Federated Adjustable Rate Securities Fund...Portfolio of Investments February 29, 2020 (unaudited)...

Semi-Annual Shareholder Report

February 29, 2020

Share Class | Ticker Institutional | FEUNX Service | FEUGX

Federated Adjustable Rate Securities FundFund Established 1985

IMPORTANT NOTICE REGARDING REPORT DELIVERY

Beginning on January 1, 2021, as permitted by regulations adopted by theSecurities and Exchange Commission, paper copies of the Fund’s shareholderreports like this one will no longer be sent by mail, unless you specifically requestpaper copies of the reports from the Fund or from your financial intermediary,such as a broker-dealer or bank. Instead, the reports will be made available on awebsite, and you will be notified by mail each time a report is posted and providedwith a website link to access the report.

If you already elected to receive shareholder reports electronically, you will not beaffected by this change and you need not take any action. You may elect to receiveshareholder reports and other communications from the Fund or your financialintermediary electronically by contacting your financial intermediary (such as abroker-dealer or bank); other shareholders may call the Fund at1-800-341-7400, Option 4.

You may elect to receive all future reports in paper free of charge. You caninform the Fund or your financial intermediary that you wish to continuereceiving paper copies of your shareholder reports by contacting your financialintermediary (such as a broker-dealer or bank); other shareholders may call theFund at 1-800-341-7400, Option 4. Your election to receive reports in paper willapply to all funds held with the Fund complex or your financial intermediary.

Not FDIC Insured ▪ May Lose Value ▪ No Bank Guarantee

J. ChristopherDonahue

President

Federated AdjustableRate Securities Fund

Letter from the PresidentDear Valued Shareholder,

I am pleased to present the Semi-Annual ShareholderReport for your fund covering the period fromSeptember 1, 2019 through February 29, 2020.

As we all confront the unprecedented effects of thecoronavirus and the challenges it presents to our families,communities, businesses and the financial markets, I wantyou to know that everyone at Federated Hermes isdedicated to helping you successfully navigate theuncertainty ahead. You can count on us for the insights,investment management knowledge and client service thatyou have come to expect. Please refer to our website,FederatedInvestors.com, for timely updates on this andother economic and market matters.

Thank you for investing with us. I hope you find thisinformation useful and look forward to keepingyou informed.

Sincerely,

J. Christopher Donahue, President

CONTENTS Portfolio of Investments Summary Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Portfolio of Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Statement of Assets and Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Statement of Operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Statement of Changes in Net Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Shareholder Expense Example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Evaluation and Approval of Advisory Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Voting Proxies on Fund Portfolio Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Quarterly Portfolio Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Portfolio of Investments Summary Table (unaudited)At February 29, 2020, the Fund’s portfolio composition1 was as follows:

Type of InvestmentPercentage of

Total Net Assets

Collateralized Mortgage Obligations 43.6%

U.S. Government Agency Adjustable Rate Mortgage Securities (ARMS) 32.1%

Asset-Backed Securities 11.2%

U.S. Government Agency Mortgage-Backed Securities 10.2%

U.S. Government Agency Commercial Mortgage-Backed Securities 1.2%

Non-Agency Mortgage-Backed Securities 1.0%

Cash Equivalents2 3.3%

Other Assets and Liabilities—Net3 (2.6)%

TOTAL 100.0%

1 See the Fund’s Prospectus and Statement of Additional Information for a description of the types ofsecurities in which the Fund invests.

2 Cash Equivalents include any investments in money market mutual funds and/or overnightrepurchase agreements.

3 Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities.

Semi-Annual Shareholder Report1

Portfolio of InvestmentsFebruary 29, 2020 (unaudited)

PrincipalAmount

or Shares Value1ADJUSTABLE RATE MORTGAGES—32.1%

Federal Home Loan Mortgage Corporation ARM—11.6%

$ 863,143 3.835%, 12/1/2034 $ 896,729

165,350 3.995%, 2/1/2036 171,630

2,597,400 4.178%, 7/1/2034 2,682,859

1,637,615 4.309%, 7/1/2038 1,698,901

1,534,862 4.466%, 10/1/2033 1,608,410

1,734,576 4.531%, 7/1/2035 1,826,783

1,764,878 4.544%, 7/1/2036 1,850,422

1,040,134 4.566%, 8/1/2035 1,095,426

1,388,485 4.603%, 11/1/2034 1,462,294

924,037 4.606%, 5/1/2035 968,671

960,889 4.663%, 4/1/2037 1,011,968

934,735 4.754%, 4/1/2034 984,424

1,547,076 4.888%, 2/1/2035 1,622,447

TOTAL 17,880,964

Federal National Mortgage Association ARM—20.3%

125,927 3.435%, 7/1/2036 129,654

973,811 3.526%, 10/1/2034 998,327

344,790 3.549%, 9/1/2033 350,341

1,082,794 3.554%, 8/1/2034 1,116,148

694,999 3.572%, 6/1/2034 716,494

178,567 3.589%, 12/1/2034 186,473

456,072 3.624%, 10/1/2037 473,497

703,642 3.663%, 12/1/2034 739,252

149,565 3.690%, 11/1/2040 157,277

1,320,224 3.820%, 2/1/2042 1,390,404

282,630 3.840%, 12/1/2033 297,655

78,286 3.845%, 10/1/2033 80,165

1,141,397 3.888%, 1/1/2040 1,202,072

644,616 3.932%, 1/1/2035 678,882

535,137 3.960%, 11/1/2039 558,838

1,070,497 3.974%, 5/1/2039 1,105,515

255,765 4.018%, 10/1/2035 270,036

2,695,675 4.019%, 8/1/2039 2,812,138

144,652 4.062%, 5/1/2035 150,458


PrincipalAmount

or Shares Value1ADJUSTABLE RATE MORTGAGES—continued

Federal National Mortgage Association ARM—continued

$ 156,220 4.082%, 11/1/2035 $ 164,140

75,151 4.089%, 2/1/2036 78,560

406,460 4.112%, 1/1/2035 421,752

194,666 4.182%, 6/1/2035 205,014

283,442 4.221%, 7/1/2035 295,266

437,190 4.226%, 10/1/2035 460,430

102,921 4.237%, 5/1/2038 106,693

584,472 4.312%, 10/1/2037 615,541

655,537 4.369%, 7/1/2035 690,384

1,928,203 4.383%, 5/1/2035 2,026,811

499,395 4.394%, 5/1/2035 519,594

269,569 4.433%, 7/1/2039 283,798

854,948 4.441%, 7/1/2035 900,177

40,998 4.482%, 4/1/2034 42,711

299,273 4.502%, 7/1/2035 313,940

1,018,687 4.509%, 7/1/2035 1,072,838

1,390,467 4.534%, 5/1/2036 1,464,381

1,853,225 4.558%, 7/1/2034 1,951,739

3,265,805 4.583%, 8/1/2035 3,430,338

468,691 4.617%, 7/1/2034 493,605

471,555 4.642%, 5/1/2035 494,292

343,971 4.670%, 6/1/2033 362,256

1,165,413 4.755%, 10/1/2035 1,227,364

222,491 4.810%, 2/1/2036 234,714

127,655 4.810%, 5/1/2036 134,441

65,151 5.215%, 7/1/2027 68,369

TOTAL 31,472,774

Government National Mortgage Association ARM—0.2%

24,092 3.125%, 11/20/2023 24,409

29,562 3.125%, 10/20/2029 30,285

26,140 3.250%, 7/20/2023 26,455

29,022 3.250%, 9/20/2023 29,384

21,712 3.875%, 5/20/2029 22,290

29,219 4.000%, 1/20/2022 29,461

34,593 4.000%, 2/20/2023 34,997

33,549 4.000%, 3/20/2023 33,948


PrincipalAmount

or Shares Value1ADJUSTABLE RATE MORTGAGES—continued

Government National Mortgage Association ARM—continued

$ 11,147 4.000%, 1/20/2030 $ 11,427

TOTAL 242,656

TOTAL ADJUSTABLE RATE MORTGAGES(IDENTIFIED COST $49,438,566) 49,596,394

1ASSET-BACKED SECURITIES—11.2%

Auto Receivables—2.1%

3,350,000 Nextgear Floorplan Master Owner Trust 2019-1A, Class A1, 2.308%(1-month USLIBOR +0.650%), 2/15/2024 3,358,822

Credit Card—8.7%

3,000,000 American Express Credit Account Master Trust 2018-5, Class A,1.998% (1-month USLIBOR +0.340%), 12/15/2025 2,999,940

3,250,000 American Express Credit Account Master Trust 2018-9, Class A,2.038% (1-month USLIBOR +0.380%), 4/15/2026 3,260,212

3,500,000 Discover Card Execution Note T 2017-A5, Class A5, 2.258% (1-monthUSLIBOR +0.600%), 12/15/2026 3,526,335

1,650,000 Discover Card Execution Note Trust 2017-A7, Class A7, 2.018%(1-month USLIBOR +0.360%), 4/15/2025 1,655,267

2,000,000 First National Master Note Trust 2018-1, Class A, 2.118% (1-monthUSLIBOR +0.460%), 10/15/2024 1,998,707

TOTAL 13,440,461

Other—0.4%

574,730 Sofi Professional Loan Program LLC, Class A1, 3.376% (1-monthUSLIBOR +1.750%), 8/25/2036 584,478

TOTAL ASSET-BACKED SECURITIES(IDENTIFIED COST $17,337,750) 17,383,761

COLLATERALIZED MORTGAGE OBLIGATIONS—43.6%1Federal Home Loan Mortgage Corporation—12.7%

197,263 REMIC, Series 2380, Class FL, 2.258% (1-month USLIBOR+0.600%), 11/15/2031 199,012

190,370 REMIC, Series 2434, Class FA, 2.658% (1-month USLIBOR+1.000%), 3/15/2032 194,185


82,302 REMIC, Series 2452, Class FC, 2.658% (1-month USLIBOR+1.000%), 1/15/2032 83,958

235,989 REMIC, Series 2459, Class FP, 2.658% (1-month USLIBOR+1.000%), 6/15/2032 240,739

59,830 REMIC, Series 2470, Class EF, 2.658% (1-month USLIBOR+1.000%), 3/15/2032 61,029

276,423 REMIC, Series 2475, Class F, 2.658% (1-month USLIBOR+1.000%), 2/15/2032 281,941


PrincipalAmount

or Shares Value

COLLATERALIZED MORTGAGE OBLIGATIONS—continued1Federal Home Loan Mortgage Corporation—continued

$ 219,168 REMIC, Series 2475, Class FD, 2.208% (1-month USLIBOR+0.550%), 6/15/2031 $ 221,100

177,614 REMIC, Series 2480, Class NF, 2.658% (1-month USLIBOR+1.000%), 1/15/2032 181,120

58,913 REMIC, Series 2498, Class AF, 2.658% (1-month USLIBOR+1.000%), 3/15/2032 60,093

211,276 REMIC, Series 3085, Class UF, 2.108% (1-month USLIBOR+0.450%), 12/15/2035 212,570

512,532 REMIC, Series 3156, Class HF, 2.143% (1-month USLIBOR+0.485%), 8/15/2035 516,157

169,983 REMIC, Series 3213, Class GF, 2.088% (1-month USLIBOR+0.430%), 9/15/2036 170,881

1,011,359 REMIC, Series 3284, Class AF, 1.968% (1-month USLIBOR+0.310%), 3/15/2037 1,011,873

4,519,650 REMIC, Series 3284, Class BF, 1.958% (1-month USLIBOR+0.300%), 3/15/2037 4,540,920

547,325 REMIC, Series 3380, Class FP, 2.008% (1-month USLIBOR+0.350%), 11/15/2036 547,780

591,558 REMIC, Series 3550, Class GF, 2.408% (1-month USLIBOR+0.750%), 7/15/2039 601,658


334,549 REMIC, Series 3593, Class CF, 2.258% (1-month USLIBOR+0.600%), 2/15/2036 336,544

4,528,294 REMIC, Series 4620, Class LF, 2.058% (1-month USLIBOR+0.400%), 10/15/2046 4,544,185

4,793,083 REMIC, Series 4916, Class FA, 2.058% (1-month USLIBOR+0.400%), 9/25/2049 4,811,226

TOTAL 19,737,868

Federal National Mortgage Association—30.4%

34,285 REMIC, Series 1995-17, Class B, 4.025%, 2/25/2025 34,751

213,696 1REMIC, Series 2001-32, Class FA, 2.176% (1-month USLIBOR+0.550%), 7/25/2031 215,294


64,877 1REMIC, Series 2001-62, Class FC, 2.276% (1-month USLIBOR+0.650%), 11/25/2031 65,657

86,799 1REMIC, Series 2001-71, Class FS, 2.226% (1-month USLIBOR+0.600%), 11/25/2031 87,723

176,229 1REMIC, Series 2002-52, Class FG, 2.126% (1-month USLIBOR+0.500%), 9/25/2032 177,737


PrincipalAmount

or Shares Value

COLLATERALIZED MORTGAGE OBLIGATIONS—continued

Federal National Mortgage Association—continued

$ 459,563 1REMIC, Series 2002-58, Class FG, 2.626% (1-month USLIBOR+1.000%), 8/25/2032 $ 469,098

74,679 1REMIC, Series 2002-60, Class FH, 2.626% (1-month USLIBOR+1.000%), 8/25/2032 76,229





192,354 1REMIC, Series 2005-67, Class FM, 1.976% (1-month USLIBOR+0.350%), 8/25/2035 192,514

876,743 1REMIC, Series 2006-103, Class FB, 2.026% (1-month USLIBOR+0.400%), 10/25/2036 883,666


884,725 1REMIC, Series 2006-65, Class DF, 1.976% (1-month USLIBOR+0.350%), 7/25/2036 886,393

326,724 1REMIC, Series 2006-76, Class QF, 2.026% (1-month USLIBOR+0.400%), 8/25/2036 326,231

3,054,347 REMIC, Series 2006-W1, Class 2AF1, 2.238%, 2/25/2046 3,028,343


238,657 1REMIC, Series 2007-20, Class F, 1.886% (1-month USLIBOR+0.260%), 3/25/2037 238,560

2,028,626 1REMIC, Series 2007-71, Class WF, 2.076% (1-month USLIBOR+0.450%), 7/25/2037 2,040,570

380,536 1REMIC, Series 2007-88, Class FW, 2.176% (1-month USLIBOR+0.550%), 9/25/2037 380,633


95,414 1REMIC, Series 2008-75, Class DF, 2.876% (1-month USLIBOR+1.250%), 9/25/2038 97,675

2,207,567 1REMIC, Series 2009-106, Class FN, 2.376% (1-month USLIBOR+0.750%), 1/25/2040 2,245,088

771,265 1REMIC, Series 2009-78, Class UF, 2.396% (1-month USLIBOR+0.770%), 10/25/2039 784,630

1,346,286 1REMIC, Series 2009-87, Class FX, 2.376% (1-month USLIBOR+0.750%), 11/25/2039 1,366,759

1,550,919 1REMIC, Series 2009-87, Class HF, 2.476% (1-month USLIBOR+0.850%), 11/25/2039 1,583,904


PrincipalAmount

or Shares Value

COLLATERALIZED MORTGAGE OBLIGATIONS—continued

Federal National Mortgage Association—continued

$ 699,033 1REMIC, Series 2010-39, Class EF, 2.146% (1-month USLIBOR+0.520%), 6/25/2037 $ 704,514

4,332,597 1REMIC, Series 2010-68, Class BF, 2.126% (1-month USLIBOR+0.500%), 7/25/2040 4,370,347

2,843,472 1REMIC, Series 2011-4, Class PF, 2.176% (1-month USLIBOR+0.550%), 2/25/2041 2,871,854

4,842,757 1REMIC, Series 2012-11, Class GF, 2.126% (1-month USLIBOR+0.500%), 5/25/2040 4,877,623

3,554,076 1REMIC, Series 2012-130, Class DF, 2.026% (1-month USLIBOR+0.400%), 12/25/2042 3,552,965

3,090,710 1REMIC, Series 2014-20, Class FB, 2.026% (1-month USLIBOR+0.400%), 4/25/2044 3,099,734

1,483,483 1REMIC, Series 2016-83, Class FA, 2.126% (1-month USLIBOR+0.500%), 11/25/2046 1,482,051

4,067,518 1REMIC, Series 2019-33, Class FB, 2.076% (1-month USLIBOR+0.450%), 7/25/2049 4,090,705

2,297,663 1REMIC, Series 2019-56, Class AF, 2.026% (1-month USLIBOR+0.400%), 10/25/2049 2,304,386

2,818,355 1REMIC, Series 2019-61, Class AF, 2.208% (1-month USLIBOR+0.500%), 11/25/2049 2,846,773

TOTAL 46,963,2191Government National Mortgage Association—0.5%

785,230 REMIC, Series 2012-42, Class HF, 2.017% (1-month USLIBOR+0.370%), 3/20/2042 784,191

TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS(IDENTIFIED COST $66,969,721) 67,485,278

NON-AGENCY MORTGAGE-BACKED SECURITY —1.0%

1,493,065 Sequoia Mortgage Trust 2013-1, Class 1A1, 1.450%, 2/25/2043(IDENTIFIED COST $1,493,066) 1,493,047

1COMMERCIAL MORTGAGE-BACKED SECURITIES—1.2%

Agency Commercial Mortgage-Backed Securities—1.2%

87,690 FHLMC REMIC, Series KF03, Class A, 2.001% (1-month USLIBOR+0.340%), 1/25/2021 87,664

247,177 FHLMC REMIC, Series KS02, Class A, 2.041% (1-month USLIBOR+0.380%), 8/25/2023 247,107

1,500,000 FNMA REMIC, Series 2020-M5, Class FA, 2.114% (1-month USLIBOR+0.460%), 1/25/2027 1,498,036

TOTAL COMMERCIAL MORTGAGE-BACKED SECURITIES(IDENTIFIED COST $1,832,752) 1,832,807


PrincipalAmount

or Shares Value

MORTGAGE-BACKED SECURITIES—10.2%

Federal Home Loan Mortgage Corporation—2.7%

$2,063,363 3.500%, 11/1/2047 $ 2,170,454

1,390,747 4.000%, 9/1/2047 1,480,287

401,127 4.000%, 11/1/2047 426,953

TOTAL 4,077,694

Federal National Mortgage Association—7.5%

2,799,698 2.500%, 9/1/2028 2,884,498

1,956,857 2.500%, 12/1/2034 2,008,790

869,872 3.000%, 8/1/2023 901,029

415,588 4.000%, 2/1/2048 441,565

480,101 4.000%, 2/1/2048 511,611

3,419,383 4.000%, 3/1/2048 3,632,053

1,072,872 4.000%, 3/1/2048 1,139,935

121,266 5.000%, 1/1/2024 126,884

TOTAL 11,646,365

TOTAL MORTGAGE-BACKED SECURITIES(IDENTIFIED COST $15,085,216) 15,724,059

INVESTMENT COMPANY—3.3%

5,109,024 Federated Government Obligations Fund, Premier Shares, 1.50%2

(AT AMORTIZED COST) 5,109,024

TOTAL INVESTMENT IN SECURITIES—102.6%(IDENTIFIED COST $157,266,095)3

158,624,370

OTHER ASSETS AND LIABILITIES - NET—(2.6)%4 (3,975,273)

TOTAL NET ASSETS—100% $154,649,097


Affiliated fund holdings are investment companies which are managed by the Adviser or anaffiliate of the Adviser. Transactions with affiliated fund holdings during the period endedFebruary 29, 2020, were as follows:

FederatedGovernment

Obligations Fund,Premier Shares

Balance of Shares Held 8/31/2019 2,419,668

Purchases/Additions 75,863,152

Sales/Reductions (73,173,796)

Balance of Shares Held 2/29/2020 5,109,024

Value $ 5,109,024

Change in Unrealized Appreciation/Depreciation N/A

Net Realized Gain/(Loss) N/A

Dividend Income $ 36,150

1 Floating/adjustable note with current rate and current maturity or next reset date shown. Adjustable ratemortgage security coupons are based on the weighted average note rates of the underlying mortgagesless the guarantee and servicing fees. These securities do not indicate an index and spread in theirdescription above.

2 7-day net yield.3 Also represents cost 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 total net assets atFebruary 29, 2020.

Various inputs are used in determining the value of the Fund’s investments. These inputs aresummarized 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 atamortized cost.Level 3—significant unobservable inputs (including the Fund’s own assumptions indetermining the fair value of investments).

The inputs or methodology used for valuing securities are not an indication of the riskassociated with investing in those securities.


The following is a summary of the inputs used, as of February 29, 2020, in valuing the Fund’sassets carried at fair value: Valuation Inputs

Level 1—QuotedPrices

Level 2—Other

SignificantObservable

Inputs

Level 3—Significant

UnobservableInputs Total

Debt Securities:

Adjustable Rate Mortgages $ — $ 49,596,394 $— $ 49,596,394

Asset-Backed Securities — 17,383,761 — 17,383,761

Collateralized Mortgage Obligations — 67,485,278 — 67,485,278

Non-Agency Mortgage-BackedSecurities — 1,493,047 — 1,493,047

Commercial Mortgage-BackedSecurities — 1,832,807 — 1,832,807

Mortgage-Backed Securities — 15,724,059 — 15,724,059

Investment Company 5,109,024 — — 5,109,024

TOTAL SECURITIES $5,109,024 $153,515,346 $— $158,624,370

The following acronyms are used throughout this portfolio: ARM —Adjustable Rate MortgageFHLMC—Federal Home Loan Mortgage CorporationFNMA —Federal National Mortgage AssociationLIBOR —London Interbank Offered RateREMIC —Real Estate Mortgage Investment Conduit

See Notes which are an integral part of the Financial Statements


Financial Highlights – Institutional Shares1

(For a Share Outstanding Throughout Each Period)

Six MonthsEnded

(unaudited)2/29/2020

PeriodEnded

8/31/20192

Net Asset Value, Beginning of Period $9.67 $9.67Income From Investment Operations:Net investment income 0.11 0.02Net realized and unrealized gain 0.03 —

TOTAL FROM INVESTMENT OPERATIONS 0.14 0.02

Less Distributions:Distributions from net investment income (0.11) (0.02)Net Asset Value, End of Period $9.70 $9.67Total Return3

1.50% 0.18%

Ratios to Average Net Assets:Net expenses 0.30%4

0.30%4

Net investment income 2.32%4 3.10%4

Expense waiver/reimbursement5 0.31%4 0.38%4

Supplemental Data:Net assets, end of period (000 omitted) $70,746 $7,773Portfolio turnover 29% 35%6

Portfolio turnover (excluding purchases and sales from dollar-roll transactions) 29% 35%6

1 The Fund’s Institutional Shares became effective as of the close of business on August 2, 2019.2 Reflects operations for the period from August 5, 2019 (commencement of operations) to

August 31, 2019.3 Based on net asset value. Total returns for periods of less than one year are not annualized.4 Computed on an annualized basis.5 This expense decrease is reflected in both the net expense and the net investment income ratios

shown above.6 Portfolio turnover is calculated at the fund level. Percentages indicated were calculated for the fiscal

year ended August 31,2019.



Financial Highlights – Service Shares1

(For a Share Outstanding Throughout Each Period)

Six MonthsEnded


Year Ended August 31,2019 2018 2017 2016 2015

Net Asset Value,Beginning of Period $9.67 $9.64 $9.67 $9.69 $9.78 $9.81Income FromInvestment Operations:Net investment income 0.10 0.22 0.14 0.08 0.06 0.05Net realized and unrealized gain (loss) 0.03 0.03 (0.03) (0.02) (0.09) (0.03)

TOTAL FROMINVESTMENT OPERATIONS 0.13 0.25 0.11 0.06 (0.03) 0.02

Less Distributions:Distributions from netinvestment income (0.10) (0.22) (0.14) (0.08) (0.06) (0.05)Net Asset Value, End of Period $9.70 $9.67 $9.64 $9.67 $9.69 $9.78Total Return2

1.38% 2.61% 1.15% 0.63% (0.35)% 0.16%

Ratios to Average Net Assets:Net expenses 0.54%3

0.65% 0.65% 0.65% 0.64% 0.64%Net investment income 2.10%3

2.24% 1.44% 0.82% 0.58% 0.47%Expense waiver/reimbursement4 0.33%3

0.38% 0.33% 0.30% 0.25% 0.24%Supplemental Data:Net assets, end of period (000 omitted) $83,904 $122,537 $151,186 $226,904 $357,065 $555,017Portfolio turnover 29% 35% 21% 1% 19% 27%Portfolio turnover (excludingpurchases and sales fromdollar-roll transactions) 29% 35% 21% 1% 19% 27%

1 Prior to August 5, 2019, Service Shares were designated as the Institutional Shares..2 Based on net asset value. Total returns for periods of less than one year are not annualized.3 Computed on an annualized basis.4 This expense decrease is reflected in both the net expense and the net investment income ratios

shown above.



Assets:

Investment in securities, at value including $5,109,024 of investment in anaffiliated holding* (identified cost $157,266,095) $158,624,370

Income receivable 694,627

Receivable for shares sold 64,420

TOTAL ASSETS 159,383,417

Liabilities:

Payable for investments purchased $3,090,962

Payable for shares redeemed 1,457,440

Income distribution payable 97,334

Payable to adviser (Note 5) 854

Payable for administrative fees (Note 5) 668

Payable for other service fees (Notes 2 and 5) 44,451

Accrued expenses (Note 5) 42,611

TOTAL LIABILITIES 4,734,320

Net assets for 15,941,543 shares outstanding $154,649,097

Net Assets Consist of:

Paid-in capital $154,878,333

Total distributable earnings (loss) (229,236)

TOTAL NET ASSETS $154,649,097

Net Asset Value, Offering Price and Redemption Proceeds Per Share

Institutional Shares:

Net asset value per share ($70,745,537 ÷ 7,294,190 shares outstanding), no parvalue, unlimited shares authorized $9.70

Service Shares:

Net asset value per share ($83,903,560 ÷ 8,647,353 shares outstanding), no parvalue, unlimited shares authorized $9.70

* See information listed after the Fund’s Portfolio of Investments.


Statement of Assets and LiabilitiesFebruary 29, 2020 (unaudited)


Investment Income:

Interest $1,873,325

Dividends received from an affiliated holding* 36,150

TOTAL INCOME 1,909,475

Expenses:

Investment adviser fee (Note 5) $ 217,321

Administrative fee (Note 5) 57,504

Custodian fees 7,451

Transfer agent fee 34,809

Directors’/Trustees’ fees (Note 5) 3,861

Auditing fees 15,766

Legal fees 4,982

Portfolio accounting fees 53,762

Other service fees (Notes 2 and 5) 116,163

Share registration costs 21,058

Printing and postage 10,454

Miscellaneous (Note 5) 28,438

TOTAL EXPENSES 571,569

Waiver and Reimbursements:

Waiver/reimbursement of investment adviser fee (Note 5) $(217,321)

Reimbursement of other operating expenses (Notes 2 and 5) (17,214)

TOTAL WAIVER AND REIMBURSEMENTS (234,535)

Net expenses 337,034

Net investment income 1,572,441

Realized and Unrealized Gain (Loss) on Investments:

Net realized gain on investments 97,263

Net change in unrealized appreciation of investments 441,005

Net realized and unrealized gain on investments 538,268

Change in net assets resulting from operations $2,110,709

* See information listed after the Fund’s Portfolio of Investments.


Statement of OperationsSix Months Ended February 29, 2020 (unaudited)


Six MonthsEnded


Year Ended8/31/2019

Increase (Decrease) in Net Assets

Operations:

Net investment income $ 1,572,441 $ 3,192,313

Net realized gain (loss) 97,263 (204,317)

Net change in unrealized appreciation 441,005 629,138

CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 2,110,709 3,617,134

Distributions to Shareholders:

Institutional Shares (538,287) (9,374)1

Service Shares (1,047,499) (3,008,168)2

Service Shares — (197,754)3

CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONSTO SHAREHOLDERS (1,585,786) (3,215,296)

Share Transactions:

Proceeds from sale of shares 103,893,332 49,965,648

Net asset value of shares issued to shareholders in payment ofdistributions declared 885,914 1,745,911

Cost of shares redeemed (80,964,824) (83,636,848)

CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 23,814,422 (31,925,289)

Change in net assets 24,339,345 (31,523,451)

Net Assets:

Beginning of period 130,309,752 161,833,203

End of period $154,649,097 $130,309,752

1 Represents the total for the period from August 5, 2019 (commencement of operations) toAugust 31, 2019.

2 Represents totals for the Fund’s previously existing Institutional Shares from September 1, 2018 toAugust 2, 2019 and for the Fund’s newly re-designated Service Shares from August 5, 2019 toAugust 31, 2019.

3 Represents the total for the Fund’s previously existing Service Shares for the period fromSeptember 1, 2018 to August 2, 2019, prior to its conversion into the newly re-designatedService Shares.


Statement of Changes in Net Assets


Notes to Financial StatementsFebruary 29, 2020 (unaudited)

1. ORGANIZATIONFederated Adjustable Rate Securities Fund (the “Trust”) is registered under the InvestmentCompany Act of 1940, as amended (the “Act”), as a diversified, open-end managementinvestment company. The Trust consists of one diversified portfolio. The financial statementsincluded herein are only those of Federated Adjustable Rate Securities Fund (the “Fund”), aportfolio with the same name as the Trust. The Fund offers two classes of shares: InstitutionalShares and Service Shares. All shares of the Fund have equal rights with respect to voting,except on class-specific matters. The investment objective of the Fund is to provide currentincome consistent with minimal volatility of principal.

Prior to August 5, 2019, Service Shares were designated as the Institutional Shares.Effective at the close of business on August 2, 2019, the existing Service Shares wereconverted into the newly re-designated Service Shares, and a new Institutional Shares classwas created.

Effective on or about June 29, 2020, the name of the Trust and Fund will change toFederated Hermes Adjustable Rate Securities Trust and Federated Hermes Adjustable RateFund, respectively.

2. SIGNIFICANT ACCOUNTING POLICIESThe following is a summary of significant accounting policies consistently followed by theFund in the preparation of its financial statements. These policies are in conformity withU.S. generally accepted accounting principles (GAAP).

Investment ValuationIn 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 the Fund’s Board of Trustees (the “Trustees”).� Shares of other mutual funds or non-exchange-traded investment companies are valued

based upon their reported NAVs.� For securities that are fair valued in accordance with procedures established by and under

the general supervision of the Trustees, certain factors may be considered, such as: the lasttraded or purchase price of the security, information obtained by contacting the issuer ordealers, analysis of the issuer’s financial statements or other available documents,fundamental analytical data, the nature and duration of restrictions on disposition, themovement of the market in which the security is normally traded, public trading in similarsecurities or derivative contracts of the issuer or comparable issuers, movement of arelevant index, or other factors including but not limited to industry changes and relevantgovernment actions.

If any price, quotation, price evaluation or other pricing source is not readily available whenthe NAV is calculated, if the Fund cannot obtain price evaluations from a pricing service orfrom more than one dealer for an investment within a reasonable period of time as set forth inthe Fund’s valuation policies and procedures, or if information furnished by a pricing service,in the opinion of the valuation committee (“Valuation Committee”), is deemed not


representative of the fair value of such security, the Fund uses the fair value of the investmentdetermined in accordance with the procedures described below. There can be no assurancethat the Fund could obtain the fair value assigned to an investment if it sold the investment atapproximately the time at which the Fund determines its NAV per share.

Fair Valuation ProceduresThe Trustees have ultimate responsibility for determining the fair value of investments forwhich market quotations are not readily available. The Trustees have appointed a ValuationCommittee comprised of officers of the Fund, Federated Investment Management Company(the “Adviser”), and certain of the Adviser’s affiliated companies to assist in determining fairvalue and in overseeing the calculation of the NAV. The Trustees have also authorized the useof pricing services recommended by the Valuation Committee to provide fair value evaluationsof the current value of certain investments for purposes of calculating the NAV. The ValuationCommittee employs various methods for reviewing third-party pricing-service evaluationsincluding periodic reviews of third-party pricing services’ policies, procedures and valuationmethods (including key inputs, methods, models and assumptions), transactional back-testing,comparisons of evaluations of different pricing services, and review of price challenges by theAdviser based on recent market activity. In the event that market quotations and priceevaluations are not available for an investment, the Valuation Committee determines the fairvalue of the investment in accordance with procedures adopted by the Trustees. The Trusteesperiodically review and approve the fair valuations made by the Valuation Committee and anychanges made to the procedures.

Factors considered by pricing services in evaluating an investment include the yields orprices of investments of comparable quality, coupon, maturity, call rights and other potentialprepayments, terms and type, reported transactions, indications as to values from dealers andgeneral market conditions. Some pricing services provide a single price evaluation reflectingthe bid-side of the market for an investment (a “bid” evaluation). Other pricing services offerboth bid evaluations and price evaluations indicative of a price between the prices bid andasked for the investment (a “mid” evaluation). The Fund normally uses bid evaluations for anyU.S. Treasury and Agency securities, mortgage-backed securities and municipal securities. TheFund normally uses mid evaluations for any other types of fixed-income securities and anyOTC derivative contracts. In the event that market quotations and price evaluations are notavailable for an investment, the fair value of the investment is determined in accordance withprocedures adopted by the Trustees.

Repurchase AgreementsThe Fund may invest in repurchase agreements for short-term liquidity purposes. It is thepolicy of the Fund to require the other party to a repurchase agreement to transfer to theFund’s custodian or sub-custodian eligible securities or cash with a market value (aftertransaction costs) at least equal to the repurchase price to be paid under the repurchaseagreement. 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 thoseterms are defined in the Uniform Commercial Code. The Fund has established procedures formonitoring the market value of the transferred securities and requiring the transfer ofadditional eligible securities if necessary to equal at least the repurchase price. Theseprocedures also allow the other party to require securities to be transferred from the accountto the extent that their market value exceeds the repurchase price or in exchange for othereligible securities of equivalent market value.


The insolvency of the other party or other failure to repurchase the securities may delay thedisposition of the underlying securities or cause the Fund to receive less than the fullrepurchase price. Under the terms of the repurchase agreement, any amounts received by theFund in excess of the repurchase price and related transaction costs must be remitted to theother party.

The Fund may enter into repurchase agreements in which eligible securities are transferredinto joint trading accounts maintained by the custodian or sub-custodian for investmentcompanies and other clients advised by the Fund’s Adviser and its affiliates. The Fund willparticipate on a pro rata basis with the other investment companies and clients in its share ofthe securities transferred under such repurchase agreements and in its share of proceedsfrom any repurchase or other disposition of such securities.

Investment Income, Gains and Losses, Expenses and DistributionsInvestment transactions are accounted for on a trade-date basis. Realized gains and lossesfrom investment transactions are recorded on an identified-cost basis. Interest income andexpenses are accrued daily. Dividend income and distributions to shareholders are recordedon the ex-dividend date. Distributions of net investment income, if any, are declared daily andpaid monthly. Amortization/accretion of premium and discount is included in investmentincome. Gains and losses realized on principal payment of mortgage-backed securities(paydown gains and losses) are classified as part of investment income. Investment income,realized and unrealized gains and losses, and certain fund-level expenses are allocated toeach class based on relative average daily net assets, except that select classes will bearcertain expenses unique to those classes. The detail of the total fund expense waiver andreimbursements of $234,535 is disclosed in various locations in this Note 2 and 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 separateclass expenses.

Other Service FeesThe Fund may pay other service fees up to 0.25% of the average daily net assets of the Fund’sInstitutional Shares and Service Shares to unaffiliated financial intermediaries or to FederatedShareholder Services Company (FSSC) for providing services to shareholders and maintainingshareholder accounts. Subject to the terms described in the Expense Limitation note, FSSCmay voluntarily reimburse the Fund for other service fees. For the six months endedFebruary 29, 2020, other service fees for the Fund were as follows:

Other ServiceFees Incurred

Service Shares $116,163

Federal TaxesIt is the Fund’s policy to comply with the Subchapter M provision of the Internal Revenue Code(the “Code”) and to distribute to shareholders each year substantially all of its income.Accordingly, no provision for federal income tax is necessary. As of and during the six monthsended February 29, 2020, the Fund did not have a liability for any uncertain tax positions. TheFund recognizes interest and penalties, if any, related to tax liabilities as income tax expense inthe Statement of Operations. As of February 29, 2020, tax years 2016 through 2019 remainsubject to examination by the Fund’s major tax jurisdictions, which include the United States ofAmerica and the Commonwealth of Massachusetts.


When-Issued and Delayed-Delivery TransactionsThe Fund may engage in when-issued or delayed-delivery transactions. The Fund recordswhen-issued securities on the trade date and maintains security positions such that sufficientliquid assets will be available to make payment for the securities purchased. Securitiespurchased on a when-issued or delayed-delivery basis are marked to market daily and beginearning interest on the settlement date. Losses may occur on these transactions due tochanges in market conditions or the failure of counterparties to perform under the contract.

Dollar-Roll TransactionsThe Fund engages in dollar-roll transactions in which the Fund sells mortgage-backedsecurities with a commitment to buy similar (same type, coupon and maturity), but notidentical mortgage-backed securities on a future date. Both securities involved are TBAmortgage-backed securities. The Fund treats dollar-roll transactions as purchases and sales.Dollar-rolls are subject to interest rate risks and credit risks.

Restricted SecuritiesThe Fund may purchase securities which are considered restricted. Restricted securities aresecurities that either: (a) cannot be offered for public sale without first being registered, orbeing able to take advantage of an exemption from registration, under the Securities Act of1933; or (b) are subject to contractual restrictions on public sales. In some cases, when asecurity cannot be offered for public sale without first being registered, the issuer of therestricted 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 thesecurities. Many such restricted securities may be resold in the secondary market intransactions exempt from registration. Restricted securities may be determined to be liquidunder criteria established by the Trustees. The Fund will not incur any registration costs uponsuch resales. The Fund’s restricted securities, like other securities, are priced in accordancewith procedures established by and under the general supervision of the Trustees.

OtherThe preparation of financial statements in conformity with GAAP requires management tomake estimates and assumptions that affect the amounts of assets, liabilities, expenses andrevenues reported in the financial statements. Actual results could differ from those estimated.The Fund applies investment company accounting and reporting guidance.

3. SHARES OF BENEFICIAL INTERESTThe following tables summarize share activity:

Six Months Ended2/29/2020

Period Ended8/31/20191

Institutional Shares: Shares Amount Shares Amount

Shares sold 9,413,901 $ 90,962,977 804,060 $7,767,221

Shares issued to shareholders in payment ofdistributions declared 24,733 239,285 606 5,857

Shares redeemed (2,948,695) (28,500,152) (415) (4,006)

NET CHANGE RESULTING FROMINSTITUTIONAL SHARES TRANSACTIONS 6,489,939 $ 62,702,110 804,251 $7,769,072


Six Months Ended2/29/2020

Year Ended8/31/20192

Service Shares: Shares Amount Shares Amount

Shares sold 1,337,290 $ 12,930,355 4,333,733 $ 41,800,616

Shares issued to shareholders in payment ofdistributions declared 66,839 646,629 161,272 1,555,708

Shares redeemed (5,428,631) (52,464,672) (7,507,588) (72,368,678)

NET CHANGE RESULTING FROMSERVICE SHARES TRANSACTIONS (4,024,502) $(38,887,688) (3,012,583) $(29,012,354)

Six Months Ended

2/29/2020Year Ended8/31/20193

Service Shares: Shares Amount Shares Amount

Shares sold — $ — 41,310 $ 397,811

Shares issued to shareholders in payment ofdistributions declared — — 19,116 184,346

Shares redeemed — — (1,165,216) (11,264,164)

NET CHANGE RESULTING FROMSERVICE SHARES TRANSACTIONS — $ — (1,104,790) $(10,682,007)

NET CHANGE RESULTING FROMTOTAL FUND SHARE TRANSACTIONS 2,465,437 $23,814,422 (3,313,122) $(31,925,289)

1 Represents totals for the period from August 5, 2019 (commencement of operations) toAugust 31, 2019.

2 Represents totals for the Fund’s previously existing Institutional Shares from September 1, 2018 toAugust 2, 2019 and for the Fund’s newly re-designated Service Shares from August 5, 2019 toAugust 31, 2019.

3 Represents totals for the Fund’s previously existing Service Shares for the period fromSeptember 1, 2018 to August 2, 2019, prior to its conversion into the newly re-designatedService Shares.

4. FEDERAL TAX INFORMATIONAt February 29, 2020, the cost of investments for federal tax purposes was $157,266,095. Thenet unrealized appreciation of investments for federal tax purposes was $1,358,275. Thisconsists of net unrealized appreciation from investments for those securities having an excessof value over cost of $1,637,934 and net unrealized depreciation from investments for thosesecurities having an excess of cost over value of $279,659.

As of August 31, 2019, the Fund had a capital loss carryforward of $1,689,838 which willreduce the Fund’s taxable income arising from future net realized gains on investments, if any,to the extent permitted by the Code, thereby reducing the amount of distributions toshareholders which would otherwise be necessary to relieve the Fund of any liability forfederal income tax. Pursuant to the Code, these net capital losses retain their character aseither short-term or long-term and do not expire.

The following schedule summarizes the Fund’s capital loss carryforwards:

Short-Term Long-Term Total

$1,335,541 $354,297 $1,689,838


5. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONSWITH AFFILIATESEffective August 5, 2019, the advisory agreement between the Fund and the Adviser providesfor an annual fee equal to 0.30% of the Fund’s average daily net assets. Prior toAugust 5, 2019, the annual advisory fee was 0.60% of the Fund’s average daily net assets.Subject to the terms described in the Expense Limitation note, the Adviser may voluntarilychoose to waive any portion of its fee. For the six months ended February 29, 2020, the Adviservoluntarily waived $215,788 of its fee and voluntarily reimbursed $17,214 of otheroperating expenses.

The Adviser has agreed to reimburse the Fund for certain investment adviser fees as aresult of transactions in other affiliated investment companies. For the six months endedFebruary 29, 2020, the Adviser reimbursed $1,533.

Administrative FeeFederated Administrative Services (FAS), under the Administrative Services Agreement,provides the Fund with administrative personnel and services. For purposes of determining theappropriate rate breakpoint, “Investment Complex” is defined as all of the Federated HermesFunds subject to a fee under the Administrative Services Agreement. The fee paid to FAS isbased on the average daily net assets of the Investment Complex as specified below:

Administrative FeeAverage Daily Net Assetsof 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 towaive any portion of its fee. For the six months ended February 29, 2020, the annualized feepaid to FAS was 0.079% of average daily net assets of the Fund.

In addition, FAS may charge certain out-of-pocket expenses to the Fund.

Distribution Services FeePrior to August 5, 2019, the Fund adopted a Distribution Plan (the “Plan”) pursuant to Rule12b-1 under the Act. Under the terms of the Plan, the Fund compensated Federated SecuritiesCorp. (FSC), the principal distributor, from the daily net assets of the Fund’s previously existingService Shares to finance activities intended to result in the sale of these shares. The Planprovided that the Fund may incur distribution expenses at 0.05% of average daily net assets,annually, to compensate FSC. FSC may voluntarily choose to waive any portion of its fee. WhenFSC receives fees, it may pay some or all of them to financial intermediaries whose customerspurchased shares.

The Fund’s newly re-designated Service Shares are not subject to the Plan.

Other Service FeesFor the six months ended February 29, 2020, FSSC received $375 of the other service feesdisclosed in Note 2.

Expense LimitationThe Adviser and certain of its affiliates (which may include FSC, FAS and FSSC) on their owninitiative have agreed to waive certain amounts of their respective fees and/or reimburseexpenses. Effective November 1, 2019, total annual fund operating expenses (as shown in thefinancial highlights, excluding interest expense, extraordinary expenses and proxy-related


expenses paid by the Fund, if any) paid by the Fund’s Institutional Shares and Service Shares(after the voluntary waivers and/or reimbursements) will not exceed 0.30% and 0.55% (the“Fee Limit”), respectively, up to but not including the later of (the “Termination Date”):(a) November 1, 2020; or (b) the date of the Fund’s next effective Prospectus. While theAdviser and its applicable affiliates currently do not anticipate terminating or increasing thesearrangements prior to the Termination Date, these arrangements may only be terminated orthe Fee Limit increased prior to the Termination Date with the agreement of the Trustees.

Directors’/Trustees’ and Miscellaneous FeesCertain Officers and Trustees of the Fund are Officers and Directors or Trustees of certain ofthe above companies. To efficiently facilitate payment, Independent Directors’/Trustees’ feesand certain expenses related to conducting meetings of the Directors/Trustees and othermiscellaneous expenses are paid by an affiliate of the Adviser which in due course arereimbursed by the Fund. These expenses related to conducting meetings of the Directors/Trustees and other miscellaneous expenses may be included in Accrued and MiscellaneousExpenses on the Statement of Assets and Liabilities and Statement of Operations, respectively.

6. INVESTMENT TRANSACTIONSPurchases and sales of investments, excluding long-term U.S. government securities andshort-term obligations, for the six months ended February 29, 2020, were as follows:

Purchases $54,372,041

Sales $13,224,710

7. LINE OF CREDITThe Fund participates with certain other Federated Hermes Funds, on a several basis, in an upto $500,000,000 unsecured, 364-day, committed, revolving line of credit (LOC) agreement. TheLOC was made available to finance temporarily the repurchase or redemption of shares of theFund, 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 LOCif an inter-fund loan is outstanding. The Fund’s ability to borrow under the LOC also is subjectto the limitations of the Act and various conditions precedent that must be satisfied before theFund can borrow. Loans under the LOC are charged interest at a fluctuating rate per annumequal to the highest, on any day, of (a) (i) the federal funds effective rate, (ii) the one monthLondon Interbank Offered Rate (LIBOR), and (iii) 0.0%, plus (b) a margin. The LOC alsorequires the Fund to pay, quarterly in arrears and at maturity, its pro rata share of acommitment fee based on the amount of the lenders’ commitment that has not been utilized.

As of February 29, 2020, the Fund had no outstanding loans. During the six months endedFebruary 29, 2020, the Fund did not utilize the LOC.

8. INTERFUND LENDINGPursuant 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 aninterfund lending program. This program provides an alternative credit facility allowing theFund to borrow from other participating affiliated funds. As of February 29, 2020, there were nooutstanding loans. During the six months ended February 29, 2020, the program wasnot utilized.


9. OTHER MATTERSAn outbreak of respiratory disease caused by a novel coronavirus was first detected in Chinain December 2019 and subsequently spread internationally. As of the date of the issuance ofthese financial statements, this coronavirus has resulted in closing borders, enhanced healthscreenings, healthcare service preparation and delivery, quarantines, cancellations, disruptionsto supply chains, workflow operations and customer activity, as well as general concern anduncertainty. The impact of this coronavirus may be short term or may last for an extendedperiod of time and result in a substantial economic downturn. The impact of this outbreak, andother epidemics and pandemics that may arise in the future, could negatively affect theworldwide economy, as well as the economies of individual countries, individual companies(including Fund service providers) and the market in general in significant and unforeseenways. Any such impact could adversely affect the Fund’s performance.


Shareholder Expense Example (unaudited)As a shareholder of the Fund, you incur ongoing costs, including managementfees and to the extent applicable, distribution (12b-1) fees and/or other servicefees and other Fund expenses. This Example is intended to help you tounderstand your ongoing costs (in dollars) of investing in the Fund and tocompare these costs with the ongoing costs of investing in other mutual funds. Itis based on an investment of $1,000 invested at the beginning of the period andheld for the entire period from September 1, 2019 to February 29, 2020.

ACTUAL EXPENSES

The first section of the table below provides information about actual accountvalues and actual expenses. You may use the information in this section, togetherwith the amount you invested, to estimate the expenses that you incurred overthe period. Simply divide your account value by $1,000 (for example, an $8,600account value divided by $1,000 = 8.6), then multiply the result by the numberin the first section under the heading entitled “Expenses Paid During Period”to estimate the expenses attributable to your investment during this period.

HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES

The second section of the table below provides information about hypotheticalaccount values and hypothetical expenses based on the Fund’s actual expenseratio and an assumed rate of return of 5% per year before expenses, which is notthe Fund’s actual return. Thus, you should not use the hypothetical accountvalues and expenses to estimate the actual ending account balance or yourexpenses for the period. Rather, these figures are required to be provided toenable you to compare the ongoing costs of investing in the Fund with otherfunds. To do so, compare this 5% hypothetical example with the 5%hypothetical examples that appear in the shareholder reports of the other funds.


Please note that the expenses shown in the table are meant to highlight yourongoing costs only. Therefore, the second section of the table is useful incomparing ongoing costs only, and will not help you determine the relative totalcosts of owning different funds.

BeginningAccount Value

9/1/2019

EndingAccount Value

2/29/2020Expenses PaidDuring Period1

Actual:

Institutional Shares $1,000 $1,015.00 $1.50

Service Shares $1,000 $1,013.80 $2.70

Hypothetical (assuming a 5% returnbefore expenses):

Institutional Shares $1,000 $1,023.40 $1.51

Service Shares $1,000 $1,022.20 $2.72

1 Expenses are equal to the Fund’s annualized net expense ratios, multiplied by the average account valueover the period, multiplied by 182/366 (to reflect the one-half-year period). The annualized net expenseratios are as follows: Institutional Shares 0.30%

Service Shares 0.54%


Evaluation and Approval of AdvisoryContract – May 2019FEDERATED ADJUSTABLE RATE SECURITIES FUND (THE “FUND”)

At its meetings in May 2019, the Fund’s Board of Trustees (the “Board”),including a majority of those Trustees who are not “interested persons” of theFund, as defined in the Investment Company Act of 1940 (the “IndependentTrustees”), reviewed and unanimously approved the continuation of the Fund’sinvestment advisory contract for an additional one-year term. The Board’sdecision regarding the contract reflects the exercise of its business judgment afterconsidering all of the information received on whether to continue theexisting arrangements.

At the request of the Independent Trustees, the Fund’s Chief ComplianceOfficer (the CCO) furnished to the Board in advance of its May 2019 meetingsan independent written evaluation presenting on the topics discussed below.The Board considered the CCO’s independent written evaluation (the “CCOFee Evaluation Report”), along with other information, in evaluating thereasonableness of the Fund’s management fee and in deciding to approve thecontinuation of the investment advisory contract. The CCO, in preparing theCCO Fee Evaluation Report, has the authority to retain consultants, experts orstaff as reasonably necessary to assist in the performance of his duties, reportsdirectly to the Board, and can be terminated only with the approval of amajority of the Independent Trustees. At the request of the IndependentTrustees, the CCO Fee Evaluation Report followed the same general approachand covered the same topics as that of the report that had previously beendelivered by the CCO in his capacity as “Senior Officer,” prior to theelimination of the Senior Officer position in December 2017.

The Board also considered judicial decisions concerning allegedly excessiveinvestment advisory fees in making its decision. Using these judicial decisions asa guide, the Board observed that the following factors may be relevant to anadviser’s fiduciary duty with respect to its receipt of compensation from a fund:(1) the nature and quality of the services provided by an adviser to a fund and itsshareholders (including the performance of the fund, its benchmark, andcomparable funds); (2) an adviser’s cost of providing the services (including theprofitability to an adviser of providing advisory services to a fund); (3) the extentto which an adviser may realize “economies of scale” as a fund grows largerand, if such economies of scale exist, whether they have been shared with a fundand its shareholders or the family of funds; (4) any “fall-out” financial benefitsthat accrue to an adviser because of its relationship with a fund (includingresearch services received from brokers that execute fund trades and any feespaid to affiliates of an adviser for services rendered to a fund); (5) comparativefee and expense structures (including a comparison of fees paid to an adviserwith those paid by similar funds both internally and externally as well asmanagement fees charged to institutional and other advisory clients of the


adviser for what might be viewed as like services); and (6) the extent of care,conscientiousness and independence with which the fund’s board membersperform their duties and their expertise (including whether they are fullyinformed about all facts the board deems relevant to its consideration of anadviser’s services and fees). The Board noted that the Securities and ExchangeCommission (SEC) disclosure requirements regarding the basis for the Board’sapproval of the Fund’s investment advisory contract generally align with thefactors listed above. The Board was aware of these factors and was guided bythem in its review of the Fund’s investment advisory contract to the extent itconsidered them to be appropriate and relevant, as discussed further below.

The Board considered and weighed these factors in light of its substantialaccumulated experience in governing the Fund and working with FederatedInvestment Management Company (the “Adviser”) and its affiliates(collectively, “Federated”) on matters relating to the funds advised by Federated(each, a “Federated Fund”). The Independent Trustees were assisted in theirdeliberations by independent legal counsel.

In addition to the extensive materials that comprise and accompany theCCO Fee Evaluation Report, the Board received detailed information aboutthe Fund and the Federated organization throughout the year, and inconnection with its May meetings at which the Board’s formal approval of theadvisory and subadvisory contracts occurred. In this regard, Federated providedmuch of this information at each regular meeting of the Board, and furnishedadditional information specifically in connection with the May meetings. In themonths preceding the May meetings, the Board requested and reviewed writtenmaterials prepared by Federated in response to requests on behalf of theIndependent Trustees encompassing a wide variety of topics. At the Maymeetings, in addition to meeting in separate sessions of the IndependentTrustees without management present, senior management of the Adviser alsomet with the Independent Trustees and their counsel to discuss the materialspresented and such additional matters as the Independent Trustees deemedreasonably necessary to evaluate the advisory and subadvisory contracts.Between regularly scheduled meetings, the Board also received information onparticular matters as the need arose.

The Board’s consideration of the investment advisory contract includedreview of the CCO Fee Evaluation Report, accompanying data and additionalinformation covering the following matters, among others: the Adviser’sinvestment philosophy, revenue, profitability, personnel and processes; investmentand operating strategies; the Fund’s short-term and long-term performance (inabsolute terms, both on a gross basis and net of expenses, as well as in termsrelative to its particular investment program and certain competitor or “peergroup” funds and/or other benchmarks, as appropriate) and comments on thereasons for performance; the Fund’s investment objectives; the Fund’s expenses,including the advisory fee and the overall expense structure of the Fund (bothin absolute terms and relative to similar and/or competing funds), with due


regard for contractual or voluntary expense limitations; the use and allocation ofbrokerage commissions derived from trading the Fund’s portfolio securities (ifany); and the nature, quality and extent of the advisory and other servicesprovided to the Fund by the Adviser and its affiliates. The Board also consideredthe preferences and expectations of Fund shareholders; the entrepreneurial andother risks assumed by the Adviser in sponsoring the Fund; the continuing stateof competition in the mutual fund industry and market practices; the range ofcomparable fees for similar funds in the mutual fund industry; the Fund’srelationship to the Federated Funds which include a comprehensive array offunds with different investment objectives, policies and strategies which aregenerally available for exchange without the incurrence of additional salescharges; compliance and audit reports concerning the Federated Funds and theFederated companies that service them (including communications fromregulatory agencies), as well as Federated’s responses to any issues raised therein;and relevant developments in the mutual fund industry and how the FederatedFunds and/or Federated are responding to them. The Board’s evaluation processis evolutionary. The criteria considered and the emphasis placed on relevantcriteria change in recognition of changing circumstances in the mutualfund marketplace.

While mindful that courts have cautioned against giving too much weight tocomparative information concerning fees charged by other advisers formanaging funds with comparable investment programs, the Board has found theuse of such comparisons to be relevant to its deliberations. In this regard, theBoard was presented with, and considered, information regarding thecontractual advisory fee rates, net advisory fee rates, total expense ratios andeach element of the Fund’s total expense ratio (i.e., gross and net advisory fees,custody fees, portfolio accounting fees and transfer agency fees) relative to anappropriate group of peer funds compiled by Federated using data supplied byindependent fund ranking organizations (the “Peer Group”). The Boardreceived a description of the composition and methodology used to select thePeer Group. The Board focused on comparisons with other similar mutual fundsmore heavily than non-mutual fund products or services because it is believedthat they are more relevant. For example, other mutual funds are the productsmost like the Fund, in that they are readily available to Fund shareholders asalternative investment vehicles. Also, they are the type of investment vehicle, infact, chosen and maintained by the Fund’s investors. The range of their fees andexpenses, therefore, appears to be a relevant indicator of what consumers havefound to be reasonable in the marketplace in which the Fund competes.

The Board reviewed the contractual advisory fee rate, net advisory fee rateand other expenses of the Fund and noted the position of the Fund’s fee ratesrelative to its Peer Group. In this regard, the Board noted that the contractualadvisory fee rate was above the median of the relevant Peer Group, but theBoard noted the applicable waivers and reimbursements, and that the overall


expense structure of the Fund remained competitive in the context of otherfactors considered by the Board. The Board considered the fact that the Advisercommitted to permanently reduce fees of the Fund in an agreed upon amount,such reduction to be effective August 2, 2019.

For comparison, the CCO reviewed the fees charged by Federated forproviding advisory services to products other than the Federated Funds(e.g., institutional separate accounts and third-party unaffiliated mutual funds forwhich Federated serves as sub-adviser) (referenced to as “Comparable Funds/Accounts”). With respect to Comparable Funds/Accounts other than third-party mutual funds, the CCO concluded that they are inherently differentproducts. Those differences include, but are not limited to, different types oftargeted investors; different applicable laws and regulations; different legalstructures; different average account sizes and portfolio management techniquesmade necessary by different cash flows and different associated costs; and thetime spent by portfolio managers and their teams, as well as personnel in theFunds Financial Services, Legal, Compliance and Risk Managementdepartments, in reviewing securities pricing, addressing different administrativeresponsibilities, addressing different degrees of risk associated with managementand a variety of different costs. The CCO also reviewed the differences in thenature of the services required for Federated to manage its proprietary mutualfund business versus managing a discrete pool of assets as a sub-adviser toanother institution’s mutual fund, and that Federated generally performssignificant additional services and assumes substantially greater risks in managingthe Fund and other Federated Funds than in its role as sub-adviser to anunaffiliated third-party mutual fund. The CCO did not consider the fees forproviding advisory services to Comparable Funds/Accounts to be determinativein judging the appropriateness of the Federated Funds’ advisory fees.

Following such evaluation, and full deliberations, the Board concluded thatthe fees and expenses of the Fund are reasonable and supported renewal of theFund’s investment advisory contract.

The Board considered the nature, extent and quality of the services providedto the Fund by the Adviser and the resources of the Adviser and its affiliatesdedicated to the Fund. In this regard, the Board evaluated, among other things,the Adviser’s personnel, experience, track record, financial resources, overallreputation and willingness to invest in personnel and infrastructure that benefitthe Fund. In addition, the Board reviewed the qualifications, backgrounds andresponsibilities of the portfolio management team primarily responsible for theday-to-day management of the Fund and the Adviser’s ability and experience inattracting and retaining qualified personnel to service the Fund. The Boardnoted the investment research and company engagement capabilities of theAdviser and its affiliates. The Board also noted the compliance program of theAdviser and the compliance-related resources provided to the Fund by theAdviser, including the Adviser’s commitment to respond to rulemakinginitiatives of the SEC. The Fund’s ability to deliver competitive performance


when compared to its Peer Group was also deemed to be relevant by the Boardas a useful indicator of how the Adviser is executing the Fund’s investmentprogram. The Adviser’s ability to execute this program was one of the Board’sconsiderations in reaching a conclusion that the nature, extent and quality of theAdviser’s investment management services warrant the continuation of theinvestment advisory contract.

In evaluating the Fund’s investment performance, the Board consideredperformance results in light of the Fund’s investment objective, strategies andrisks, as disclosed in the Fund’s prospectus. The Board considered detailedinvestment reports on the Fund’s performance that were provided to the Boardthroughout the year and in connection with the May meetings. The CCO alsoreviewed information regarding the performance of other mutual funds in thePeer Group, noting the CCO’s view that comparisons to fund peer groups maybe helpful, though not conclusive, in evaluating the performance of the Adviserin managing the Fund. The Board considered, in evaluating such comparisons,that in some cases there may be differences in the funds’ objectives orinvestment management techniques, or the costs to implement the funds, evenwithin the same Peer Group.

For the periods covered by the CCO Fee Evaluation Report, the Fund’sperformance for the one-year period was above the median of the relevant PeerGroup, and the Fund’s performance fell below the median of the relevant PeerGroup for the three-year and five-year periods. The Board discussed the Fund’sperformance with the Adviser and recognized the efforts being taken by theAdviser in the context of other factors considered relevant by the Board.

Following such evaluation, and full deliberations, the Board concluded thatthe performance of the Fund supported renewal of the Fund’s investmentadvisory contract.

The Board also received financial information about Federated, includinginformation regarding the compensation and ancillary (or “fall-out”) benefitsFederated derived from its relationships with the Federated Funds. Thisinformation covered not only the fees under the investment advisory contracts,but also fees received by Federated’s subsidiaries for providing other services tothe Federated Funds under separate contracts (e.g., for serving as the Federatedfunds’ administrator and distributor). In this regard, the Board considered thatcertain Federated subsidiaries provide distribution and shareholder services tothe Federated Funds, for which they may be compensated through distributionand servicing fees paid pursuant to Rule 12b-1 plans or otherwise. Theinformation also detailed any indirect benefit Federated may derive from itsreceipt of research services from brokers who execute Federated Fund trades. Inaddition, the Board considered the fact that, in order for a Federated Fund to becompetitive in the marketplace, the Adviser and its affiliates frequently waivedfees and/or reimbursed expenses and have disclosed to Federated Fund investorsand/or indicated to the Board their intention to do so in the future. Moreover,the Board receives regular reporting as to the institution, adjustment or


elimination of these voluntary waivers. The Board considered Federated’sprevious reductions in contractual management fees to certain Federated Fundsin response to the CCO’s recommendations in the prior year’s CCO FeeEvaluation Report.

In 2019, the Board approved a reduction of 30 basis points in the contractualadvisory fee.

Federated furnished information, requested by the CCO, that reportedrevenues on a fund-by-fund basis and made estimates of the allocation ofexpenses on a fund-by-fund basis, using allocation methodologies specified bythe CCO. The CCO noted that, while these cost allocation reports applyconsistent allocation processes, the inherent difficulties in allocating costscontinues to cause the CCO to question the precision of the process and toconclude that such reports may be unreliable, since a single change in anallocation estimate may dramatically alter the resulting estimate of cost and/orprofitability of a Federated Fund and may produce unintended consequences.The allocation information, including the CCO’s view that fund-by-fundestimations may be unreliable, was considered in the evaluation by the Board.

The Board and the CCO also reviewed information compiled by Federatedcomparing its profitability information to other publicly held fund managementcompanies, including information regarding profitability trends over time. In thisregard, the CCO concluded that Federated’s profit margins did not appear to beexcessive. The CCO also noted that Federated appeared financially sound, withthe resources necessary to fulfill its obligations under its contracts withthe Fund.

The CCO Fee Evaluation Report also discussed the notion of possiblerealization of “economies of scale” as a fund grows larger, the difficulties ofcalculating economies of scale at an individual fund level, and the extent towhich potential scale benefits are shared with shareholders. In this regard, theBoard considered that Federated has made significant and long-term investmentsin areas that support all of the Federated Funds, such as personnel and processesfor the portfolio management, shareholder services, compliance, internal auditand risk management functions, as well as systems technology (includingtechnology relating to cybersecurity) and that the benefits of these investments(as well as any economies of scale, should they exist) were likely to be sharedwith the Federated Fund family as a whole. The Board noted that Federated’sinvestments in these areas are extensive. In addition, the Board considered thatthe Adviser and its affiliates have frequently waived fees and/or reimbursedexpenses and that this has allowed potential economies of scale to be sharedwith shareholders. The Board also considered that such waivers andreimbursements can provide protection from an increase in expenses if aFederated Fund’s assets decline. Federated, as it does throughout the year, andspecifically in connection with the Board’s review of the advisory andsubadvisory contracts, furnished information relative to revenue sharing oradviser-paid fees. Federated and the CCO noted that this information should be


viewed to determine if there was an incentive to either not apply breakpoints, orto apply breakpoints at higher levels, and should not be viewed to determine theappropriateness of advisory fees. The Board also noted the absence of anyapplicable regulatory or industry guidelines on this subject, which (as discussedin the CCO Fee Evaluation Report) is compounded by the lack of anycommon industry practice or general pattern with respect to structuring fundadvisory fees with “breakpoints” that serve to reduce the fee as a fund attains acertain size.

The CCO stated that his observations and the information accompanying theCCO Fee Evaluation Report supported a finding by the Board that themanagement fee for the Fund was reasonable. Under these circumstances, nochanges were recommended to, and no objection was raised to the continuationof, the Fund’s investment advisory contract. The CCO also recognized that theBoard’s evaluation of the Federated Funds’ advisory and subadvisoryarrangements is a continuing and on-going process that is informed by theinformation that the Board requests and receives from management throughoutthe course of the year and, in this regard, the CCO noted certain items forfuture reporting to the Board or further consideration by management as theBoard continues its on-going oversight of the Federated Funds.

In its decision to continue an existing investment advisory contract, the Boardwas mindful of the potential disruptions of the Fund’s operations and variousrisks, uncertainties and other effects that could occur as a result of a decision toterminate or not renew an investment advisory contract. In particular, the Boardrecognized that many shareholders have invested in the Fund on the strength ofthe Adviser’s industry standing and reputation and with the expectation that theAdviser will have a continuing role in providing advisory services to the Fund.Thus, the Board’s approval of the investment advisory contract reflected the factthat it is the shareholders who have effectively selected the Adviser by virtue ofhaving invested in the Fund. The Board concluded that, in light of the factorssummarized above, including the nature, quality and scope of the servicesprovided to the Fund by the Adviser and its affiliates, continuation of theinvestment advisory contract was appropriate.

The Board based its decision to approve the investment advisory contract onthe totality of the circumstances and relevant factors and with a view to past andfuture long-term considerations. Not all of the factors and considerationsidentified above were necessarily relevant to the Fund, nor did the Boardconsider any one of them to be determinative. With respect to the factors thatwere relevant, the Board’s decision to approve the continuation of the contractreflects its view that Federated’s performance and actions provided a satisfactorybasis to support the decision to continue the existing arrangement.


Voting Proxies on Fund Portfolio SecuritiesA description of the policies and procedures that the Fund uses to determinehow to vote proxies, if any, relating to securities held in the Fund’s portfolio isavailable, without charge and upon request, by calling 1-800-341-7400. A reporton “Form N-PX” of how the Fund voted any such proxies during the mostrecent 12-month period ended June 30 is available via the Proxy Voting Record(Form N-PX) link associated with the Fund and share class name atFederatedInvestors.com/FundInformation. Form N-PX filings are also availableat the SEC’s website at sec.gov.

Quarterly Portfolio ScheduleEach fiscal quarter, the Fund will file with the SEC a complete schedule of itsmonthly portfolio holdings on “Form N-PORT.” The Fund’s holdings as ofthe end of the third month of every fiscal quarter, as reported onForm N-PORT, will be publicly available on the SEC’s website at sec.govwithin 60 days of the end of the fiscal quarter upon filing. You may also accessthis information via the link to the Fund and share class nameat FederatedInvestors.com.


Mutual funds are not bank deposits or obligations, are not guaranteed by any bank andare not insured or guaranteed by the U.S. government, the Federal Deposit InsuranceCorporation, the Federal Reserve Board or any other government agency. Investment inmutual funds involves investment risk, including the possible loss of principal.

This Report is authorized for distribution to prospective investors only whenpreceded or accompanied by the Fund’s Prospectus, which contains factsconcerning its objective and policies, management fees, expenses andother information.

IMPORTANT NOTICE ABOUT FUND DOCUMENT DELIVERY In an effort to reduce costs and avoid duplicate mailings, the Fund(s) intendto deliver a single copy of certain documents to each household in whichmore than one shareholder of the Fund(s) resides (so-called“householding”), as permitted by applicable rules. The Fund’s“householding” program covers its/their Prospectus and Statement ofAdditional Information, and supplements to each, as well as Semi-Annualand Annual Shareholder Reports and any Proxies or information statements.Shareholders must give their written consent to participate in the“householding” program. The Fund is also permitted to treat a shareholderas having given consent (“implied consent”) if (i) shareholders with the samelast name, or believed to be members of the same family, reside at the samestreet address or receive mail at the same post office box, (ii) the Fund givesnotice of its intent to “household” at least sixty (60) days before it begins“householding” and (iii) none of the shareholders in the household havenotified the Fund(s) or their agent of the desire to “opt out” of“householding.” Shareholders who have granted written consent, or havebeen deemed to have granted implied consent, can revoke that consent andopt out of “householding” at any time: shareholders who purchased sharesthrough an intermediary should contact their representative; othershareholders may call the Fund at 1-800-341-7400.


Notes

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Federated Adjustable Rate Securities FundFederated Hermes Funds4000 Ericsson DriveWarrendale, PA 15086-7561

Contact us at FederatedInvestors.comor call 1-800-341-7400.

Federated Securities Corp., Distributor

CUSIP 314082306CUSIP 314082108

8040404 (4/20)

© 2020 Federated Hermes, Inc.

Federated Adjustable Rate Securities Fund...Portfolio of Investments February 29, 2020 (unaudited)...

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