Federated Hermes SDG Engagement High Yield Credit Fund
Portfolio of Investments
November 30, 2022 (unaudited)
Foreign Currency Par Amount or Principal Amount | Value in U.S. Dollars | ||
CORPORATE BONDS—69.5% | |||
Automotive—2.6% | |||
EUR 230,000 | Faurecia, Sr. Unsecd. Note, 2.375%, 6/15/2027 | $201,069 | |
100,000 | Goodyear Europe B.V., Sr. Unsecd. Note, REGS, 2.750%, 8/15/2028 | 85,566 | |
250,000 | LKQ Italia Bondco Di Lkq, Sr. Unsecd. Note, REGS, 3.875%, 4/1/2024 | 260,579 | |
525,000 | Volvo Car AB, Sr. Unsecd. Note, Series EMTN, 2.000%, 1/24/2025 | 523,791 | |
TOTAL | 1,071,005 | ||
Banking—10.5% | |||
200,000 | 1 | ABN Amro Bank NV, Jr. Sub. Deb., 4.750% (5YR EUR Swap Annual +3.898%), 9/22/2027 | 179,067 |
$200,000 | Akbank TAS, Sr. Unsecd. Note, REGS, 5.125%, 3/31/2025 | 190,552 | |
250,000 | 1 | Ally Financial, Inc., Jr. Sub. Note, Series C, 4.700% (7-year Constant Maturity Treasury +3.481%), 5/15/2028 | 167,119 |
EUR 100,000 | Alpha Bank AE, Sub., 5.500% (5YR EUR Swap Annual +5.823%), 6/11/2031 | 84,163 | |
$200,000 | 1 | Argentum Netherlands B.V., Sub., 4.625% (5-year Constant Maturity Treasury +2.764%), 8/15/2027 | 163,640 |
200,000 | 1 | Banco Mercantil De Norte, Jr. Sub. Deb., REGS, 7.500% (Prime +5.470%), 6/27/2029 | 175,478 |
EUR 300,000 | Bank of Ireland Group PLC, Sub. Note, Series EMTN, 1.375% (6-month Tbill Auction High Disc Rate +1.650%), 8/11/2031 | 262,639 | |
GBP 100,000 | Bank of Ireland Group PLC, Sub., Series EMTN, 7.594%, 12/6/2032 | 119,496 | |
$200,000 | 1 | BNP Paribas, Jr. Sub. Note, REGS, 4.500% (5-year Constant Maturity Treasury +2.944%), 2/25/2030 | 147,646 |
200,000 | 1 | BNP Paribas, Jr. Sub. Note, REGS, 4.625% (5-year Constant Maturity Treasury +3.340%), 2/25/2031 | 152,500 |
EUR 200,000 | Cellnex Finance Co. SA, Series EMTN, 2.000%, 2/15/2033 | 159,163 | |
$175,000 | CIT Group, Inc., Sub., 6.125%, 3/9/2028 | 179,714 | |
EUR 400,000 | 1 | Commerzbank AG, Jr. Sub. Note, 4.250% (5YR EUR Swap Annual +4.387%), 10/9/2027 | 309,756 |
200,000 | 1 | Cooperatieve Rabobank UA, Jr. Sub. Note, 3.250% (5YR EUR Swap Annual +3.702%), 12/29/2026 | 179,504 |
$400,000 | 1 | Credit Suisse Group AG, Jr. Sub. Note, REGS, 4.500% (5-year Constant Maturity Treasury +3.554%), 9/3/2030 | 195,460 |
EUR 100,000 | Deutsche Bank AG, Sr. Unsecd. Note, Series EMTN, 5.625% (5YR EUR Swap Annual +6.000%), 5/19/2031 | 102,929 | |
$200,000 | 1 | DNB Bank ASA, Jr. Sub. Note, Series -, 4.875% (5-year Constant Maturity Treasury +3.140%), 11/12/2024 | 189,669 |
300,000 | 1 | ING Groep N.V., Jr. Sub. Note, Series NC10, 4.250% (6-month Tbill Auction High Disc Rate +2.862%), 5/16/2031 | 204,750 |
EUR 480,000 | 1 | Intesa Sanpaolo SpA, Jr. Sub. Note, 4.125% (5YR EUR Swap Annual +4.274%), 2/27/2030 | 371,216 |
$200,000 | Itau Unibanco Holding SA, Sub. Deb., REGS, 4.500% (Prime +2.822%), 11/21/2029 | 191,000 | |
400,000 | 1 | NatWest Markets plc, Jr. Sub. Note, 4.600% (5-year Constant Maturity Treasury +3.100%), 6/28/2031 | 281,432 |
200,000 | 1 | UBS Group AG, Jr. Sub. Note, REGS, 4.375%, 2/10/2031 | 148,750 |
EUR 200,000 | 1 | UniCredit SpA, Jr. Sub. Note, Series EMTN, 3.875%, 6/3/2027 | 159,733 |
TOTAL | 4,315,376 | ||
Basic Industries—8.6% | |||
$325,000 | Alcoa Nederland Holding B.V., Sr. Unsecd. Note, 144A, 4.125%, 3/31/2029 | 285,415 | |
250,000 | Ashland LLC, Sr. Unsecd. Note, 144A, 3.375%, 9/1/2031 | 200,660 | |
EUR 150,000 | Ashland Services B.V., Sr. Unsecd. Note, REGS, 2.000%, 1/30/2028 | 132,755 | |
$400,000 | Cemex SAB de CV, REGS, 3.875%, 7/11/2031 | 325,853 | |
45,000 | CF Industries Holdings, Inc., Sr. Unsecd. Note, 4.950%, 6/1/2043 | 39,202 | |
45,000 | CF Industries Holdings, Inc., Sr. Unsecd. Note, 5.150%, 3/15/2034 | 43,000 | |
40,000 | Cleveland-Cliffs, Inc., Sr. Unsecd. Note, 7.000%, 3/15/2027 | 37,286 | |
EUR 100,000 | Graphic Packaging International Corp., Sr. Unsecd. Note, REGS, 2.625%, 2/1/2029 | 90,427 | |
100,000 | Graphic Packaging International, LLC, Unsecd. Note, 144A, 2.625%, 2/1/2029 | 90,427 | |
$200,000 | GUSAP III L.P., Sr. Unsecd. Note, REGS, 4.250%, 1/21/2030 | 181,433 | |
320,000 | Huntsman International LLC, Sr. Unsecd. Note, 2.950%, 6/15/2031 | 251,767 | |
116,000 | Novelis Corporation, Sr. Unsecd. Note, 144A, 3.875%, 8/15/2031 | 95,258 | |
110,000 | Novelis Corporation, Sr. Unsecd. Note, 144A, 4.750%, 1/30/2030 | 97,938 |
1
Foreign Currency Par Amount or Principal Amount | Value in U.S. Dollars | ||
CORPORATE BONDS—continued | |||
Basic Industries—continued | |||
EUR 100,000 | Novelis Sheet Ingot Gmbh, Sr. Unsecd. Note, REGS, 3.375%, 4/15/2029 | $90,178 | |
300,000 | Olympus Water US Holding Corp., Sr. Unsecd. Note, REGS, 5.375%, 10/1/2029 | 227,513 | |
$200,000 | Orbia Advance Corp. SAB de CV, Sr. Unsecd. Note, REGS, 2.875%, 5/11/2031 | 157,835 | |
EUR 100,000 | Sappi Papier Holding GmbH, Sr. Unsecd. Note, REGS, 3.125%, 4/15/2026 | 97,832 | |
300,000 | 1 | Solvay S.A., Jr. Sub. Note, 2.500% (5YR EUR Swap Annual +2.977%), 12/2/2025 | 273,134 |
$200,000 | SPCM SA, Sr. Unsecd. Note, 144A, 3.375%, 3/15/2030 | 159,610 | |
200,000 | Summit Digitel Infrastructure, 144A, 2.875%, 8/12/2031 | 152,060 | |
450,000 | Suzano Austria GmbH, Sr. Unsecd. Note, Series DM3N, 3.125%, 1/15/2032 | 351,998 | |
186,000 | Taylor Morrison Communities, Inc./Monarch Communities, Inc., Sr. Unsecd. Note, 144A, 5.125%, 8/1/2030 | 162,702 | |
TOTAL | 3,544,283 | ||
Capital Goods—10.3% | |||
200,000 | ARD Finance SA, Sec. Fac. Bond, 144A, 6.500%, 6/30/2027 | 148,379 | |
EUR 100,000 | Ardagh Metal Packaging, Sr. Unsecd. Note, REGS, 3.000%, 9/1/2029 | 77,525 | |
GBP 600,000 | Ardagh Packaging Finance PLC/Ardagh Holdings, Sr. Unsecd. Note, REGS, 4.750%, 7/15/2027 | 507,135 | |
$725,000 | Ball Corp., Sr. Unsecd. Note, 2.875%, 8/15/2030 | 590,418 | |
EUR 100,000 | Berry Global, Inc., Sec. Fac. Bond, REGS, 1.500%, 1/15/2027 | 91,771 | |
300,000 | Berry Global, Inc., Term Loan—1st Lien, REGS, 1.000%, 1/15/2025 | 293,032 | |
500,000 | Crown European Holdings SA, Sr. Unsecd. Note, REGS, 2.875%, 2/1/2026 | 492,986 | |
$250,000 | Klabin Austria Gmbh, Sr. Unsecd. Note, 144A, 3.200%, 1/12/2031 | 196,655 | |
400,000 | Klabin Austria Gmbh, Sr. Unsecd. Note, REGS, 3.200%, 1/12/2031 | 314,648 | |
EUR 100,000 | Rexel S.A., Sr. Unsecd. Note, 2.125%, 12/15/2028 | 89,794 | |
$475,000 | Sealed Air Corp., Sr. Unsecd. Note, 144A, 4.000%, 12/1/2027 | 426,982 | |
EUR 102,000 | Sig Combibloc Purchaser, Sr. Unsecd. Note, 144A, 2.125%, 6/18/2025 | 100,941 | |
350,000 | Sig Combibloc Purchaser, Sr. Unsecd. Note, REGS, 2.125%, 6/18/2025 | 346,365 | |
400,000 | Smurfit Kappa Treasury Unlimited Company, Sr. Unsecd. Note, 1.000%, 9/22/2033 | 303,227 | |
100,000 | Trivium Packaging Finance BV, Sec. Fac. Bond, REGS, 3.750%, 8/15/2026 | 94,838 | |
200,000 | Verallia, Sr. Unsecd. Note, 1.875%, 11/10/2031 | 165,102 | |
TOTAL | 4,239,798 | ||
Consumer Goods—2.2% | |||
200,000 | Arcelik AS, Sr. Unsecd. Note, 3.000%, 5/27/2026 | 184,645 | |
GBP 200,000 | Kraft Heinz Foods Co., Sr. Unsecd. Note, 4.125%, 7/1/2027 | 232,746 | |
$100,000 | Kraft Heinz Foods Co., Sr. Unsecd. Note, 4.375%, 6/1/2046 | 84,409 | |
83,000 | Post Holdings, Inc., Sr. Unsecd. Note, 144A, 4.500%, 9/15/2031 | 70,835 | |
368,000 | Post Holdings, Inc., Sr. Unsecd. Note, 144A, 4.625%, 4/15/2030 | 323,435 | |
TOTAL | 896,070 | ||
Consumer Non-Cyclical—2.1% | |||
460,000 | Hanesbrands, Inc., Sr. Unsecd. Note, 144A, 4.875%, 5/15/2026 | 419,269 | |
542,000 | Levi Strauss & Co., Sr. Unsecd. Note, 144A, 3.500%, 3/1/2031 | 445,639 | |
TOTAL | 864,908 | ||
Energy—3.4% | |||
300,000 | Aker BP ASA, Sr. Unsecd. Note, REGS, 3.750%, 1/15/2030 | 266,173 | |
GBP 100,000 | 1 | BP Capital Markets PLC, Sub., 4.250%, 3/22/2027 | 106,062 |
$100,000 | DCP Midstream Operating LP, Sr. Unsecd. Note, 5.375%, 7/15/2025 | 98,887 | |
275,000 | EnLink Midstream Partners LP, Sr. Unsecd. Note, 5.450%, 6/1/2047 | 223,222 | |
32,000 | EnLink Midstream Partners LP, Sr. Unsecd. Note, 5.600%, 4/1/2044 | 26,614 | |
300,000 | EQT Corp., Sr. Unsecd. Note, 3.900%, 10/1/2027 | 278,071 | |
39,000 | EQT Corp., Sr. Unsecd. Note, 7.500%, 2/1/2030 | 41,084 |
2
Foreign Currency Par Amount or Principal Amount | Value in U.S. Dollars | ||
CORPORATE BONDS—continued | |||
Energy—continued | |||
$387,000 | Range Resources Corp., Sr. Unsecd. Note, 4.875%, 5/15/2025 | $375,506 | |
TOTAL | 1,415,619 | ||
Financial Services—1.2% | |||
230,000 | 1 | Barclays Bank plc, Jr. Sub. Deb., 6.278% (3-month USLIBOR +1.550%), 12/15/2034 | 216,882 |
400,000 | China Ping An Insurance Overseas (Holdings) Ltd., Sr. Secd. Note, Series EMTN, 2.850%, 8/12/2031 | 271,835 | |
TOTAL | 488,717 | ||
Health Care—4.7% | |||
519,000 | Centene Corp., 2.500%, 3/1/2031 | 410,840 | |
50,000 | Centene Corp., Sr. Unsecd. Note, 2.625%, 8/1/2031 | 39,370 | |
EUR 200,000 | 1 | Eurofins Scientific SE, Jr. Sub. Note, 3.250% (3-month EURIBOR +5.167%), 11/13/2025 | 183,679 |
580,000 | Grifols Escrow Issuer SA, Sr. Unsecd. Note, REGS, 3.875%, 10/15/2028 | 497,742 | |
$50,000 | HCA, Inc., Sec. Fac. Bond, 3.500%, 7/15/2051 | 33,873 | |
EUR 700,000 | Iqvia, Inc., Sr. Unsecd. Note, REGS, 2.250%, 3/15/2029 | 620,981 | |
$149,000 | Mozart Debt Merger Sub, Inc., Sec. Fac. Bond, 144A, 3.875%, 4/1/2029 | 128,272 | |
TOTAL | 1,914,757 | ||
Insurance—1.6% | |||
GBP 325,000 | 1 | Phoenix Group Holdings PLC, Jr. Sub. Deb., 5.750% (12-month GBPLIBOR +4.169%), 10/26/2170 | 323,175 |
EUR 200,000 | 1 | UnipolSai Assicurazioni SpA, Jr. Sub. Note, 6.375% (5YR EUR Swap Annual +6.744%), 4/27/2030 | 187,932 |
$200,000 | Zurich Finance Ireland, Sub. Note, Series EMTN, 3.000% (6-month Tbill Auction High Disc Rate +2.777%), 4/19/2051 | 152,264 | |
TOTAL | 663,371 | ||
Media—3.5% | |||
EUR 300,000 | Altice France Holding SA, Sr. Unsecd. Note, REGS, 4.000%, 2/15/2028 | 209,617 | |
100,000 | Lagardere S.C.A., Sr. Unsecd. Note, 1.750%, 10/7/2027 | 97,579 | |
550,000 | Netflix, Inc., Sr. Unsecd. Note, REGS, 3.625%, 6/15/2030 | 534,959 | |
$230,000 | UPC Broadband Finco BV, Sr. Note, 144A, 4.875%, 7/15/2031 | 196,949 | |
EUR 100,000 | VZ Vendor Financing B.V., Sr. Unsecd. Note, REGS, 2.875%, 1/15/2029 | 81,418 | |
391,000 | Ziggo Bond Co. BV, Sr. Unsecd. Note, REGS, 3.375%, 2/28/2030 | 310,752 | |
TOTAL | 1,431,274 | ||
Real Estate—1.3% | |||
100,000 | CANPACK SA and Eastern PA Land Investment Holding LLC, REGS, 2.375%, 11/1/2027 | 86,092 | |
$200,000 | Country Garden Holdings Co., 5.125%, 1/17/2025 | 101,500 | |
GBP 200,000 | MPT Operating Partnership LP/MPT Finance Corp., Sr. Unsecd. Note, 3.692%, 6/5/2028 | 178,524 | |
$32,000 | MPT Operating Partnership LP/MPT Finance Corp., Sr. Unsecd. Note, 3.500%, 3/15/2031 | 22,601 | |
EUR 300,000 | 1 | Samhallsbyggnadsbolaget i Norden AB, Jr. Sub. Note, 2.625% (5YR EUR Swap Annual +3.227%), 12/14/2025 | 124,808 |
100,000 | 1 | Samhallsbyggnadsbolaget i Norden AB, Jr. Sub. Note, Series *, 2.624% (5YR EUR Swap Annual +2.814%), 1/30/2025 | 41,234 |
TOTAL | 554,759 | ||
Retail—0.5% | |||
GBP 100,000 | Marks & Spencer PLC, Sr. Unsecd. Note, 3.250%, 7/10/2027 | 103,851 | |
$100,000 | Marks & Spencer PLC, Sr. Unsecd. Note, REGS, 7.125%, 12/1/2037 | 89,041 | |
TOTAL | 192,892 | ||
Services—1.0% | |||
EUR 500,000 | Catalent Pharma Solutions, Inc., Sr. Unsecd. Note, REGS, 2.375%, 3/1/2028 | 430,592 | |
Technology & Electronics—1.7% | |||
$100,000 | Dell, Inc., Sr. Unsecd. Note, 5.400%, 9/10/2040 | 88,013 | |
50,000 | NXP BV / NXP Funding LLC / NXP USA Inc., Sr. Unsecd. Note, 2.500%, 5/11/2031 | 39,612 | |
69,000 | NXP BV / NXP Funding LLC / NXP USA Inc., Sr. Unsecd. Note, 3.400%, 5/1/2030 | 60,061 | |
678,000 | Seagate HDD Cayman, Sr. Unsecd. Note, 3.375%, 7/15/2031 | 524,850 | |
TOTAL | 712,536 |
3
Foreign Currency Par Amount or Principal Amount | Value in U.S. Dollars | ||
CORPORATE BONDS—continued | |||
Telecommunications—8.0% | |||
EUR 100,000 | Altice Financing SA, Sec. Fac. Bond, REGS, 4.250%, 8/15/2029 | $85,564 | |
100,000 | Cellnex Telecom S.A., Conv. Bond, Series CLNX, 0.750%, 11/20/2031 | 78,035 | |
100,000 | Cellnex Telecom S.A., Sr. Unsecd. Note, 1.875%, 6/26/2029 | 86,966 | |
200,000 | Iliad SA, Sr. Secd. Note, 1.875%, 2/11/2028 | 174,301 | |
300,000 | Infrastrutture Wireless Italiane SPA, Sr. Unsecd. Note, Series EMTN, 1.750%, 4/19/2031 | 252,730 | |
200,000 | Infrastrutture Wireless Italiane SPA, Sr. Unsecd. Note, Series GMTN, 1.625%, 10/21/2028 | 180,149 | |
$425,000 | Lumen Technologies, Inc., Sr. Unsecd. Note, Series P, 7.600%, 9/15/2039 | 291,913 | |
400,000 | Millicom International Cellular S. A., Sr. Unsecd. Note, REGS, 4.500%, 4/27/2031 | 328,579 | |
300,000 | 1 | Network i2i Ltd., Sub. Deb., REGS, 5.650% (Prime +4.274%), 1/15/2025 | 282,930 |
100,000 | Sprint Corp., Sr. Unsecd. Note, 7.875%, 9/15/2023 | 102,294 | |
72,000 | T-Mobile USA, Inc., 2.250%, 11/15/2031 | 57,378 | |
300,000 | T-Mobile USA, Inc., 3.300%, 2/15/2051 | 208,714 | |
325,000 | Telecom Italia Capital SA, Sr. Unsecd. Note, 6.000%, 9/30/2034 | 251,501 | |
EUR 600,000 | 1 | Telefonica Europe BV, Jr. Sub. Note, 2.376% (8-month EURIBOR +2.616%), 2/12/2029 | 483,800 |
$200,000 | Turk Telekomunikasyon AS, Sr. Unsecd. Note, REGS, 4.875%, 6/19/2024 | 180,016 | |
GBP 149,000 | Vmed O2 UK Financing I PLC, Sec. Fac. Bond, REGS, 4.500%, 7/15/2031 | 142,320 | |
$200,000 | VTR Comunicaciones SpA, Sec. Fac. Bond, REGS, 4.375%, 4/15/2029 | 105,936 | |
TOTAL | 3,293,126 | ||
Utilities—6.3% | |||
57,000 | AES Corp., Sr. Unsecd. Note, 2.450%, 1/15/2031 | 45,341 | |
200,000 | AES Gener S.A., Jr. Sub. Note, REGS, 6.350%, 10/7/2079 | 180,351 | |
150,000 | Clearway Energy Operating LLC, Sr. Unsecd. Note, 144A, 3.750%, 1/15/2032 | 119,814 | |
443,000 | Clearway Energy Operating LLC, Sr. Unsecd. Note, 144A, 3.750%, 2/15/2031 | 375,837 | |
EUR 300,000 | 1 | Enel SpA, Jr. Sub. Note, Series 9.5Y, 1.875% (5YR EUR Swap Annual +0.000%), 6/8/2030 | 223,618 |
400,000 | Energias de Portugal SA, Jr. Sub. Note, Series NC8, 1.875% (5YR EUR Swap Annual +2.080%), 3/14/2082 | 300,735 | |
$195,500 | Greenko Power II Ltd., Sr. Unsecd. Note, REGS, 4.300%, 12/13/2028 | 169,049 | |
EUR 151,000 | Orsted A/S, Sub., 1.750% (5YR EUR Swap Annual +1.952%), 12/9/3019 | 132,763 | |
GBP 149,000 | Orsted A/S, Sub., Series GBP, 2.500%, 2/18/3021 | 120,082 | |
$550,000 | TerraForm Power Operating LLC, Sr. Unsecd. Note, 144A, 4.750%, 1/15/2030 | 495,998 | |
EUR 500,000 | 1 | Veolia Environnement SA, Jr. Sub. Note, Series 0, 2.500% (5YR EUR Swap Annual +2.840%), 1/20/2029 | 417,850 |
TOTAL | 2,581,438 | ||
TOTAL CORPORATE BONDS (IDENTIFIED COST $35,200,634) | 28,610,521 | ||
U.S. TREASURIES—23.4% | |||
$5,403,500 | United States Treasury Note, 0.250%, 3/15/2024 | 5,109,119 | |
5,020,200 | United States Treasury Note, 0.250%, 8/31/2025 | 4,518,504 | |
TOTAL U.S. TREASURIES (IDENTIFIED COST $9,745,302) | 9,627,623 | ||
FOREIGN GOVERNMENT/AGENCIES—1.1% | |||
GBP 400,000 | United Kingdom, Government of, Unsecd. Note, 0.125%, 1/31/2024 (IDENTIFIED COST $445,077) | 464,274 | |
TOTAL INVESTMENT IN SECURITIES—94.0% (IDENTIFIED COST $45,391,013) | 38,702,418 | ||
OTHER ASSETS AND LIABILITIES - NET—6.0%2 | 2,485,880 | ||
TOTAL NET ASSETS—100% | $41,188,298 |
4
At November 30, 2022, the Fund had the following outstanding futures contracts:
Description | Number of Contracts | Notional Value | Expiration Date | Value and Unrealized Appreciation (Depreciation) |
Long Futures: | ||||
United States Treasury Notes 2-Year Long Futures | 2 | $410,719 | March 2023 | $1,064 |
Short Futures: | ||||
United States Treasury Notes 10-Year Short Futures | 7 | $794,500 | March 2023 | $(4,231) |
United States Treasury Ultra Bond Short Futures | 6 | $817,688 | March 2023 | $(3,252) |
NET UNREALIZED DEPRECIATION ON FUTURES CONTRACTS | $(6,419) | |||
The average notional value of long and short futures contracts held by the Fund throughout the period was $411,730 and $2,033,027. This is based on amounts held as of each month-end throughout the three-month fiscal period.
At November 30, 2022, the Fund had the following open swap contracts:
Credit Default Swaps
Counterparty | Reference Entity | Buy/ Sell | Pay/ Receive Fixed Rate | Expiration Date | Implied Credit Spread at 11/30/20224 | Notional Amount | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation (Depreciation) |
OTC Swaps: | |||||||||
Barclays | Volvo | Sell | 5.00% | 12/20/2027 | 2.80% | $50,000 | $5,042 | $3,829 | $1,213 |
Goldman Sachs | Cellnex Telecom SA | Sell | 5.00% | 12/20/2027 | 2.06% | $100,000 | $13,346 | $9,864 | $3,482 |
Goldman Sachs | Schaeffler AG | Sell | 5.00% | 06/20/2027 | 2.70% | $310,000 | $28,963 | $39,771 | $(10,808) |
JPMorgan | Faurecia | Sell | 5.00% | 12/20/2027 | 4.18% | $100,000 | $3,575 | $(4,171) | $7,746 |
Morgan Stanley | AES Corp. | Sell | 5.00% | 12/20/2027 | 1.33% | $100,000 | $16,373 | $14,798 | $1,575 |
Morgan Stanley | Ally Financial, Inc. | Sell | 5.00% | 12/20/2027 | 2.87% | $78,000 | $6,925 | $7,704 | $(779) |
Morgan Stanley | Anglo American PLC | Sell | 5.00% | 12/20/2027 | 1.75% | $175,000 | $26,390 | $21,474 | $4,916 |
Morgan Stanley | Arcelor Mittal SA | Sell | 5.00% | 12/20/2027 | 2.21% | $200,000 | $25,386 | $17,994 | $7,392 |
Morgan Stanley | Cleveland-Cliffs, Inc. | Sell | 5.00% | 12/20/2027 | 4.36% | $145,000 | $3,894 | $6,131 | $(2,237) |
Morgan Stanley | Dell, Inc. | Sell | 1.00% | 12/20/2027 | 1.38% | $500,000 | $(8,072) | $(26,812) | $18,740 |
Morgan Stanley | Ford Motor Co. | Sell | 5.00% | 12/20/2027 | 3.07% | $485,000 | $37,669 | $36,789 | $880 |
Morgan Stanley | General Motors Co. | Sell | 5.00% | 12/20/2027 | 1.88% | $507,000 | $68,237 | $63,570 | $4,667 |
Morgan Stanley | Goodyear Tire & Rubber Co. | Sell | 5.00% | 12/20/2027 | 4.61% | $225,000 | $3,943 | $6,108 | $(2,165) |
Morgan Stanley | HCA, Inc. | Sell | 5.00% | 12/20/2027 | 1.31% | $360,000 | $57,919 | $53,007 | $4,912 |
Morgan Stanley | Hess Corp. | Sell | 1.00% | 12/20/2027 | 1.38% | $100,000 | $(1,582) | $(1,744) | $162 |
Morgan Stanley | Iron Mountain, Inc. | Sell | 5.00% | 12/20/2027 | 2.11% | $215,000 | $26,421 | $21,439 | $4,982 |
Morgan Stanley | KB Home | Sell | 5.00% | 12/20/2027 | 3.57% | $520,000 | $31,136 | $15,055 | $16,081 |
Morgan Stanley | Lennar Corp. | Sell | 5.00% | 12/20/2027 | 1.46% | $325,000 | $50,070 | $39,265 | $10,805 |
Morgan Stanley | Lumen Technologies, Inc. | Sell | 1.00% | 12/20/2027 | 9.15% | $25,000 | $(7,077) | $(4,749) | $(2,328) |
5
Counterparty | Reference Entity | Buy/ Sell | Pay/ Receive Fixed Rate | Expiration Date | Implied Credit Spread at 11/30/20224 | Notional Amount | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation (Depreciation) |
Morgan Stanley | Markit CDX North America High Yield Index Series 39 | Sell | 5.00% | 12/20/2027 | 4.53% | $2,845,000 | $53,345 | $(81,724) | $135,069 |
Morgan Stanley | Markit iTraxx Europe Crossover Index Series 38 | Sell | 5.00% | 12/20/2027 | 4.59% | $2,857,000 | $48,685 | $(91,910) | $140,595 |
Morgan Stanley | Marks & Spencer PLC | Sell | 1.00% | 12/20/2027 | 3.90% | $100,000 | $(12,302) | $(14,798) | $2,496 |
Morgan Stanley | Nokia Oy | Sell | 5.00% | 12/20/2027 | 1.29% | $475,000 | $83,111 | $69,360 | $13,751 |
Morgan Stanley | NRG Energy, Inc. | Sell | 5.00% | 12/20/2027 | 3.19% | $260,000 | $19,300 | $14,118 | $5,182 |
Morgan Stanley | Occidental Petroleum Corp. | Sell | 1.00% | 06/20/2027 | 1.18% | $84,000 | $(1,008) | $(860) | $(148) |
Morgan Stanley | Rexel SA | Sell | 5.00% | 12/20/2027 | 2.44% | $200,000 | $23,432 | $15,973 | $7,459 |
Morgan Stanley | Stellantis N.V. | Sell | 5.00% | 12/20/2027 | 1.69% | $425,000 | $65,249 | $45,302 | $19,947 |
Morgan Stanley | Telecom Italia SpA | Sell | 1.00% | 12/20/2027 | 4.55% | $200,000 | $(29,865) | $(32,593) | $2,728 |
Morgan Stanley | Tenet Healthcare Corp. | Sell | 5.00% | 12/20/2027 | 5.11% | $488,000 | $(1,287) | $18,496 | $(19,783) |
Morgan Stanley | Toll Brothers, Inc. | Sell | 1.00% | 12/20/2027 | 2.34% | $335,000 | $(19,038) | $(28,285) | $9,247 |
Morgan Stanley | Valeo | Sell | 1.00% | 12/20/2027 | 3.37% | $370,000 | $(30,022) | $(37,690) | $7,668 |
Morgan Stanley | Virgin Media Finance PLC | Sell | 5.00% | 12/20/2027 | 4.60% | $381,000 | $6,754 | $(9,214) | $15,968 |
TOTAL CREDIT DEFAULT SWAPS | $594,912 | $185,497 | $409,415 | ||||||
The average notional amount of credit default swap contracts held by the Fund throughout the period was $14,977,850. This is based on amounts held as of each month-end throughout the three-month fiscal period.
At November 30, 2022, the Fund had the following outstanding foreign exchange contracts:
Settlement Date | Counterparty | Foreign Currency Units to Receive/Deliver | In Exchange For | Unrealized Appreciation (Depreciation) |
Contracts Purchased: | ||||
12/21/2022 | State Street | 100,000 EUR | $97,353 | $6,913 |
12/21/2022 | State Street | 200,000 EUR | $192,484 | $16,049 |
12/21/2022 | State Street | 200,000 EUR | $196,454 | $12,079 |
12/21/2022 | State Street | 300,000 EUR | $297,067 | $15,732 |
12/21/2022 | State Street | 150,000 GBP | $161,753 | $19,194 |
Contracts Sold: | ||||
12/21/2022 | Lloyds Bank PLC | 400,000 EUR | $392,052 | $(25,014) |
12/21/2022 | Lloyds Bank PLC | 150,000 EUR | $149,405 | $(6,994) |
12/21/2022 | State Street | 5,500,000 EUR | $5,552,899 | $(181,755) |
12/21/2022 | State Street | 5,500,000 EUR | $5,552,899 | $(181,755) |
12/21/2022 | State Street | 400,000 EUR | $413,683 | $(3,383) |
12/21/2022 | State Street | 300,000 EUR | $301,385 | $(11,415) |
12/21/2022 | State Street | 200,000 EUR | $197,954 | $(10,579) |
12/21/2022 | State Street | 200,000 EUR | $199,274 | $(9,259) |
12/21/2022 | State Street | 150,000 EUR | $156,300 | $(99) |
12/21/2022 | State Street | 150,000 EUR | $155,272 | $(1,127) |
12/21/2022 | State Street | 2,300,000 GBP | $2,634,931 | $(139,591) |
NET UNREALIZED DEPRECIATION ON FOREIGN EXCHANGE CONTRACTS | $(501,004) | |||
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The average value at settlement date payable and receivable of foreign exchange contracts purchased and sold by the Fund throughout the period was $160,829 and $323,473, respectively. This is based on the contracts held as of each month-end throughout the three-month fiscal period.
Net Unrealized Appreciation (Depreciation) on Futures Contracts, Foreign Exchange Contracts and value for Swap Contracts is included in “Other Assets and Liabilities—Net.”
1
Perpetual Bond Security. The maturity date reflects the next call date.
2
Assets, other than investments in securities, less liabilities.
3
Non-income-producing security.
4
Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. A credit spread identified as “Defaulted” indicates a credit event has occurred for the referenced entity or obligation.
Note: The categories of investments are shown as a percentage of total net assets at November 30, 2022.
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”).
◾ Equity securities listed on an exchange or traded through a regulated market system are valued at their last reported sale price or official closing price in their principal exchange or market.
◾ Derivative contracts listed on exchanges are valued at their reported settlement or closing price, except that options are valued at the mean of closing bid and ask quotations.
◾ Over-the-counter (OTC) derivative contracts are fair valued using price evaluations provided by a pricing service approved by the Adviser.
◾ Shares of other mutual funds or nonexchange-traded investment companies are valued based upon their reported NAVs, or NAV per share practical expedient, as applicable.
◾ For securities that are fair valued in accordance with procedures established by and under the general supervision of the Adviser, certain factors may be considered, such as: the last traded or purchase price of the security, information obtained by contacting the issuer or dealers, analysis of the issuer’s financial statements or other available documents, fundamental analytical data, the nature and duration of restrictions on disposition, the movement of the market in which the security is normally traded, public trading in similar securities or derivative contracts of the issuer or comparable issuers, movement of a relevant index, or other factors including but not limited to industry changes and relevant government actions.
If any price, quotation, price evaluation or other pricing source is not readily available when the NAV is calculated, if the Fund cannot obtain price evaluations from a pricing service or from more than one dealer for an investment within a reasonable period of time as set forth in the Adviser’s valuation policies and procedures for the Fund, or if information furnished by a pricing service, in the opinion of the Adviser's valuation committee (“Valuation Committee”), is deemed not representative of the fair value of such security, the Fund uses the fair value of the investment determined in accordance with the procedures described below. There can be no assurance that the Fund could obtain the fair value assigned to an investment if it sold the investment at approximately the time at which the Fund determines its NAV per share, and the actual value obtained could be materially different.
Fair Valuation and Significant Events Procedures
Pursuant to Rule 2a-5 under the Investment Company Act, the Fund's Board of Trustees (the “Trustees”) have 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.
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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.
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 principally traded 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.
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below:
Level 1—quoted prices in active markets for identical securities.
Level 2—other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Also includes securities valued at amortized cost.
Level 3—significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used, as of November 30, 2022, in valuing the Fund's assets carried at fair value:
Valuation Inputs | ||||
Level 1— Quoted Prices | Level 2— Other Significant Observable Inputs | Level 3— Significant Unobservable Inputs | Total | |
Debt Securities: | ||||
Corporate Bonds | $— | $28,610,521 | $— | $28,610,521 |
Foreign Governments/Agencies | — | 464,274 | — | 464,274 |
U.S. Treasuries | — | 9,627,623 | — | 9,627,623 |
TOTAL SECURITIES | $— | $38,702,418 | $— | $38,702,418 |
Other Financial Instruments: | ||||
Assets: | ||||
Futures | $1,064 | $— | $— | $1,064 |
Foreign Exchange Contracts | — | 69,967 | — | 69,967 |
Swap Contracts | — | 705,165 | — | 705,165 |
Liabilities: | ||||
Futures | $(7,483) | $— | $— | $(7,483) |
Foreign Exchange Contracts | — | (570,971) | — | (570,971) |
Swap Contracts | — | (110,253) | — | (110,253) |
TOTAL OTHER FINANCIAL INSTRUMENTS | $(6,419) | $93,908 | $— | $87,489 |
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