
of
the period held with BNY Mellon as tri-party agent, were U.S. Government Agency securities and a U.S. Treasury security
with
various maturities to 6/1/2057 and the market value of those underlying securities was $1,272,845,543.
(IDENTIFIED
COST $31,712,000) |
31,712,000
|
|
|
2
|
COMMERCIAL
PAPER—3.1% |
|
|
|
|
Utility
- Natural Gas—3.1% |
|
|
10,000,000
|
|
Energy
Transfer LP, 3.830%, 9/1/2026
(IDENTIFIED
COST $10,000,000) |
9,998,935
|
|
|
|
TOTAL
INVESTMENT IN SECURITIES—100.2%
(IDENTIFIED
COST $324,806,548)3
|
324,863,690
|
|
|
|
OTHER
ASSETS AND LIABILITIES - NET—(0.2)%4
|
(556,383)
|
|
|
|
NET
ASSETS—100% |
$324,307,307
|
|
1
|
Floating/variable
note with current rate and current maturity or next reset date shown. |
|
2
|
Discount
rate at time of purchase for discount issues, or the coupon for interest-bearing issues. |
|
3
|
Also
represents cost of investments for federal tax purposes. |
|
4
|
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 August 31, 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 August 31, 2026, all investments of
the Fund utilized Level 2 inputs in valuing the Fund’s assets carried at fair value.
|
The
following acronym(s) are used throughout this portfolio: |
| |
|
MTN
|
—Medium
Term Note | |
|
SOFR
|
—Secured
Overnight Financing Rate | |
See Notes which are an integral part of
the Financial Statements
Annual
Financial Statements and Additional Information
4
Financial
Highlights–Class
A Shares
(For a Share Outstanding Throughout Each
Period)
|
|
Year
Ended
8/31/2026
|
Period
Ended
8/31/20251
|
|
Net Asset
Value, Beginning of Period |
$10.02
|
$10.01
|
|
Income
From Investment Operations: |
|
|
|
Net
investment income (loss)2
|
0.40
|
0.38
|
|
Net
realized and unrealized gain (loss) |
(0.01)
|
0.02
|
|
Total
From Investment Operations |
0.39
|
0.40
|
|
Less Distributions:
|
|
|
|
Distributions
from net investment income |
(0.41)
|
(0.39)
|
|
Distributions
from net realized gain |
(0.00)3
|
(0.00)3
|
|
Total
Distributions |
(0.41)
|
(0.39)
|
|
Net
Asset Value, End of Period |
$10.00
|
$10.02
|
|
Total
Return4
|
3.93%
|
4.02%
|
|
Ratios
to Average Net Assets: |
|
|
|
Net
expenses5
|
0.40%
|
0.40%6
|
|
Net
investment income |
4.01%
|
4.51%6
|
|
Expense
waiver/reimbursement7
|
0.20%
|
0.24%6
|
|
Supplemental
Data: |
|
|
|
Net
assets, end of period (000 omitted) |
$20,617
|
$5,827
|
|
Portfolio
turnover8
|
28%
|
26%9
|
|
1
|
Reflects
operations for the period from October 29, 2024 (commencement of operations) to August 31, 2025. |
|
2
|
Per
share numbers have been calculated using the average shares method. |
|
3
|
Represents
less than $0.01. |
|
4
|
Based
on net asset value. Total returns for periods of less than one year are not annualized. |
|
5
|
Amount
does not reflect net expenses incurred by investment companies in which the Fund may invest. |
|
6
|
Computed
on an annualized basis. |
|
7
|
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. |
|
8
|
Securities
that mature are considered sales for purposes of this calculation. |
|
9
|
Portfolio
turnover is calculated at the Fund level. Percentage indicated was calculated for the year ended August 31, 2025. |
See Notes which are an integral part of
the Financial Statements
Annual
Financial Statements and Additional Information
5
Financial
Highlights–Institutional
Shares
(For a Share Outstanding Throughout Each
Period)
|
|
Year Ended August 31,
| ||||
|
|
2026
|
2025
|
2024
|
2023
|
2022
|
|
Net Asset
Value, Beginning of Period |
$10.02
|
$10.01
|
$9.98
|
$9.94
|
$10.02
|
|
Income
From Investment Operations: |
|
|
|
|
|
|
Net
investment income (loss)1
|
0.42
|
0.48
|
0.56
|
0.43
|
0.07
|
|
Net
realized and unrealized gain (loss) |
(0.02)
|
0.01
|
0.03
|
0.03
|
(0.08)
|
|
Total
From Investment Operations |
0.40
|
0.49
|
0.59
|
0.46
|
(0.01)
|
|
Less Distributions:
|
|
|
|
|
|
|
Distributions
from net investment income |
(0.42)
|
(0.48)
|
(0.56)
|
(0.42)
|
(0.07)
|
|
Distributions
from net realized gain |
(0.00)2
|
(0.00)2
|
—
|
—
|
—
|
|
Total
Distributions |
(0.42)
|
(0.48)
|
(0.56)
|
(0.42)
|
(0.07)
|
|
Net
Asset Value, End of Period |
$10.00
|
$10.02
|
$10.01
|
$9.98
|
$9.94
|
|
Total
Return3
|
4.09%
|
5.04%
|
6.11%
|
4.72%
|
(0.10)%
|
|
Ratios
to Average Net Assets: |
|
|
|
|
|
|
Net
expenses4
|
0.25%
|
0.25%
|
0.17%
|
0.07%
|
0.05%
|
|
Net
investment income |
4.20%
|
4.80%
|
5.62%
|
4.30%
|
0.73%
|
|
Expense
waiver/reimbursement5
|
0.20%
|
0.23%
|
0.36%
|
0.50%
|
0.55%
|
|
Supplemental
Data: |
|
|
|
|
|
|
Net
assets, end of period (000 omitted) |
$303,690
|
$256,081
|
$148,404
|
$90,541
|
$61,280
|
|
Portfolio
turnover6
|
28%
|
26%
|
78%
|
34%
|
37%
|
|
1
|
Per
share numbers have been calculated using the average shares method. |
|
2
|
Represents
less than $0.01. |
|
3
|
Based
on net asset value. |
|
4
|
Amount
does not reflect net expenses incurred by investment companies in which the Fund may invest. |
|
5
|
This
expense decrease is reflected in both the net expense and the net investment income ratios shown above. Amount does not reflect expense
waiver/
reimbursement
recorded by investment companies in which the Fund may invest. |
|
6
|
Securities
that mature are considered sales for purposes of this calculation. |
See Notes which are an integral part of
the Financial Statements
Annual
Financial Statements and Additional Information
6
Statement
of Assets and Liabilities
August 31, 2026
|
Assets:
|
|
|
Investment
in repurchase agreements and other repurchase agreements |
$112,617,000
|
|
Investment
in securities |
212,246,690
|
|
Investment
in securities, at value (identified
cost $324,806,548) |
324,863,690
|
|
Income
receivable |
968,834
|
|
Receivable
for shares sold |
401,768
|
|
Total
Assets |
326,234,292
|
|
Liabilities:
|
|
|
Payable
for investments purchased |
1,000,000
|
|
Payable
for shares redeemed |
775,897
|
|
Payable
to bank |
352
|
|
Income
distribution payable |
3,040
|
|
Payable
for investment adviser fee (Note 5)
|
399
|
|
Payable
for administrative fee (Note 5)
|
684
|
|
Payable
for Directors’/Trustees’ fees (Note 5)
|
254
|
|
Payable
for portfolio accounting fees |
64,847
|
|
Payable
for distribution services fee (Note 5)
|
2,508
|
|
Accrued
expenses (Note 5)
|
79,004
|
|
Total
Liabilities |
1,926,985
|
|
Net
assets for 32,433,660 shares outstanding |
$324,307,307
|
|
Net Assets
Consist of: |
|
|
Paid-in
capital |
$324,214,118
|
|
Total
distributable earnings (loss) |
93,189
|
|
Net
Assets |
$324,307,307
|
|
Net Asset
Value, Offering Price and Redemption Proceeds Per Share: |
|
|
Class A
Shares: |
|
|
Net
asset value per share ($20,617,415 ÷ 2,061,850 shares outstanding), no par value, unlimited shares authorized |
$10.00
|
|
Institutional
Shares: |
|
|
Net
asset value per share ($303,689,892 ÷ 30,371,810 shares outstanding), no par value, unlimited shares authorized |
$10.00
|
See Notes which are an integral part of
the Financial Statements
Annual
Financial Statements and Additional Information
7
Statement
of Operations
Year Ended August
31, 2026
|
Investment
Income: |
|
|
Interest
|
$12,711,643
|
|
Expenses:
|
|
|
Investment
adviser fee (Note 5)
|
712,931
|
|
Administrative
fee (Note 5)
|
222,152
|
|
Custodian
fees |
36,395
|
|
Transfer
agent fees |
21,385
|
|
Directors’/Trustees’
fees (Note 5)
|
2,365
|
|
Auditing
fees |
34,212
|
|
Legal
fees |
10,984
|
|
Portfolio
accounting fees |
101,684
|
|
Distribution
services fee (Note 5)
|
20,866
|
|
Share
registration costs |
99,848
|
|
Printing
and postage |
25,427
|
|
Miscellaneous
(Note 5)
|
22,330
|
|
TOTAL
EXPENSES |
1,310,579
|
|
Waiver
of investment adviser fee (Note 5) |
(562,809)
|
|
Net
expenses |
747,770
|
|
Net
investment income |
11,963,873
|
|
Realized
and Unrealized Gain (Loss) on Investments: |
|
|
Net
realized gain on investments |
174
|
|
Net
change in unrealized appreciation of investments |
(693,377)
|
|
Net
realized and unrealized gain (loss) on investments |
(693,203)
|
|
Change
in net assets resulting from operations |
$11,270,670
|
See Notes which are an integral part of
the Financial Statements
Annual
Financial Statements and Additional Information
8
Statement
of Changes in Net Assets
|
Year
Ended August 31 |
2026
|
2025
|
|
Increase
(Decrease) in Net Assets |
|
|
|
Operations:
|
|
|
|
Net
investment income |
$11,963,873
|
$9,525,390
|
|
Net
realized gain (loss) |
174
|
6,703
|
|
Net
change in unrealized appreciation/depreciation |
(693,377)
|
318,398
|
|
CHANGE
IN NET ASSETS RESULTING FROM OPERATIONS |
11,270,670
|
9,850,491
|
|
Distributions
to Shareholders: |
|
|
|
Class
A Shares |
(556,964)
|
(59,100)1
|
|
Institutional
Shares |
(11,412,451)
|
(9,460,606)
|
|
CHANGE
IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS |
(11,969,415)
|
(9,519,706)
|
|
Share Transactions:
|
|
|
|
Proceeds
from sale of shares |
287,991,992
|
294,445,955
|
|
Net
asset value of shares issued to shareholders in payment of distributions declared |
11,920,661
|
9,459,025
|
|
Cost
of shares redeemed |
(236,814,603)
|
(190,731,677)
|
|
CHANGE
IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS |
63,098,050
|
113,173,303
|
|
Change
in net assets |
62,399,305
|
113,504,088
|
|
Net Assets:
|
|
|
|
Beginning
of period |
261,908,002
|
148,403,914
|
|
End
of period |
$324,307,307
|
$261,908,002
|
|
1
|
Reflects
operations for the period from October 29, 2024 (commencement of operations) to August 31, 2025. |
See Notes which are an integral part of
the Financial Statements
Annual
Financial Statements and Additional Information
9
Notes to
Financial Statements
August 31, 2026
1. ORGANIZATION
Federated Hermes Adviser Series (the “Trust”)
was established as a Delaware statutory trust on July 12, 2017, and is registered under the
Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Trust consists of
9 portfolios. The financial statements included herein are only
those of Federated Hermes Conservative Microshort 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: Class A Shares and Institutional Shares. The investment objective of the Fund is to provide current income
consistent with capital preservation while maintaining liquidity.
The Fund’s Class A Shares commenced
operations on October 29, 2024.
2. SIGNIFICANT
ACCOUNTING POLICIES
The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of its financial statements.
These policies are in conformity with U.S. generally accepted accounting principles (GAAP).
Investment Valuation
In
calculating its net asset value (NAV), the Fund generally values investments as follows:
■
Shares
of other mutual funds or non-exchange-traded investment companies are valued based upon their reported NAVs, or NAV per share
practical expedient, as applicable.
■
Fixed-income
securities are fair valued using price evaluations provided by a pricing service approved by Federated Investment Management
Company (the “Adviser”).
■
For
securities that are fair valued in accordance with procedures established by and under the general supervision of the Adviser, certain
factors may be considered, such as: the last traded or purchase price of the security, information obtained by contacting the issuer
or dealers, analysis of the issuer’s financial statements or other available documents, fundamental analytical data, the nature
and duration of restrictions on disposition, the movement of the
market in which the security is normally traded, public trading in similar securities
or derivative contracts of the issuer or comparable issuers, movement of a relevant index, or other factors including but not limited
to industry changes and relevant government actions.
If any price, quotation, price evaluation
or other pricing source is not readily available when the NAV is calculated, if the Fund cannot obtain
price evaluations from a pricing service or from more than one dealer for an investment within a reasonable period of time as set forth
in the Adviser’s valuation policies and procedures for the Fund, or if information furnished by a pricing service, in the opinion
of the Adviser’s valuation committee (“Valuation Committee”),
is deemed not representative of the fair value of such security, the Fund uses the
fair value of the investment determined in accordance with the procedures described below. There can be no assurance that the Fund
could obtain the fair value assigned to an investment if it sold the investment at approximately the time at which the Fund determines
its NAV per share, and the actual value obtained could be materially different.
Fair Valuation and Significant Events Procedures
Pursuant
to Rule 2a-5 under the Act, the Fund’s Board of Trustees (the “Trustees”) has designated the Adviser as the Fund’s
valuation designee to perform any fair value determinations for
securities and other assets held by the Fund. The Adviser is subject to the Trustees’
oversight and certain reporting and other requirements intended to provide the Trustees the information needed to oversee the
Adviser’s fair value determinations.
The Adviser, acting through
its Valuation Committee, is responsible for determining the fair value of investments for which market quotations
are not readily available. The Valuation Committee is comprised of officers of the Adviser and certain of the Adviser’s affiliated
companies and determines fair value and oversees the calculation of the NAV. The Valuation Committee is also authorized to use
pricing services to provide fair value evaluations of the current value of certain investments for purposes of calculating the NAV. The
Valuation Committee employs various methods for reviewing third-party
pricing-service evaluations including periodic reviews of third-party
pricing services’ policies, procedures and valuation methods (including key inputs, methods, models and assumptions), transactional
back-testing, comparisons of evaluations of different pricing services, and review of price challenges by the Adviser based on
recent market activity. In the event that market quotations and price evaluations are not available for an investment, the Valuation Committee
determines the fair value of the investment in accordance with procedures adopted by the Adviser. The Trustees periodically review
the fair valuations made by the Valuation Committee. The Trustees have also approved the Adviser’s fair valuation and significant
events procedures as part of the Fund’s compliance program
and will review any changes made to the procedures.
Factors considered by
pricing services in evaluating an investment include the yields or prices of investments of comparable quality, coupon,
maturity, call rights and other potential prepayments, terms and type, reported transactions, indications as to values from dealers
and general market conditions. Some pricing services provide a single price evaluation reflecting the bid-side of the market for an
investment (a “bid” evaluation). Other pricing services offer both bid evaluations and price evaluations indicative of a price
between the prices bid and ask for the investment (a “mid”
evaluation). The Fund normally uses bid evaluations for any U.S. Treasury and Agency securities,
mortgage-backed securities and municipal securities. The Fund normally uses mid evaluations for any other types of fixed-income
securities and any OTC derivative contracts. In the event that market quotations and price evaluations are not available for an investment,
the fair value of the investment is determined in accordance with procedures adopted by the Adviser.
Annual
Financial Statements and Additional Information
10
The
Adviser has also adopted procedures requiring an investment to be priced at its fair value whenever the Valuation Committee determines
that a significant event affecting the value of the investment has occurred between the time as of which the price of the investment
would otherwise be determined and the time as of which the NAV is computed. An event is considered significant if there is both
an affirmative expectation that the investment’s value will change in response to the event and a reasonable basis for quantifying
the resulting change in value. Examples of significant events
that may occur after the close of the principal market on which a security is traded,
or after the time of a price evaluation provided by a pricing service or a dealer, include:
■
With
respect to securities traded principally in foreign markets, significant trends in U.S. equity markets or in the trading of foreign securities
index futures contracts;
■
Political
or other developments affecting the economy or markets in which an issuer conducts its operations or its securities are
traded;
■
Announcements
concerning matters such as acquisitions, recapitalizations, litigation developments, or a natural disaster affecting the issuer’s
operations or regulatory changes or market developments affecting the issuer’s industry.
The Adviser has adopted procedures whereby
the Valuation Committee uses a pricing service to provide factors to update the fair value of
equity securities traded principally in foreign markets from the time of the close of their respective foreign stock exchanges to the
pricing time of the Fund. For other significant events, the Fund
may seek to obtain more current quotations or price evaluations from alternative
pricing sources. If a reliable alternative pricing source is not available, the Valuation Committee will determine the fair value of the
investment in accordance with the fair valuation procedures approved by the Adviser. The Trustees periodically review fair valuations
made in response to significant events.
Repurchase Agreements
The
Fund may invest in repurchase agreements for short-term liquidity purposes. It is the policy of the Fund to require the other party to
a repurchase agreement to transfer to the Fund’s custodian
or sub-custodian eligible securities or cash with a market value (after transaction
costs) at least equal to the repurchase price to be paid under the repurchase agreement. The eligible securities are transferred
to accounts with the custodian or sub-custodian in which the Fund holds a “securities entitlement” and exercises “control”
as those terms are defined in the Uniform Commercial Code. Certain
repurchase agreements may be structured as loans secured by a security
interest or lien on the eligible securities. The Fund has established procedures for monitoring the market value of the transferred securities
and requiring the transfer of additional eligible securities if necessary to equal at least the repurchase price. These procedures also
allow the other party to require securities to be transferred from the account to the extent that their market value exceeds the repurchase
price or in exchange for other eligible securities of equivalent market value.
The insolvency of the
other party or other failure to repurchase the securities may delay the disposition of the underlying securities or cause
the Fund to receive less than the full repurchase price. Under the terms of the repurchase agreement, any amounts received by the Fund
in excess of the repurchase price and related transaction costs must be remitted to the other party.
The Fund may enter into
repurchase agreements in which eligible securities are transferred into joint trading accounts maintained by the
custodian or sub-custodian for investment companies and other clients advised by the Fund’s Adviser and its affiliates. The Fund
will participate on a pro rata basis with the other investment
companies and clients in its share of the securities transferred under such repurchase
agreements and in its share of proceeds from any repurchase or other disposition of such securities.
Repurchase agreements
are subject to Master Netting Agreements (MNA) which are agreements between the Fund and its counterparties
that provide for the net settlement of all transactions and collateral with the Fund, through a single payment, in the event of
default or termination. Amounts presented on the Portfolio of Investments and Statement of Assets and Liabilities are not net settlement
amounts but gross. As indicated above, the cash or securities to be repurchased, as shown on the Portfolio of Investments, exceeds
the repurchase price to be paid under the agreement reducing the net settlement amount to zero.
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 daily 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. The detail of the total fund expense waiver of $562,809 is disclosed in Note 5. Dividends are declared
separately for each class. No class has preferential dividend rights; differences in per share dividend rates are generally due to differences
in separate class expenses.
Other Service Fees
The
Fund may pay other service fees up to 0.25% of the average daily net assets of the Fund’s Class A Shares to financial intermediaries
or to Federated Shareholder Services Company (FSSC) for providing
services to shareholders and maintaining shareholder accounts. For the
year ended August 31, 2026, the Fund’s Class A Shares did not incur other service fees. The Fund’s Class A Shares will not
incur and pay such fees until such time as approved by the Trustees.
Annual
Financial Statements and Additional Information
11
Federal Taxes
It
is the Fund’s policy to comply with the Subchapter M provision of the Internal Revenue Code of 1986 and to distribute to shareholders
each year substantially all of its income. Accordingly, no provision
for federal income tax is necessary. As of and during the year ended August
31, 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 August 31, 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.
Restricted Securities
The
Fund may purchase securities which are considered restricted. Restricted securities are securities that either: (a) cannot be offered
for public sale without first being registered, or being able
to take advantage of an exemption from registration, under the Securities Act of
1933; or (b) are subject to contractual restrictions on public sales. In some cases, when a security cannot be offered for public sale
without first being registered, the issuer of the restricted security
has agreed to register such securities for resale, at the issuer’s expense, either
upon demand by the Fund or in connection with another registered offering of the securities. Many such restricted securities may be
resold in the secondary market in transactions exempt from registration. Restricted securities may be determined to be liquid under criteria
established by the Trustees. The Fund will not incur any registration costs upon such resales. The Fund’s restricted securities,
like other securities, are priced in accordance with procedures
established by and under the general supervision of the Adviser.
Other
The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the
amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ materially from
those estimated. The Fund applies investment company accounting
and reporting guidance.
3. SHARES
OF BENEFICIAL INTEREST
The following tables summarize share activity:
|
|
Year
Ended
8/31/2026
|
Year
Ended
8/31/20251
| ||
|
Class
A Shares: |
Shares
|
Amount
|
Shares
|
Amount
|
|
Shares
sold |
2,711,095
|
$27,155,623
|
620,318
|
$6,208,816
|
|
Shares
issued to shareholders in payment of distributions declared |
55,194
|
552,734
|
5,710
|
57,167
|
|
Shares
redeemed |
(1,285,954)
|
(12,877,913)
|
(44,513)
|
(445,138)
|
|
NET
CHANGE RESULTING FROM CLASS A SHARE TRANSACTIONS |
1,480,335
|
$14,830,444
|
581,515
|
$5,820,845
|
|
|
Year
Ended
8/31/2026
|
Year
Ended
8/31/2025
| ||
|
Institutional
Shares: |
Shares
|
Amount
|
Shares
|
Amount
|
|
Shares
sold |
26,039,939
|
$260,836,369
|
28,791,227
|
$288,237,139
|
|
Shares
issued to shareholders in payment of distributions declared |
1,134,821
|
11,367,927
|
938,943
|
9,401,858
|
|
Shares
redeemed |
(22,352,965)
|
(223,936,690)
|
(19,006,036)
|
(190,286,539)
|
|
NET
CHANGE RESULTING FROM INSTITUTIONAL SHARE TRANSACTIONS |
4,821,795
|
$48,267,606
|
10,724,134
|
$107,352,458
|
|
NET
CHANGE RESULTING FROM TOTAL FUND SHARE TRANSACTIONS |
6,302,130
|
$63,098,050
|
11,305,649
|
$113,173,303
|
|
1
|
Reflects
operations for the period from October 29, 2024 (commencement of operations) to August 31, 2025. |
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, 2026 and 2025,
was as follows:
|
|
2026
|
2025
|
|
Ordinary
income |
$11,962,538
|
$9,516,462
|
|
Long-term
capital gains |
$6,877
|
$3,244
|
Annual
Financial Statements and Additional Information
12
As of August 31, 2026,
the components of distributable earnings on a tax-basis were as follows:
|
Undistributed
ordinary income |
$36,047
|
|
Net
unrealized appreciation |
$57,142
|
|
TOTAL
|
$93,189
|
At August 31, 2026, the cost of investments
for federal tax purposes was $324,806,548. The net unrealized appreciation of investments for
federal tax purposes was $57,142. This consists of unrealized appreciation from investments for those securities having an excess of value
over cost of $327,545 and unrealized depreciation from investments for those securities having an excess of cost over value of
$270,403.
5. INVESTMENT
ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
The
advisory agreement between the Fund and the Adviser provides for an annual fee equal to 0.25% of the Fund’s average daily net assets.
Subject to the terms described in the Expense Limitation note, the Adviser may voluntarily choose to waive 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, 2026, the Adviser voluntarily waived $562,809 of its
fee.
Administrative Fee
Federated
Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and
services. For purposes of determining the appropriate rate breakpoint, “Investment Complex” is defined as all of the Federated
Hermes Funds subject to a fee under the Administrative Services
Agreement. The fee paid to FAS is based on the average daily net assets
of the Investment Complex as specified below:
|
Administrative
Fee |
Average
Daily Net Assets
of
the Investment Complex |
|
0.100%
|
on
assets up to $50 billion |
|
0.075%
|
on
assets over $50 billion |
Subject to the terms described in the Expense
Limitation note, FAS may voluntarily choose to waive any portion of its fee. For the year ended
August 31, 2026, the annualized fee paid to FAS was 0.078% of average daily net assets of the Fund.
In addition, FAS may charge certain out-of-pocket
expenses to the Fund.
Distribution Services Fee
The
Fund has adopted a Distribution Plan (the “Plan”) pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund
will compensate Federated Securities Corp. (FSC), the principal
distributor, from the daily net assets of the Fund’s Class A Shares to finance activities
intended to result in the sale of these shares. The Plan provides that the Fund may incur distribution expenses of up to 0.25% of average
daily net assets, annually, to compensate FSC. The Fund’s Class A Shares will not incur and pay a fee in excess of 0.15% until such
time as approved by the Trustees.
Subject to the terms
described in the Expense Limitation note, FSC may voluntarily choose to waive any portion of its fee. For the year
ended August 31, 2026, distribution services fees for the Fund were as follows:
|
|
Distribution
Services
Fees
Incurred |
|
Class
A Shares |
$20,866
|
When FSC receives fees, it may pay some
or all of them to financial intermediaries whose customers purchase shares. For the year ended August
31, 2026, FSC did not retain any fees paid by the Fund.
Expense Limitation
The
Adviser and certain of its affiliates (which may include FSC, FAS and FSSC) on their own initiative have agreed to waive certain amounts
of their respective fees and/or reimburse expenses. Total annual fund operating expenses (as shown in the financial highlights, excluding
interest expense, extraordinary expenses and proxy-related expenses, if any) paid by the Fund’s Class A Shares and Institutional
Shares (after the voluntary waivers and/or reimbursements) will not exceed 0.40% and 0.25% (the “Fee Limit”), respectively,
up to but not including the later of (the “Termination Date”):
(a) November 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.
Annual
Financial Statements and Additional Information
13
Directors’/Trustees’
and Miscellaneous Fees
Certain
Officers and Trustees of the Fund are Officers and Directors or Trustees of certain of the above companies. To efficiently facilitate
payment, Independent Directors’/Trustees’ fees and
certain expenses related to conducting meetings of the Directors/Trustees and other
miscellaneous expenses are paid by an affiliate of the Adviser which in due course are reimbursed by the Fund. These expenses related
to conducting meetings of the Directors/Trustees and other miscellaneous expenses may be included in Accrued and Miscellaneous
Expenses on the Statement of Assets and Liabilities and Statement of Operations, respectively.
6. INVESTMENT
TRANSACTIONS
Purchases and sales of investments, excluding
long-term U.S. government securities and short-term obligations, for the year ended August
31, 2026, were as follows:
|
Purchases
|
$93,805,323
|
|
Sales
|
$54,800,090
|
7. LINE
OF CREDIT
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 August 31, 2026, the Fund had no
outstanding loans. During the year ended August 31, 2026, the
Fund did not utilize the LOC.
8. INTERFUND
LENDING
Pursuant to an Exemptive Order issued by
the SEC, the Fund, along with other funds advised by subsidiaries of Federated Hermes, Inc., may
participate in an interfund lending program. This program provides an alternative credit facility allowing the Fund to borrow from other
participating affiliated funds. As of August 31, 2026, there were no outstanding loans. During the year ended August 31, 2026, the program
was not utilized.
9. OPERATING
SEGMENTS
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.
10. INDEMNIFICATIONS
Under the Fund’s organizational documents,
its Officers and Directors/Trustees are indemnified against certain liabilities arising out of the
performance of their duties to the Fund (other than liabilities arising out of their willful misfeasance, bad faith, gross negligence
or reckless disregard of their duties to the Fund). In addition,
in the normal course of business, the Fund provides certain indemnifications under
arrangements with third parties. Typically, obligations to indemnify a third party arise in the context of an arrangement entered into
by the Fund under which the Fund agrees to indemnify such third party for certain liabilities arising out of actions taken pursuant to
the arrangement, provided the third party’s actions are
not deemed to have breached an agreed-upon standard of care (such as willful misfeasance,
bad faith, gross negligence or reckless disregard of their duties under the contract). The Fund’s maximum exposure under these
arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet arisen. The Fund
does not anticipate any material claims or losses pursuant to these arrangements at this time, and accordingly expects the risk of loss
to be remote.
11. FEDERAL
TAX INFORMATION (UNAUDITED)
For the fiscal year ended August 31, 2026,
100% of total ordinary income distributions qualified as business interest income for purposes of
163(j) of the Code and the regulations thereunder.
For the year ended August 31, 2026, the
amount of long-term capital gains designated by the Fund was $6,877.
Annual
Financial Statements and Additional Information
14
Report of
Independent Registered Public Accounting Firm
TO THE SHAREHOLDERS AND THE
BOARD OF TRUSTEES OF FEDERATED HERMES CONSERVATIVE MICROSHORT
FUND:
Opinion on the Financial Statements
We have audited the accompanying
statement of assets and liabilities of Federated Hermes Conservative Microshort Fund (the
“Fund”) (one of the portfolios constituting Federated Hermes Adviser Series (the “Trust”)), including the portfolio
of investments, as of August 31, 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 August 31, 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.
Basis for Opinion
These financial statements are
the responsibility of the Trust’s management. Our responsibility is to express an opinion on the
Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audits in accordance
with 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 August 31, 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
October 26, 2026
Annual
Financial Statements and Additional Information
15
Evaluation
and Approval of Advisory Contract–May
2026
Federated Hermes Conservative
Microshort 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 Investment Management Company (the “Adviser”) (the “Contract”) for an additional one-year
term. The Board’s determination to approve the continuation of the Contract reflects the exercise of its business judgment
after considering such information deemed necessary to evaluate the terms of the Contract and to approve the continuation
of the existing arrangement. The information, factors and conclusions that formed the basis for the Board’s approval
are summarized below.
Information Received
and Review Process
At the request
of the Independent Trustees, the Fund’s Chief Compliance Officer (the “CCO”) furnished to the Board in advance
of its May Meetings an independent written report regarding data related to the Fund’s management fee (the
“CCO Management Fee Report”). The Board considered the CCO Management Fee Report, along with other information,
in evaluating the reasonableness of the Fund’s management fee and in determining to approve the continuation
of the Contract.
In addition
to the CCO Management Fee Report, the Board considered information specifically prepared in connection with
the approval of the continuation of the Contract that was presented at the May Meetings. In this regard, in the months preceding
the May Meetings, the Board requested and reviewed written responses and supporting materials prepared by the
Adviser and its affiliates (collectively, “Federated Hermes”) in response to requests posed to Federated Hermes by independent
legal counsel on behalf of the Independent Trustees encompassing a wide variety of topics, including those summarized
below. The Board also considered such additional matters as the Independent Trustees deemed reasonably necessary
to evaluate the Contract, which included detailed information about the Fund and Federated Hermes furnished to the
Board at its meetings throughout the year.
The Board’s
consideration of the Contract included review of materials and information covering the following matters, among
others: (1) a copy of the Contract; (2) the nature, quality and extent of the advisory and other services provided to the
Fund by Federated Hermes; (3) Federated Hermes’ business and operations; (4) the Adviser’s investment philosophy, personnel
and processes; (5) the Fund’s investment objective and strategies; (6) the Fund’s short-term and long-term performance
- in absolute terms (both on a gross basis and net of expenses) and relative to an appropriate group of peer funds
and its benchmark; (7) the Fund’s fees and expenses, including the advisory fee and the overall expense structure of the
Fund - in absolute terms and relative to an appropriate group of peer funds, with due regard for contractual or voluntary
expense limitations (if any); (8) the financial condition of Federated Hermes; (9) the Adviser’s profitability with respect
to managing the Fund; (10) distribution and sales activity for the Fund; and (11) the use and allocation of brokerage
commissions derived from trading the Fund’s portfolio securities (if any).
The Board
also considered judicial decisions concerning allegedly excessive investment advisory fees charged to other registered
funds in evaluating the Contract. Using these judicial decisions as a guide, the Board considered several factors it
deemed relevant to an adviser’s fiduciary duty with respect to its receipt of compensation from a fund, including: (1) the nature
and quality of the services provided by the adviser to the fund and its shareholders, including the performance of the
fund, its benchmark and comparable funds; (2) the adviser’s cost of providing the services and the profitability to the adviser
of providing advisory services to the fund; (3) the extent to which the adviser may realize “economies of scale” as the
fund grows larger and, if such economies of scale exist, whether they have been appropriately shared with the fund and its
shareholders or the family of funds; (4) any “fall-out” benefits that accrue to the adviser because of its relationship with
the fund, including research services received from
brokers that execute fund trades and any fees paid to affiliates of the adviser
for services rendered to the fund; (5) comparative fees and expenses, including a comparison of management fees paid
to the adviser with those paid by similar funds managed by the same adviser or other advisers as well as management fees
charged to institutional and other advisory clients of the same adviser for what might be viewed as like services; and (6)
the extent of care, conscientiousness and independence with which the fund’s board members perform their duties and their
expertise, including whether they are fully informed about all facts the board deems relevant to its consideration of the
adviser’s services and fees. The Board considered that the Securities and Exchange Commission (“SEC”) disclosure requirements
regarding the basis for a fund board’s approval of the fund’s investment advisory contract generally align with
the factors listed above. The Board was guided by these factors in its evaluation of the Contract to the extent it considered
them to be appropriate and relevant, as discussed further below. The Board considered and weighed these factors
in light of its substantial accumulated experience in governing the Fund and working with Federated Hermes on matters
relating to the oversight of the other funds advised by Federated Hermes (each, a “Federated Hermes Fund” and, collectively,
the “Federated Hermes Funds”).
Annual
Financial Statements and Additional Information
16
In
addition, the Board considered the preferences and expectations of Fund shareholders and the potential disruptions of the
Fund’s operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate
or not renew the Contract. In particular, the Board recognized that many shareholders likely have invested in the Fund
based on the strength of Federated Hermes’ industry standing and reputation and with the expectation that Federated Hermes
will have a continuing role in providing advisory services to the Fund. Thus, the Board observed that there are a range
of investment options available to the Fund’s shareholders in the marketplace, and such shareholders, having had the opportunity
to consider other investment options, have effectively selected Federated Hermes by virtue of investing in the
Fund.
In determining
to approve the continuation of the Contract, the members of the Board reviewed and evaluated information
and factors they believed to be relevant and appropriate through the exercise of their reasonable business judgment.
While individual members of the Board may have weighed certain factors differently, the Board’s determination
to approve the continuation of the Contract was based on a comprehensive consideration of all information provided
to the Board throughout the year. The Board recognized that its evaluation process is evolutionary and that the factors
considered and the emphasis placed on relevant factors may change in recognition of changing circumstances in the
registered fund marketplace. The Independent Trustees were assisted throughout the evaluation process by independent legal
counsel. In connection with their deliberations at the May Meetings, the Independent Trustees met separately in executive
session with their independent legal counsel and without management present to review the relevant materials and
consider their responsibilities under applicable laws. In addition, senior management representatives of Federated Hermes
also met with the Independent Trustees and their independent legal counsel to discuss the materials and presentations
furnished to the Board at the May Meetings. The Board considered the approval of the Contract for the Fund as
part of its consideration of agreements for funds across the family of Federated Hermes Funds, but its approvals were made
on a fund-by-fund basis.
Nature, Extent and
Quality of Services
The Board
considered the nature, extent and quality of the services provided to the Fund by the Adviser and the resources
of Federated Hermes dedicated to the Fund. In this regard, the Board evaluated, among other things, the terms of the
Contract and the full range of services provided to the Fund by Federated Hermes. The Board considered the Adviser’s personnel,
investment philosophy and process, investment research capabilities and resources, trade operations capabilities,
experience and performance track record. The Board reviewed the qualifications, backgrounds and responsibilities
of the portfolio management team primarily responsible for the day-to-day management of the Fund and evaluated
Federated Hermes’ ability and experience in attracting and retaining qualified personnel to service the Fund. The Board
considered the trading operations by the Adviser, including the execution of portfolio transactions and the selection of
brokers for those transactions. The Board also considered the Adviser’s ability to deliver competitive investment performance
for the Fund when compared to the Fund’s Performance Peer Group (as defined below).
In addition,
the Board considered the financial resources and overall reputation of Federated Hermes and its willingness to
consider and make investments in personnel, infrastructure, technology, cybersecurity, business continuity planning and operational
enhancements that are designed to benefit the Federated Hermes Funds. The Board considered Federated Hermes’
oversight of the securities lending program for the Federated Hermes Funds that engage in securities lending and noted
the income earned by the Federated Hermes Funds that participate in such program. In addition, the Board considered
the quality of Federated Hermes’ communications with the Board and responsiveness to Board inquiries and requests
made from time to time with respect to the Federated Hermes Funds. The Board also considered that Federated Hermes
is responsible for providing the Federated Hermes Funds’ officers.
The Board
received and evaluated information regarding Federated Hermes’ regulatory and compliance environment. The
Board considered Federated Hermes’ compliance program and compliance history and reports from the CCO about Federated
Hermes’ compliance with applicable laws and regulations, including responses to regulatory developments and any
compliance or other issues raised by regulatory agencies. The Board also noted Federated Hermes’ support of the Federated
Hermes Funds’ compliance control structure and the compliance-related resources devoted by Federated Hermes
in support of the Fund’s obligations pursuant to Rule 38a-1 under the Investment Company Act of 1940, as amended,
including Federated Hermes’ commitment to respond to rulemaking and other regulatory initiatives of the SEC. The
Board considered Federated Hermes’ approach to internal audits and risk management with respect to the Federated Hermes
Funds and its day-to-day oversight of the Federated Hermes Funds’ compliance with their investment objectives and
policies as well as with applicable laws and regulations, noting that regulatory and other developments had over time led,
and continue to lead, to an increase in the scope of Federated Hermes’ oversight in this regard. In addition, the Board noted
Federated Hermes’ commitment to maintaining high quality systems and expending substantial resources to prepare for
and respond to ongoing changes due to the market, regulatory and control environments in which the Fund and its service
providers operate.
Annual
Financial Statements and Additional Information
17
The
Board considered Federated Hermes’ efforts to provide shareholders in the Federated Hermes Funds with a comprehensive
array of funds with different investment objectives, policies and strategies. The Board considered the expenses
that Federated Hermes had incurred, as well as the entrepreneurial and other risks assumed by Federated Hermes, in
sponsoring and providing on-going services to new funds to expand these opportunities for shareholders. The Board noted
the benefits to shareholders of being part of the family of Federated Hermes Funds, which include the general right to
exchange investments between the same class of shares without the incurrence of additional sales charges.
Based on
these considerations, the Board concluded that it was satisfied with the nature, extent and quality of the services
provided by the Adviser to the Fund.
Fund Investment Performance
The Board
considered the investment performance of the Fund. In evaluating the Fund’s investment performance, the Board
considered performance results in light of the Fund’s investment objective, strategies and risks. The Board considered
detailed investment reports on, and the Adviser’s analysis of, the Fund’s performance over different time periods
that were provided to the Board throughout the year and in connection with the May Meetings. These reports included,
among other items, information on the Fund’s gross and net returns, the Fund’s investment performance compared
to one or more relevant categories or groups of peer funds and the Fund’s benchmark, performance attribution information
and commentary on the effect of market conditions. The Board noted that it evaluated investment performance at
meetings throughout the year and received reports from Federated Hermes regarding the performance of certain Federated
Hermes Funds as well as Federated Hermes’ explanations for less favorable performance and any specific actions
Federated Hermes had taken, or had determined to take, to seek to enhance Fund investment performance and the results
of those actions.
The Board
also reviewed comparative information regarding the performance of other registered funds in the category of
peer funds selected by Morningstar, Inc. (“Morningstar”), an independent fund ranking organization (the “Performance
Peer Group”). The Board noted the CCO’s
statement that comparisons to fund peer groups may be helpful, though not conclusive,
in evaluating the performance of the Adviser in managing the Fund.
The Board
also considered comparative performance data from Lipper, Inc. that was included in reports provided to the Board
throughout the year.
The Board
considered that for both the one-year and three-year periods ended December 31, 2025, the Fund’s performance
was above the median of the Performance Peer Group.
Based on
these considerations, the Board concluded that it had continued confidence in the Adviser’s overall capabilities
to manage the Fund.
Fund Expenses
The Board
considered the advisory fee and overall expense structure of the Fund and the comparative fee and expense information
that had been provided in connection with the May Meetings. In this regard, the Board was presented with, and
considered, information regarding the contractual advisory fee rates, net advisory fee rates, total expense ratios and each
element of the Fund’s total expense ratio (i.e., gross and net advisory fees, administrative fees, custody fees, portfolio accounting
fees and transfer agency fees) relative to an appropriate group of peer funds compiled by Federated Hermes from
the overall category of peer funds selected by Morningstar (the “Expense Peer Group”). The Board received a description
of the methodology used to select the Expense Peer Group from the overall Morningstar category. The Board also
reviewed comparative information regarding the fees and expenses of the broader group of funds in the overall Morningstar
category.
While mindful
that courts have cautioned against giving too much weight to comparative information concerning fees charged
to funds by other advisers, the use of comparisons between the Fund and its Expense Peer Group assisted the Board
in its evaluation of the Fund’s fees and expenses. The Board focused on comparisons with other registered funds more
heavily than non-registered fund products or services because such comparisons are believed to be more relevant. The
Board considered that other registered funds are the products most like the Fund, in that they are readily available to Fund
shareholders as alternative investment vehicles, and they are the type of investment vehicle, in fact, chosen and maintained
by the Fund’s shareholders. The Board noted that the range of such other registered funds’ fees and expenses, therefore,
appears to be a relevant indicator of what investors have found to be reasonable in the marketplace in which the Fund
competes.
The Board
reviewed the contractual advisory fee rate, net advisory fee rate and other expenses of the Fund and noted the position
of the Fund’s fee rates relative to its Expense Peer Group. In this regard, the Board noted that the contractual advisory
fee rate was at the median of the Expense Peer Group, and the Board was satisfied that the overall expense structure
of the Fund remained competitive.
Annual
Financial Statements and Additional Information
18
The
Board also received and considered information about the nature and extent of services offered and fees charged by Federated
Hermes to other types of clients with investment strategies similar to those of the Federated Hermes Funds, including
non-registered fund clients (such as institutional separate accounts) and third-party unaffiliated registered funds for
which the Adviser or its affiliates serve as sub-adviser. The Board noted the CCO’s statement that non-registered fund clients
are inherently different products due to the following differences, among others: (i) types of targeted investors; (ii)
applicable laws and regulations; (iii) legal structures; (iv) average account sizes; (v) portfolio management techniques made
necessary by different cash flows and different associated costs; (vi) the time spent by portfolio managers and their teams
(among other personnel across various departments, including legal, compliance and risk management) in reviewing securities
pricing; (vii) SEC mandated risk management programs with respect to fund liquidity and use of derivatives; (viii)
questions on regulatory reporting; (ix) a variety of different administrative responsibilities; and (x) degrees of risk associated
with management. The Board also considered information regarding the differences in the nature of the services required
for Federated Hermes to manage its proprietary registered fund business versus managing a discrete pool of assets as
a sub-adviser to another institution’s registered fund, noting the CCO’s statement that Federated Hermes generally performs
significant additional services and assumes substantially greater risks in managing the Fund and other Federated Hermes
Funds than in its role as sub-adviser to an unaffiliated third-party registered fund. The Board noted that the CCO emphasized
that differences in fees for providing advisory services to other types of clients may not be appropriate when judging
the appropriateness of the Federated Hermes Funds’ advisory fees because of the different services provided.
In the case
of the Fund, the Board noted that Federated Hermes does not manage any other types of clients that are comparable
to the Fund.
Based on
these considerations, the Board concluded that the fees and total operating expenses of the Fund, in conjunction
with other matters considered, are reasonable in light of the services provided.
Profitability
The Board
received and considered profitability information furnished by Federated Hermes. Such profitability information
included revenues reported on a fund-by-fund basis and estimates of the allocation of expenses made on a fund-by-fund
basis, using allocation methodologies specified by the CCO and described to the Board. The Board considered
the CCO’s statement that, while the cost allocation report applies consistent allocation processes for purposes of
general comparison of funds, the inherent difficulties in arbitrarily allocating costs 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 Contract are consistent with the methodologies
previously reviewed by an independent consultant. The Board noted that the independent consultant had previously
conducted a review of the allocation methodologies and reported to the Board that, although there is no single best
method to allocate expenses, the methodologies used by Federated Hermes are reasonable. The Board considered the CCO’s
statement that the estimated profitability to the Adviser from its relationship with the Fund was not unreasonable in relation
to the services provided.
The Board
also reviewed information compiled by Federated Hermes comparing its profitability information to other publicly-held
fund management companies, including information regarding profitability trends over time. The Board recognized
that profitability comparisons among fund management companies are difficult because of the variation in the type
of comparative information that is publicly available, and the profitability of any fund management company is affected
by numerous factors. The Board considered the CCO’s statement that, based on such profitability information, Federated
Hermes’ profit margins did not appear to be excessive and that Federated Hermes appeared financially sound, with
the resources available to fulfill its contractual obligations.
Economies of Scale
The Board
received and considered information about the notion of possible realization of “economies of scale” as a fund
grows larger, the difficulties of isolating and quantifying economies of scale at an individual fund level, and the extent
to which potential scale benefits are shared with shareholders. In this regard, the Board considered that Federated Hermes
has made significant and long-term investments in areas that support all of the Federated Hermes Funds, such as: portfolio
management, investment research and trading operations; shareholder services; compliance; business continuity, cybersecurity
and information security programs; internal audit and risk management functions; and technology, systems capabilities
and use of data. The Board noted that Federated Hermes’ investments in these areas are extensive and are designed
to provide enhanced or expanded services to the Federated Hermes Funds and their shareholders. The Board considered
that the benefits of these investments are likely to be shared with the family of Federated Hermes Funds as a whole.
In addition, the Board considered that fee waivers and expense reimbursements are another means for potential economies
of scale to be shared with shareholders and can provide protection from an increase in expenses if a Federated Hermes
Fund’s assets decline. The Board considered that, in order for the Federated Hermes Funds to remain competitive
Annual
Financial Statements and Additional Information
19
in the marketplace,
Federated Hermes has frequently waived fees and/or reimbursed expenses for the Federated Hermes Funds
and has disclosed to shareholders and/or reported to the Board its intention to do so (or continue to do so) in the future.
The Board also considered that Federated Hermes has been active in managing expenses of the Federated Hermes Funds
in recent years, which has resulted in benefits being realized by shareholders.
The Board
also received and considered information on adviser-paid fees (commonly referred to as “revenue sharing” payments)
that was provided to the Board throughout the year and in connection with the May Meetings. The Board considered
that Federated Hermes believes that this information is relevant to consider whether Federated Hermes had an incentive
to either not apply breakpoints, or to apply breakpoints at higher levels, but should not be considered when evaluating
the reasonableness of advisory fees. The Board also noted the absence of any applicable regulatory or industry guidelines
on economies of scale, which is compounded by the lack of any uniform methodology or pattern with respect to structuring
fund advisory fees with breakpoints that serve to reduce the fees as a fund attains a certain size.
Other Benefits
The Board
considered information regarding the compensation and other ancillary (or “fall-out”) benefits that Federated Hermes
derived from its relationships with the Federated Hermes Funds. The Board considered that Federated Hermes may
derive a benefit to its reputation as an adviser to the Fund, which may help in attracting other clients and investment personnel.
The Board noted that, in addition to receiving advisory fees under the Federated Hermes Funds’ investment advisory
contracts, Federated Hermes’ affiliates also receive fees for providing other services to the Federated Hermes Funds
under separate service contracts, including for serving as the Federated Hermes Funds’ administrator and distributor.
In this regard, the Board considered that Federated Hermes’ affiliates provide distribution and shareholder services
to the Federated Hermes Funds, for which they may be compensated through distribution and servicing fees paid pursuant
to Rule 12b-1 plans or otherwise. The Board also received and considered information detailing the benefits, if any,
that Federated Hermes may derive from its receipt of research services from brokers who execute portfolio trades for the
Federated Hermes Funds.
Conclusions
The Board
considered the CCO’s presentation and statements and the information accompanying the CCO Management Fee
Report. The Board recognized that its evaluation of the Federated Hermes Funds’ advisory and sub-advisory arrangements
is a continuing and ongoing process that is informed by the information that the Board requests and receives from
management throughout the course of the year.
On the basis
of the information and factors summarized above, among other information and factors deemed relevant by the
Board, and the evaluation thereof, the Board, including the Independent Trustees, unanimously voted to approve the continuation
of the Contract. The Board based its determination to approve the Contract on the totality of the circumstances
and relevant factors and with a view of past and future long-term considerations. Not all of the factors and considerations
identified above were necessarily deemed to be relevant to the Fund, nor did the Board consider any one of them
to be determinative.
Annual
Financial Statements and Additional Information
20
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 Conservative Microshort
Fund
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us at
FederatedHermes.com
or call 1-800-341-7400.
or call 1-800-341-7400.
Federated Securities Corp., Distributor
CUSIP 31423A481
CUSIP 31423A473
CUSIP 31423A473
Q455164 (10/26)
©
2026 Federated Hermes, Inc.
Annual Financial Statements
and Additional Information
and Additional Information
August 31, 2026
|
Share
Class | Ticker
|
A | FHMAX
|
Institutional | FHMIX
|
|
|
Federated Hermes Conservative Municipal Microshort Fund
A Portfolio of Federated Hermes Adviser Series
Not FDIC Insured ▪ May
Lose Value ▪ No Bank Guarantee
CONTENTS
Portfolio
of Investments
August 31, 2026
|
Principal
Amount
|
|
|
Value
|
|
|
1
|
SHORT-TERM
MUNICIPALS—93.4% |
|
|
|
|
Alabama—1.3%
|
|
|
$ 1,600,000
|
|
Mobile,
AL IDB (Alabama Power Co.), (Series 2001-A) Daily VRDNs, 3.300%, 9/1/2026 |
$ 1,600,000
|
|
4,600,000
|
|
UAB
St Vincent’s Health System Authority, BAML 3a-7 (Series 2025-BAML5063), (Bank of America N.A. LIQ)/(Bank of
America
N.A. LOC), 2.480%, Optional Tender 9/17/2026 |
4,600,000
|
|
1,600,000
|
|
Walker
County, AL Economic and IDA (Alabama Power Co.), (Series 2007) Daily VRDNs, 3.300%, 9/1/2026 |
1,600,000
|
|
|
|
TOTAL
|
7,800,000
|
|
|
|
Arizona—2.0%
|
|
|
3,200,000
|
|
Arizona
Health Facilities Authority (Banner Health), (Series 2015C) Daily VRDNs, (Bank of America N.A. LOC),
3.050%,
9/1/2026 |
3,200,000
|
|
4,700,000
|
|
Arizona
State IDA (Phoenix Children’s Hospital), (Series 2019A) Daily VRDNs, (TD Bank, N.A. LOC), 2.900%, 9/1/2026 |
4,700,000
|
|
4,000,000
|
|
Phoenix,
AZ IDA (Republic Services, Inc.), (Series 2013), 3.000%, Mandatory Tender 11/2/2026 |
3,998,133
|
|
|
|
TOTAL
|
11,898,133
|
|
|
|
Arkansas—0.7%
|
|
|
2,150,000
|
|
Blytheville,
AR (Nucor Corp.), (Series 2002) Weekly VRDNs, 2.550%, 9/2/2026 |
2,150,000
|
|
2,130,000
|
|
Lowell,
AR IDRB (Arkansas Democrat-Gazette, Inc.), (Series 2006) Weekly VRDNs, (JPMorgan Chase Bank, N.A. LOC),
2.420%,
9/2/2026 |
2,130,000
|
|
|
|
TOTAL
|
4,280,000
|
|
|
|
California—7.8%
|
|
|
4,500,000
|
|
California
Municipal Finance Authority (Republic Services, Inc.), (Series 2021A), 2.950%, Mandatory Tender 10/1/2026 |
4,498,712
|
|
6,000,000
|
|
California
Municipal Finance Authority (Republic Services, Inc.), (Series 2021-B), 3.050%, Mandatory Tender 1/15/2027 |
5,994,759
|
|
7,000,000
|
|
California
Municipal Finance Authority (Waste Management, Inc.), Solid Waste Disposal Revenue Bonds (Series 2017A),
(Waste
Management Holdings, Inc. GTD), 3.450%, Mandatory Tender 12/1/2026 |
7,004,694
|
|
3,000,000
|
|
California
PCFA (Republic Services, Inc.), (Series 2023), 3.000%, Mandatory Tender 2/16/2027 |
2,996,025
|
|
6,000,000
|
|
California
Statewide Communities Development Authority (Kensington Apartments LP), Mizuho 3a-7 (Series 2022-MIZ9113)
VRENs,
(Mizuho Bank Ltd. GTD)/(Mizuho Bank Ltd. LIQ), 2.460%, 9/3/2026 |
6,000,000
|
|
9,800,000
|
|
Nuveen
California AMT-Free Quality Municipal Income Fund, (Series A) MuniFund Preferred Shares Weekly VRDPs,
2.730%,
9/1/2026 |
9,800,000
|
|
1,445,000
|
|
Nuveen
California Quality Municipal Income Fund, RIB Floater Trust (Series 2022-FR-RI-005) (Series 2 Preferred Shares)
VRENs,
(Barclays Bank PLC LIQ)/(Barclays Bank PLC LOC), 2.630%, 9/3/2026 |
1,445,000
|
|
9,000,000
|
|
San
Francisco, CA City and County (1500 Mission Urban Housing LP), Mizuho 3a-7 (Series 2022-MIZ9115) VRENs, (Mizuho
Bank
Ltd. GTD)/(Mizuho Bank Ltd. LIQ), 2.460%, 9/3/2026 |
9,000,000
|
|
|
|
TOTAL
|
46,739,190
|
|
|
|
Colorado—0.1%
|
|
|
805,000
|
|
Denver,
CO City & County Department of Aviation, Airport System Subordinate Revenue Bonds (Series 2018A),
5.000%,
12/1/2026 |
809,505
|
|
|
|
District
of Columbia—0.1% |
|
|
675,000
|
|
Metropolitan
Washington, DC Airports Authority, Airport System Revenue and Refunding Bonds (Series 2025A),
5.000%,
10/1/2026 |
676,155
|
|
|
|
Florida—2.6%
|
|
|
12,900,000
|
|
Liberty
County, FL (Georgia-Pacific LLC), (Series 2004) Weekly VRDNs, 2.400%, 9/3/2026 |
12,900,000
|
|
1,400,000
|
|
Miami-Dade
County, FL HFA (2901 Wynwood LLC), (2026-XG0632) Weekly VRDNs, (Deutsche Bank AG LIQ)/(Deutsche Bank
AG
LOC), 2.680%, 9/3/2026 |
1,400,000
|
|
1,020,000
|
|
Sumter
County, FL IDA (American Cement Co. LLC), (Series 2007) Weekly VRDNs, (Bank of America N.A. LOC),
2.590%,
9/3/2026 |
1,020,000
|
|
|
|
TOTAL
|
15,320,000
|
|
|
|
Georgia—6.7%
|
|
|
3,700,000
|
|
Appling
County, GA Development Authority (Georgia Power Co.), (1st Series 1997) Daily VRDNs, 3.100%, 9/1/2026 |
3,700,000
|
|
14,930,000
|
|
Appling
County, GA Development Authority (Georgia Power Co.), (First Series 2011) Daily VRDNs, 3.100%, 9/1/2026 |
14,930,000
|
|
5,100,000
|
|
Appling
County, GA Development Authority (Oglethorpe Power Corp.), (Series 2013A) Weekly VRDNs, 2.650%, 9/2/2026 |
5,100,000
|
|
1,305,000
|
|
Brookhaven
Development Authority, GA (Children’s Healthcare of Atlanta, Inc.), (Series 2019D) Weekly VRDNs, (Truist Bank
LIQ),
2.310%, 9/3/2026 |
1,305,000
|
|
2,200,000
|
|
Burke
County, GA Development Authority (Georgia Power Co.), (1st Series 2009) Daily VRDNs, 3.100%, 9/1/2026 |
2,200,000
|
Annual
Financial Statements and Additional Information
1
|
Principal
Amount
|
|
|
Value
|
|
|
1
|
SHORT-TERM
MUNICIPALS—continued
|
|
|
|
|
Georgia—continued
|
|
|
$ 2,000,000
|
|
Burke
County, GA Development Authority (Georgia Power Co.), (2018 1st Series) Daily VRDNs, 3.050%, 9/1/2026 |
$ 2,000,000
|
|
2,000,000
|
|
Heard
County, GA Development Authority (Georgia Power Co.), (First Series 1996) Daily VRDNs, 3.200%, 9/1/2026 |
2,000,000
|
|
2,000,000
|
|
Metropolitan
Atlanta Rapid Transit Authority, GA, Variable Rate Refunding (Series 2026B) Daily VRDNs, (TD Bank, N.A.
LOC),
2.900%, 9/1/2026 |
2,000,000
|
|
7,100,000
|
|
Monroe
County, GA Development Authority (Georgia Power Co.), Pollution Control Revenue Bonds (First Series 1997) Daily
VRDNs,
3.100%, 9/1/2026 |
7,100,000
|
|
|
|
TOTAL
|
40,335,000
|
|
|
|
Illinois—7.0%
|
|
|
4,000,000
|
|
Chicago,
IL O’Hare International Airport, General Airport Senior Lien Revenue Refunding Bonds (Series 2024D),
5.000%,
1/1/2027 |
4,026,596
|
|
3,260,000
|
|
Chicago,
IL O’Hare International Airport, (Series 2023-XF1457) Daily VRDNs, (JPMorgan Chase Bank, N.A. LIQ),
3.300%,
9/1/2026 |
3,260,000
|
|
20,000,000
|
|
Illinois
Finance Authority (Carle Foundation), BAML VRDO (Series 2025-VRS-206) Daily VRDNs, (Bank of America N.A.
LIQ)/(Bank
of America N.A. LOC), 3.100%, 9/1/2026 |
20,000,000
|
|
5,565,000
|
|
Illinois
Finance Authority (Saint Xavier University), (Series 2006) Weekly VRDNs, (Huntington National Bank LOC),
2.580%,
9/3/2026 |
5,565,000
|
|
4,540,000
|
|
Illinois
Finance Authority (University of Chicago Medical Center Obligated Group), Mizuho 3a-7 (Series 2024-MIZ9165) Daily
VRDNs,
(Mizuho Bank Ltd. GTD)/(Mizuho Bank Ltd. LIQ), 3.150%, 9/1/2026 |
4,540,000
|
|
1,410,000
|
|
Illinois
Finance Authority (University of Chicago Medical Center Obligated Group), Mizuho 3a-7 (Series 2024-MIZ9167) Daily
VRDNs,
(Mizuho Bank Ltd. GTD)/(Mizuho Bank Ltd. LIQ), 3.150%, 9/1/2026 |
1,410,000
|
|
1,000,000
|
|
Illinois
State Solid Waste Development Authority (Waste Management, Inc.), (Series 2019), 3.450%, Mandatory
Tender
11/2/2026 |
1,001,075
|
|
2,000,000
|
|
Illinois
State, (Series 2026C), 5.000%, 4/1/2027 |
2,025,678
|
|
|
|
TOTAL
|
41,828,349
|
|
|
|
Iowa—0.1%
|
|
|
780,000
|
|
PEFA,
Inc., Gas Project Revenue Refunding Bonds (Series 2026A), (Massachusetts Mutual Life Insurance Co. GTD),
5.000%,
4/1/2027 |
786,749
|
|
|
|
Kentucky—0.1%
|
|
|
400,000
|
|
Louisville
& Jefferson County, KY Metropolitan Government (Louisville Gas & Electric Co.), (2007 Series A) Weekly VRDNs,
2.350%,
9/4/2026 |
400,000
|
|
250,000
|
|
Meade
County, KY Industrial Building Revenue Authority (Nucor Corp.), (Series 2020B-1) Daily VRDNs, 3.350%, 9/1/2026 |
250,000
|
|
|
|
TOTAL
|
650,000
|
|
|
|
Louisiana—1.5%
|
|
|
7,000,000
|
|
Louisiana
Public Facilities Authority (Air Products & Chemicals, Inc.), (Series 2008A) Daily VRDNs, 3.100%, 9/1/2026 |
7,000,000
|
|
1,250,000
|
|
St.
James Parish, LA (Nucor Steel Louisiana LLC), (Series 2010A-1) Weekly VRDNs, (Nucor Corp. GTD), 2.660%, 9/2/2026 |
1,250,000
|
|
470,000
|
|
St.
James Parish, LA (Nucor Steel Louisiana LLC), (Series 2010B-1) Weekly VRDNs, (Nucor Corp. GTD), 2.450%, 9/2/2026 |
470,000
|
|
|
|
TOTAL
|
8,720,000
|
|
|
|
Maryland—0.8%
|
|
|
5,000,000
|
|
Maryland
Health and Higher Educational Facilities Authority (LifeBridge Health Obligated Group), (Series 2026-BAML5071)
Daily
VRDNs, (Bank of America N.A. LIQ)/(Bank of America N.A. LOC), 3.080%, 9/1/2026 |
5,000,000
|
|
|
|
Michigan—0.9%
|
|
|
5,250,000
|
|
Wayne
County, MI Airport Authority, Airport Revenue Refunding Bonds (Series 2025G), 5.000%, 12/1/2026 |
5,275,139
|
|
|
|
Montana—0.3%
|
|
|
1,825,000
|
|
Montana
Board of Housing (Aspen Village Housing Partners, LP), Multifamily Housing Revenue Bonds (Series 2025), (United
States
Treasury GTD), 2.900%, Mandatory Tender 12/1/2026 |
1,824,589
|
|
|
|
Multi-State—11.5%
|
|
|
22,200,000
|
|
BlackRock
MuniHoldings Fund, Inc., PUTTERs 3a-7 (VMTP 5114) Weekly VRDNs, (JPMorgan Chase Bank, N.A. LIQ),
2.680%,
9/3/2026 |
22,200,000
|
|
6,005,000
|
|
DWS
Municipal Income Trust, PUTTERs 3a-7 VMTP (Series 5055) Weekly VRDNs, (JPMorgan Chase Bank, N.A. LIQ),
2.580%,
9/3/2026 |
6,005,000
|
|
1,391,000
|
|
Federal
Home Loan Mortgage Corp. (Multifamily Housing Revenue Bond Pass-Through Certificates), Floater Certificates
(Series
M017-A) Weekly VRDNs, (Federal Home Loan Mortgage Corp. GTD)/(Federal Home Loan Mortgage Corp. LIQ),
2.930%,
9/3/2026 |
1,391,000
|
|
12,400,000
|
|
Invesco
Municipal Opportunity Trust, PUTTERs 3a-7 (VMTP 5029) Daily VRDNs, (JPMorgan Chase Bank, N.A. LIQ),
3.470%,
9/1/2026 |
12,400,000
|
Annual
Financial Statements and Additional Information
2
|
Principal
Amount
|
|
|
Value
|
|
|
1
|
SHORT-TERM
MUNICIPALS—continued
|
|
|
|
|
Multi-State—continued
|
|
|
$ 700,000
|
|
Invesco
Trust for Investment Grade Municipals, PUTTERs 3a-7 (VMTP 5028) Daily VRDNs, (JPMorgan Chase Bank, N.A. LIQ),
3.420%,
9/1/2026 |
$ 700,000
|
|
4,600,000
|
|
Invesco
Value Municipal Income Trust, PUTTERs 3a-7 (VMTP 5027) Daily VRDNs, (JPMorgan Chase Bank, N.A. LIQ),
3.420%,
9/1/2026 |
4,600,000
|
|
5,000,000
|
|
National
Finance Authority, NH (Invesco Quality Municipal Income Trust), PUTTERs 3a-7 (VMTP Series 2026-5111) Weekly
VRDNs,
(JPMorgan Chase Bank, N.A. LIQ), 2.610%, 9/3/2026 |
5,000,000
|
|
9,300,000
|
|
Nuveen
AMT-Free Quality Municipal Income Fund, (Series D) MuniFund Preferred Shares Weekly VRDPs, 2.730%, 9/1/2026 |
9,300,000
|
|
7,000,000
|
|
PIMCO
Flexible Municipal Income Fund, PUTTERs 3a-7 (Series 5046) MuniFund Term Preferred Shares Daily VRDNs,
(JPMorgan
Chase Bank, N.A. LIQ), 3.420%, 9/1/2026 |
7,000,000
|
|
|
|
TOTAL
|
68,596,000
|
|
|
|
New
Hampshire—0.3% |
|
|
1,970,000
|
|
National
Finance Authority, NH (University Hospitals Home Care, Inc.), Morgan Stanley 3a-7 (Series 2024-MS0023), (Morgan
Stanley
Bank, N.A. LIQ)/(Morgan Stanley Bank, N.A. LOC), 2.580%, Optional Tender 9/10/2026 |
1,970,000
|
|
|
|
New
Jersey—10.6% |
|
|
1,902,000
|
|
Absecon,
NJ BANs, 3.500%, 12/22/2026 |
1,902,956
|
|
1,575,000
|
|
Allamuchy
Township, NJ BANs, 4.000%, 4/1/2027 |
1,577,253
|
|
1,000,000
|
|
Alpine
Borough, NJ BANs, 4.000%, 8/11/2027 |
1,005,730
|
|
2,055,000
|
|
Barnegat
Light, NJ, (Series A) BANs, 3.750%, 4/22/2027 |
2,054,785
|
|
1,469,344
|
|
Chester
Borough, NJ BANs, 4.500%, 10/9/2026 |
1,469,829
|
|
1,389,275
|
|
Chesterfield
Township, NJ BANs, 4.000%, 7/20/2027 |
1,395,137
|
|
6,000,000
|
|
Clyde-Savannah
CSD, NY BANs, 4.000%, 6/24/2027 |
6,044,046
|
|
1,651,895
|
|
Delanco
Township, NJ BANs, 3.750%, 6/2/2027 |
1,659,453
|
|
2,248,700
|
|
Dunellen,
NJ BANs, 3.750%, 4/5/2027 |
2,255,171
|
|
1,368,650
|
|
East
Orange, NJ BANs, 3.500%, 9/23/2026 |
1,368,750
|
|
1,987,001
|
|
Eatontown,
NJ BANs, 4.000%, 3/12/2027 |
1,995,296
|
|
1,151,159
|
|
Glen
Gardner Borough, NJ BANs, 4.000%, 4/27/2027 |
1,153,170
|
|
1,738,000
|
|
Hanover
Township, NJ BANs, 4.750%, 9/25/2026 |
1,738,275
|
|
2,446,300
|
|
Hasbrouck
Heights, NJ BANs, 4.000%, 8/6/2027 |
2,459,224
|
|
1,034,452
|
|
Hillside
Township, NJ BANs, 3.500%, 3/4/2027 |
1,033,878
|
|
2,680,000
|
|
Kearny,
NJ BANs, 3.250%, 3/22/2027 |
2,677,892
|
|
2,197,674
|
|
Lavallette
Borough, NJ BANs, 4.000%, 6/16/2027 |
2,203,059
|
|
1,888,000
|
|
Little
Falls Township, NJ BANs, 3.750%, 9/18/2026 |
1,887,908
|
|
1,822,488
|
|
Lopatcong
Township, NJ BANs, 3.250%, 3/25/2027 |
1,821,239
|
|
1,325,250
|
|
Mansfield
Township, NJ BANs, 3.500%, 9/29/2026 |
1,325,165
|
|
1,506,655
|
|
Netcong,
NJ BANs, 3.750%, 7/1/2027 |
1,513,465
|
|
1,000,000
|
|
New
Milford, NJ BANs, 3.500%, 12/11/2026 |
1,000,903
|
|
892,117
|
|
Oxford
Township, NJ BANs, 4.000%, 4/20/2027 |
895,645
|
|
1,500,000
|
|
Ridgefield
Park, NJ BANs, 3.750%, 4/2/2027 |
1,502,489
|
|
3,731,000
|
|
River
Edge, NJ BANs, 3.750%, 6/16/2027 |
3,735,615
|
|
3,619,000
|
|
Riverside
Township, NJ, (Series A) BANs, 3.250%, 10/30/2026 |
3,618,933
|
|
1,607,122
|
|
Rockaway
Borough, NJ BANs, 4.000%, 7/15/2027 |
1,613,637
|
|
1,887,300
|
|
Roxbury
Township, NJ BANs, 3.750%, 2/26/2027 |
1,887,117
|
|
1,443,267
|
|
Stillwater
Township, NJ BANs, 5.000%, 9/11/2026 |
1,443,463
|
|
1,611,540
|
|
Sussex,
NJ BANs, 4.000%, 7/16/2027 |
1,617,955
|
|
2,654,920
|
|
West
Wildwood, NJ BANs, 3.250%, 2/19/2027 |
2,652,618
|
|
3,035,000
|
|
Winslow
Township, NJ BANs, 3.500%, 2/19/2027 |
3,040,013
|
|
|
|
TOTAL
|
63,550,069
|
|
|
|
New
York—12.5% |
|
|
2,400,000
|
|
Beaver
River, NY CSD, (Series B) BANs, 4.000%, 7/23/2027 |
2,417,605
|
|
1,000,000
|
|
Campbell-Savona,
NY CSD BANs, 4.000%, 7/9/2027 |
1,009,014
|
|
1,999,014
|
|
Cherry
Valley-Springfield, NY CSD BANs, 4.000%, 6/24/2027 |
2,010,276
|
|
1,000,000
|
|
Clyde-Savannah,
NY CSD BANs, 3.750%, 6/24/2027 |
1,004,167
|
Annual
Financial Statements and Additional Information
3
|
Principal
Amount
|
|
|
Value
|
|
|
1
|
SHORT-TERM
MUNICIPALS—continued
|
|
|
|
|
New
York—continued |
|
|
$ 1,500,000
|
|
Deruyter,
NY CSD BANs, 3.750%, 7/9/2027 |
$ 1,507,241
|
|
1,865,000
|
|
Ellicottville,
NY CSD BANs, 3.750%, 6/25/2027 |
1,873,546
|
|
1,200,000
|
|
Johnsburg,
NY CSD BANs, 3.750%, 6/18/2027 |
1,203,002
|
|
1,200,000
|
|
Marathon,
NY CSD TANs, 4.100%, 3/31/2027 |
1,203,963
|
|
7,800,000
|
|
New
York City Transitional Finance Authority Building Aid Revenue (New York City, NY Transitional Finance Authority), (Fiscal
2018
Subseries C-7) Daily VRDNs, (TD Bank, N.A. LIQ), 2.900%, 9/1/2026 |
7,800,000
|
|
2,600,000
|
|
New
York City, NY Municipal Water Finance Authority, (Fiscal 2015 Subseries BB-2) Daily VRDNs, (Mizuho Bank Ltd. LIQ),
3.000%,
9/1/2026 |
2,600,000
|
|
6,100,000
|
|
New
York City, NY Transitional Finance Authority, (Series 2025 H-2) Daily VRDNs, (TD Bank, N.A. LIQ), 2.900%, 9/1/2026 |
6,100,000
|
|
1,000,000
|
|
New
York City, NY, (Fiscal 2018 Series E Subseries E-5) Daily VRDNs, (TD Bank, N.A. LOC), 2.900%, 9/1/2026 |
1,000,000
|
|
7,355,000
|
|
New
York City, NY, (Subseries A-2) Daily VRDNs, (Mizuho Bank Ltd. LOC), 3.000%, 9/1/2026 |
7,355,000
|
|
9,900,000
|
|
Nuveen
New York AMT-Free Quality Municipal Income Fund, 800 (Series A) MuniFund Preferred Shares Weekly VRDPs,
2.730%,
9/1/2026 |
9,900,000
|
|
1,800,000
|
|
Oxford
Academy and CSD, NY, (Series B) BANs, 3.750%, 7/2/2027 |
1,809,205
|
|
2,680,000
|
|
Panama,
NY CSD BANs, 4.000%, 6/25/2027 |
2,697,147
|
|
1,000,000
|
|
Port
Authority of New York and New Jersey, Consolidated Bonds (Series 2018-207), 5.000%, 9/15/2026 |
1,000,821
|
|
1,000,000
|
|
Port
Authority of New York and New Jersey, Consolidated Bonds (Series 2021-226), 5.000%, 10/15/2026 |
1,002,593
|
|
4,000,000
|
|
Salmon
River, NY CSD RANs, 3.750%, 6/25/2027 |
4,013,182
|
|
1,300,000
|
|
Sauquoit
Valley, NY CSD BANs, 3.750%, 6/24/2027 |
1,304,893
|
|
4,300,000
|
|
Sherrill,
NY City School District BANs, 3.750%, 6/24/2027 |
4,318,942
|
|
2,500,000
|
|
Sherrill,
NY City School District RANs, 3.750%, 6/17/2027 |
2,506,816
|
|
1,265,954
|
|
Warwick,
NY, (Series C) BANs, 3.500%, 11/20/2026 |
1,266,027
|
|
1,645,000
|
|
Watertown,
NY Enlarged City School District BANs, 4.000%, 6/29/2027 |
1,655,813
|
|
3,000,000
|
|
Watertown,
NY Enlarged City School District RANs, 3.250%, 10/9/2026 |
3,000,449
|
|
3,000,000
|
|
Yonkers,
NY BANs, 3.500%, 12/3/2026 |
3,001,480
|
|
|
|
TOTAL
|
74,561,182
|
|
|
|
North
Carolina—2.3% |
|
|
10,000,000
|
|
Cumberland
County, NC Industrial Facilities & PCFA (Project Aero), (Series 2025), (United States Treasury COL), 3.125%,
Mandatory
Tender 12/1/2026 |
10,001,024
|
|
2,200,000
|
|
Hertford
County, NC Industrial Facilities & PCFA (Nucor Corp.), (Series 2000A) Weekly VRDNs, 2.550%, 9/2/2026 |
2,200,000
|
|
1,700,000
|
|
Hertford
County, NC Industrial Facilities & PCFA (Nucor Corp.), (Series 2000B) Weekly VRDNs, 2.550%, 9/2/2026 |
1,700,000
|
|
|
|
TOTAL
|
13,901,024
|
|
|
|
Ohio—2.5%
|
|
|
2,000,000
|
|
Broadview
Heights City, OH BANs, 4.375%, 10/22/2026 |
2,003,479
|
|
2,000,000
|
|
Elyria,
OH BANs, 3.625%, 6/24/2027 |
2,007,641
|
|
2,105,000
|
|
Euclid,
OH BANs, (Ohio State GTD), 4.375%, 8/11/2027 |
2,125,444
|
|
365,000
|
|
Hamilton
County, OH (Christ Hospital), Healthcare Facilities Improvement and Refunding Revenue Bonds (Series 2026),
5.000%,
6/1/2027 |
370,626
|
|
2,545,000
|
|
Newark,
OH BANs, 4.000%, 11/4/2026 |
2,548,847
|
|
5,690,000
|
|
Public
Finance Authority (University Hospitals Health System, Inc.), BAML VRDO (Series 2026-VRS-222) Daily VRDNs, (Bank
of
America N.A. LOC), 3.100%, 9/1/2026 |
5,690,000
|
|
|
|
TOTAL
|
14,746,037
|
|
|
|
Oklahoma—1.6%
|
|
|
5,100,000
|
|
Garfield
County, OK Industrial Authority Pollution Control (Oklahoma Gas and Electric Co.), (Series A) Weekly VRDNs,
2.300%,
9/2/2026 |
5,100,000
|
|
3,150,000
|
|
Oklahoma
HFA (Lakeshore Pointe, LLC), Collateralized Revenue Bonds (Series 2024), (United States Treasury GTD), 3.350%,
Mandatory
Tender 12/1/2026 |
3,154,811
|
|
1,525,000
|
|
Oklahoma
HFA (Villages at A New Leaf II, LP), Collateralized Revenue Bonds (Series 2025), (United States Treasury GTD),
3.400%,
Mandatory Tender 7/1/2027 |
1,530,248
|
|
|
|
TOTAL
|
9,785,059
|
|
|
|
Pennsylvania—4.0%
|
|
|
7,300,000
|
|
Allegheny
County, PA Airport Authority, (Series 2025-XM1248) Daily VRDNs, (Assured Guaranty, Inc. INS)/(JPMorgan Chase
Bank,
N.A. LIQ), 3.220%, 9/1/2026 |
7,300,000
|
Annual
Financial Statements and Additional Information
4
|
Principal
Amount
|
|
|
Value
|
|
|
1
|
SHORT-TERM
MUNICIPALS—continued
|
|
|
|
|
Pennsylvania—continued
|
|
|
$ 1,250,000
|
|
Pennsylvania
Economic Development Financing Authority (Republic Services, Inc.), (Series 2019 B-2), 3.050%, Mandatory
Tender
1/15/2027 |
$ 1,248,908
|
|
5,250,000
|
|
Pennsylvania
Economic Development Financing Authority (Waste Management, Inc.), Solid Waste Disposal Revenue Bonds
(Series
2019A), 3.250%, Mandatory Tender 8/2/2027 |
5,249,671
|
|
6,000,000
|
|
Pennsylvania
Economic Development Financing Authority (Waste Management, Inc.), Solid Waste Disposal Revenue Bonds
(Series
2021A), 3.250%, Mandatory Tender 7/1/2027 |
6,000,111
|
|
4,000,000
|
|
Pennsylvania
Economic Development Financing Authority (Waste Management, Inc.), Solid Waste Disposal Revenue Bonds
(Series
2025A), (Waste Management Holdings, Inc. GTD), 2.850%, Mandatory Tender 9/1/2026 |
4,000,000
|
|
|
|
TOTAL
|
23,798,690
|
|
|
|
Tennessee—2.9%
|
|
|
17,465,000
|
|
Chattanooga,
TN Health, Educational & Housing Facility Board (CommonSpirit Health), (Series 2004 C) Weekly VRDNs,
2.600%,
9/2/2026 |
17,465,000
|
|
|
|
Texas—12.4%
|
|
|
900,000
|
|
Austin,
TX Department of Aviation, Airport System Revenue Refunding Bonds (Series 2025), 5.000%, 11/15/2026 |
903,450
|
|
5,763,000
|
|
Bexar
County, TX Housing Finance Corp. (Agape Waterford Portfolio, Inc.), (Series 2024-XF3256) Weekly VRDNs, (Mizuho
Bank
Ltd. GTD)/(Mizuho Bank Ltd. LIQ), 2.560%, 9/3/2026 |
5,763,000
|
|
1,120,000
|
|
Las
Varas, TX Public Facility Corp. (Roers San Antonio Apartments Owner I LP), Mizuho 3a-7 (Series 2024-MIZ9158) VRENs,
(Mizuho
Bank Ltd. GTD)/(Mizuho Bank Ltd. LIQ), 2.510%, 9/3/2026 |
1,120,000
|
|
600,000
|
|
New
Hope Cultural Education Facilities Finance Corp. (Children’s Health System of Texas), (Series 2025C) Daily VRDNs,
(U.S.
Bank, N.A. LIQ), 3.200%, 9/1/2026 |
600,000
|
|
4,400,000
|
|
Port
of Corpus Christi Authority of Nueces County, TX (Flint Hills Resources LLC), (Series 2002A) Daily VRDNs,
3.100%,
9/1/2026 |
4,400,000
|
|
6,300,000
|
|
Port
of Corpus Christi Authority of Nueces County, TX (Flint Hills Resources LLC), (Series 2005) Daily VRDNs,
3.100%,
9/1/2026 |
6,300,000
|
|
5,950,000
|
|
Port
of Port Arthur Navigation District of Jefferson County, TX (Motiva Enterprises LLC), (Series 2010D) Weekly VRDNs,
2.550%,
9/2/2026 |
5,950,000
|
|
32,525,000
|
|
Port
of Port Arthur Navigation District of Jefferson County, TX (Motiva Enterprises LLC), (Series 2010E) Weekly VRDNs,
2.500%,
9/2/2026 |
32,525,000
|
|
16,000,000
|
|
San
Antonio, TX Airport System, (Series 2025-XF8180) Weekly VRDNs, (Build America Mutual Assurance INS)/(JPMorgan
Chase
Bank, N.A. LIQ), 2.420%, 9/3/2026 |
16,000,000
|
|
400,000
|
|
Texas
Municipal Gas Acquisition & Supply Corp. VI, Gas Supply Revenue Bonds (Series 2025), (Bank of America Corp. GTD),
5.000%,
1/1/2027 |
402,027
|
|
|
|
TOTAL
|
73,963,477
|
|
|
|
West
Virginia—0.8% |
|
|
4,500,000
|
|
West
Virginia EDA Solid Waste Disposal Facilities (Nucor Steel West Virginia LLC), (Series 2025A-1) Weekly VRDNs, (Nucor
Corp.
GTD), 2.690%, 9/2/2026 |
4,500,000
|
|
|
|
TOTAL
SHORT-TERM MUNICIPALS
(IDENTIFIED COST $558,842,753) |
558,779,347
|
|
|
|
MUNICIPAL
BONDS—6.4% |
|
|
|
|
Alabama—1.1%
|
|
|
1,750,000
|
|
Black
Belt Energy Gas District, AL, Gas Project Revenue Bonds (Series 2026A), (PNC Bank, N.A. GTD), 5.000%, 12/1/2027 |
1,780,765
|
|
1,000,000
|
|
Black
Belt Energy Gas District, AL, Gas Project Revenue Bonds (Series 2026G), (Canadian Imperial Bank of Commerce GTD),
5.000%,
6/1/2028 |
1,024,990
|
|
1,500,000
|
|
Black
Belt Energy Gas District, AL, Gas Project Revenue Bonds (Series 2026J), (BP PLC GTD), 5.000%, 11/1/2028 |
1,545,177
|
|
750,000
|
|
Black
Belt Energy Gas District, AL, Gas Project Revenue Refunding Bonds (Series 2026 H-2-1), (Goldman Sachs Group, Inc.
GTD),
5.000%, 12/1/2027 |
762,724
|
|
350,000
|
|
Energy
Southeast, AL, Energy Supply Revenue Bonds (Series 2026A-1), (Morgan Stanley GTD), 5.000%, 10/1/2027 |
355,749
|
|
400,000
|
|
Energy
Southeast, AL, Energy Supply Revenue Bonds (Series 2026A-1), (Morgan Stanley GTD), 5.000%, 4/1/2028 |
409,112
|
|
500,000
|
|
Energy
Southeast, AL, Energy Supply Revenue Bonds (Series 2026A-1), (Morgan Stanley GTD), 5.000%, 10/1/2028 |
514,513
|
|
|
|
TOTAL
|
6,393,030
|
|
|
|
California—0.2%
|
|
|
1,000,000
|
|
California
HFA (CRP Pinnacle Pass, LP), Multifamily Housing Revenue Bonds (Series 2026P-1), (United States Treasury GTD),
2.950%,
Mandatory Tender 3/1/2028 |
999,969
|
|
|
|
Florida—0.7%
|
|
|
2,100,000
|
|
Florida
Housing Finance Corp. (Citrus Glen Preservation, Ltd.), Multifamily Mortgage Revenue Bonds (Series 2025AA-2),
(United
States Treasury GTD), 3.100%, Mandatory Tender 1/1/2028 |
2,100,715
|
Annual
Financial Statements and Additional Information
5
|
Principal
Amount
|
|
|
Value
|
|
|
|
MUNICIPAL
BONDS—continued |
|
|
|
|
Florida—continued
|
|
|
$ 2,250,000
|
|
Polk
County, FL HFA (Cypress Oaks Preservation, Ltd.), Multifamily Housing Revenue Bonds (Series 2025), (United States
Treasury
GTD), 3.150%, Mandatory Tender 12/1/2027 |
$ 2,251,239
|
|
|
|
TOTAL
|
4,351,954
|
|
|
|
Illinois—0.4%
|
|
|
1,385,000
|
|
Illinois
State, UT GO Bonds (Series 2020B), 5.000%, 10/1/2027 |
1,417,429
|
|
1,000,000
|
|
Illinois
State, UT GO Refunding Bonds (Series 2022B), 5.000%, 3/1/2028 |
1,031,645
|
|
|
|
TOTAL
|
2,449,074
|
|
|
|
Michigan—1.6%
|
|
|
1,500,000
|
|
Michigan
State Housing Development Authority (Flats Phase II Ltd. Dividend Housing Association, LLC), Multifamily Housing
Revenue
Bonds (Series 2026), (United States Treasury GTD), 3.000%, Mandatory Tender 11/1/2028 |
1,496,419
|
|
3,000,000
|
|
Wayne
County, MI Airport Authority, Revenue Bonds (Series 2017E), 4.000%, 12/1/2027 |
3,035,237
|
|
4,700,000
|
|
Wayne
County, MI Airport Authority, Airport Revenue Refunding Bonds (Series 2025G), 5.000%, 12/1/2027 |
4,812,386
|
|
|
|
TOTAL
|
9,344,042
|
|
|
|
Minnesota—0.2%
|
|
|
1,500,000
|
|
Minnesota
Rural Water Finance Authority, Public Project Construction Notes (Series 2026), 2.875%, 1/1/2028 |
1,498,430
|
|
|
|
New
York—0.3% |
|
|
1,811,643
|
|
Alden
Village, NY BANs, 4.000%, 9/2/2027 |
1,826,317
|
|
|
|
North
Carolina—0.3% |
|
|
1,500,000
|
|
Chapel
Hill, NC (Elliott Chase Housing Partners, LP), Multifamily Housing Revenue Bonds (Series 2026), (United States
Treasury
GTD), 3.100%, Mandatory Tender 10/1/2027 |
1,500,477
|
|
|
|
Pennsylvania—0.3%
|
|
|
1,698,000
|
|
Pennsylvania
HFA (B’nai B’rith House of Reading, LLC), Multifamily Housing Development Bonds (Series 2025B), (United
States
Treasury GTD), 3.150%, Mandatory Tender 9/1/2027 |
1,699,596
|
|
|
|
Tennessee—0.9%
|
|
|
3,175,000
|
|
McMinnville-Warren
County, TN IDB (Beersheba III, LP), Multifamily Housing Bonds (Series 2025), (United States Treasury
GTD),
2.750%, Mandatory Tender 9/1/2027 |
3,168,977
|
|
2,150,000
|
|
Memphis,
TN Health, Educational and Housing Facility Board (APP Surrey Partners, LLLP), Multifamily Housing Bonds
(Series
2026), (United States Treasury GTD), 2.750%, Mandatory Tender 4/1/2028 |
2,138,106
|
|
|
|
TOTAL
|
5,307,083
|
|
|
|
Texas—0.1%
|
|
|
380,000
|
|
Austin,
TX Department of Aviation, Airport System Revenue Refunding Bonds (Series 2025), 5.000%, 11/15/2027 |
388,594
|
|
400,000
|
|
Texas
Municipal Gas Acquisition & Supply Corp. VI, Gas Supply Revenue Bonds (Series 2026A), (Bank of America Corp.
GTD),
5.000%, 3/1/2028 |
408,144
|
|
|
|
TOTAL
|
796,738
|
|
|
|
West
Virginia—0.3% |
|
|
1,950,000
|
|
West
Virginia Housing Development Fund (Rivermont Senior Housing LP), Multifamily Housing Revenue Bonds (Series 2025),
(United
States Treasury GTD), 3.200%, Mandatory Tender 2/1/2028 |
1,951,634
|
|
|
|
TOTAL
MUNICIPAL BONDS
(IDENTIFIED
COST $38,139,639) |
38,118,344
|
|
|
|
TOTAL
INVESTMENT IN SECURITIES—99.8%
(IDENTIFIED
COST $596,982,392)2
|
596,897,691
|
|
|
|
OTHER
ASSETS AND LIABILITIES - NET—0.2%3
|
1,322,728
|
|
|
|
NET
ASSETS—100% |
$598,220,419
|
Securities that are subject to the federal
alternative minimum tax (AMT) represent 33.8% of the portfolio as calculated based upon total market
value (unaudited).
|
1
|
Current
rate and current maturity or next reset date shown for floating rate notes and variable rate notes/demand instruments. Certain variable
rate securities are
not
based on a published reference rate and spread but are determined by the issuer or agent and are based on current market conditions. These
securities do
not
indicate a reference rate and spread in their description above. |
|
2
|
Also
represents cost of investments for federal tax purposes. |
|
3
|
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 August 31, 2026.
Annual
Financial Statements and Additional Information
6
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 August 31, 2026, all investments of
the Fund utilized Level 2 inputs in valuing the Fund’s assets carried at fair value.
|
The
following acronym(s) are used throughout this portfolio: |
| |
|
AMT
|
—Alternative
Minimum Tax | |
|
BANs
|
—Bond
Anticipation Notes | |
|
COL
|
—Collateralized
| |
|
CSD
|
—Central
School District | |
|
EDA
|
—Economic
Development Authority | |
|
GO
|
—General
Obligation | |
|
GTD
|
—Guaranteed
| |
|
HFA
|
—Housing
Finance Authority | |
|
IDA
|
—Industrial
Development Authority | |
|
IDB
|
—Industrial
Development Bond | |
|
IDRB
|
—Industrial
Development Revenue Bond | |
|
INS
|
—Insured
| |
|
LIQ
|
—Liquidity
Agreement | |
|
LOC
|
—Letter
of Credit | |
|
PCFA
|
—Pollution
Control Financing Authority | |
|
PUTTERs
|
—Puttable
Tax-Exempt Receipts | |
|
RANs
|
—Revenue
Anticipation Notes | |
|
TANs
|
—Tax
Anticipation Notes | |
|
UT
|
—Unlimited
Tax | |
|
VMTP
|
—Variable
Municipal Term Preferred | |
|
VRDNs
|
—Variable
Rate Demand Notes | |
|
VRDPs
|
—Variable
Rate Demand Preferreds | |
|
VRENs
|
—Variable
Rate Extendible Notes | |
See Notes which are an integral part of
the Financial Statements
Annual
Financial Statements and Additional Information
7
Financial
Highlights–Class
A Shares
(For a Share Outstanding Throughout Each
Period)
|
|
Year
Ended
8/31/2026
|
Period
Ended
8/31/20251
|
|
Net Asset
Value, Beginning of Period |
$10.01
|
$10.00
|
|
Income
From Investment Operations: |
|
|
|
Net
investment income (loss)2
|
0.26
|
0.23
|
|
Net
realized and unrealized gain (loss) |
(0.01)
|
0.03
|
|
Total
From Investment Operations |
0.25
|
0.26
|
|
Less Distributions:
|
|
|
|
Distributions
from net investment income |
(0.26)
|
(0.25)
|
|
Distributions
from net realized gain |
—
|
(0.00)3
|
|
Total
Distributions |
(0.26)
|
(0.25)
|
|
Net
Asset Value, End of Period |
$10.00
|
$10.01
|
|
Total
Return4
|
2.51%
|
2.58%
|
|
Ratios
to Average Net Assets: |
|
|
|
Net
expenses5
|
0.40%
|
0.40%6
|
|
Net
investment income |
2.58%
|
2.79%6
|
|
Expense
waiver/reimbursement7
|
0.15%
|
0.18%6
|
|
Supplemental
Data: |
|
|
|
Net
assets, end of period (000 omitted) |
$153,360
|
$113,089
|
|
Portfolio
turnover8
|
69%
|
60%9
|
|
1
|
Reflects
operations for the period from October 29, 2024 (commencement of operations) to August 31, 2025. |
|
2
|
Per
share numbers have been calculated using the average shares method. |
|
3
|
Represents
less than $0.01. |
|
4
|
Based
on net asset value. Total returns for periods of less than one year are not annualized. |
|
5
|
Amount
does not reflect net expenses incurred by investment companies in which the Fund may invest. |
|
6
|
Computed
on an annualized basis. |
|
7
|
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. |
|
8
|
Securities
that mature are considered sales for purposes of this calculation. |
|
9
|
Portfolio
turnover is calculated at the Fund level. Percentage indicated was calculated for the year ended August 31, 2025. |
See Notes which are an integral part of
the Financial Statements
Annual
Financial Statements and Additional Information
8
Financial
Highlights–Institutional
Shares
(For a Share Outstanding Throughout Each
Period)
|
|
Year Ended August 31,
| ||||
|
|
2026
|
2025
|
2024
|
2023
|
2022
|
|
Net Asset
Value, Beginning of Period |
$10.01
|
$10.01
|
$10.00
|
$10.00
|
$10.00
|
|
Income
From Investment Operations: |
|
|
|
|
|
|
Net
investment income (loss)1
|
0.27
|
0.31
|
0.37
|
0.31
|
0.09
|
|
Net
realized and unrealized gain (loss) |
(0.01)
|
0.01
|
0.01
|
0.002
|
(0.03)
|
|
Total
From Investment Operations |
0.26
|
0.32
|
0.38
|
0.31
|
0.06
|
|
Less Distributions:
|
|
|
|
|
|
|
Distributions
from net investment income |
(0.27)
|
(0.32)
|
(0.37)
|
(0.31)
|
(0.06)
|
|
Distributions
from net realized gain |
—
|
(0.00)2
|
—
|
—
|
—
|
|
Total
Distributions |
(0.27)
|
(0.32)
|
(0.37)
|
(0.31)
|
(0.06)
|
|
Net
Asset Value, End of Period |
$10.00
|
$10.01
|
$10.01
|
$10.00
|
$10.00
|
|
Total
Return3
|
2.67%
|
3.20%
|
3.89%
|
3.18%
|
0.60%
|
|
Ratios
to Average Net Assets: |
|
|
|
|
|
|
Net
expenses4
|
0.25%
|
0.25%
|
0.25%
|
0.15%
|
0.05%
|
|
Net
investment income |
2.72%
|
3.12%
|
3.71%
|
3.07%
|
0.91%
|
|
Expense
waiver/reimbursement5
|
0.15%
|
0.18%
|
0.20%
|
0.30%
|
0.56%
|
|
Supplemental
Data: |
|
|
|
|
|
|
Net
assets, end of period (000 omitted) |
$444,861
|
$355,367
|
$239,399
|
$175,326
|
$130,017
|
|
Portfolio
turnover6
|
69%
|
60%
|
39%
|
72%
|
32%
|
|
1
|
Per
share numbers have been calculated using the average shares method. |
|
2
|
Represents
less than $0.01. |
|
3
|
Based
on net asset value. |
|
4
|
Amount
does not reflect net expenses incurred by investment companies in which the Fund may invest. |
|
5
|
This
expense decrease is reflected in both the net expense and the net investment income ratios shown above. Amount does not reflect expense
waiver/
reimbursement
recorded by investment companies in which the Fund may invest. |
|
6
|
Securities
that mature are considered sales for purposes of this calculation. |
See Notes which are an integral part of
the Financial Statements
Annual
Financial Statements and Additional Information
9
Statement
of Assets and Liabilities
August 31, 2026
|
Assets:
|
|
|
Investment
in securities, at value (identified
cost $596,982,392) |
$596,897,691
|
|
Cash
|
9,605
|
|
Income
receivable |
3,318,367
|
|
Receivable
for shares sold |
404,353
|
|
Total
Assets |
600,630,016
|
|
Liabilities:
|
|
|
Payable
for investments purchased |
1,826,517
|
|
Payable
for shares redeemed |
419,543
|
|
Payable
for investment adviser fee (Note 5)
|
1,722
|
|
Payable
for administrative fee (Note 5)
|
1,263
|
|
Payable
for auditing fees |
32,945
|
|
Payable
for portfolio accounting fees |
76,722
|
|
Payable
for distribution services fee (Note 5)
|
19,359
|
|
Accrued
expenses (Note 5)
|
31,526
|
|
Total
Liabilities |
2,409,597
|
|
Net
assets for 59,824,234 shares outstanding |
$598,220,419
|
|
Net Assets
Consist of: |
|
|
Paid-in
capital |
$598,211,860
|
|
Total
distributable earnings (loss) |
8,559
|
|
Net
Assets |
$598,220,419
|
|
Net Asset
Value, Offering Price and Redemption Proceeds Per Share: |
|
|
Class A
Shares: |
|
|
$153,359,765
÷ 15,335,994 shares outstanding, no par value, unlimited shares authorized |
$10.00
|
|
Institutional
Shares: |
|
|
$444,860,654
÷ 44,488,240 shares outstanding, no par value, unlimited shares authorized |
$10.00
|
See Notes which are an integral part of
the Financial Statements
Annual
Financial Statements and Additional Information
10
Statement
of Operations
Year Ended August
31, 2026
|
Investment
Income: |
|
|
Interest
|
$13,884,812
|
|
Expenses:
|
|
|
Investment
adviser fee (Note 5)
|
1,164,967
|
|
Administrative
fee (Note 5)
|
362,450
|
|
Custodian
fees |
16,862
|
|
Transfer
agent fees |
30,118
|
|
Directors’/Trustees’
fees (Note 5)
|
3,000
|
|
Auditing
fees |
34,212
|
|
Legal
fees |
10,983
|
|
Portfolio
accounting fees |
121,753
|
|
Distribution
services fee (Note 5)
|
170,156
|
|
Share
registration costs |
94,403
|
|
Printing
and postage |
23,293
|
|
Miscellaneous
(Note 5)
|
23,078
|
|
TOTAL
EXPENSES |
2,055,275
|
|
Waiver
of investment adviser fee (Note 5) |
(697,319)
|
|
Net
expenses |
1,357,956
|
|
Net
investment income |
12,526,856
|
|
Realized
and Unrealized Gain (Loss) on Investments: |
|
|
Net
realized gain on investments |
19,477
|
|
Net
change in unrealized appreciation of investments |
(435,324)
|
|
Net
realized and unrealized gain (loss) on investments |
(415,847)
|
|
Change
in net assets resulting from operations |
$12,111,009
|
See Notes which are an integral part of
the Financial Statements
Annual
Financial Statements and Additional Information
11
Statement
of Changes in Net Assets
|
Year
Ended August 31 |
2026
|
2025
|
|
Increase
(Decrease) in Net Assets |
|
|
|
Operations:
|
|
|
|
Net
investment income |
$12,526,856
|
$10,217,772
|
|
Net
realized gain (loss) |
19,477
|
—
|
|
Net
change in unrealized appreciation/depreciation |
(435,324)
|
201,441
|
|
CHANGE
IN NET ASSETS RESULTING FROM OPERATIONS |
12,111,009
|
10,419,213
|
|
Distributions
to Shareholders: |
|
|
|
Class
A Shares |
(2,923,530)
|
(1,294,645)1
|
|
Institutional
Shares |
(9,575,245)
|
(8,924,873)
|
|
CHANGE
IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS |
(12,498,775)
|
(10,219,518)
|
|
Share Transactions:
|
|
|
|
Proceeds
from sale of shares |
586,123,732
|
404,909,186
|
|
Net
asset value of shares issued to shareholders in payment of distributions declared |
12,429,789
|
10,149,997
|
|
Cost
of shares redeemed |
(468,400,582)
|
(186,202,492)
|
|
CHANGE
IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS |
130,152,939
|
228,856,691
|
|
Change
in net assets |
129,765,173
|
229,056,386
|
|
Net Assets:
|
|
|
|
Beginning
of period |
468,455,246
|
239,398,860
|
|
End
of period |
$598,220,419
|
$468,455,246
|
|
1
|
Reflects
operations for the period from October 29, 2024 (commencement of operations) to August 31, 2025. |
See Notes which are an integral part of
the Financial Statements
Annual
Financial Statements and Additional Information
12
Notes to
Financial Statements
August 31, 2026
1. ORGANIZATION
Federated Hermes Adviser Series (the “Trust”)
was established as a Delaware statutory trust on July 12, 2017, and is registered under the
Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Trust consists of
9 portfolios. The financial statements included herein are only
those of Federated Hermes Conservative Municipal Microshort 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: Class A Shares and Institutional Shares. The investment objective of the Fund is to provide
current income consistent with preservation of capital with an emphasis on maintaining liquidity on a tax-exempt basis.
The Fund’s Class A Shares commenced
operations on October 29, 2024.
2. SIGNIFICANT
ACCOUNTING POLICIES
The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of its financial statements.
These policies are in conformity with U.S. generally accepted accounting principles (GAAP).
Investment Valuation
In
calculating its net asset value (NAV), the Fund generally values investments as follows:
■
Fixed-income
securities are fair valued using price evaluations provided by a pricing service approved by Federated Investment Management
Company (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 Procedures
Pursuant
to Rule 2a-5 under the Act, the Fund’s Board of Trustees (the “Trustees”) has designated the Adviser as the Fund’s
valuation designee to perform any fair value determinations for
securities and other assets held by the Fund. The Adviser is subject to the Trustees’
oversight and certain reporting and other requirements intended to provide the Trustees the information needed to oversee the
Adviser’s fair value determinations.
The Adviser, acting through
its Valuation Committee, is responsible for determining the fair value of investments for which market quotations
are not readily available. The Valuation Committee is comprised of officers of the Adviser and certain of the Adviser’s affiliated
companies and determines fair value and oversees the calculation of the NAV. The Valuation Committee is also authorized to use
pricing services to provide fair value evaluations of the current value of certain investments for purposes of calculating the NAV. The
Valuation Committee employs various methods for reviewing third-party
pricing-service evaluations including periodic reviews of third-party
pricing services’ policies, procedures and valuation methods (including key inputs, methods, models and assumptions), transactional
back-testing, comparisons of evaluations of different pricing services, and review of price challenges by the Adviser based on
recent market activity. In the event that market quotations and price evaluations are not available for an investment, the Valuation Committee
determines the fair value of the investment in accordance with procedures adopted by the Adviser. The Trustees periodically review
the fair valuations made by the Valuation Committee. The Trustees have also approved the Adviser’s fair valuation and significant
events procedures as part of the Fund’s compliance program
and will review any changes made to the procedures.
Factors considered by
pricing services in evaluating an investment include the yields or prices of investments of comparable quality, coupon,
maturity, call rights and other potential prepayments, terms and type, reported transactions, indications as to values from dealers
and general market conditions. Some pricing services provide a single price evaluation reflecting the bid-side of the market for an
investment (a “bid” evaluation). Other pricing services offer both bid evaluations and price evaluations indicative of a price
between the prices bid and ask for the investment (a “mid”
evaluation). The Fund normally uses bid evaluations for any U.S. Treasury and Agency securities,
mortgage-backed securities and municipal securities. The Fund normally uses mid evaluations for any other types of fixed-income
securities and any OTC derivative contracts. In the event that market quotations and price evaluations are not available for an investment,
the fair value of the investment is determined in accordance with procedures adopted by the Adviser.
Annual
Financial Statements and Additional Information
13
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,
if any, are declared daily 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. The
detail of the total fund expense waiver of $697,319 is disclosed in Note 5. Dividends
are declared separately for each class. No class has preferential dividend rights; differences in per share dividend rates are generally
due to differences in separate class expenses.
Other Service Fees
The
Fund may pay other service fees up to 0.25% of the average daily net assets of the Fund’s Class A Shares to unaffiliated financial
intermediaries or to Federated Shareholder Services Company (FSSC)
for providing services to shareholders and maintaining shareholder accounts.
For the year ended August 31, 2026, the Fund’s Class A Shares did not incur other service fees. The Fund’s Class A Shares
will not incur and pay such fees until such time as approved by
the Trustees.
Federal Taxes
It
is the Fund’s policy to comply with the Subchapter M provision of the Internal Revenue Code of 1986 and to distribute to shareholders
each year substantially all of its income. Accordingly, no provision
for federal income tax is necessary. As of and during the year ended August
31, 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 August 31, 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.
Restricted Securities
The
Fund may purchase securities which are considered restricted. Restricted securities are securities that either: (a) cannot be offered
for public sale without first being registered, or being able
to take advantage of an exemption from registration, under the Securities Act of
1933; or (b) are subject to contractual restrictions on public sales. In some cases, when a security cannot be offered for public sale
without first being registered, the issuer of the restricted security
has agreed to register such securities for resale, at the issuer’s expense, either
upon demand by the Fund or in connection with another registered offering of the securities. Many such restricted securities may be
resold in the secondary market in transactions exempt from registration. Restricted securities may be determined to be liquid under criteria
established by the Trustees. The Fund will not incur any registration costs upon such resales. The Fund’s restricted securities,
like other securities, are priced in accordance with procedures
established by and under the general supervision of the Adviser.
Other
The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the
amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ materially from
those estimated. The Fund applies investment company accounting
and reporting guidance.
3. SHARES
OF BENEFICIAL INTEREST
The following table summarizes share activity:
|
|
Year
Ended
8/31/2026
|
Year
Ended
8/31/20251
| ||
|
Class
A Shares: |
Shares
|
Amount
|
Shares
|
Amount
|
|
Shares
sold |
18,474,517
|
$184,819,296
|
14,863,963
|
$148,635,838
|
|
Shares
issued to shareholders in payment of distributions declared |
292,126
|
2,921,544
|
129,395
|
1,294,203
|
|
Shares
redeemed |
(14,731,996)
|
(147,354,877)
|
(3,692,011)
|
(36,929,640)
|
|
NET
CHANGE RESULTING FROM CLASS A SHARE TRANSACTIONS |
4,034,647
|
$40,385,963
|
11,301,347
|
$113,000,401
|
Annual
Financial Statements and Additional Information
14
|
|
Year
Ended
8/31/2026
|
Year
Ended
8/31/2025
| ||
|
Institutional
Shares: |
Shares
|
Amount
|
Shares
|
Amount
|
|
Shares
sold |
40,124,603
|
$401,304,436
|
25,626,509
|
$256,273,348
|
|
Shares
issued to shareholders in payment of distributions declared |
950,689
|
9,508,245
|
885,214
|
8,855,794
|
|
Shares
redeemed |
(32,096,212)
|
(321,045,705)
|
(14,922,999)
|
(149,272,852)
|
|
NET
CHANGE RESULTING FROM INSTITUTIONAL SHARE TRANSACTIONS |
8,979,080
|
$89,766,976
|
11,588,724
|
$115,856,290
|
|
NET
CHANGE RESULTING FROM TOTAL FUND SHARE TRANSACTIONS |
13,013,727
|
$130,152,939
|
22,890,071
|
$228,856,691
|
|
1
|
Reflects
operations for the period from October 29, 2024 (commencement of operations) to August 31, 2025. |
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, 2026 and 2025,
was as follows:
|
|
2026
|
2025
|
|
Tax-exempt
income |
$12,498,775
|
$10,217,326
|
|
Ordinary
income1
|
$—
|
$2,192
|
|
1
|
For
tax purposes, short-term capital gain distributions are considered ordinary income distributions. |
As of August 31, 2026, the components of
distributable earnings on a tax-basis were as follows:
|
Undistributed
tax-exempt income |
$73,783
|
|
Undistributed
ordinary income1
|
$10,726
|
|
Net
unrealized depreciation |
$(84,701)
|
|
Undistributed
long-term capital gains |
$8,751
|
|
TOTAL
|
$8,559
|
|
1
|
For
tax purposes, short-term capital gains are considered ordinary income in determining distributable earnings. |
At August 31, 2026, the cost of investments
for federal tax purposes was $596,982,392. The net unrealized depreciation of investments for
federal tax purposes was $84,701. This consists of unrealized appreciation from investments for those securities having an excess of value
over cost of $54,921 and unrealized depreciation from investments for those securities having an excess of cost over value of
$139,622.
5. INVESTMENT
ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
The
advisory agreement between the Fund and the Adviser provides for an annual fee equal to 0.25% of the Fund’s average daily net assets.
Subject to the terms described in the Expense Limitation note, the Adviser may voluntarily choose to waive any portion of its fee and/or
reimburse certain operating expenses of the Fund for competitive reasons such as to maintain the Fund’s expense ratio, or as and
when appropriate, to maintain positive or zero net yields. For
the year ended August 31, 2026, the Adviser voluntarily waived $697,319 of
its fee.
Administrative Fee
Federated
Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and
services. For purposes of determining the appropriate rate breakpoint, “Investment Complex” is defined as all of the Federated
Hermes Funds subject to a fee under the Administrative Services
Agreement. The fee paid to FAS is based on the average daily net assets
of the Investment Complex as specified below:
|
Administrative
Fee |
Average
Daily Net Assets
of
the Investment Complex |
|
0.100%
|
on
assets up to $50 billion |
|
0.075%
|
on
assets over $50 billion |
Subject to the terms described in the Expense
Limitation note, FAS may voluntarily choose to waive any portion of its fee. For the year ended
August 31, 2026, the annualized fee paid to FAS was 0.078% of average daily net assets of the Fund.
In addition, FAS may charge certain out-of-pocket
expenses to the Fund.
Annual
Financial Statements and Additional Information
15
Distribution Services Fee
The
Fund has adopted a Distribution Plan (the “Plan”) pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund
will compensate Federated Securities Corp. (FSC), the principal
distributor, from the daily net assets of the Class A Shares to finance activities
intended to result in the sale of these shares. The Plan provides that the Fund may incur distribution expenses of up to 0.25% of average
daily net assets annually, to compensate FSC. The Fund’s Class A Shares will not incur and pay a fee in excess of 0.15% until such
time as approved by the Trustees.
Subject to the terms
described in the Expense Limitation note, FSC may voluntarily choose to waive any portion of its fee. For the year
ended August 31, 2026, distribution services fees for the Fund were as follows:
|
|
Distribution
Services
Fees
Incurred |
|
Class
A Shares |
$170,156
|
When FSC receives fees, it may pay some
or all of them to financial intermediaries whose customers purchase shares. For the year ended August
31, 2026, FSC retained $108 of fees paid by the Fund.
Expense Limitation
The
Adviser and certain of its affiliates (which may include FAS and FSC) 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 Class A Shares and Institutional Shares
(after the voluntary waivers and/or reimbursements) will not exceed
0.40% and 0.25%, respectively, (the “Fee Limit”), up to but not including
the later of (the “Termination Date”): (a) November 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.
Interfund Transactions
During
the year ended August 31, 2026, the Fund engaged in purchase and sale transactions with funds that have a common investment adviser
(or affiliated investment advisers), common Directors/Trustees and/or common Officers. These purchase and sale transactions complied
with Rule 17a-7 under the Act and amounted to $317,595,000 and $326,625,000, respectively. Net realized gain/loss recognized
on these transactions was $0.
Directors’/Trustees’ and Miscellaneous Fees
Certain
Officers and Trustees of the Fund are Officers and Directors or Trustees of certain of the above companies. To efficiently facilitate
payment, Independent Directors’/Trustees’ fees and
certain expenses related to conducting meetings of the Directors/Trustees and other
miscellaneous expenses are paid by an affiliate of the Adviser which in due course are reimbursed by the Fund. These expenses related
to conducting meetings of the Directors/Trustees and other miscellaneous expenses may be included in Accrued and Miscellaneous
Expenses on the Statement of Assets and Liabilities and Statement of Operations, respectively.
6. INVESTMENT
TRANSACTIONS
Purchases and sales of investments, excluding
long-term U.S. government securities and short-term obligations, for the year ended August
31, 2026, were as follows:
|
Purchases
|
$86,833,642
|
|
Sales
|
$100,858,202
|
7. LINE
OF CREDIT
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 August 31, 2026, the Fund had no
outstanding loans. During the year ended August 31, 2026, the
Fund did not utilize the LOC.
8. INTERFUND
LENDING
Pursuant to an Exemptive Order issued by
the Securities and Exchange Commission, the Fund, along with other funds advised by subsidiaries
of Federated Hermes, Inc., may participate in an interfund lending program. This program provides an alternative credit facility
allowing the Fund to borrow from other participating affiliated funds. As of August 31, 2026, there were no outstanding loans. During
the year ended August 31, 2026, the program was not utilized.
Annual
Financial Statements and Additional Information
16
9. OPERATING
SEGMENTS
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.
10. INDEMNIFICATIONS
Under the Fund’s organizational documents,
its Officers and Directors/Trustees are indemnified against certain liabilities arising out of the
performance of their duties to the Fund (other than liabilities arising out of their willful misfeasance, bad faith, gross negligence
or reckless disregard of their duties to the Fund). In addition,
in the normal course of business, the Fund provides certain indemnifications under
arrangements with third parties. Typically, obligations to indemnify a third party arise in the context of an arrangement entered into
by the Fund under which the Fund agrees to indemnify such third party for certain liabilities arising out of actions taken pursuant to
the arrangement, provided the third party’s actions are
not deemed to have breached an agreed-upon standard of care (such as willful misfeasance,
bad faith, gross negligence or reckless disregard of their duties under the contract). The Fund’s maximum exposure under these
arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet arisen. The Fund
does not anticipate any material claims or losses pursuant to these arrangements at this time, and accordingly expects the risk of loss
to be remote.
11. FEDERAL
TAX INFORMATION (UNAUDITED)
For the year ended August 31, 2026, 100%
of the distributions from net investment income is exempt from federal income tax, other than
the federal AMT.
Annual
Financial Statements and Additional Information
17
Report of
Independent Registered Public Accounting Firm
TO THE SHAREHOLDERS AND THE
BOARD OF TRUSTEES OF FEDERATED HERMES CONSERVATIVE MUNICIPAL MICROSHORT
FUND:
Opinion on the Financial Statements
We have audited the accompanying
statement of assets and liabilities of Federated Hermes Conservative Municipal Microshort
Fund (the “Fund”) (one of the portfolios constituting Federated Hermes Adviser Series (the “Trust”)), including
the portfolio of investments, as of August 31, 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 August 31, 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.
Basis for Opinion
These financial statements are
the responsibility of the Trust’s management. Our responsibility is to express an opinion on the
Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audits in accordance
with 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 August 31, 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
October 26, 2026
Annual
Financial Statements and Additional Information
18
Evaluation
and Approval of Advisory Contract–May
2026
Federated Hermes Conservative
Municipal Microshort 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 Investment Management Company (the “Adviser”) (the “Contract”) for an additional one-year
term. The Board’s determination to approve the continuation of the Contract reflects the exercise of its business judgment
after considering such information deemed necessary to evaluate the terms of the Contract and to approve the continuation
of the existing arrangement. The information, factors and conclusions that formed the basis for the Board’s approval
are summarized below.
Information Received
and Review Process
At the request
of the Independent Trustees, the Fund’s Chief Compliance Officer (the “CCO”) furnished to the Board in advance
of its May Meetings an independent written report regarding data related to the Fund’s management fee (the
“CCO Management Fee Report”). The Board considered the CCO Management Fee Report, along with other information,
in evaluating the reasonableness of the Fund’s management fee and in determining to approve the continuation
of the Contract.
In addition
to the CCO Management Fee Report, the Board considered information specifically prepared in connection with
the approval of the continuation of the Contract that was presented at the May Meetings. In this regard, in the months preceding
the May Meetings, the Board requested and reviewed written responses and supporting materials prepared by the
Adviser and its affiliates (collectively, “Federated Hermes”) in response to requests posed to Federated Hermes by independent
legal counsel on behalf of the Independent Trustees encompassing a wide variety of topics, including those summarized
below. The Board also considered such additional matters as the Independent Trustees deemed reasonably necessary
to evaluate the Contract, which included detailed information about the Fund and Federated Hermes furnished to the
Board at its meetings throughout the year.
The Board’s
consideration of the Contract included review of materials and information covering the following matters, among
others: (1) a copy of the Contract; (2) the nature, quality and extent of the advisory and other services provided to the
Fund by Federated Hermes; (3) Federated Hermes’ business and operations; (4) the Adviser’s investment philosophy, personnel
and processes; (5) the Fund’s investment objective and strategies; (6) the Fund’s short-term and long-term performance
- in absolute terms (both on a gross basis and net of expenses) and relative to an appropriate group of peer funds
and its benchmark; (7) the Fund’s fees and expenses, including the advisory fee and the overall expense structure of the
Fund - in absolute terms and relative to an appropriate group of peer funds, with due regard for contractual or voluntary
expense limitations (if any); (8) the financial condition of Federated Hermes; (9) the Adviser’s profitability with respect
to managing the Fund; (10) distribution and sales activity for the Fund; and (11) the use and allocation of brokerage
commissions derived from trading the Fund’s portfolio securities (if any).
The Board
also considered judicial decisions concerning allegedly excessive investment advisory fees charged to other registered
funds in evaluating the Contract. Using these judicial decisions as a guide, the Board considered several factors it
deemed relevant to an adviser’s fiduciary duty with respect to its receipt of compensation from a fund, including: (1) the nature
and quality of the services provided by the adviser to the fund and its shareholders, including the performance of the
fund, its benchmark and comparable funds; (2) the adviser’s cost of providing the services and the profitability to the adviser
of providing advisory services to the fund; (3) the extent to which the adviser may realize “economies of scale” as the
fund grows larger and, if such economies of scale exist, whether they have been appropriately shared with the fund and its
shareholders or the family of funds; (4) any “fall-out” benefits that accrue to the adviser because of its relationship with
the fund, including research services received from
brokers that execute fund trades and any fees paid to affiliates of the adviser
for services rendered to the fund; (5) comparative fees and expenses, including a comparison of management fees paid
to the adviser with those paid by similar funds managed by the same adviser or other advisers as well as management fees
charged to institutional and other advisory clients of the same adviser for what might be viewed as like services; and (6)
the extent of care, conscientiousness and independence with which the fund’s board members perform their duties and their
expertise, including whether they are fully informed about all facts the board deems relevant to its consideration of the
adviser’s services and fees. The Board considered that the Securities and Exchange Commission (“SEC”) disclosure requirements
regarding the basis for a fund board’s approval of the fund’s investment advisory contract generally align with
the factors listed above. The Board was guided by these factors in its evaluation of the Contract to the extent it considered
them to be appropriate and relevant, as discussed further below. The Board considered and weighed these factors
in light of its substantial accumulated experience in governing the Fund and working with Federated Hermes on matters
relating to the oversight of the other funds advised by Federated Hermes (each, a “Federated Hermes Fund” and, collectively,
the “Federated Hermes Funds”).
Annual
Financial Statements and Additional Information
19
In
addition, the Board considered the preferences and expectations of Fund shareholders and the potential disruptions of the
Fund’s operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate
or not renew the Contract. In particular, the Board recognized that many shareholders likely have invested in the Fund
based on the strength of Federated Hermes’ industry standing and reputation and with the expectation that Federated Hermes
will have a continuing role in providing advisory services to the Fund. Thus, the Board observed that there are a range
of investment options available to the Fund’s shareholders in the marketplace, and such shareholders, having had the opportunity
to consider other investment options, have effectively selected Federated Hermes by virtue of investing in the
Fund.
In determining
to approve the continuation of the Contract, the members of the Board reviewed and evaluated information
and factors they believed to be relevant and appropriate through the exercise of their reasonable business judgment.
While individual members of the Board may have weighed certain factors differently, the Board’s determination
to approve the continuation of the Contract was based on a comprehensive consideration of all information provided
to the Board throughout the year. The Board recognized that its evaluation process is evolutionary and that the factors
considered and the emphasis placed on relevant factors may change in recognition of changing circumstances in the
registered fund marketplace. The Independent Trustees were assisted throughout the evaluation process by independent legal
counsel. In connection with their deliberations at the May Meetings, the Independent Trustees met separately in executive
session with their independent legal counsel and without management present to review the relevant materials and
consider their responsibilities under applicable laws. In addition, senior management representatives of Federated Hermes
also met with the Independent Trustees and their independent legal counsel to discuss the materials and presentations
furnished to the Board at the May Meetings. The Board considered the approval of the Contract for the Fund as
part of its consideration of agreements for funds across the family of Federated Hermes Funds, but its approvals were made
on a fund-by-fund basis.
Nature, Extent and
Quality of Services
The Board
considered the nature, extent and quality of the services provided to the Fund by the Adviser and the resources
of Federated Hermes dedicated to the Fund. In this regard, the Board evaluated, among other things, the terms of the
Contract and the full range of services provided to the Fund by Federated Hermes. The Board considered the Adviser’s personnel,
investment philosophy and process, investment research capabilities and resources, trade operations capabilities,
experience and performance track record. The Board reviewed the qualifications, backgrounds and responsibilities
of the portfolio management team primarily responsible for the day-to-day management of the Fund and evaluated
Federated Hermes’ ability and experience in attracting and retaining qualified personnel to service the Fund. The Board
considered the trading operations by the Adviser, including the execution of portfolio transactions and the selection of
brokers for those transactions. The Board also considered the Adviser’s ability to deliver competitive investment performance
for the Fund when compared to the Fund’s Performance Peer Group (as defined below).
In addition,
the Board considered the financial resources and overall reputation of Federated Hermes and its willingness to
consider and make investments in personnel, infrastructure, technology, cybersecurity, business continuity planning and operational
enhancements that are designed to benefit the Federated Hermes Funds. The Board considered Federated Hermes’
oversight of the securities lending program for the Federated Hermes Funds that engage in securities lending and noted
the income earned by the Federated Hermes Funds that participate in such program. In addition, the Board considered
the quality of Federated Hermes’ communications with the Board and responsiveness to Board inquiries and requests
made from time to time with respect to the Federated Hermes Funds. The Board also considered that Federated Hermes
is responsible for providing the Federated Hermes Funds’ officers.
The Board
received and evaluated information regarding Federated Hermes’ regulatory and compliance environment. The
Board considered Federated Hermes’ compliance program and compliance history and reports from the CCO about Federated
Hermes’ compliance with applicable laws and regulations, including responses to regulatory developments and any
compliance or other issues raised by regulatory agencies. The Board also noted Federated Hermes’ support of the Federated
Hermes Funds’ compliance control structure and the compliance-related resources devoted by Federated Hermes
in support of the Fund’s obligations pursuant to Rule 38a-1 under the Investment Company Act of 1940, as amended,
including Federated Hermes’ commitment to respond to rulemaking and other regulatory initiatives of the SEC. The
Board considered Federated Hermes’ approach to internal audits and risk management with respect to the Federated Hermes
Funds and its day-to-day oversight of the Federated Hermes Funds’ compliance with their investment objectives and
policies as well as with applicable laws and regulations, noting that regulatory and other developments had over time led,
and continue to lead, to an increase in the scope of Federated Hermes’ oversight in this regard. In addition, the Board noted
Federated Hermes’ commitment to maintaining high quality systems and expending substantial resources to prepare for
and respond to ongoing changes due to the market, regulatory and control environments in which the Fund and its service
providers operate.
Annual
Financial Statements and Additional Information
20
The
Board considered Federated Hermes’ efforts to provide shareholders in the Federated Hermes Funds with a comprehensive
array of funds with different investment objectives, policies and strategies. The Board considered the expenses
that Federated Hermes had incurred, as well as the entrepreneurial and other risks assumed by Federated Hermes, in
sponsoring and providing on-going services to new funds to expand these opportunities for shareholders. The Board noted
the benefits to shareholders of being part of the family of Federated Hermes Funds, which include the general right to
exchange investments between the same class of shares without the incurrence of additional sales charges.
Based on
these considerations, the Board concluded that it was satisfied with the nature, extent and quality of the services
provided by the Adviser to the Fund.
Fund Investment Performance
The Board
considered the investment performance of the Fund. In evaluating the Fund’s investment performance, the Board
considered performance results in light of the Fund’s investment objective, strategies and risks. The Board considered
detailed investment reports on, and the Adviser’s analysis of, the Fund’s performance over different time periods
that were provided to the Board throughout the year and in connection with the May Meetings. These reports included,
among other items, information on the Fund’s gross and net returns, the Fund’s investment performance compared
to one or more relevant categories or groups of peer funds and the Fund’s benchmark, performance attribution information
and commentary on the effect of market conditions. The Board noted that it evaluated investment performance at
meetings throughout the year and received reports from Federated Hermes regarding the performance of certain Federated
Hermes Funds as well as Federated Hermes’ explanations for less favorable performance and any specific actions
Federated Hermes had taken, or had determined to take, to seek to enhance Fund investment performance and the results
of those actions.
The Board
also reviewed comparative information regarding the performance of other registered funds in the category of
peer funds selected by Morningstar, Inc. (“Morningstar”), an independent fund ranking organization (the “Performance
Peer Group”). The Board noted the CCO’s
statement that comparisons to fund peer groups may be helpful, though not conclusive,
in evaluating the performance of the Adviser in managing the Fund.
The Board
also considered comparative performance data from Lipper, Inc. that was included in reports provided to the Board
throughout the year.
The Board
considered that the Fund’s performance fell below the median of the Performance Peer Group for both the one-year
and three-year periods ended December 31, 2025. The Board discussed the Fund’s performance with the Adviser and
recognized the efforts being taken by the Adviser in the context of other factors considered relevant by the Board.
Based on
these considerations, the Board concluded that it had continued confidence in the Adviser’s overall capabilities
to manage the Fund.
Fund Expenses
The Board
considered the advisory fee and overall expense structure of the Fund and the comparative fee and expense information
that had been provided in connection with the May Meetings. In this regard, the Board was presented with, and
considered, information regarding the contractual advisory fee rates, net advisory fee rates, total expense ratios and each
element of the Fund’s total expense ratio (i.e., gross and net advisory fees, administrative fees, custody fees, portfolio accounting
fees and transfer agency fees) relative to an appropriate group of peer funds compiled by Federated Hermes from
the overall category of peer funds selected by Morningstar (the “Expense Peer Group”). The Board received a description
of the methodology used to select the Expense Peer Group from the overall Morningstar category. The Board also
reviewed comparative information regarding the fees and expenses of the broader group of funds in the overall Morningstar
category.
While mindful
that courts have cautioned against giving too much weight to comparative information concerning fees charged
to funds by other advisers, the use of comparisons between the Fund and its Expense Peer Group assisted the Board
in its evaluation of the Fund’s fees and expenses. The Board focused on comparisons with other registered funds more
heavily than non-registered fund products or services because such comparisons are believed to be more relevant. The
Board considered that other registered funds are the products most like the Fund, in that they are readily available to Fund
shareholders as alternative investment vehicles, and they are the type of investment vehicle, in fact, chosen and maintained
by the Fund’s shareholders. The Board noted that the range of such other registered funds’ fees and expenses, therefore,
appears to be a relevant indicator of what investors have found to be reasonable in the marketplace in which the Fund
competes.
The Board
reviewed the contractual advisory fee rate, net advisory fee rate and other expenses of the Fund and noted the position
of the Fund’s fee rates relative to its Expense Peer Group. In this regard, the Board noted that the contractual advisory
fee rate was below the median of the Expense Peer Group, and the Board was satisfied that the overall expense structure
of the Fund remained competitive.
Annual
Financial Statements and Additional Information
21
The
Board also received and considered information about the nature and extent of services offered and fees charged by Federated
Hermes to other types of clients with investment strategies similar to those of the Federated Hermes Funds, including
non-registered fund clients (such as institutional separate accounts) and third-party unaffiliated registered funds for
which the Adviser or its affiliates serve as sub-adviser. The Board noted the CCO’s statement that non-registered fund clients
are inherently different products due to the following differences, among others: (i) types of targeted investors; (ii)
applicable laws and regulations; (iii) legal structures; (iv) average account sizes; (v) portfolio management techniques made
necessary by different cash flows and different associated costs; (vi) the time spent by portfolio managers and their teams
(among other personnel across various departments, including legal, compliance and risk management) in reviewing securities
pricing; (vii) SEC mandated risk management programs with respect to fund liquidity and use of derivatives; (viii)
questions on regulatory reporting; (ix) a variety of different administrative responsibilities; and (x) degrees of risk associated
with management. The Board also considered information regarding the differences in the nature of the services required
for Federated Hermes to manage its proprietary registered fund business versus managing a discrete pool of assets as
a sub-adviser to another institution’s registered fund, noting the CCO’s statement that Federated Hermes generally performs
significant additional services and assumes substantially greater risks in managing the Fund and other Federated Hermes
Funds than in its role as sub-adviser to an unaffiliated third-party registered fund. The Board noted that the CCO emphasized
that differences in fees for providing advisory services to other types of clients may not be appropriate when judging
the appropriateness of the Federated Hermes Funds’ advisory fees because of the different services provided.
In the case
of the Fund, the Board noted that Federated Hermes does not manage any other types of clients that are comparable
to the Fund.
Based on
these considerations, the Board concluded that the fees and total operating expenses of the Fund, in conjunction
with other matters considered, are reasonable in light of the services provided.
Profitability
The Board
received and considered profitability information furnished by Federated Hermes. Such profitability information
included revenues reported on a fund-by-fund basis and estimates of the allocation of expenses made on a fund-by-fund
basis, using allocation methodologies specified by the CCO and described to the Board. The Board considered
the CCO’s statement that, while the cost allocation report applies consistent allocation processes for purposes of
general comparison of funds, the inherent difficulties in arbitrarily allocating costs 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 Contract are consistent with the methodologies
previously reviewed by an independent consultant. The Board noted that the independent consultant had previously
conducted a review of the allocation methodologies and reported to the Board that, although there is no single best
method to allocate expenses, the methodologies used by Federated Hermes are reasonable. The Board considered the CCO’s
statement that the estimated profitability to the Adviser from its relationship with the Fund was not unreasonable in relation
to the services provided.
The Board
also reviewed information compiled by Federated Hermes comparing its profitability information to other publicly-held
fund management companies, including information regarding profitability trends over time. The Board recognized
that profitability comparisons among fund management companies are difficult because of the variation in the type
of comparative information that is publicly available, and the profitability of any fund management company is affected
by numerous factors. The Board considered the CCO’s statement that, based on such profitability information, Federated
Hermes’ profit margins did not appear to be excessive and that Federated Hermes appeared financially sound, with
the resources available to fulfill its contractual obligations.
Economies of Scale
The Board
received and considered information about the notion of possible realization of “economies of scale” as a fund
grows larger, the difficulties of isolating and quantifying economies of scale at an individual fund level, and the extent
to which potential scale benefits are shared with shareholders. In this regard, the Board considered that Federated Hermes
has made significant and long-term investments in areas that support all of the Federated Hermes Funds, such as: portfolio
management, investment research and trading operations; shareholder services; compliance; business continuity, cybersecurity
and information security programs; internal audit and risk management functions; and technology, systems capabilities
and use of data. The Board noted that Federated Hermes’ investments in these areas are extensive and are designed
to provide enhanced or expanded services to the Federated Hermes Funds and their shareholders. The Board considered
that the benefits of these investments are likely to be shared with the family of Federated Hermes Funds as a whole.
In addition, the Board considered that fee waivers and expense reimbursements are another means for potential economies
of scale to be shared with shareholders and can provide protection from an increase in expenses if a Federated Hermes
Fund’s assets decline. The Board considered that, in order for the Federated Hermes Funds to remain competitive
Annual
Financial Statements and Additional Information
22
in the marketplace,
Federated Hermes has frequently waived fees and/or reimbursed expenses for the Federated Hermes Funds
and has disclosed to shareholders and/or reported to the Board its intention to do so (or continue to do so) in the future.
The Board also considered that Federated Hermes has been active in managing expenses of the Federated Hermes Funds
in recent years, which has resulted in benefits being realized by shareholders.
The Board
also received and considered information on adviser-paid fees (commonly referred to as “revenue sharing” payments)
that was provided to the Board throughout the year and in connection with the May Meetings. The Board considered
that Federated Hermes believes that this information is relevant to consider whether Federated Hermes had an incentive
to either not apply breakpoints, or to apply breakpoints at higher levels, but should not be considered when evaluating
the reasonableness of advisory fees. The Board also noted the absence of any applicable regulatory or industry guidelines
on economies of scale, which is compounded by the lack of any uniform methodology or pattern with respect to structuring
fund advisory fees with breakpoints that serve to reduce the fees as a fund attains a certain size.
Other Benefits
The Board
considered information regarding the compensation and other ancillary (or “fall-out”) benefits that Federated Hermes
derived from its relationships with the Federated Hermes Funds. The Board considered that Federated Hermes may
derive a benefit to its reputation as an adviser to the Fund, which may help in attracting other clients and investment personnel.
The Board noted that, in addition to receiving advisory fees under the Federated Hermes Funds’ investment advisory
contracts, Federated Hermes’ affiliates also receive fees for providing other services to the Federated Hermes Funds
under separate service contracts, including for serving as the Federated Hermes Funds’ administrator and distributor.
In this regard, the Board considered that Federated Hermes’ affiliates provide distribution and shareholder services
to the Federated Hermes Funds, for which they may be compensated through distribution and servicing fees paid pursuant
to Rule 12b-1 plans or otherwise. The Board also received and considered information detailing the benefits, if any,
that Federated Hermes may derive from its receipt of research services from brokers who execute portfolio trades for the
Federated Hermes Funds.
Conclusions
The Board
considered the CCO’s presentation and statements and the information accompanying the CCO Management Fee
Report. The Board recognized that its evaluation of the Federated Hermes Funds’ advisory and sub-advisory arrangements
is a continuing and ongoing process that is informed by the information that the Board requests and receives from
management throughout the course of the year.
On the basis
of the information and factors summarized above, among other information and factors deemed relevant by the
Board, and the evaluation thereof, the Board, including the Independent Trustees, unanimously voted to approve the continuation
of the Contract. The Board based its determination to approve the Contract on the totality of the circumstances
and relevant factors and with a view of past and future long-term considerations. Not all of the factors and considerations
identified above were necessarily deemed to be relevant to the Fund, nor did the Board consider any one of them
to be determinative.
Annual
Financial Statements and Additional Information
23
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 Conservative Municipal
Microshort Fund
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us at
FederatedHermes.com
or call 1-800-341-7400.
or call 1-800-341-7400.
Federated Securities Corp., Distributor
CUSIP 31423A465
CUSIP 31423A457
CUSIP 31423A457
Q455161 (10/26)
©
2026 Federated Hermes, Inc.
| Item 8. | Changes in and Disagreements with Accountants for Open-End Management Investment Companies |
Federated Hermes Conservative Microshort Fund: Not Applicable.
Federated Hermes Conservative Municipal Microshort Fund: Not Applicable.
| Item 9. | Proxy Disclosures for Open-End Management Investment Companies. |
Federated Hermes Conservative Microshort Fund: Not Applicable.
Federated Hermes Conservative Municipal Microshort Fund: Not Applicable.
| Item 10. | Remuneration Paid to Directors, Officers, and Others of Open-End Management Investment Companies. |
Federated Hermes Conservative Microshort Fund: The Fund’s disclosure of remuneration items is included as part of the Financial Statements filed under Item 7 of this form.
Federated Hermes Conservative Municipal Microshort 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 Conservative Microshort Fund: The Fund’s Evaluation and Approval of Advisory Contract summary by fund appear in the Financial Statements filed under Item 7 of this form.
Federated Hermes Conservative Municipal Microshort Fund: The Fund’s Evaluation and Approval of Advisory Contract summary by fund appear in the Financial Statements filed under Item 7 of this form.
| Item 12. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies |
Not Applicable
| Item 13. | Portfolio Managers of Closed-End Management Investment Companies. |
Not Applicable
| Item 14. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
Not Applicable
| Item 15. | Submission of Matters to a Vote of Security Holders. |
No Changes to Report
| Item 16. | Controls and Procedures. |
(a) The registrant’s Principal Executive Officer and Principal Financial Officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Act) are effective in design and operation and are sufficient to form the basis of the certifications required by Rule 30a-(2) under the Act, based on their evaluation of these disclosure controls and procedures as of a date within 90 days of the filing date of this report on Form N-CSR.
(b) There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
| Item 17. | Disclosure of Securities Lending Activities for Closed-End Management Investment Companies. |
Not Applicable
| Item 18. | Recovery of Erroneously Awarded Compensation |
(a) Not Applicable
(b) Not Applicable
| Item 19. | Exhibits |
(a)(1) Not Applicable.
(a)(2) Not Applicable.
(a)(3) Certifications of Principal Executive Officer and Principal Financial Officer.
(a)(4) Not Applicable.
(a)(5) Not Applicable.
(b) Certifications pursuant to 18 U.S.C. Section 1350.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: Federated Hermes Adviser Series
By: /s/ Jeremy D. Boughton
Jeremy D. Boughton, Principal Financial Officer
Date: October 26, 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: October 26, 2026
By: /s/ Jeremy D. Boughton
Jeremy D. Boughton, Principal Financial Officer
Date: October 26, 2026