United States Securities
and Exchange Commission
Washington, D.C. 20549
Form
Certified Shareholder Report
of Registered Management Investment Companies
811-8042
(Investment Company Act File Number)
(Exact Name of Registrant as Specified in Charter)
Federated Hermes Funds
4000 Ericsson
Drive
Warrendale, PA 15086-7561
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant’s Telephone
Number)
Peter J. Germain, Esquire
1001 Liberty
Avenue
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
(Notices should be sent to the Agent
for Service)
Date of Fiscal Year End: 2026-12-31
Date of Reporting Period: Six
months ended
| Item 1. | Reports to Stockholders |
| Item 2. | Code of Ethics |
Not Applicable
| Item 3. | Audit Committee Financial Expert |
Not Applicable
| Item 4. | Principal Accountant Fees and Services |
Not Applicable
| Item 5. | Audit Committee of Listed Registrants |
Not Applicable
| Item 6. | Schedule of Investments |
(a) The registrant’s Schedule of Investments is included as part of the Financial Statements filed under Item 7 of this form.
(b) Not Applicable
| Item 7. | Financial Statements and Financial Highlights for Open-End Management Companies |
Semi-Annual Financial Statements
and Additional Information
and Additional Information
June 30, 2026
|
Share
Class |
Service
|
|
|
|
Federated Hermes Government Money Fund II
A Portfolio of Federated Hermes Insurance Series
Not FDIC Insured ▪ May
Lose Value ▪ No Bank Guarantee
Portfolio
of Investments
June 30, 2026 (unaudited)
|
Principal
Amount
|
|
|
Value
|
|
|
|
REPURCHASE
AGREEMENTS—53.7% |
|
|
$10,000,000
|
|
Interest
in $250,000,000 joint repurchase agreement 3.66%, dated 6/30/2026 under which ABN Amro Bank N.V., Netherlands
will
repurchase securities provided as collateral for $250,025,417 on 7/1/2026. The securities provided as collateral at the end
of
the period held with BNY Mellon as tri-party agent, were U.S. Government Agency and U.S. Treasury securities with various
maturities
to 5/1/2056 and the market value of those underlying securities was $255,354,843. |
$10,000,000
|
|
500,000
|
|
Interest
in $800,000,000 joint repurchase agreement 3.64%, dated 6/5/2026 under which Bank of Montreal will repurchase
securities
provided as collateral for $802,507,556 on 7/6/2026. The securities provided as collateral at the end of the period
held
with BNY Mellon as tri-party agent, were U.S. Government Agency securities with various maturities to 7/1/2056 and the
market
value of those underlying securities was $818,145,173. |
500,000
|
|
1,000,000
|
|
Interest
in $700,000,000 joint repurchase agreement 3.64%, dated 6/10/2026 under which Bank of Montreal will repurchase
securities
provided as collateral for $702,123,333 on 7/10/2026. The securities provided as collateral at the end of the period
held
with BNY Mellon as tri-party agent, were U.S. Government Agency securities with various maturities to 6/1/2056 and the
market
value of those underlying securities was $715,516,061. |
1,000,000
|
|
7,744,000
|
|
Interest
in $500,000,000 joint repurchase agreement 3.65%, dated 6/30/2026 under which Bank of Nova Scotia will
repurchase
securities provided as collateral for $500,050,694 on 7/1/2026. The securities provided as collateral at the end of
the
period held with BNY Mellon as tri-party agent, were U.S. Government Agency securities and a U.S. Treasury security with
various
maturities to 12/1/2055 and the market value of those underlying securities was $510,051,714. |
7,744,000
|
|
500,000
|
|
Interest
in $700,000,000 joint repurchase agreement 3.66%, dated 6/22/2026 under which BMO Capital Markets Corp. will
repurchase
securities provided as collateral for $702,135,000 on 7/22/2026. The securities provided as collateral at the end of
the
period held with BNY Mellon as tri-party agent, were U.S. Government Agency securities with various maturities to
6/20/2056
and the market value of those underlying securities was $714,653,311. |
500,000
|
|
500,000
|
|
Interest
in $875,000,000 joint repurchase agreement 3.68%, dated 6/30/2026 under which BMO Capital Markets Corp. will
repurchase
securities provided as collateral for $877,772,778 on 7/31/2026. The securities provided as collateral at the end of
the
period held with BNY Mellon as tri-party agent, were U.S. Government Agency securities with various maturities to
5/20/2056
and the market value of those underlying securities was $892,591,234. |
500,000
|
|
300,000
|
|
Interest
in $1,475,000,000 joint repurchase agreement 3.71%, dated 3/26/2026 under which BNP Paribas S.A. will repurchase
securities
provided as collateral for $1,503,121,285 on 9/28/2026. The securities provided as collateral at the end of the
period
held with BNY Mellon as tri-party agent, were U.S. Treasury securities with various maturities to 2/15/2053 and the
market
value of those underlying securities was $1,533,183,718. |
300,000
|
|
1,500,000
|
|
Interest
in $5,000,000,000 joint repurchase agreement 3.66%, dated 6/9/2026 under which J.P. Morgan Securities LLC will
repurchase
securities provided as collateral for $5,017,791,667 on 7/14/2026. The securities provided as collateral at the end
of
the period held with BNY Mellon as tri-party agent, were U.S. Treasury securities with various maturities to 10/15/2029 and
the
market value of those underlying securities was $5,100,000,105. |
1,500,000
|
|
500,000
|
|
Interest
in $1,800,000,000 joint repurchase agreement 3.64%, dated 6/18/2026 under which Natixis Financial Products LLC
will
repurchase securities provided as collateral for $1,807,644,000 on 7/30/2026. The securities provided as collateral at the
end
of the period held with BNY Mellon as tri-party agent, were U.S. Government Agency and U.S. Treasury securities with
various
maturities to 11/20/2074 and the market value of those underlying securities was $1,840,163,146. |
500,000
|
|
3,000,000
|
|
Interest
in $5,000,000,000 joint repurchase agreement 3.64%, dated 5/21/2026 under which Royal Bank of Canada, New York
Branch
will repurchase securities provided as collateral for $5,034,883,333 on 7/29/2026. The securities provided as collateral
at
the end of the period held with BNY Mellon as tri-party agent, were U.S. Government Agency and U.S. Treasury securities
with
various maturities to 10/1/2062 and the market value of those underlying securities was $5,135,890,427. |
3,000,000
|
|
1,000,000
|
|
Interest
in $1,000,000,000 joint repurchase agreement 3.67%, dated 4/27/2026 under which Royal Bank of Canada, New York
Branch
will repurchase securities provided as collateral for $1,006,626,389 on 7/1/2026. The securities provided as collateral
at
the end of the period held with BNY Mellon as tri-party agent, were U.S. Government Agency and U.S. Treasury securities
with
various maturities to 7/25/2056 and the market value of those underlying securities was $1,035,214,322. |
1,000,000
|
|
3,000,000
|
|
Interest
in $5,000,000,000 joint repurchase agreement 3.67%, dated 4/30/2026 under which Royal Bank of Canada, New York
Branch
will repurchase securities provided as collateral for $5,046,384,722 on 7/31/2026. The securities provided as collateral
at
the end of the period held with BNY Mellon as tri-party agent, were U.S. Government Agency and U.S. Treasury securities
with
various maturities to 7/1/2056 and the market value of those underlying securities was $5,147,312,441. |
3,000,000
|
|
10,000,000
|
|
Interest
in $4,355,000,000 joint repurchase agreement 3.65%, dated 6/30/2026 under which Wells Fargo Securities LLC will
repurchase
securities provided as collateral for $4,355,441,549 on 7/1/2026. The securities provided as collateral at the end
of
the period held with BNY Mellon as tri-party agent, were U.S. Government Agency securities with various maturities to
4/26/2060
and the market value of those underlying securities was $4,486,104,795. |
10,000,000
|
|
|
|
TOTAL
REPURCHASE AGREEMENTS |
39,544,000
|
|
|
|
GOVERNMENT
AGENCIES—18.8% |
|
|
100,000
|
1
|
Federal
Farm Credit System Floating Rate Notes, 3.665% (SOFR +0.045%), 7/1/2026 |
100,000
|
|
685,000
|
1
|
Federal
Farm Credit System Floating Rate Notes, 3.700% (SOFR +0.080%), 7/1/2026 |
684,959
|
|
150,000
|
1
|
Federal
Farm Credit System Floating Rate Notes, 3.705% (SOFR +0.085%), 7/1/2026 |
150,000
|
|
375,000
|
1
|
Federal
Farm Credit System Floating Rate Notes, 3.710% (SOFR +0.090%), 7/1/2026 |
375,000
|
|
650,000
|
1
|
Federal
Farm Credit System Floating Rate Notes, 3.715% (SOFR +0.095%), 7/1/2026 |
650,000
|
|
100,000
|
1
|
Federal
Farm Credit System Floating Rate Notes, 3.720% (SOFR +0.100%), 7/1/2026 |
100,000
|
Semi-Annual
Financial Statements and Additional Information
1
|
Principal
Amount
|
|
|
Value
|
|
|
|
GOVERNMENT
AGENCIES—continued
|
|
|
$ 250,000
|
1
|
Federal
Farm Credit System Floating Rate Notes, 3.725% (SOFR +0.105%), 7/1/2026 |
$ 250,000
|
|
325,000
|
1
|
Federal
Farm Credit System Floating Rate Notes, 3.730% (SOFR +0.110%), 7/1/2026 |
325,000
|
|
200,000
|
1
|
Federal
Farm Credit System Floating Rate Notes, 3.735% (SOFR +0.115%), 7/1/2026 |
200,000
|
|
200,000
|
1
|
Federal
Farm Credit System Floating Rate Notes, 3.740% (SOFR +0.120%), 7/1/2026 |
200,000
|
|
450,000
|
1
|
Federal
Farm Credit System Floating Rate Notes, 3.750% (SOFR +0.130%), 7/1/2026 |
450,000
|
|
100,000
|
1
|
Federal
Farm Credit System Floating Rate Notes, 3.755% (SOFR +0.135%), 7/1/2026 |
100,000
|
|
150,000
|
1
|
Federal
Farm Credit System Floating Rate Notes, 3.760% (SOFR +0.140%), 7/1/2026 |
150,000
|
|
100,000
|
1
|
Federal
Farm Credit System Floating Rate Notes, 3.765% (SOFR +0.145%), 7/1/2026 |
100,000
|
|
100,000
|
1
|
Federal
Farm Credit System Floating Rate Notes, 3.770% (SOFR +0.150%), 7/1/2026 |
100,000
|
|
1,950,000
|
2
|
Federal
Home Loan Bank System Discount Notes, 3.509% - 3.630%, 8/7/2026 - 12/11/2026 |
1,933,242
|
|
500,000
|
1
|
Federal
Home Loan Bank System Floating Rate Notes, 3.660% (SOFR +0.040%), 7/1/2026 |
500,000
|
|
200,000
|
1
|
Federal
Home Loan Bank System Floating Rate Notes, 3.670% (SOFR +0.050%), 7/1/2026 |
200,000
|
|
250,000
|
1
|
Federal
Home Loan Bank System Floating Rate Notes, 3.695% (SOFR +0.075%), 7/1/2026 |
250,000
|
|
150,000
|
1
|
Federal
Home Loan Bank System Floating Rate Notes, 3.700% (SOFR +0.080%), 7/1/2026 |
150,000
|
|
50,000
|
1
|
Federal
Home Loan Bank System Floating Rate Notes, 3.710% (SOFR +0.090%), 7/1/2026 |
50,000
|
|
150,000
|
1
|
Federal
Home Loan Bank System Floating Rate Notes, 3.740% (SOFR +0.120%), 7/1/2026 |
150,000
|
|
100,000
|
1
|
Federal
Home Loan Bank System Floating Rate Notes, 3.755% (SOFR +0.135%), 7/1/2026 |
100,000
|
|
200,000
|
1
|
Federal
Home Loan Bank System Floating Rate Notes, 3.765% (SOFR +0.145%), 7/1/2026 |
200,000
|
|
150,000
|
1
|
Federal
Home Loan Bank System Floating Rate Notes, 3.800% (SOFR +0.180%), 7/1/2026 |
150,000
|
|
4,416,667
|
|
Federal
Home Loan Bank System, 3.500% - 3.990%, 10/23/2026 - 6/17/2027 |
4,416,667
|
|
200,000
|
1
|
Federal
Home Loan Mortgage Corp. Floating Rate Notes, 3.715% (SOFR +0.095%), 7/1/2026 |
200,000
|
|
250,000
|
1
|
Federal
Home Loan Mortgage Corp. Floating Rate Notes, 3.750% (SOFR +0.130%), 7/1/2026 |
250,000
|
|
150,000
|
1
|
Federal
Home Loan Mortgage Corp. Floating Rate Notes, 3.760% (SOFR +0.140%), 7/1/2026 |
150,000
|
|
400,000
|
1
|
Federal
National Mortgage Association Floating Rate Notes, 3.700% (SOFR +0.080%), 7/1/2026 |
400,000
|
|
150,000
|
1
|
Federal
National Mortgage Association Floating Rate Notes, 3.705% (SOFR +0.085%), 7/1/2026 |
150,000
|
|
200,000
|
1
|
Federal
National Mortgage Association Floating Rate Notes, 3.710% (SOFR +0.090%), 7/1/2026 |
200,000
|
|
300,000
|
1
|
Federal
National Mortgage Association Floating Rate Notes, 3.760% (SOFR +0.140%), 7/1/2026 |
300,000
|
|
150,000
|
1
|
Federal
National Mortgage Association Floating Rate Notes, 3.880% (SOFR +0.260%), 7/1/2026 |
150,228
|
|
|
|
TOTAL
GOVERNMENT AGENCIES |
13,835,096
|
|
|
|
U.S.
TREASURIES—27.5% |
|
|
|
2
|
U.S.
Treasury Bills—20.3% |
|
|
650,000
|
|
United
States Treasury Bills, 3.380% - 3.840%, 12/24/2026 |
638,360
|
|
500,000
|
|
United
States Treasury Bills, 3.390%, 1/21/2027 |
490,395
|
|
1,100,000
|
|
United
States Treasury Bills, 3.460% - 3.470%, 11/27/2026 |
1,084,233
|
|
500,000
|
|
United
States Treasury Bills, 3.500%, 8/20/2026 |
497,569
|
|
1,100,000
|
|
United
States Treasury Bills, 3.525%, 7/30/2026 |
1,096,877
|
|
750,000
|
|
United
States Treasury Bills, 3.540%, 10/1/2026 |
743,215
|
|
2,100,000
|
|
United
States Treasury Bills, 3.590% - 3.615%, 7/7/2026 |
2,098,739
|
|
1,100,000
|
|
United
States Treasury Bills, 3.590%, 9/22/2026 |
1,090,895
|
|
250,000
|
|
United
States Treasury Bills, 3.595% - 3.656%, 3/18/2027 |
243,465
|
|
750,000
|
|
United
States Treasury Bills, 3.610%, 7/21/2026 |
748,496
|
|
600,000
|
|
United
States Treasury Bills, 3.615%, 9/15/2026 |
595,421
|
|
750,000
|
|
United
States Treasury Bills, 3.630%, 9/29/2026 |
743,194
|
|
1,000,000
|
|
United
States Treasury Bills, 3.635%, 10/6/2026 |
990,206
|
|
600,000
|
|
United
States Treasury Bills, 3.640%, 9/10/2026 |
595,693
|
|
350,000
|
|
United
States Treasury Bills, 3.650%, 5/13/2027 |
338,786
|
|
1,500,000
|
|
United
States Treasury Bills, 3.665%, 10/13/2026 |
1,484,118
|
|
400,000
|
|
United
States Treasury Bills, 3.665%, 12/3/2026 |
393,688
|
|
400,000
|
|
United
States Treasury Bills, 3.750%, 6/10/2027 |
385,667
|
|
700,000
|
|
United
States Treasury Bills, 3.925%, 7/9/2026 |
699,389
|
|
|
|
TOTAL
|
14,958,406
|
Semi-Annual
Financial Statements and Additional Information
2
|
Principal
Amount
|
|
|
Value
|
|
|
|
U.S.
TREASURIES—continued
|
|
|
|
|
U.S.
Treasury Notes—7.2% |
|
|
$ 1,000,000
|
1
|
United
States Treasury Floating Rate Notes, 3.873% (91-day T-Bill +0.098%), 7/7/2026 |
$ 999,952
|
|
1,000,000
|
1
|
United
States Treasury Floating Rate Notes, 3.935% (91-day T-Bill +0.160%), 7/7/2026 |
1,000,074
|
|
500,000
|
1
|
United
States Treasury Floating Rate Notes, 3.980% (91-day T-Bill +0.205%), 7/7/2026 |
500,102
|
|
200,000
|
|
United
States Treasury Notes, 0.625%, 7/31/2026 |
199,466
|
|
200,000
|
|
United
States Treasury Notes, 1.125%, 10/31/2026 |
198,308
|
|
100,000
|
|
United
States Treasury Notes, 1.250%, 12/31/2026 |
98,857
|
|
450,000
|
|
United
States Treasury Notes, 1.500% - 4.125%, 1/31/2027 |
447,757
|
|
300,000
|
|
United
States Treasury Notes, 2.625% - 3.875%, 5/31/2027 |
299,095
|
|
150,000
|
|
United
States Treasury Notes, 3.500%, 9/30/2026 |
149,934
|
|
200,000
|
|
United
States Treasury Notes, 3.750%, 8/31/2026 |
199,876
|
|
200,000
|
|
United
States Treasury Notes, 3.750%, 6/30/2027 |
199,600
|
|
200,000
|
|
United
States Treasury Notes, 3.875%, 3/31/2027 |
200,449
|
|
100,000
|
|
United
States Treasury Notes, 4.125%, 2/15/2027 |
100,346
|
|
350,000
|
|
United
States Treasury Notes, 4.250%, 11/30/2026 |
350,961
|
|
350,000
|
|
United
States Treasury Notes, 4.625%, 9/15/2026 |
350,629
|
|
|
|
TOTAL
|
5,295,406
|
|
|
|
TOTAL
U.S. TREASURIES |
20,253,812
|
|
|
|
TOTAL
INVESTMENT IN SECURITIES—100.0%
(AT
AMORTIZED COST)3
|
73,632,908
|
|
|
|
OTHER
ASSETS AND LIABILITIES - NET—0.0%4
|
24,117
|
|
|
|
NET
ASSETS—100% |
$73,657,025
|
|
1
|
Floating/variable
note with current rate and current maturity or next reset date shown. |
|
2
|
Discount
rate(s) at time of purchase. |
|
3
|
Also
represents cost of investments for federal tax purposes. |
|
4
|
Assets,
other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
Note: The categories of investments are
shown as a percentage of net assets at June 30, 2026.
Various inputs are used in determining the
value of the Fund’s investments. These inputs are summarized in the three broad levels listed
below:
Level 1—quoted prices in active markets
for identical securities.
Level 2—other significant observable
inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk,
etc.). Also includes securities valued at amortized cost.
Level 3—significant unobservable inputs
(including the Fund’s own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing
securities are not an indication of the risk associated with investing in those securities.
In valuing the Fund’s assets as of
June 30, 2026, all investments of the Fund are valued at amortized cost, which is a methodology utilizing
Level 2 inputs.
|
The
following acronym(s) are used throughout this portfolio: |
| |
|
SOFR
|
—Secured
Overnight Financing Rate | |
See Notes which are an integral part of
the Financial Statements
Semi-Annual
Financial Statements and Additional Information
3
Financial
Highlights–Service
Shares
(For a Share Outstanding Throughout Each
Period)
|
|
Six
Months
Ended
(unaudited)
6/30/2026
|
Year Ended December 31,
| ||||
|
|
2025
|
2024
|
2023
|
2022
|
2021
| |
|
Net Asset
Value, Beginning of Period |
$1.00
|
$1.00
|
$1.00
|
$1.00
|
$1.00
|
$1.00
|
|
Income
From Investment Operations: |
|
|
|
|
|
|
|
Net
investment income (loss)1
|
0.015
|
0.037
|
0.046
|
0.044
|
0.011
|
0.0002
|
|
Net
realized gain (loss) |
—
|
0.0002
|
0.0002
|
—
|
0.001
|
(0.000)2
|
|
Total
From Investment Operations |
0.015
|
0.037
|
0.046
|
0.044
|
0.012
|
0.0002
|
|
Less Distributions:
|
|
|
|
|
|
|
|
Distributions
from net investment income |
(0.015)
|
(0.037)
|
(0.046)
|
(0.044)
|
(0.012)
|
(0.000)2
|
|
Net
Asset Value, End of Period |
$1.00
|
$1.00
|
$1.00
|
$1.00
|
$1.00
|
$1.00
|
|
Total
Return3
|
1.54%
|
3.73%
|
4.67%
|
4.52%
|
1.16%
|
0.00%4
|
|
Ratios
to Average Net Assets: |
|
|
|
|
|
|
|
Net
expenses5
|
0.63%6
|
0.63%
|
0.66%
|
0.63%
|
0.48%
|
0.07%
|
|
Net
investment income |
3.09%6
|
3.67%
|
4.58%
|
4.43%
|
1.14%
|
0.00%4
|
|
Expense
waiver/reimbursement7
|
0.05%6
|
0.08%
|
0.07%
|
0.08%
|
0.24%
|
0.66%
|
|
Supplemental
Data: |
|
|
|
|
|
|
|
Net
assets, end of period (000 omitted) |
$73,657
|
$74,905
|
$80,180
|
$80,914
|
$80,514
|
$81,245
|
|
1
|
Per
share numbers have been calculated using the average shares method. |
|
2
|
Represents
less than $0.001. |
|
3
|
Based
on net asset value. Total returns do not reflect any additional fees or expenses that may be imposed by separate accounts of insurance
companies or in
connection
with any variable annuity or variable life insurance contract. Total returns for periods of less than one year are not annualized.
|
|
4
|
Represents
less than 0.01%. |
|
5
|
Amount
does not reflect net expenses incurred by investment companies in which the Fund may invest. |
|
6
|
Computed
on an annualized basis. |
|
7
|
This
expense decrease is reflected in both the net expense and the net investment income ratios shown above. Amount does not reflect expense
waiver/
reimbursement
recorded by investment companies in which the Fund may invest. |
See Notes which are an integral part of
the Financial Statements
Semi-Annual
Financial Statements and Additional Information
4
Statement
of Assets and Liabilities
June 30, 2026 (unaudited)
|
Assets:
|
|
|
Investment
in repurchase agreements |
$39,544,000
|
|
Investment
in securities |
34,088,908
|
|
Total
investment in securities, at amortized cost and fair value |
73,632,908
|
|
Income
receivable |
157,409
|
|
Receivable
for shares sold |
13,752
|
|
Prepaid
expenses |
16,082
|
|
Total
Assets |
73,820,151
|
|
Liabilities:
|
|
|
Payable
for shares redeemed |
89,075
|
|
Payable
to bank |
532
|
|
Payable
for investment adviser fee (Note 4)
|
203
|
|
Payable
for administrative fee (Note 4)
|
155
|
|
Payable
for custodian fees |
6,546
|
|
Payable
for legal fees |
6,564
|
|
Payable
for portfolio accounting fees |
32,526
|
|
Payable
for other service fees (Notes 2 and 4)
|
15,211
|
|
Payable
for printing and postage |
9,739
|
|
Accrued
expenses (Note 4)
|
2,575
|
|
Total
Liabilities |
163,126
|
|
Net
assets for 73,657,431 shares outstanding |
$73,657,025
|
|
Net Assets
Consist of: |
|
|
Paid-in
capital |
$73,656,980
|
|
Total
distributable earnings (loss) |
45
|
|
Net
Assets |
$73,657,025
|
|
Net Asset
Value, Offering Price and Redemption Proceeds Per Share: |
|
|
Service
Shares: |
|
|
$73,657,025
÷ 73,657,431 shares outstanding, no par value, unlimited shares authorized |
$1.00
|
See Notes which are an integral part of
the Financial Statements
Semi-Annual
Financial Statements and Additional Information
5
Statement
of Operations
Six Months Ended June
30, 2026 (unaudited)
|
Investment
Income: |
|
|
Interest
|
$1,351,415
|
|
Expenses:
|
|
|
Investment
adviser fee (Note 4)
|
54,414
|
|
Administrative
fee (Note 4)
|
29,072
|
|
Custodian
fees |
6,656
|
|
Transfer
agent fees |
2,132
|
|
Directors’/Trustees’
fees (Note 4)
|
844
|
|
Auditing
fees |
13,860
|
|
Legal
fees |
5,495
|
|
Portfolio
accounting fees |
33,898
|
|
Other
service fees (Notes 2 and 4)
|
89,950
|
|
Printing
and postage |
7,230
|
|
Miscellaneous
(Note 4)
|
2,778
|
|
TOTAL
EXPENSES |
246,329
|
|
Waiver
of investment adviser fee (Note 4) |
(16,752)
|
|
Net
expenses |
229,577
|
|
Net
investment income |
1,121,838
|
|
Change
in net assets resulting from operations |
$1,121,838
|
See Notes which are an integral part of
the Financial Statements
Semi-Annual
Financial Statements and Additional Information
6
Statement
of Changes in Net Assets
|
|
Six
Months
Ended
(unaudited)
6/30/2026
|
Year
Ended
12/31/2025
|
|
Increase
(Decrease) in Net Assets |
|
|
|
Operations:
|
|
|
|
Net
investment income |
$1,121,838
|
$2,832,578
|
|
Net
realized gain (loss) |
—
|
1,062
|
|
CHANGE
IN NET ASSETS RESULTING FROM OPERATIONS |
1,121,838
|
2,833,640
|
|
Distributions
to Shareholders: |
|
|
|
Service
Shares |
(1,122,867)
|
(2,832,948)
|
|
Share Transactions:
|
|
|
|
Proceeds
from sale of shares |
12,016,132
|
18,149,054
|
|
Net
asset value of shares issued to shareholders in payment of distributions declared |
1,122,866
|
2,832,944
|
|
Cost
of shares redeemed |
(14,385,875)
|
(26,257,546)
|
|
CHANGE
IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS |
(1,246,877)
|
(5,275,548)
|
|
Change
in net assets |
(1,247,906)
|
(5,274,856)
|
|
Net Assets:
|
|
|
|
Beginning
of period |
74,904,931
|
80,179,787
|
|
End
of period |
$73,657,025
|
$74,904,931
|
See Notes which are an integral part of
the Financial Statements
Semi-Annual
Financial Statements and Additional Information
7
Notes to
Financial Statements
June 30, 2026 (unaudited)
1. ORGANIZATION
Federated Hermes Insurance Series (the “Trust”)
is registered under the Investment Company Act of 1940, as amended (the “Act”), as an
open-end management investment company. The Trust consists of six portfolios. The financial statements included herein are only those
of Federated Hermes Government Money Fund II (the “Fund”), a diversified portfolio. The financial statements of the other
portfolios are presented separately. The assets of each portfolio
are segregated and a shareholder’s interest is limited to the portfolio in which
shares are held. Each portfolio pays its own expenses. The Fund offers one class of shares: Service Shares. Fund shares are available
exclusively as a funding vehicle for life insurance companies writing variable life insurance policies and variable annuity contracts.
The investment objective of the Fund is to provide current income consistent with stability of principal and liquidity.
The Fund operates as
a government money market fund. As a government money market fund, the Fund: (1) invests at least 99.5% of its
total assets in: (i) cash; (ii) securities issued or guaranteed by the United States or certain U.S. government agencies or instrumentalities;
and/or (iii) repurchase agreements that are collateralized fully; and (2) generally continues to use amortized cost to value
its portfolio securities and transact at a stable $1.00 net asset value (NAV).
2. SIGNIFICANT
ACCOUNTING POLICIES
The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of its financial statements.
These policies are in conformity with U.S. generally accepted accounting principles (GAAP).
Investment Valuation
Securities
are valued at amortized cost. The amortized cost method of valuation generally prescribes that an investment is valued at its acquisition
cost as adjusted daily for amortization of premium or accretion of discount to the specified redemption value on the nearest call,
demand or maturity date, as appropriate. If amortized cost is determined not to approximate fair value, the value of the portfolio securities
will be 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.
Pursuant to Rule 2a-5
under the Act, the Fund’s Board of Trustees (the “Trustees”) has designated Federated Investment Management
Company (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 (“Valuation Committee”), is responsible for determining the fair value of investments.
The Valuation Committee is comprised of officers of the Adviser and certain of the Adviser’s affiliated companies and determines
fair value of securities and oversees the comparison of amortized cost to market-based value. 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 monitoring
the relationship of market-based value and amortized cost. 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 and assumptions), 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.
Repurchase Agreements
The
Fund may invest in repurchase agreements for short-term liquidity purposes. It is the policy of the Fund to require the other party to
a repurchase agreement to transfer to the Fund’s custodian
or sub-custodian eligible securities or cash with a market value (after transaction
costs) at least equal to the repurchase price to be paid under the repurchase agreement. The eligible securities are transferred
to accounts with the custodian or sub-custodian in which the Fund holds a “securities entitlement” and exercises “control”
as those terms are defined in the Uniform Commercial Code. Certain
repurchase agreements may be structured as loans secured by a security
interest or lien on the eligible securities. The Fund has established procedures for monitoring the market value of the transferred securities
and requiring the transfer of additional eligible securities if necessary to equal at least the repurchase price. These procedures also
allow the other party to require securities to be transferred from the account to the extent that their market value exceeds the repurchase
price or in exchange for other eligible securities of equivalent market value.
The insolvency of the
other party or other failure to repurchase the securities may delay the disposition of the underlying securities or cause
the Fund to receive less than the full repurchase price. Under the terms of the repurchase agreement, any amounts received by the Fund
in excess of the repurchase price and related transaction costs must be remitted to the other party.
The Fund may enter into
repurchase agreements in which eligible securities are transferred into joint trading accounts maintained by the
custodian or sub-custodian for investment companies and other clients advised by the Fund’s Adviser and its affiliates. The Fund
will participate on a pro rata basis with the other investment
companies and clients in its share of the securities transferred under such repurchase
agreements and in its share of proceeds from any repurchase or other disposition of such securities.
Semi-Annual
Financial Statements and Additional Information
8
Repurchase
agreements are subject to Master Netting Agreements which are agreements between the Fund and its counterparties that
provide for the net settlement of all transactions and collateral with the Fund, through a single payment, in the event of default or
termination. Amounts presented on the Portfolio of Investments
and Statement of Assets and Liabilities are not net settlement amounts but
gross. As indicated above, the cash or securities to be repurchased, as shown on the Portfolio of Investments, exceeds the repurchase
price to be paid under the agreement reducing the net settlement amount to zero.
Investment Income, Gains and Losses, Expenses and Distributions
Investment
transactions are accounted for on a trade-date basis. Realized gains and losses from investment transactions are recorded on an
identified-cost basis. Interest income and expenses are accrued daily. Distributions to shareholders are recorded on the ex-dividend date.
Distributions of net investment income, if any, are declared daily and paid monthly. In addition, distributions of capital gains, if any,
are declared and paid at least annually. Amortization/accretion
of premium and discount is included in investment income. The detail of the
total fund expense waiver of $16,752 is disclosed in Note 4.
Dividends are declared
separately for each class. No class has preferential dividend rights; differences in per share dividend rates are generally
due to differences in separate class expenses.
Other Service Fees
The
Fund may pay other service fees up to 0.25% of the average daily net assets of the Fund’s Service Shares to unaffiliated financial
intermediaries for providing services to shareholders and maintaining
shareholder accounts. Subject to the terms described in the Expense
Limitation note, the Adviser may voluntarily reimburse the Fund for other service fees.
For the six months ended June 30, 2026,
other service fees for the Fund were as follows:
|
|
Other
Service
Fees
Incurred |
|
Service
Shares |
$89,950
|
Federal Taxes
It
is the Fund’s policy to comply with the Subchapter M provision of the Internal Revenue Code of 1986 and to distribute to shareholders
each year substantially all of its income. Accordingly, no provision
for federal income tax is necessary. As of and during the six months ended
June 30, 2026, the Fund did not have a liability for any uncertain tax positions. The Fund recognizes interest and penalties, if any,
related to tax liabilities as income tax expense in the Statement
of Operations. As of June 30, 2026, tax years 2022 through 2025 remain subject
to examination by the Fund’s major tax jurisdictions, which include the United States of America and the Commonwealth of
Massachusetts.
When-Issued and Delayed-Delivery Transactions
The
Fund may engage in when-issued or delayed-delivery transactions. The Fund records when-issued securities on the trade date and maintains
security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased
on a when-issued or delayed-delivery basis are marked to market daily and begin earning interest on the settlement date. Losses
may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the
contract.
Other
The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the
amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ materially from
those estimated. The Fund applies investment company accounting
and reporting guidance.
3. SHARES
OF BENEFICIAL INTEREST
The following table summarizes share activity:
|
|
Six
Months Ended
6/30/2026
|
Year
Ended
12/31/2025
|
|
Shares
sold |
12,016,132
|
18,149,054
|
|
Shares
issued to shareholders in payment of distributions declared |
1,122,866
|
2,832,944
|
|
Shares
redeemed |
(14,385,875)
|
(26,257,546)
|
|
NET
CHANGE RESULTING FROM FUND SHARE TRANSACTIONS |
(1,246,877)
|
(5,275,548)
|
4. INVESTMENT
ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
The
advisory agreement between the Fund and the Adviser provides for an annual fee equal to 0.15% of the Fund’s average daily net assets.
Prior to September 1, 2024, the Fund’s gross investment advisory fee was 0.20% of the Fund’s average daily net assets. Subject
to the terms described in the Expense Limitation note, the Adviser
may voluntarily choose to waive any portion of its fee and/or reimburse certain
operating expenses of the Fund for competitive reasons such as to maintain the Fund’s expense ratio, or as and when appropriate,
to maintain positive or zero net yields. For the six months ended June 30, 2026, the Adviser voluntarily waived $16,752 of its
fee.
Semi-Annual
Financial Statements and Additional Information
9
Administrative Fee
Federated
Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and
services. For purposes of determining the appropriate rate breakpoint, “Investment Complex” is defined as all of the Federated
Hermes Funds subject to a fee under the Administrative Services
Agreement. The fee paid to FAS is based on the average daily net assets
of the Investment Complex as specified below:
|
Administrative
Fee |
Average
Daily Net Assets
of
the Investment Complex |
|
0.100%
|
on
assets up to $50 billion |
|
0.075%
|
on
assets over $50 billion |
Subject to the terms described in the Expense
Limitation note, FAS may voluntarily choose to waive any portion of its fee. For the six months
ended June 30, 2026, the annualized fee paid to FAS was 0.080% of average daily net assets of the Fund.
In addition, FAS may charge certain out-of-pocket
expenses to the Fund.
Expense Limitation
Due
to the possibility of changes in market conditions and other factors, there can be no assurance that the level of waivers/reimbursement/reduction
of Fund expenses reflected in the financial highlights will be maintained in the future. However, the Adviser and
certain of its affiliates (which may include FAS and FSC) on their own initiative have agreed to waive certain amounts of their respective
fees and/or reimburse expenses. Total annual fund operating expenses (as shown in the financial highlights, excluding interest expense,
extraordinary expenses and proxy-related expenses, if any) paid by the Fund’s Service Shares (after the voluntary waivers and/or
reimbursements) will not exceed 0.63% (the “Fee Limit”), up to but not including the later of (the “Termination Date”):
(a) May 1, 2027; or (b) the date of the Fund’s next effective
Prospectus. While the Adviser and its applicable affiliates currently do not anticipate
terminating or increasing these arrangements prior to the Termination Date, these arrangements may only be terminated or the
Fee Limit increased prior to the Termination Date with the approval of the Trustees.
Directors’/Trustees’ and Miscellaneous Fees
Certain
Officers and Trustees of the Fund are Officers and Directors or Trustees of certain of the above companies. To efficiently facilitate
payment, Independent Directors’/Trustees’ fees and
certain expenses related to conducting meetings of the Directors/Trustees and other
miscellaneous expenses are paid by an affiliate of the Adviser which in due course are reimbursed by the Fund. These expenses related
to conducting meetings of the Directors/Trustees and other miscellaneous expenses may be included in Accrued and Miscellaneous
Expenses on the Statement of Assets and Liabilities and Statement of Operations, respectively.
5. INTERFUND
LENDING
Pursuant to an Exemptive Order issued by
the Securities and Exchange Commission, the Fund, along with other funds advised by subsidiaries
of Federated Hermes, Inc., may participate in an interfund lending program. This program provides an alternative credit facility
allowing the Fund to borrow from other participating affiliated funds. As of June 30, 2026, there were no outstanding loans. During
the six months ended June 30, 2026, the program was not utilized.
6. Operating
Segments
An operating segment is defined as a component
of a public entity that engages in business activities from which it may recognize revenues
and incur expenses, has operating results that are regularly reviewed by the public entity’s chief operating decision maker (CODM)
to make decisions about resources to be allocated to the segment and assess its performance, and has discrete financial information
available. A management committee of the Adviser acts as the CODM. The Fund represents a single operating segment, as the
CODM monitors the operating results of the Fund as a whole and the strategic asset allocation is determined based on the investment
objective of the Fund and executed by the Fund’s portfolio management team. The financial information in the form of the Fund’s
portfolio composition, total returns, expense ratios and changes in net assets (i.e., changes in net assets resulting from operations,
subscriptions and redemptions) which is reviewed by the CODM to assess the Fund’s performance in comparison to the Fund’s
benchmarks and to make resource allocation decisions for the Fund’s single segment is consistent with the information presented
in these financial statements. Segment assets are reflected on
the accompanying Statement of Assets and Liabilities as “total assets” and significant
segment expenses are listed on the accompanying Statement of Operations.
7. INDEMNIFICATIONS
Under the Fund’s organizational documents,
its Officers and Directors/Trustees are indemnified against certain liabilities arising out of the
performance of their duties to the Fund (other than liabilities arising out of their willful misfeasance, bad faith, gross negligence
or reckless disregard of their duties to the Fund). In addition,
in the normal course of business, the Fund provides certain indemnifications under
arrangements with third parties. Typically, obligations to indemnify a third party arise in the context of an arrangement entered into
by the Fund under which the Fund agrees to indemnify such third party for certain liabilities arising out of actions taken pursuant to
the arrangement, provided the third party’s actions are
not deemed to have breached an agreed-upon standard of care (such as willful misfeasance,
bad faith, gross negligence or reckless disregard of their duties under the contract). The Fund’s maximum exposure under these
arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet arisen. The Fund
does not anticipate any material claims or losses pursuant to these arrangements at this time, and accordingly expects the risk of loss
to be remote.
Semi-Annual
Financial Statements and Additional Information
10
Evaluation
and Approval of Advisory Contract–May
2026
Federated Hermes Government
Money Fund II (the “Fund”)
At its meetings in May 2026 (the
“May Meetings”), the Fund’s Board of Trustees (the “Board”), including those Trustees who
are not “interested persons” of the Fund, as defined in the Investment Company Act of 1940, as amended (the
“Independent Trustees”), reviewed and unanimously approved the continuation of the investment advisory contract between
the Fund and Federated Investment Management Company (the “Adviser”) (the “Contract”) for an additional one-year
term. The Board’s determination to approve the continuation of the Contract reflects the exercise of its business judgment
after considering such information deemed necessary to evaluate the terms of the Contract and to approve the continuation
of the existing arrangement. The information, factors and conclusions that formed the basis for the Board’s approval
are summarized below.
Information Received
and Review Process
At the request
of the Independent Trustees, the Fund’s Chief Compliance Officer (the “CCO”) furnished to the Board in advance
of its May Meetings an independent written report regarding data related to the Fund’s management fee (the
“CCO Management Fee Report”). The Board considered the CCO Management Fee Report, along with other information,
in evaluating the reasonableness of the Fund’s management fee and in determining to approve the continuation
of the Contract.
In addition
to the CCO Management Fee Report, the Board considered information specifically prepared in connection with
the approval of the continuation of the Contract that was presented at the May Meetings. In this regard, in the months preceding
the May Meetings, the Board requested and reviewed written responses and supporting materials prepared by the
Adviser and its affiliates (collectively, “Federated Hermes”) in response to requests posed to Federated Hermes by independent
legal counsel on behalf of the Independent Trustees encompassing a wide variety of topics, including those summarized
below. The Board also considered such additional matters as the Independent Trustees deemed reasonably necessary
to evaluate the Contract, which included detailed information about the Fund and Federated Hermes furnished to the
Board at its meetings throughout the year.
The Board’s
consideration of the Contract included review of materials and information covering the following matters, among
others: (1) a copy of the Contract; (2) the nature, quality and extent of the advisory and other services provided to the
Fund by Federated Hermes; (3) Federated Hermes’ business and operations; (4) the Adviser’s investment philosophy, personnel
and processes; (5) the Fund’s investment objective and strategies; (6) the Fund’s short-term and long-term performance
- in absolute terms (both on a gross basis and net of expenses) and relative to an appropriate group of peer funds
and its benchmark; (7) the Fund’s fees and expenses, including the advisory fee and the overall expense structure of the
Fund - in absolute terms and relative to an appropriate group of peer funds, with due regard for contractual or voluntary
expense limitations (if any); (8) the financial condition of Federated Hermes; (9) the Adviser’s profitability with respect
to managing the Fund; (10) distribution and sales activity for the Fund; and (11) the use and allocation of brokerage
commissions derived from trading the Fund’s portfolio securities (if any).
The Board
also considered judicial decisions concerning allegedly excessive investment advisory fees charged to other registered
funds in evaluating the Contract. Using these judicial decisions as a guide, the Board considered several factors it
deemed relevant to an adviser’s fiduciary duty with respect to its receipt of compensation from a fund, including: (1) the nature
and quality of the services provided by the adviser to the fund and its shareholders, including the performance of the
fund, its benchmark and comparable funds; (2) the adviser’s cost of providing the services and the profitability to the adviser
of providing advisory services to the fund; (3) the extent to which the adviser may realize “economies of scale” as the
fund grows larger and, if such economies of scale exist, whether they have been appropriately shared with the fund and its
shareholders or the family of funds; (4) any “fall-out” benefits that accrue to the adviser because of its relationship with
the fund, including research services received from
brokers that execute fund trades and any fees paid to affiliates of the adviser
for services rendered to the fund; (5) comparative fees and expenses, including a comparison of management fees paid
to the adviser with those paid by similar funds managed by the same adviser or other advisers as well as management fees
charged to institutional and other advisory clients of the same adviser for what might be viewed as like services; and (6)
the extent of care, conscientiousness and independence with which the fund’s board members perform their duties and their
expertise, including whether they are fully informed about all facts the board deems relevant to its consideration of the
adviser’s services and fees. The Board considered that the Securities and Exchange Commission (“SEC”) disclosure requirements
regarding the basis for a fund board’s approval of the fund’s investment advisory contract generally align with
the factors listed above. The Board was guided by these factors in its evaluation of the Contract to the extent it considered
them to be appropriate and relevant, as discussed further below. The Board considered and weighed these factors
in light of its substantial accumulated experience in governing the Fund and working with Federated Hermes on matters
relating to the oversight of the other funds advised by Federated Hermes (each, a “Federated Hermes Fund” and, collectively,
the “Federated Hermes Funds”).
Semi-Annual
Financial Statements and Additional Information
11
In
addition, the Board considered the preferences and expectations of Fund shareholders and the potential disruptions of the
Fund’s operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate
or not renew the Contract. In particular, the Board recognized that many shareholders likely have invested in the Fund
based on the strength of Federated Hermes’ industry standing and reputation and with the expectation that Federated Hermes
will have a continuing role in providing advisory services to the Fund. Thus, the Board observed that there are a range
of investment options available to the Fund’s shareholders in the marketplace, and such shareholders, having had the opportunity
to consider other investment options, have effectively selected Federated Hermes by virtue of investing in the
Fund.
In determining
to approve the continuation of the Contract, the members of the Board reviewed and evaluated information
and factors they believed to be relevant and appropriate through the exercise of their reasonable business judgment.
While individual members of the Board may have weighed certain factors differently, the Board’s determination
to approve the continuation of the Contract was based on a comprehensive consideration of all information provided
to the Board throughout the year. The Board recognized that its evaluation process is evolutionary and that the factors
considered and the emphasis placed on relevant factors may change in recognition of changing circumstances in the
registered fund marketplace. The Independent Trustees were assisted throughout the evaluation process by independent legal
counsel. In connection with their deliberations at the May Meetings, the Independent Trustees met separately in executive
session with their independent legal counsel and without management present to review the relevant materials and
consider their responsibilities under applicable laws. In addition, senior management representatives of Federated Hermes
also met with the Independent Trustees and their independent legal counsel to discuss the materials and presentations
furnished to the Board at the May Meetings. The Board considered the approval of the Contract for the Fund as
part of its consideration of agreements for funds across the family of Federated Hermes Funds, but its approvals were made
on a fund-by-fund basis.
Nature, Extent and
Quality of Services
The Board
considered the nature, extent and quality of the services provided to the Fund by the Adviser and the resources
of Federated Hermes dedicated to the Fund. In this regard, the Board evaluated, among other things, the terms of the
Contract and the full range of services provided to the Fund by Federated Hermes. The Board considered the Adviser’s personnel,
investment philosophy and process, investment research capabilities and resources, trade operations capabilities,
experience and performance track record. The Board reviewed the qualifications, backgrounds and responsibilities
of the portfolio management team primarily responsible for the day-to-day management of the Fund and evaluated
Federated Hermes’ ability and experience in attracting and retaining qualified personnel to service the Fund. The Board
considered the trading operations by the Adviser, including the execution of portfolio transactions and the selection of
brokers for those transactions. In addition, the Board noted that the Fund is a money market mutual fund that operates in accordance
with the limitations set forth in Rule 2a-7 under the Investment Company Act of 1940, as amended. In this connection,
the Board considered the expertise of the Adviser in managing money market funds, its extensive experience with
the requirements of Rule 2a-7 and its commitment to managing the Fund in accordance with these requirements. The Board
also considered the Adviser’s ability to deliver competitive investment performance for the Fund when compared to the
Fund’s Performance Peer Group (as defined below), which was deemed by the Board to be a useful indicator of how the
Adviser is executing the Fund’s investment program.
In addition,
the Board considered the financial resources and overall reputation of Federated Hermes and its willingness to
consider and make investments in personnel, infrastructure, technology, cybersecurity, business continuity planning and operational
enhancements that are designed to benefit the Federated Hermes Funds. The Board considered the quality of Federated
Hermes’ communications with the Board and responsiveness to Board inquiries and requests made from time to time
with respect to the Federated Hermes Funds. The Board also considered that Federated Hermes is responsible for providing
the Federated Hermes Funds’ officers.
The Board
received and evaluated information regarding Federated Hermes’ regulatory and compliance environment. The
Board considered Federated Hermes’ compliance program and compliance history and reports from the CCO about Federated
Hermes’ compliance with applicable laws and regulations, including responses to regulatory developments and any
compliance or other issues raised by regulatory agencies. The Board also noted Federated Hermes’ support of the Federated
Hermes Funds’ compliance control structure and the compliance-related resources devoted by Federated Hermes
in support of the Fund’s obligations pursuant to Rule 38a-1 under the Investment Company Act of 1940, as amended,
including Federated Hermes’ commitment to respond to rulemaking and other regulatory initiatives of the SEC. The
Board considered Federated Hermes’ approach to internal audits and risk management with respect to the Federated Hermes
Funds and its day-to-day oversight of the Federated Hermes Funds’ compliance with their investment objectives and
policies as well as with applicable laws and regulations, noting that regulatory and other developments had over time
Semi-Annual
Financial Statements and Additional Information
12
led, and
continue to lead, to an increase in the scope of Federated Hermes’ oversight in this regard. In addition, the Board noted
Federated Hermes’ commitment to maintaining high quality systems and expending substantial resources to prepare for
and respond to ongoing changes due to the market, regulatory and control environments in which the Fund and its service
providers operate.
The Board
considered Federated Hermes’ efforts to provide shareholders in the Federated Hermes Funds with a comprehensive
array of funds with different investment objectives, policies and strategies. The Board considered the expenses
that Federated Hermes had incurred, as well as the entrepreneurial and other risks assumed by Federated Hermes, in
sponsoring and providing on-going services to new funds to expand these opportunities for shareholders. The Board noted
the benefits to shareholders of being part of the family of Federated Hermes Funds, which include the general right to
exchange investments between the same class of shares without the incurrence of additional sales charges.
Based on
these considerations, the Board concluded that it was satisfied with the nature, extent and quality of the services
provided by the Adviser to the Fund.
Fund Investment Performance
The Board
considered the investment performance of the Fund. In evaluating the Fund’s investment performance, the Board
considered performance results in light of the Fund’s investment objective, strategies and risks. The Board considered
detailed investment reports on, and the Adviser’s analysis of, the Fund’s performance over different time periods
that were provided to the Board throughout the year and in connection with the May Meetings. These reports included,
among other items, information on the Fund’s gross and net returns, the Fund’s investment performance compared
to one or more relevant categories or groups of peer funds and the Fund’s benchmark, performance attribution information
and commentary on the effect of market conditions. The Board noted that it evaluated investment performance at
meetings throughout the year and received reports from Federated Hermes regarding the performance of certain Federated
Hermes Funds as well as Federated Hermes’ explanations for less favorable performance and any specific actions
Federated Hermes had taken, or had determined to take, to seek to enhance Fund investment performance and the results
of those actions.
The Board
also reviewed comparative information regarding the performance of other registered funds in the category of
peer funds selected by iMoneyNet, an independent fund ranking organization (the “Performance Peer Group”). The Board
noted the CCO’s statement that comparisons to fund peer groups may be helpful, though not conclusive, in evaluating
the performance of the Adviser in managing the Fund.
The Board
also considered comparative performance data from Lipper, Inc. that was included in reports provided to the Board
throughout the year.
The Board
considered that the Fund’s performance fell below the median of the Performance Peer Group for the one-year
period ended December 31, 2025. The Board discussed the Fund’s performance with the Adviser and recognized the efforts
being taken by the Adviser in the context of other factors considered relevant by the Board. The Board also considered
the relatively tight dispersion of performance data with respect to the Fund and its Peer Group.
Based on
these considerations, the Board concluded that it had continued confidence in the Adviser’s overall capabilities
to manage the Fund.
Fund Expenses
The Board
considered the advisory fee and overall expense structure of the Fund and the comparative fee and expense information
that had been provided in connection with the May Meetings. In this regard, the Board was presented with, and
considered, information regarding the contractual advisory fee rates, total expense ratios and each element of the Fund’s
total expense ratio (i.e., gross and net advisory fees, administrative fees, custody fees, portfolio accounting fees and transfer
agency fees) relative to an appropriate group of peer funds compiled by Federated Hermes from the overall category
of peer funds selected by iMoneyNet (the “Expense Peer Group”). The Board received a description of the methodology
used to select the Expense Peer Group from the overall iMoneyNet category. The Board also reviewed comparative
information regarding the fees and expenses of the broader group of funds in the overall iMoneyNet category.
While mindful
that courts have cautioned against giving too much weight to comparative information concerning fees charged
to funds by other advisers, the Board found that the use of comparisons between the Fund and its Expense Peer Group
assisted the Board in its evaluation of the Fund’s fees and expenses. The Board focused on comparisons with other registered
funds more heavily than non-registered fund products or services because such comparisons are believed to be more
relevant. The Board considered that other registered funds are the products most like the Fund, in that they are readily
available to Fund shareholders as alternative investment vehicles, and they are the type of investment vehicle, in fact,
chosen and maintained by the Fund’s shareholders. The Board noted that the range of such other registered funds’ fees
and expenses, therefore, appears to be a relevant indicator of what investors have found to be reasonable in the marketplace
in which the Fund competes.
Semi-Annual
Financial Statements and Additional Information
13
The
Board reviewed the contractual advisory fee rate, net advisory fee rate and other expenses of the Fund and noted the position
of the Fund’s contractual advisory fee rate and other expenses relative to its Expense Peer Group. In this regard, the
Board noted that the contractual advisory fee rate was below the median of the Expense Peer Group, and the Board was
satisfied that the overall expense structure of the Fund remained competitive. In considering the Fund’s expenses, the Board
noted that the Adviser recommended, and the Board approved, a contractual advisory fee reduction of 5 basis points for
the Fund, effective August 15, 2024.
The Board
also received and considered information about the nature and extent of services offered and fees charged by Federated
Hermes to other types of clients with investment strategies similar to those of the Federated Hermes Funds, including
non-registered fund clients (such as institutional separate accounts) and third-party unaffiliated registered funds for
which the Adviser or its affiliates serve as sub-adviser. The Board noted the CCO’s statement that non-registered fund clients
are inherently different products due to the following differences, among others: (i) types of targeted investors; (ii)
applicable laws and regulations; (iii) legal structures; (iv) average account sizes; (v) portfolio management techniques made
necessary by different cash flows and different associated costs; (vi) the time spent by portfolio managers and their teams
(among other personnel across various departments, including legal, compliance and risk management) in reviewing securities
pricing; (vii) SEC mandated risk management programs with respect to fund liquidity and use of derivatives; (viii)
questions on regulatory reporting; (ix) a variety of different administrative responsibilities; and (x) degrees of risk associated
with management. The Board also considered information regarding the differences in the nature of the services required
for Federated Hermes to manage its proprietary registered fund business versus managing a discrete pool of assets as
a sub-adviser to another institution’s registered fund, noting the CCO’s statement that Federated Hermes generally performs
significant additional services and assumes substantially greater risks in managing the Fund and other Federated Hermes
Funds than in its role as sub-adviser to an unaffiliated third-party registered fund. The Board noted that the CCO emphasized
that differences in fees for providing advisory services to other types of clients may not be appropriate when judging
the appropriateness of the Federated Hermes Funds’ advisory fees because of the different services provided.
In the case
of the Fund, the Board noted that Federated Hermes does not manage any other types of clients that are comparable
to the Fund.
Based on
these considerations, the Board concluded that the fees and total operating expenses of the Fund, in conjunction
with other matters considered, are reasonable in light of the services provided.
Profitability
The Board
received and considered profitability information furnished by Federated Hermes. Such profitability information
included revenues reported on a fund-by-fund basis and estimates of the allocation of expenses made on a fund-by-fund
basis, using allocation methodologies specified by the CCO and described to the Board. The Board considered
the CCO’s statement that, while the cost allocation report applies consistent allocation processes for purposes of
general comparison of funds, the inherent difficulties in arbitrarily allocating costs lack precision and may cause the report
to be unreliable because a single change in an allocation estimate can dramatically alter the resulting estimate of cost
and/or profitability of a Federated Hermes Fund and may produce unintended consequences. In addition, the Board considered
the CCO’s statement that the allocation methodologies used by Federated Hermes in estimating profitability for purposes
of reporting to the Board in connection with the continuation of the Contract are consistent with the methodologies
previously reviewed by an independent consultant. The Board noted that the independent consultant had previously
conducted a review of the allocation methodologies and reported to the Board that, although there is no single best
method to allocate expenses, the methodologies used by Federated Hermes are reasonable. The Board considered the CCO’s
statement that the estimated profitability to the Adviser from its relationship with the Fund was not unreasonable in relation
to the services provided.
The Board
also reviewed information compiled by Federated Hermes comparing its profitability information to other publicly-held
fund management companies, including information regarding profitability trends over time. The Board recognized
that profitability comparisons among fund management companies are difficult because of the variation in the type
of comparative information that is publicly available, and the profitability of any fund management company is affected
by numerous factors. The Board considered the CCO’s statement that, based on such profitability information, Federated
Hermes’ profit margins did not appear to be excessive and that Federated Hermes appeared financially sound, with
the resources available to fulfill its contractual obligations.
Economies of Scale
The Board
received and considered information about the notion of possible realization of “economies of scale” as a fund
grows larger, the difficulties of isolating and quantifying economies of scale at an individual fund level, and the extent
to which potential scale benefits are shared with shareholders. In this regard, the Board considered that Federated Hermes
has made significant and long-term investments in areas that support all of the Federated Hermes Funds, such as: portfolio
management, investment research and trading operations; shareholder services; compliance; business continuity, cybersecurity
and information security programs; internal audit and risk management functions; and technology, systems
Semi-Annual
Financial Statements and Additional Information
14
capabilities
and use of data. The Board noted that Federated Hermes’ investments in these areas are extensive and are designed
to provide enhanced or expanded services to the Federated Hermes Funds and their shareholders. The Board considered
that the benefits of these investments are likely to be shared with the family of Federated Hermes Funds as a whole.
In addition, the Board considered that fee waivers and expense reimbursements are another means for potential economies
of scale to be shared with shareholders and can provide protection from an increase in expenses if a Federated Hermes
Fund’s assets decline. The Board considered that, in order for the Federated Hermes Funds to remain competitive in
the marketplace, Federated Hermes has frequently waived fees and/or reimbursed expenses for the Federated Hermes Funds
and has disclosed to shareholders and/or reported to the Board its intention to do so (or continue to do so) in the future.
The Board also considered that Federated Hermes has been active in managing expenses of the Federated Hermes Funds
in recent years, which has resulted in benefits being realized by shareholders.
The Board
also received and considered information on adviser-paid fees (commonly referred to as “revenue sharing” payments)
that was provided to the Board throughout the year and in connection with the May Meetings. The Board considered
that Federated Hermes believes that this information is relevant to consider whether Federated Hermes had an incentive
to either not apply breakpoints, or to apply breakpoints at higher levels, but should not be considered when evaluating
the reasonableness of advisory fees. The Board also noted the absence of any applicable regulatory or industry guidelines
on economies of scale, which is compounded by the lack of any uniform methodology or pattern with respect to structuring
fund advisory fees with breakpoints that serve to reduce the fees as a fund attains a certain size.
Other Benefits
The Board
considered information regarding the compensation and other ancillary (or “fall-out”) benefits that Federated Hermes
derived from its relationships with the Federated Hermes Funds. The Board considered that Federated Hermes may
derive a benefit to its reputation as an adviser to the Fund, which may help in attracting other clients and investment personnel.
The Board noted that, in addition to receiving advisory fees under the Federated Hermes Funds’ investment advisory
contracts, Federated Hermes’ affiliates also receive fees for providing other services to the Federated Hermes Funds
under separate service contracts, including for serving as the Federated Hermes Funds’ administrator and distributor.
In this regard, the Board considered that Federated Hermes’ affiliates provide distribution and shareholder services
to the Federated Hermes Funds, for which they may be compensated through distribution and servicing fees paid pursuant
to Rule 12b-1 plans or otherwise. The Board also received and considered information detailing the benefits, if any,
that Federated Hermes may derive from its receipt of research services from brokers who execute portfolio trades for the
Federated Hermes Funds.
Conclusions
The Board
considered the CCO’s presentation and statements and the information accompanying the CCO Management Fee
Report. The Board recognized that its evaluation of the Federated Hermes Funds’ advisory and sub-advisory arrangements
is a continuing and ongoing process that is informed by the information that the Board requests and receives from
management throughout the course of the year.
On the basis
of the information and factors summarized above, among other information and factors deemed relevant by the
Board, and the evaluation thereof, the Board, including the Independent Trustees, unanimously voted to approve the continuation
of the Contract. The Board based its determination to approve the Contract on the totality of the circumstances
and relevant factors and with a view of past and future long-term considerations. Not all of the factors and considerations
identified above were necessarily deemed to be relevant to the Fund, nor did the Board consider any one of them
to be determinative.
Semi-Annual
Financial Statements and Additional Information
15
Variable
investment options are not bank deposits or obligations, are not guaranteed by any bank and are not insured or guaranteed
by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government
agency. Investment in variable investment options involves investment risk, including the possible loss of principal.
You could lose money by investing in the
Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per
share, it cannot guarantee it will do so. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support
to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
This information is authorized
for distribution to prospective investors only when preceded or accompanied by the Fund’s Prospectus,
which contains facts concerning its objective and policies, management fees, expenses and other information.
In an effort to reduce costs
and avoid duplicate mailings, the Fund(s) intend to deliver a single copy of certain documents
to each household in which more 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 of Additional
Information, and supplements to each, as well as Semi-Annual and 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 shareholder as having given consent (“implied consent”) if (i)
shareholders with the same last name, or believed to be members of the same family, reside at the same street address
or receive mail at the same post office box, (ii) the Fund gives notice of its intent to “household” at least sixty (60)
days before it begins “householding” and (iii) none of the shareholders in the household have notified the Fund(s)
or their agent of the desire to “opt out” of “householding.” Shareholders who have granted written consent, or
have been deemed to have granted implied consent, can
revoke that consent and opt out of “householding” at any time:
shareholders who purchased shares through an intermediary should contact their representative; other shareholders
may call the Fund at 1-800-341-7400, Option #4.
Federated Hermes Government Money Fund
II
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us at
FederatedHermes.com/us
or call 1-800-341-7400.
or call 1-800-341-7400.
Federated Securities Corp., Distributor
CUSIP 313916504
G00433-05 (8/26)
©
2026 Federated Hermes, Inc.
Semi-Annual Financial Statements
and Additional Information
and Additional Information
June 30, 2026
|
Share
Class |
Primary
|
Service
|
|
|
Federated Hermes High Income Bond Fund II
A Portfolio of Federated Hermes Insurance Series
Not FDIC Insured ▪ May
Lose Value ▪ No Bank Guarantee
Portfolio
of Investments
June 30, 2026 (unaudited)
|
Principal
Amount
or
Shares |
|
|
Value
|
|
|
|
CORPORATE
BONDS—96.5% |
|
|
|
|
Aerospace/Defense—1.7%
|
|
|
$ 50,000
|
|
TransDigm,
Inc., 144A, 6.250%, 1/31/2034 |
$ 51,061
|
|
375,000
|
|
TransDigm,
Inc., 1st Priority Sr. Secd. Note, 144A, 6.625%, 3/1/2032 |
385,077
|
|
425,000
|
|
TransDigm,
Inc., Sr. Secd. Note, 144A, 6.875%, 12/15/2030 |
437,059
|
|
200,000
|
|
TransDigm,
Inc., Sr. Sub. Note, 144A, 6.375%, 5/31/2033 |
202,037
|
|
125,000
|
|
TransDigm,
Inc., Sr. Sub. Note, 144A, 6.750%, 1/31/2034 |
128,303
|
|
100,000
|
|
TransDigm,
Inc., Sr. Sub., 144A, 6.125%, 7/31/2034 |
99,996
|
|
|
|
TOTAL
|
1,303,533
|
|
|
|
Airlines—0.1%
|
|
|
75,000
|
|
United
Airlines Holdings, Inc., Sr. Unsecd. Note, 5.375%, 3/1/2031 |
74,555
|
|
|
|
Automotive—3.4%
|
|
|
150,000
|
|
Adient
Global Holdings Ltd., Sr. Unsecd. Note, 144A, 7.500%, 2/15/2033 |
154,825
|
|
100,000
|
|
Adient
Global Holdings Ltd., Sr. Unsecd. Note, 144A, 8.250%, 4/15/2031 |
104,599
|
|
50,000
|
|
Clarios
Global LP, Sr. Secd. Note, 144A, 6.750%, 2/15/2030 |
51,550
|
|
475,000
|
|
Clarios
Global LP, Sr. Unsecd. Note, 144A, 6.750%, 9/15/2032 |
485,415
|
|
75,000
|
|
Cyprium
Corp. / Cyprium Holdings, Sr. Unsecd. Note, 144A, 6.125%, 4/15/2031 |
75,184
|
|
200,000
|
|
Cyprium
Corp. / Cyprium Holdings, Sr. Unsecd. Note, 144A, 6.375%, 4/15/2034 |
200,100
|
|
283,250
|
|
Dexko
Global, Inc., Sr. Unsecd. Note, 144A, 7.500%, 4/15/2032 |
233,964
|
|
25,000
|
|
Dorman
Products, Inc., Sr. Unsecd. Note, 144A, 6.250%, 6/15/2034 |
25,319
|
|
350,000
|
|
Forvia
SE, Sr. Unsecd. Note, 144A, 6.750%, 9/15/2033 |
350,071
|
|
375,000
|
|
IHO
Verwaltungs GmbH, 144A, 8.000%, 11/15/2032 |
390,908
|
|
200,000
|
|
IHO
Verwaltungs GmbH, Secured Note, 144A, 7.375%, 5/15/2033 |
208,071
|
|
275,000
|
|
JB
Poindexter & Co., Inc., Sr. Unsecd. Note, 144A, 8.750%, 12/15/2031 |
283,078
|
|
|
|
TOTAL
|
2,563,084
|
|
|
|
Building
Materials—4.5% |
|
|
175,000
|
|
American
Builders & Contractors Supply Co., Inc., 144A, 4.000%, 1/15/2028 |
172,195
|
|
25,000
|
|
American
Builders & Contractors Supply Co., Inc., Sr. Unsecd. Note, 144A, 3.875%, 11/15/2029 |
23,845
|
|
50,000
|
|
Core
& Main LP, Sr. Unsecd. Note, 144A, 6.000%, 7/1/2034 |
50,287
|
|
250,000
|
|
CP
Atlas Buyer, Inc., 144A, 9.750%, 7/15/2030 |
240,286
|
|
50,000
|
|
Installed
Building Products, Inc., Sr. Unsecd. Note, 144A, 5.625%, 2/1/2034 |
49,755
|
|
250,000
|
|
Masterbrand,
Inc., 144A, 7.000%, 7/15/2032 |
253,585
|
|
300,000
|
|
Miter
Brands Acquisition Holdco, Inc./MIWD Borrower LLC, Sr. Secd. Note, 144A, 6.750%, 4/1/2032 |
297,606
|
|
25,000
|
|
MIWD
Holdco II LLC/MIWD Finance Corp., Sr. Unsecd. Note, 144A, 5.500%, 2/1/2030 |
23,554
|
|
300,000
|
|
Patrick
Industries, Inc., Co. Guarantee, 144A, 6.375%, 11/1/2032 |
299,057
|
|
275,000
|
|
Queen
MergerCo, Inc., Sr. Secd. Note, 144A, 6.750%, 4/30/2032 |
284,126
|
|
200,000
|
|
Quikrete
Holdings, Inc., Sr. Secd. Note, 144A, 6.375%, 3/1/2032 |
204,331
|
|
100,000
|
|
Quikrete
Holdings, Inc., Sr. Unsecd. Note, 144A, 6.750%, 3/1/2033 |
101,988
|
|
225,000
|
|
QXO
Building Products, Sr. Unsecd. Note, 144A, 6.875%, 7/15/2034 |
231,114
|
|
175,000
|
|
Standard
Industries, Inc., Sr. Unsecd. Note, 144A, 3.375%, 1/15/2031 |
157,619
|
|
250,000
|
|
Standard
Industries, Inc., Sr. Unsecd. Note, 144A, 6.250%, 8/1/2033 |
248,482
|
|
175,000
|
|
Standard
Industries, Inc., Sr. Unsecd. Note, 144A, 6.500%, 8/15/2032 |
176,171
|
|
275,000
|
|
TopBuild
Corp., Sr. Unsecd. Note, 144A, 5.625%, 1/31/2034 |
278,699
|
|
250,000
|
|
White
Cap Supply Holdings LLC, Sr. Unsecd. Note, 144A, 7.375%, 11/15/2030 |
253,714
|
|
|
|
TOTAL
|
3,346,414
|
|
|
|
Cable
Satellite—4.4% |
|
|
125,000
|
|
CCO
Holdings LLC/Cap Corp., Sr. Unsecd. Note, 144A, 4.250%, 2/1/2031 |
112,671
|
|
100,000
|
|
CCO
Holdings LLC/Cap Corp., Sr. Unsecd. Note, 144A, 4.250%, 1/15/2034 |
84,751
|
|
225,000
|
|
CCO
Holdings LLC/Cap Corp., Sr. Unsecd. Note, 144A, 4.500%, 6/1/2033 |
195,387
|
Semi-Annual
Financial Statements and Additional Information
1
|
Principal
Amount
or
Shares |
|
|
Value
|
|
|
|
CORPORATE
BONDS—continued |
|
|
|
|
Cable
Satellite—continued |
|
|
$ 700,000
|
|
CCO
Holdings LLC/Cap Corp., Sr. Unsecd. Note, 144A, 4.750%, 3/1/2030 |
$ 664,070
|
|
225,000
|
|
CCO
Holdings LLC/Cap Corp., Sr. Unsecd. Note, 144A, 5.000%, 2/1/2028 |
222,297
|
|
200,000
|
|
CCO
Holdings LLC/Cap Corp., Sr. Unsecd. Note, 144A, 5.375%, 6/1/2029 |
195,758
|
|
175,000
|
|
CCO
Holdings LLC/Cap Corp., Sr. Unsecd. Note, 144A, 7.000%, 2/1/2033 |
171,765
|
|
200,000
|
|
CSC
Holdings LLC, Sr. Unsecd. Note, 144A, 4.500%, 11/15/2031 |
118,328
|
|
150,000
|
|
Sirius
XM Radio LLC, Sr. Unsecd. Note, 144A, 4.000%, 7/15/2028 |
146,149
|
|
200,000
|
|
Sirius
XM Radio LLC, Sr. Unsecd. Note, 144A, 4.125%, 7/1/2030 |
188,374
|
|
125,000
|
|
Sirius
XM Radio LLC, Sr. Unsecd. Note, 144A, 5.500%, 7/1/2029 |
124,777
|
|
125,000
|
|
Sirius
XM Radio LLC, Sr. Unsecd. Note, 144A, 5.875%, 4/15/2032 |
123,613
|
|
375,000
|
|
Sunrise
FinCo I B.V., Sr. Note, 144A, 4.875%, 7/15/2031 |
354,818
|
|
50,000
|
|
Telenet
Finance Luxembourg, Sr. Secd. Note, 144A, 5.500%, 3/1/2028 |
48,884
|
|
200,000
|
|
Virgin
Media Secured Finance PLC, Sr. Secd. Note, 144A, 4.500%, 8/15/2030 |
169,994
|
|
200,000
|
|
Vmed
O2 UK Financing I PLC, Sr. Note, 144A, 4.750%, 7/15/2031 |
164,519
|
|
250,000
|
|
VZ
Secured Financing B.V., Sr. Secd. Note, 144A, 5.000%, 1/15/2032 |
219,046
|
|
|
|
TOTAL
|
3,305,201
|
|
|
|
Chemicals—4.8%
|
|
|
150,000
|
|
Ashland,
Inc., Sr. Unsecd. Note, 144A, 3.375%, 9/1/2031 |
139,672
|
|
150,000
|
|
Axalta
Coating Systems LLC/Axalta Coating Systems Dutch Holding B B.V., Sr. Unsecd. Note, 144A, 4.750%, 6/15/2027 |
149,638
|
|
150,000
|
|
Axalta
Coating Systems LLC/Axalta Coating Systems Dutch Holding B B.V., Sr. Unsecd. Note, 144A, 7.250%, 2/15/2031 |
156,003
|
|
200,000
|
|
Bond
US Bidco 1/2/3/G1/2, Secured Note, 144A, 7.125%, 6/15/2033 |
202,065
|
|
25,000
|
|
Celanese
US Holdings LLC, Sr. Unsecd. Note, 6.500%, 4/15/2030 |
25,495
|
|
350,000
|
|
Celanese
US Holdings LLC, Sr. Unsecd. Note, 6.750%, 4/15/2033 |
356,731
|
|
125,000
|
|
Celanese
US Holdings LLC, Sr. Unsecd. Note, 7.000%, 2/15/2031 |
128,746
|
|
150,000
|
|
Element
Solutions, Inc., Sr. Unsecd. Note, 144A, 3.875%, 9/1/2028 |
146,457
|
|
175,000
|
|
H.B.
Fuller Co., Sr. Unsecd. Note, 4.250%, 10/15/2028 |
172,306
|
|
53,000
|
|
Illuminate
Buyer LLC/Illuminate Holdings IV, Inc., Sr. Unsecd. Note, 144A, 9.000%, 7/1/2028 |
53,143
|
|
200,000
|
|
Inversion
Escrow Issuer LLC, Secured Note, 144A, 6.750%, 8/1/2032 |
195,560
|
|
325,000
|
|
Maxam
Prill S.a.r.l., Sr. Secd. Note, 144A, 7.750%, 7/15/2030 |
335,042
|
|
375,000
|
|
Olympus
Water US Holding Corp., Secured Note, 144A, 7.250%, 2/15/2033 |
371,146
|
|
275,000
|
|
Olympus
Water US Holding Corp., Sr. Secd. Note, 144A, 4.250%, 10/1/2028 |
266,915
|
|
75,000
|
|
Qnity
Electronics, Inc., Sr. Unsecd. Note, 144A, 6.250%, 8/15/2033 |
76,401
|
|
200,000
|
|
SNF
Group SACA, Sr. Unsecd. Note, 144A, 3.375%, 3/15/2030 |
186,313
|
|
150,000
|
|
Solstice
Advanced Materials, Inc., Sr. Unsecd. Note, 144A, 5.625%, 9/30/2033 |
149,145
|
|
25,000
|
|
WR
Grace Holdings LLC, Secured Note, 144A, 7.000%, 8/1/2033 |
24,365
|
|
225,000
|
|
WR
Grace Holdings LLC, Sr. Secd. Note, 144A, 6.625%, 8/15/2032 |
218,396
|
|
75,000
|
|
WR
Grace Holdings LLC, Sr. Secd. Note, 144A, 7.375%, 3/1/2031 |
75,362
|
|
125,000
|
|
WR
Grace Holdings LLC, Sr. Unsecd. Note, 144A, 5.625%, 8/15/2029 |
117,587
|
|
|
|
TOTAL
|
3,546,488
|
|
|
|
Construction
Machinery—0.8% |
|
|
50,000
|
|
Herc
Holdings, Inc., Sr. Unsecd. Note, 144A, 6.000%, 3/15/2034 |
49,719
|
|
125,000
|
|
Herc
Holdings, Inc., Sr. Unsecd. Note, 144A, 7.000%, 6/15/2030 |
129,531
|
|
100,000
|
|
Herc
Holdings, Inc., Sr. Unsecd. Note, 144A, 7.250%, 6/15/2033 |
104,326
|
|
175,000
|
|
United
Rentals North America, Inc., Sr. Unsecd. Note, 3.750%, 1/15/2032 |
162,365
|
|
75,000
|
|
United
Rentals North America, Inc., Sr. Unsecd. Note, 4.000%, 7/15/2030 |
71,760
|
|
50,000
|
|
United
Rentals North America, Inc., Sr. Unsecd. Note, 144A, 5.375%, 11/15/2033 |
49,285
|
|
|
|
TOTAL
|
566,986
|
|
|
|
Consumer
Cyclical Services—2.9% |
|
|
75,000
|
|
Allied
Universal Holdco LLC, Sr. Secd. Note, 144A, 6.875%, 6/15/2030 |
77,121
|
|
300,000
|
|
Allied
Universal Holdco LLC, Sr. Secd. Note, 144A, 7.875%, 2/15/2031 |
313,776
|
|
200,000
|
|
Allied
Universal Holdco LLC, Sr. Unsecd. Note, 144A, 6.000%, 6/1/2029 |
199,253
|
Semi-Annual
Financial Statements and Additional Information
2
|
Principal
Amount
or
Shares |
|
|
Value
|
|
|
|
CORPORATE
BONDS—continued |
|
|
|
|
Consumer
Cyclical Services—continued |
|
|
$ 125,000
|
|
Cars.com,
Inc., Sr. Unsecd. Note, 144A, 6.375%, 11/1/2028 |
$ 124,073
|
|
50,000
|
|
Garda
World Security Corp., Sr. Secd. Note, 144A, 6.500%, 1/15/2031 |
50,730
|
|
50,000
|
|
Garda
World Security Corp., Sr. Unsecd. Note, 144A, 6.000%, 6/1/2029 |
49,293
|
|
650,000
|
|
Garda
World Security Corp., Sr. Unsecd. Note, 144A, 8.375%, 11/15/2032 |
665,616
|
|
450,000
|
|
Match
Group Holdings II LLC, Sr. Unsecd. Note, 144A, 4.125%, 8/1/2030 |
423,818
|
|
75,000
|
|
The
Brink’s Co., Sr. Unsecd. Note, 144A, 6.500%, 6/15/2029 |
76,557
|
|
150,000
|
|
The
Brink’s Co., Sr. Unsecd. Note, 144A, 6.750%, 6/15/2032 |
153,405
|
|
|
|
TOTAL
|
2,133,642
|
|
|
|
Consumer
Products—2.6% |
|
|
75,000
|
|
Acushnet
Co., Sr. Unsecd. Note, 144A, 5.625%, 12/1/2033 |
74,791
|
|
608,780
|
|
Beach
Acquisition Bidco, Sr. Unsecd. Note, 144A, 10.750%, 7/15/2033 |
691,565
|
|
275,000
|
|
Champ
Acquisition Corp., Sr. Secd. Note, 144A, 8.375%, 12/1/2031 |
288,444
|
|
350,000
|
|
Energizer
Holdings, Inc., Sr. Unsecd. Note, 144A, 4.375%, 3/31/2029 |
339,053
|
|
75,000
|
|
Energizer
Holdings, Inc., Sr. Unsecd. Note, 144A, 4.750%, 6/15/2028 |
74,448
|
|
200,000
|
|
Energizer
Holdings, Inc., Sr. Unsecd. Note, 144A, 6.000%, 9/15/2033 |
192,681
|
|
50,000
|
|
Prestige
Brands, Inc., Sr. Unsecd. Note, 144A, 6.250%, 7/15/2034 |
50,000
|
|
225,000
|
|
Whirlpool
Corp., Sr. Unsecd. Note, 6.500%, 6/15/2033 |
195,318
|
|
|
|
TOTAL
|
1,906,300
|
|
|
|
Diversified
Manufacturing—1.5% |
|
|
25,000
|
|
ADI
Escrow Issuer LLC, Sr. Unsecd. Note, 144A, 7.125%, 7/15/2034 |
25,520
|
|
375,000
|
|
EMRLD
Borrower LP/Emerald Co-Issuer, Inc., Sr. Secd. Note, 144A, 6.625%, 12/15/2030 |
383,844
|
|
375,000
|
|
Gates
Corp., Sr. Unsecd. Note, 144A, 6.875%, 7/1/2029 |
384,010
|
|
50,000
|
|
WESCO
Distribution, Inc., Sr. Unsecd. Note, 144A, 5.500%, 4/15/2034 |
49,587
|
|
75,000
|
|
WESCO
Distribution, Inc., Sr. Unsecd. Note, 144A, 6.375%, 3/15/2033 |
77,005
|
|
175,000
|
|
WESCO
Distribution, Inc., Sr. Unsecd. Note, 144A, 6.625%, 3/15/2032 |
180,549
|
|
|
|
TOTAL
|
1,100,515
|
|
|
|
Environmental—0.2%
|
|
|
150,000
|
|
Clean
Harbors, Inc., Sr. Unsecd. Note, 144A, 5.750%, 10/15/2033 |
151,116
|
|
|
|
Finance
Companies—1.5% |
|
|
500,000
|
|
CrossCountry
Intermediate HoldCo LLC, Sr. Unsecd. Note, 144A, 6.500%, 10/1/2030 |
493,441
|
|
25,000
|
|
CrossCountry
Intermediate HoldCo LLC, Sr. Unsecd. Note, 144A, 6.750%, 12/1/2032 |
24,160
|
|
200,000
|
|
Rocket
Cos., Inc., Sr. Unsecd. Note, 144A, 6.375%, 8/1/2033 |
203,643
|
|
50,000
|
|
Rocket
Cos., Inc., Sr. Unsecd. Note, 144A, 6.500%, 6/15/2034 |
51,346
|
|
100,000
|
|
Rocket
Mortgage Co-Issuer, Inc., Sr. Unsecd. Note, 144A, 3.625%, 3/1/2029 |
96,254
|
|
125,000
|
|
Rocket
Mortgage Co-Issuer, Inc., Sr. Unsecd. Note, 144A, 3.875%, 3/1/2031 |
117,025
|
|
150,000
|
|
Rocket
Mortgage Co-Issuer, Inc., Sr. Unsecd. Note, 144A, 4.000%, 10/15/2033 |
135,089
|
|
|
|
TOTAL
|
1,120,958
|
|
|
|
Food
& Beverage—2.4% |
|
|
300,000
|
|
Bellring
Brands, Inc., Sr. Unsecd. Note, 144A, 7.000%, 3/15/2030 |
300,172
|
|
450,000
|
|
Froneri
Lux Finco S.a.r.l., Sr. Secd. Note, 144A, 6.000%, 8/1/2032 |
441,579
|
|
275,000
|
|
Industrial
F&B Investments III, Inc., 144A, 7.750%, 2/11/2033 |
280,446
|
|
125,000
|
|
Performance
Food Group, Inc., Sr. Unsecd. Note, 144A, 4.250%, 8/1/2029 |
121,395
|
|
125,000
|
|
Performance
Food Group, Inc., Sr. Unsecd. Note, 144A, 5.625%, 3/1/2034 |
122,773
|
|
125,000
|
|
Performance
Food Group, Inc., Sr. Unsecd. Note, 144A, 6.125%, 9/15/2032 |
126,685
|
|
150,000
|
|
US
Foods, Inc., Sr. Unsecd. Note, 144A, 4.625%, 6/1/2030 |
146,546
|
|
250,000
|
|
US
Foods, Inc., Sr. Unsecd. Note, 144A, 4.750%, 2/15/2029 |
246,915
|
|
25,000
|
|
US
Foods, Inc., Sr. Unsecd. Note, 144A, 5.750%, 4/15/2033 |
25,048
|
|
|
|
TOTAL
|
1,811,559
|
|
|
|
Gaming—4.2%
|
|
|
125,000
|
|
Boyd
Gaming Corp., Sr. Unsecd. Note, 4.750%, 12/1/2027 |
124,637
|
Semi-Annual
Financial Statements and Additional Information
3
|
Principal
Amount
or
Shares |
|
|
Value
|
|
|
|
CORPORATE
BONDS—continued |
|
|
|
|
Gaming—continued
|
|
|
$ 100,000
|
|
Boyd
Gaming Corp., Sr. Unsecd. Note, 144A, 4.750%, 6/15/2031 |
$ 96,613
|
|
500,000
|
|
Caesars
Entertainment, Inc., 144A, 6.000%, 10/15/2032 |
453,465
|
|
50,000
|
|
Caesars
Entertainment, Inc., Sr. Secd. Note, 144A, 6.500%, 2/15/2032 |
48,812
|
|
300,000
|
|
Churchill
Downs, Inc., Sr. Secd. Note, 144A, 5.750%, 4/1/2030 |
299,881
|
|
75,000
|
|
Churchill
Downs, Inc., Sr. Unsecd. Note, 144A, 6.750%, 5/1/2031 |
76,406
|
|
50,000
|
|
Light
& Wonder International, Inc., Sr. Unsecd. Note, 144A, 6.250%, 10/1/2033 |
49,750
|
|
100,000
|
|
Light
& Wonder International, Inc., Sr. Unsecd. Note, 144A, 7.250%, 11/15/2029 |
101,861
|
|
250,000
|
|
Light
& Wonder International, Inc., Sr. Unsecd. Note, 144A, 7.500%, 9/1/2031 |
259,255
|
|
125,000
|
|
MGM
Resorts International, Sr. Unsecd. Note, 6.125%, 9/15/2029 |
126,301
|
|
225,000
|
|
MGM
Resorts International, Sr. Unsecd. Note, 6.500%, 4/15/2032 |
225,169
|
|
375,000
|
|
Midwest
Gaming Borrower LLC, Sr. Note, 144A, 4.875%, 5/1/2029 |
365,262
|
|
50,000
|
|
Pioneer
OpCo LLC, Secured Note, 144A, 7.000%, 5/15/2033 |
50,943
|
|
175,000
|
|
Rivers
Enterprise Lender LLC/Rivers Enterprise Lender Corp., Secured Note, 144A, 6.250%, 10/15/2030 |
177,286
|
|
50,000
|
|
Station
Casinos, LLC, 144A, 6.625%, 3/15/2032 |
50,805
|
|
225,000
|
|
Station
Casinos, LLC, Sr. Unsecd. Note, 144A, 4.500%, 2/15/2028 |
222,549
|
|
125,000
|
|
Station
Casinos, LLC, Sr. Unsecd. Note, 144A, 4.625%, 12/1/2031 |
118,758
|
|
275,000
|
|
Wynn
Resorts Finance LLC/Wynn Resorts Capital Corp., Sr. Unsecd. Note, 144A, 6.250%, 3/15/2033 |
276,181
|
|
|
|
TOTAL
|
3,123,934
|
|
|
|
Health
Care—3.6% |
|
|
175,000
|
|
AHP
Health Partners, Inc., Sr. Unsecd. Note, 144A, 5.750%, 7/15/2029 |
172,925
|
|
225,000
|
|
Avantor
Funding, Inc., Sr. Unsecd. Note, 144A, 3.875%, 11/1/2029 |
214,949
|
|
225,000
|
|
Avantor
Funding, Inc., Sr. Unsecd. Note, 144A, 4.625%, 7/15/2028 |
222,757
|
|
75,000
|
|
CHS/Community
Health Systems, Inc., 144A, 6.125%, 4/1/2030 |
67,406
|
|
125,000
|
|
CHS/Community
Health Systems, Inc., Sr. Note, 144A, 5.250%, 5/15/2030 |
118,036
|
|
150,000
|
|
CHS/Community
Health Systems, Inc., Sr. Secd. Note, 144A, 9.750%, 1/15/2034 |
156,800
|
|
125,000
|
|
Concentra
Escrow Issuer Corp., Sr. Unsecd. Note, 144A, 6.875%, 7/15/2032 |
129,548
|
|
150,000
|
|
Encompass
Health Corp., Sr. Unsecd. Note, 144A, 5.875%, 6/1/2034 |
149,794
|
|
50,000
|
|
Insulet
Corp., Sr. Unsecd. Note, 144A, 6.500%, 4/1/2033 |
50,753
|
|
375,000
|
|
Medline
Borrower LP, Sr. Unsecd. Note, 144A, 5.250%, 10/1/2029 |
372,898
|
|
75,000
|
|
Raven
Acquisition Holdings LLC, Sr. Secd. Note, 144A, 6.875%, 11/15/2031 |
73,356
|
|
250,000
|
|
Select
Medical Corp., 144A, 6.250%, 12/1/2032 |
243,025
|
|
50,000
|
|
Teleflex,
Inc., Sr. Unsecd. Note, 144A, 4.250%, 6/1/2028 |
49,313
|
|
75,000
|
|
Teleflex,
Inc., Sr. Unsecd. Note, 144A, 5.875%, 1/15/2032 |
75,661
|
|
25,000
|
|
Tenet
Healthcare Corp., 4.625%, 6/15/2028 |
24,804
|
|
50,000
|
|
Tenet
Healthcare Corp., 5.125%, 11/1/2027 |
50,026
|
|
75,000
|
|
Tenet
Healthcare Corp., 144A, 5.500%, 11/15/2032 |
74,614
|
|
50,000
|
|
Tenet
Healthcare Corp., Sr. Secd. Note, 6.125%, 6/15/2030 |
50,429
|
|
150,000
|
|
Tenet
Healthcare Corp., Sr. Secd. Note, 6.750%, 5/15/2031 |
153,736
|
|
210,000
|
|
Tenet
Healthcare Corp., Sr. Unsecd. Note, 6.125%, 10/1/2028 |
210,955
|
|
|
|
TOTAL
|
2,661,785
|
|
|
|
Health
Insurance—0.1% |
|
|
75,000
|
|
Molina
Healthcare, Inc., Sr. Unsecd. Note, 144A, 6.250%, 1/15/2033 |
75,177
|
|
|
|
Independent
Energy—3.3% |
|
|
50,000
|
|
Aethon
United BR LP/Aethon United Finance Corp., 144A, 7.500%, 10/1/2029 |
52,022
|
|
125,000
|
|
Ascent
Resources Utica Holdings LLC/ ARU Finance Corp., Sr. Unsecd. Note, 144A, 5.875%, 6/30/2029 |
124,992
|
|
75,000
|
|
Ascent
Resources Utica Holdings LLC/ ARU Finance Corp., Sr. Unsecd. Note, 144A, 6.625%, 7/15/2033 |
75,890
|
|
250,000
|
|
California
Resources Corp., Sr. Unsecd. Note, 144A, 7.250%, 1/15/2035 |
248,172
|
|
150,000
|
|
Chord
Energy Corp., Sr. Unsecd. Note, 144A, 6.000%, 10/1/2030 |
150,713
|
|
100,000
|
|
CNX
Resources Corp., Sr. Unsecd. Note, 144A, 5.875%, 3/1/2034 |
97,370
|
|
150,000
|
|
CNX
Resources Corp., Sr. Unsecd. Note, 144A, 7.250%, 3/1/2032 |
154,618
|
Semi-Annual
Financial Statements and Additional Information
4
|
Principal
Amount
or
Shares |
|
|
Value
|
|
|
|
CORPORATE
BONDS—continued |
|
|
|
|
Independent
Energy—continued |
|
|
$ 75,000
|
|
Comstock
Resources, Inc., Sr. Unsecd. Note, 144A, 6.750%, 3/1/2029 |
$ 73,900
|
|
125,000
|
|
Comstock
Resources, Inc., Sr. Unsecd. Note, 144A, 6.750%, 3/1/2029 |
122,807
|
|
50,000
|
|
Matador
Resources Co., Sr. Unsecd. Note, 144A, 6.000%, 4/15/2034 |
48,776
|
|
250,000
|
|
Matador
Resources Co., Sr. Unsecd. Note, 144A, 6.500%, 4/15/2032 |
251,498
|
|
75,000
|
|
Range
Resources Corp., Sr. Unsecd. Note, 144A, 4.750%, 2/15/2030 |
73,481
|
|
375,000
|
|
Rockcliff
Energy II LLC, Sr. Unsecd. Note, 144A, 5.500%, 10/15/2029 |
369,233
|
|
50,000
|
|
SM
Energy Co., Sr. Unsecd. Note, 6.625%, 1/15/2027 |
50,098
|
|
100,000
|
|
SM
Energy Co., Sr. Unsecd. Note, 144A, 6.625%, 4/15/2034 |
98,491
|
|
125,000
|
|
SM
Energy Co., Sr. Unsecd. Note, 144A, 6.750%, 8/1/2029 |
127,351
|
|
125,000
|
|
SM
Energy Co., Sr. Unsecd. Note, 144A, 8.375%, 7/1/2028 |
127,985
|
|
50,000
|
|
SM
Energy Co., Sr. Unsecd. Note, 144A, 8.625%, 11/1/2030 |
52,534
|
|
150,000
|
|
SM
Energy Co., Sr. Unsecd. Note, 144A, 8.750%, 7/1/2031 |
156,742
|
|
|
|
TOTAL
|
2,456,673
|
|
|
|
Industrial
- Other—1.0% |
|
|
200,000
|
|
LSF12
Helix Parent LLC, Secured Note, 144A, 7.125%, 2/1/2033 |
194,143
|
|
575,000
|
|
Madison
IAQ LLC, Sr. Unsecd. Note, 144A, 5.875%, 6/30/2029 |
575,644
|
|
|
|
TOTAL
|
769,787
|
|
|
|
Insurance
- P&C—9.0% |
|
|
250,000
|
|
Alliant
Holdings Intermediate LLC / Alliant Holdings Co-Issuer, 144A, 5.875%, 11/1/2029 |
244,902
|
|
250,000
|
|
Alliant
Holdings Intermediate LLC / Alliant Holdings Co-Issuer, 144A, 7.375%, 10/1/2032 |
248,452
|
|
200,000
|
|
Alliant
Holdings Intermediate LLC / Alliant Holdings Co-Issuer, Sr. Secd. Note, 144A, 7.000%, 1/15/2031 |
203,355
|
|
275,000
|
|
AmWINS
Group, Inc., Sr. Secd. Note, 144A, 6.375%, 2/15/2029 |
276,517
|
|
475,000
|
|
AmWINS
Group, Inc., Sr. Unsecd. Note, 144A, 4.875%, 6/30/2029 |
458,009
|
|
425,000
|
|
Amynta
Agency/Warranty Borrower, Inc., Sr. Unsecd. Note, 144A, 7.500%, 7/15/2033 |
408,891
|
|
850,000
|
|
Ardonagh
Group Finance Ltd., Sr. Unsecd. Note, 144A, 8.875%, 2/15/2032 |
826,416
|
|
100,000
|
|
Asurion
LLC and Asurion Co-Issuer, Inc., Secured Note, 144A, 8.000%, 12/31/2032 |
100,837
|
|
350,000
|
|
Baldwin
Insurance Group Holdings LLC/Baldwin Insurance Group Holdings Finance, 144A, 7.125%, 5/15/2031 |
351,772
|
|
650,000
|
|
Broadstreet
Partners, Inc., Sr. Unsecd. Note, 144A, 5.875%, 4/15/2029 |
635,234
|
|
125,000
|
|
Hub
International Ltd., Sr. Secd. Note, 144A, 7.250%, 6/15/2030 |
128,345
|
|
300,000
|
|
Hub
International Ltd., Sr. Unsecd. Note, 144A, 5.625%, 12/1/2029 |
299,100
|
|
650,000
|
|
Hub
International Ltd., Sr. Unsecd. Note, 144A, 7.375%, 1/31/2032 |
662,028
|
|
125,000
|
|
Jones
Deslauriers Insurance Management, Inc., Sr. Secd. Note, 144A, 8.500%, 3/15/2030 |
127,586
|
|
450,000
|
|
Jones
Deslauriers Insurance Management, Inc., Sr. Unsecd. Note, 144A, 6.875%, 10/1/2033 |
417,649
|
|
500,000
|
|
Panther
Escrow Issuer, Sr. Secd. Note, 144A, 7.125%, 6/1/2031 |
498,703
|
|
75,000
|
|
Ryan
Specialty LLC, Sr. Secd. Note, 144A, 4.375%, 2/1/2030 |
72,366
|
|
275,000
|
|
Ryan
Specialty LLC, Sr. Secd. Note, 144A, 5.875%, 8/1/2032 |
270,724
|
|
500,000
|
|
USI,
Inc./NY, Sr. Unsecd. Note, 144A, 7.500%, 1/15/2032 |
505,337
|
|
|
|
TOTAL
|
6,736,223
|
|
|
|
Leisure—1.4%
|
|
|
175,000
|
|
Carnival
Corp. Ltd., Sr. Unsecd. Note, 144A, 5.750%, 3/15/2030 |
177,242
|
|
50,000
|
|
Carnival
Corp. Ltd., Sr. Unsecd. Note, 144A, 5.750%, 8/1/2032 |
50,551
|
|
150,000
|
|
Carnival
Corp. Ltd., Sr. Unsecd. Note, 144A, 6.125%, 2/15/2033 |
151,889
|
|
25,000
|
|
NCL
Corp. Ltd., Sr. Secd. Note, 144A, 5.875%, 1/15/2031 |
24,282
|
|
25,000
|
|
NCL
Corp. Ltd., Sr. Secd. Note, 144A, 6.250%, 9/15/2033 |
24,294
|
|
200,000
|
|
NCL
Corp. Ltd., Sr. Unsecd. Note, 144A, 6.750%, 2/1/2032 |
199,691
|
|
25,000
|
|
NCL
Corp. Ltd., Sr. Unsecd. Note, 144A, 7.750%, 2/15/2029 |
26,102
|
|
50,000
|
|
Royal
Caribbean Cruises, Ltd., 144A, 6.000%, 2/1/2033 |
50,719
|
|
200,000
|
|
Royal
Caribbean Cruises, Ltd., Sr. Unsecd. Note, 144A, 6.250%, 3/15/2032 |
204,464
|
|
100,000
|
|
United
Parks & Resorts, Inc., Sr. Unsecd. Note, 144A, 5.250%, 8/15/2029 |
97,925
|
|
|
|
TOTAL
|
1,007,159
|
Semi-Annual
Financial Statements and Additional Information
5
|
Principal
Amount
or
Shares |
|
|
Value
|
|
|
|
CORPORATE
BONDS—continued |
|
|
|
|
Lodging—1.9%
|
|
|
$ 100,000
|
|
Hilton
Domestic Operating Co., Inc., Sr. Unsecd. Note, 144A, 3.625%, 2/15/2032 |
$ 91,576
|
|
50,000
|
|
Hilton
Domestic Operating Co., Inc., Sr. Unsecd. Note, 144A, 5.500%, 3/31/2034 |
49,595
|
|
125,000
|
|
Hilton
Domestic Operating Co., Inc., Sr. Unsecd. Note, 144A, 5.750%, 9/15/2033 |
125,530
|
|
175,000
|
|
Hilton
Domestic Operating Co., Inc., Sr. Unsecd. Note, Series WI, 4.875%, 1/15/2030 |
174,505
|
|
75,000
|
|
RHP
Hotel Property/RHP Finance Corp., Sr. Unsecd. Note, 144A, 5.750%, 3/15/2034 |
74,348
|
|
275,000
|
|
RHP
Hotel Property/RHP Finance Corp., Sr. Unsecd. Note, 144A, 6.500%, 4/1/2032 |
281,539
|
|
25,000
|
|
RHP
Hotel Property/RHP Finance Corp., Sr. Unsecd. Note, 144A, 6.500%, 6/15/2033 |
25,666
|
|
175,000
|
|
Wyndham
Hotels & Resorts, Inc., Sr. Unsecd. Note, 144A, 4.375%, 8/15/2028 |
172,573
|
|
125,000
|
|
Wyndham
Hotels & Resorts, Inc., Sr. Unsecd. Note, 144A, 5.625%, 3/1/2033 |
123,447
|
|
275,000
|
|
XHR
LP, Sr. Unsecd. Note, 144A, 6.625%, 5/15/2030 |
281,690
|
|
|
|
TOTAL
|
1,400,469
|
|
|
|
Media
Entertainment—2.9% |
|
|
50,000
|
|
Discovery
Holdings, Inc., Sr. Unsecd. Note, 4.279%, 3/15/2032 |
44,899
|
|
375,000
|
|
Discovery
Holdings, Inc., Sr. Unsecd. Note, 5.050%, 3/15/2042 |
275,182
|
|
75,000
|
|
Gray
Escrow II, Inc., Sr. Unsecd. Note, 144A, 5.375%, 11/15/2031 |
50,377
|
|
100,000
|
|
Lamar
Media Corp., Sr. Unsecd. Note, 4.875%, 1/15/2029 |
99,251
|
|
100,000
|
|
Lamar
Media Corp., Sr. Unsecd. Note, Series WI, 3.625%, 1/15/2031 |
93,302
|
|
150,000
|
|
Oak-Eagle
AcquireCo, Inc., 144A, 7.250%, 7/1/2033 |
156,998
|
|
300,000
|
|
Oak-Eagle
AcquireCo, Inc., Sr. Unsecd. Note, 144A, 8.750%, 7/1/2034 |
318,577
|
|
50,000
|
|
Outfront
Media Capital LLC / Outfront Media Capital Corp., Sr. Unsecd. Note, 144A, 4.250%, 1/15/2029 |
48,714
|
|
275,000
|
|
Outfront
Media Capital LLC / Outfront Media Capital Corp., Sr. Unsecd. Note, 144A, 4.625%, 3/15/2030 |
266,883
|
|
125,000
|
|
Paramount
Global, Sr. Unsecd. Note, 4.375%, 3/15/2043 |
80,744
|
|
175,000
|
|
Paramount
Global, Sr. Unsecd. Note, 6.875%, 4/30/2036 |
164,237
|
|
125,000
|
|
Univision
Communications, Inc., Secured Note, 144A, 8.875%, 4/15/2033 |
123,138
|
|
250,000
|
|
Univision
Communications, Inc., Sr. Secd. Note, 144A, 4.500%, 5/1/2029 |
238,867
|
|
175,000
|
|
Univision
Communications, Inc., Sr. Secd. Note, 144A, 7.375%, 6/30/2030 |
175,617
|
|
|
|
TOTAL
|
2,136,786
|
|
|
|
Metals
& Mining—1.3% |
|
|
50,000
|
|
Carpenter
Technology Corp., Sr. Unsecd. Note, 144A, 5.625%, 3/1/2034 |
50,025
|
|
150,000
|
|
Cleveland-Cliffs,
Inc., Sr. Unsecd. Note, 144A, 4.625%, 3/1/2029 |
144,875
|
|
200,000
|
|
Cleveland-Cliffs,
Inc., Sr. Unsecd. Note, 144A, 6.750%, 4/15/2030 |
200,321
|
|
200,000
|
|
Cleveland-Cliffs,
Inc., Sr. Unsecd. Note, 144A, 7.000%, 3/15/2032 |
198,669
|
|
25,000
|
|
Cleveland-Cliffs,
Inc., Sr. Unsecd. Note, 144A, 7.500%, 9/15/2031 |
25,322
|
|
275,000
|
|
Coeur
Mining, Inc., Sr. Unsecd. Note, 144A, 5.125%, 2/15/2029 |
272,902
|
|
75,000
|
|
Worthington
Steel, Inc., Secured Note, 144A, 7.750%, 6/1/2033 |
77,069
|
|
|
|
TOTAL
|
969,183
|
|
|
|
Midstream—4.8%
|
|
|
150,000
|
|
Antero
Midstream Partners LP, Sr. Unsecd. Note, 144A, 5.375%, 6/15/2029 |
149,603
|
|
400,000
|
|
Antero
Midstream Partners LP, Sr. Unsecd. Note, 144A, 5.750%, 1/15/2028 |
400,068
|
|
50,000
|
|
Antero
Midstream Partners LP, Sr. Unsecd. Note, 144A, 5.750%, 10/15/2033 |
49,546
|
|
50,000
|
|
Antero
Midstream Partners LP, Sr. Unsecd. Note, 144A, 5.750%, 7/1/2034 |
49,405
|
|
75,000
|
|
Blue
Racer Midstream LLC/Blue Racer Finance Corp., Sr. Unsecd. Note, 144A, 7.000%, 7/15/2029 |
76,919
|
|
100,000
|
|
Blue
Racer Midstream LLC/Blue Racer Finance Corp., Sr. Unsecd. Note, 144A, 7.250%, 7/15/2032 |
103,517
|
|
325,000
|
|
CNX
Midstream Partners LP, Sr. Unsecd. Note, 144A, 4.750%, 4/15/2030 |
309,981
|
|
75,000
|
|
DBR
Land Holdings LLC, Sr. Unsecd. Note, 144A, 6.250%, 12/1/2030 |
76,210
|
|
250,000
|
|
Northriver
Midstream Fin, 144A, 6.750%, 7/15/2032 |
253,320
|
|
250,000
|
|
Rockies
Express Pipeline, Sr. Unsecd. Note, 144A, 6.750%, 3/15/2033 |
257,098
|
|
175,000
|
|
Suburban
Propane Partners LP, Sr. Unsecd. Note, 144A, 5.000%, 6/1/2031 |
165,982
|
|
150,000
|
|
Suburban
Propane Partners LP, Sr. Unsecd. Note, 144A, 6.500%, 12/15/2035 |
145,048
|
|
350,000
|
|
Tallgrass
Energy Partners LP, Sr. Unsecd. Note, 144A, 6.750%, 3/15/2034 |
354,151
|
Semi-Annual
Financial Statements and Additional Information
6
|
Principal
Amount
or
Shares |
|
|
Value
|
|
|
|
CORPORATE
BONDS—continued |
|
|
|
|
Midstream—continued
|
|
|
$ 225,000
|
|
Venture
Global LNG, Inc., Sr. Unsecd. Note, 144A, 6.375%, 12/15/2034 |
$ 221,254
|
|
225,000
|
|
Venture
Global Plaquemines LNG LLC, Sr. Secd. Note, 144A, 6.500%, 1/15/2034 |
234,549
|
|
225,000
|
|
Venture
Global Plaquemines LNG LLC, Sr. Secd. Note, 144A, 7.500%, 5/1/2033 |
247,039
|
|
225,000
|
|
Venture
Global Plaquemines LNG LLC, Sr. Unsecd. Note, 144A, 6.500%, 6/15/2034 |
234,512
|
|
150,000
|
|
WBI
Operating LLC, Sr. Unsecd. Note, 144A, 6.250%, 10/15/2030 |
150,915
|
|
125,000
|
|
WBI
Operating LLC, Sr. Unsecd. Note, 144A, 6.500%, 10/15/2033 |
125,851
|
|
|
|
TOTAL
|
3,604,968
|
|
|
|
Oil
Field Services—1.6% |
|
|
100,000
|
|
Archrock
Services LP/Archrock Partners Finance Corp., Sr. Unsecd. Note, 144A, 6.000%, 2/1/2034 |
99,461
|
|
75,000
|
|
Kodiak
Gas Services LLC, Sr. Unsecd. Note, 144A, 5.875%, 4/1/2031 |
75,232
|
|
150,000
|
|
Kodiak
Gas Services LLC, Sr. Unsecd. Note, 144A, 6.500%, 10/1/2033 |
152,134
|
|
100,000
|
|
Kodiak
Gas Services LLC, Sr. Unsecd. Note, 144A, 6.750%, 10/1/2035 |
102,648
|
|
75,000
|
|
Nabors
Industries, Inc., Co. Guarantee, 144A, 9.125%, 1/31/2030 |
78,423
|
|
125,000
|
|
Nabors
Industries, Inc., Sr. Unsecd. Note, 144A, 7.625%, 11/15/2032 |
127,976
|
|
175,000
|
|
Oceaneering
International, Inc., Sr. Unsecd. Note, 144A, 6.875%, 7/15/2034 |
177,856
|
|
75,000
|
|
Solaris
Energy Infrastructure, Inc., Sr. Unsecd. Note, 144A, 6.375%, 5/15/2031 |
75,875
|
|
175,000
|
|
USA
Compression Partners LP, Sr. Unsecd. Note, 144A, 6.250%, 10/1/2033 |
173,608
|
|
150,000
|
|
USA
Compression Partners LP, Sr. Unsecd. Note, 144A, 7.125%, 3/15/2029 |
153,720
|
|
|
|
TOTAL
|
1,216,933
|
|
|
|
Packaging—3.7%
|
|
|
1
|
1,2,3
|
ARD
Finance S.A., Secured Note, 144A, 7.250% PIK, 6/30/2027 |
0
|
|
252,000
|
|
Ardagh
Group S.A., Secured Note, 144A, 9.500%, 12/1/2030 |
269,553
|
|
200,000
|
|
Ardagh
Metal Packaging, Secured Note, 144A, 6.250%, 1/30/2031 |
202,367
|
|
200,000
|
|
Ardagh
Metal Packaging, Sr. Unsecd. Note, 144A, 4.000%, 9/1/2029 |
190,218
|
|
225,000
|
|
Ball
Corp., Sr. Unsecd. Note, 2.875%, 8/15/2030 |
205,425
|
|
250,000
|
|
Canpack
Group, Inc., Sr. Unsecd. Note, 144A, 6.000%, 5/15/2031 |
251,590
|
|
150,000
|
|
Clydesdale
Acquisition Holdings, Inc., Sr. Secd. Note, 144A, 6.750%, 4/15/2032 |
145,703
|
|
50,000
|
|
Clydesdale
Acquisition Holdings, Inc., Sr. Unsecd. Note, 144A, 8.750%, 4/15/2030 |
49,361
|
|
275,000
|
|
Crown
Americas LLC, Sr. Unsecd. Note, 5.875%, 6/1/2033 |
277,113
|
|
100,000
|
|
Mauser
Packaging Solutions Holding Co., 144A, 7.875%, 4/15/2030 |
102,285
|
|
100,000
|
|
Mauser
Packaging Solutions Holding Co., 144A, 9.250%, 4/15/2030 |
98,461
|
|
200,000
|
|
Sword
Purchaser LLC, Secured Note, 144A, 8.250%, 4/15/2033 |
207,068
|
|
200,000
|
|
Sword
Purchaser LLC, Secured Note, 144A, 10.500%, 4/15/2034 |
209,394
|
|
180,000
|
|
Trivium
Packaging Finance B.V., 144A, 8.250%, 7/15/2030 |
190,301
|
|
325,000
|
|
Trivium
Packaging Finance B.V., 144A, 12.250%, 1/15/2031 |
359,477
|
|
|
|
TOTAL
|
2,758,316
|
|
|
|
Paper—0.4%
|
|
|
175,000
|
|
Clearwater
Paper Corp., Sr. Unsecd. Note, 144A, 4.750%, 8/15/2028 |
143,089
|
|
150,000
|
|
Graphic
Packaging International, LLC, Sr. Unsecd. Note, 144A, 3.500%, 3/1/2029 |
142,729
|
|
25,000
|
|
Graphic
Packaging International, LLC, Sr. Unsecd. Note, 144A, 3.750%, 2/1/2030 |
23,510
|
|
|
|
TOTAL
|
309,328
|
|
|
|
Pharmaceuticals—2.6%
|
|
|
50,000
|
|
Amneal
Pharmaceuticals, Inc. Sr. Secd. Note, 144A, 6.875%, 8/1/2032 |
51,963
|
|
75,000
|
|
Bausch
Health Cos., Inc., Sr. Unsecd. Note, 144A, 5.000%, 2/15/2029 |
55,333
|
|
100,000
|
|
Bausch
Health Cos., Inc., Sr. Unsecd. Note, 144A, 5.250%, 2/15/2031 |
59,117
|
|
525,000
|
|
Bausch
Health, Sr. Secd. Note, 144A, 10.000%, 4/15/2032 |
532,091
|
|
200,000
|
|
Genmab
A/S/Genmab Finance LLC, Sr. Unsecd. Note, 144A, 7.250%, 12/15/2033 |
208,652
|
|
400,000
|
|
Grifols
Escrow Issuer S.A., Sr. Unsecd. Note, 144A, 4.750%, 10/15/2028 |
392,258
|
|
200,000
|
|
Opal
Bidco SAS, Sr. Secd. Note, 144A, 6.500%, 3/31/2032 |
204,140
|
|
200,000
|
|
Organon
& Co./Organon Foreign Debt Co-Issuer B.V., Sr. Unsecd. Note, 144A, 7.875%, 5/15/2034 |
214,364
|
Semi-Annual
Financial Statements and Additional Information
7
|
Principal
Amount
or
Shares |
|
|
Value
|
|
|
|
CORPORATE
BONDS—continued |
|
|
|
|
Pharmaceuticals—continued
|
|
|
$ 225,000
|
|
Organon
Finance 1 LLC, Sr. Unsecd. Note, 144A, 5.125%, 4/30/2031 |
$ 222,702
|
|
|
|
TOTAL
|
1,940,620
|
|
|
|
Restaurant—1.4%
|
|
|
225,000
|
|
1011778
BC Unltd. Liability Co./New Red Finance, Inc., 144A, 3.500%, 2/15/2029 |
216,347
|
|
600,000
|
|
1011778
BC Unltd. Liability Co./New Red Finance, Inc., 144A, 4.000%, 10/15/2030 |
566,774
|
|
250,000
|
|
Yum!
Brands, Inc., Sr. Unsecd. Note, 4.625%, 1/31/2032 |
239,337
|
|
|
|
TOTAL
|
1,022,458
|
|
|
|
Retailers—3.0%
|
|
|
100,000
|
|
Academy
Ltd., Secured Note, 144A, 5.875%, 5/15/2031 |
100,065
|
|
75,000
|
|
Asbury
Automotive Group, Inc., Sr. Unsecd. Note, 144A, 4.625%, 11/15/2029 |
73,078
|
|
250,000
|
|
Asbury
Automotive Group, Inc., Sr. Unsecd. Note, 144A, 5.000%, 2/15/2032 |
239,254
|
|
300,000
|
|
BELRON
UK Finance PLC, 144A, 5.750%, 10/15/2029 |
301,581
|
|
225,000
|
|
Gap
(The), Inc., Sr. Unsecd. Note, 144A, 3.625%, 10/1/2029 |
212,155
|
|
200,000
|
|
Group
1 Automotive, Inc., Sr. Unsecd. Note, 144A, 6.375%, 1/15/2030 |
202,637
|
|
150,000
|
|
LCM
Investments Holdings II, LLC, Sr. Unsecd. Note, 144A, 4.875%, 5/1/2029 |
146,122
|
|
100,000
|
|
LCM
Investments Holdings II, LLC, Sr. Unsecd. Note, 144A, 8.250%, 8/1/2031 |
104,257
|
|
275,000
|
|
Lithia
Motors, Inc., Sr. Unsecd. Note, 144A, 5.500%, 10/1/2030 |
271,801
|
|
150,000
|
|
Mens
Wearhouse, Inc., Secured Note, 144A, 9.000%, 2/1/2031 |
159,480
|
|
175,000
|
|
Sally
Hldgs. LLC/Sally Capital, Inc., Sr. Unsecd. Note, 6.750%, 4/1/2032 |
178,897
|
|
50,000
|
|
Wayfair
LLC, Secured Note, 144A, 7.125%, 5/31/2034 |
51,444
|
|
200,000
|
|
William
Carter Co., Sr. Unsecd. Note, 144A, 7.375%, 2/15/2031 |
206,868
|
|
|
|
TOTAL
|
2,247,639
|
|
|
|
Supermarkets—0.7%
|
|
|
300,000
|
|
Albertsons
Cos. LLC/SAFEW, Sr. Unsecd. Note, 144A, 3.500%, 3/15/2029 |
285,154
|
|
175,000
|
|
Albertsons
Cos. LLC/SAFEW, Sr. Unsecd. Note, 144A, 5.625%, 3/31/2032 |
169,286
|
|
50,000
|
|
Albertsons
Cos. LLC/SAFEW, Sr. Unsecd. Note, 144A, 6.250%, 3/15/2033 |
49,588
|
|
|
|
TOTAL
|
504,028
|
|
|
|
Technology—15.7%
|
|
|
94,000
|
|
Ahead
DB Holdings LLC, Sec. Fac. Bond, 144A, 6.625%, 5/1/2028 |
94,406
|
|
250,000
|
|
Amentum
Holdings, Inc., Sr. Unsecd. Note, 144A, 7.250%, 8/1/2032 |
257,660
|
|
100,000
|
|
APLD
ComputeCo 3 LLC, 144A, 7.000%, 6/15/2031 |
99,920
|
|
50,000
|
|
APLD
ComputeCo LLC, 144A, 6.750%, 3/15/2031 |
50,215
|
|
325,000
|
|
APLD
ComputeCo LLC, Sr. Secd. Note, 144A, 9.250%, 12/15/2030 |
350,790
|
|
350,000
|
|
AthenaHealth
Group, Inc., Sr. Unsecd. Note, 144A, 6.500%, 2/15/2030 |
335,807
|
|
175,000
|
|
CACI
International, Inc., Sr. Unsecd. Note, 144A, 6.375%, 6/15/2033 |
177,593
|
|
175,000
|
|
Cipher
Compute LLC, 144A, 7.125%, 11/15/2030 |
182,135
|
|
450,000
|
|
Clarivate
Science Holdings Corp., Sr. Unsecd. Note, 144A, 4.875%, 7/1/2029 |
403,120
|
|
325,000
|
|
Cloud
Software Group, Inc., Secured Note, 144A, 9.000%, 9/30/2029 |
315,702
|
|
200,000
|
|
Cloud
Software Group, Inc., Sr. Secd. Note, 144A, 6.500%, 3/31/2029 |
194,204
|
|
100,000
|
|
Cloud
Software Group, Inc., Sr. Secd. Note, 144A, 6.625%, 8/15/2033 |
86,779
|
|
100,000
|
|
Cloud
Software Group, Inc., Sr. Secd. Note, 144A, 8.250%, 6/30/2032 |
93,797
|
|
300,000
|
|
Coherent
Corp., Sr. Unsecd. Note, 144A, 5.000%, 12/15/2029 |
295,541
|
|
225,000
|
|
Consensus
Cloud Solutions, Inc., Sr. Unsecd. Note, 144A, 6.500%, 10/15/2028 |
225,141
|
|
150,000
|
|
Core
Scientific Finance I LLC, Secured Note, 144A, 7.750%, 5/15/2031 |
152,220
|
|
50,000
|
|
CoreWeave,
Inc., Sr. Unsecd. Note, 144A, 9.000%, 2/1/2031 |
49,473
|
|
150,000
|
|
CoreWeave,
Inc., Sr. Unsecd. Note, 144A, 9.250%, 6/1/2030 |
151,085
|
|
125,000
|
|
CoreWeave,
Inc., Sr. Unsecd. Note, 144A, 9.625%, 7/15/2032 |
123,287
|
|
100,000
|
|
CoreWeave,
Inc., Sr. Unsecd. Note, 144A, 9.750%, 10/1/2031 |
99,850
|
|
125,000
|
|
Edged
Compute LLC, Sr. Secd. Note, 144A, 7.500%, 4/30/2031 |
121,923
|
|
325,000
|
|
Elastic
N.V., Sr. Unsecd. Note, 144A, 4.125%, 7/15/2029 |
310,300
|
Semi-Annual
Financial Statements and Additional Information
8
|
Principal
Amount
or
Shares |
|
|
Value
|
|
|
|
CORPORATE
BONDS—continued |
|
|
|
|
Technology—continued
|
|
|
$ 100,000
|
|
Ellucian
Holdings, Inc., Sr. Secd. Note, 144A, 6.500%, 12/1/2029 |
$ 96,915
|
|
250,000
|
|
Entegris,
Inc., Sr. Unsecd. Note, 144A, 5.950%, 6/15/2030 |
252,795
|
|
75,000
|
|
Fair
Isaac & Co., Inc., Sr. Unsecd. Note, 144A, 6.000%, 5/15/2033 |
73,889
|
|
150,000
|
|
Fair
Isaac & Co., Inc., Sr. Unsecd. Note, 144A, 6.250%, 9/15/2034 |
147,839
|
|
400,000
|
|
Fortress
Intermediate 3, Inc., Sr. Secd. Note, 144A, 7.500%, 6/1/2031 |
407,152
|
|
250,000
|
|
Gen
Digital, Inc., Sr. Unsecd. Note, 144A, 6.250%, 4/1/2033 |
246,575
|
|
225,000
|
|
HealthEquity,
Inc., Sr. Unsecd. Note, 144A, 4.500%, 10/1/2029 |
218,880
|
|
250,000
|
|
Insight
Enterprises, Inc., Sr. Unsecd. Note, 144A, 6.625%, 5/15/2032 |
254,258
|
|
200,000
|
|
Iron
Mountain, Inc., 144A, 6.250%, 1/15/2033 |
202,192
|
|
75,000
|
|
Iron
Mountain, Inc., Sr. Unsecd. Note, 144A, 5.250%, 7/15/2030 |
73,924
|
|
225,000
|
|
Iron
Mountain, Inc., Sr. Unsecd. Note, 144A, 6.250%, 1/15/2035 |
226,158
|
|
200,000
|
|
Iron
Mountain, Inc., Sr. Unsecd. Note, 144A, 7.000%, 2/15/2029 |
203,894
|
|
275,000
|
|
KIOXIA
Holdings Corp., Sr. Unsecd. Note, 144A, 6.625%, 7/24/2033 |
287,713
|
|
675,000
|
|
McAfee
Corp., Sr. Unsecd. Note, 144A, 7.375%, 2/15/2030 |
574,133
|
|
150,000
|
|
Meridian
Arc Holdco LLC, Secured Note, 144A, 6.250%, 4/30/2031 |
150,434
|
|
175,000
|
|
NCR
Voyix Corp., Sr. Unsecd. Note, 144A, 5.000%, 10/1/2028 |
170,806
|
|
59,000
|
|
NCR
Voyix Corp., Sr. Unsecd. Note, 144A, 5.125%, 4/15/2029 |
57,592
|
|
175,000
|
|
Open
Text, Inc., Sr. Unsecd. Note, 144A, 3.875%, 2/15/2028 |
170,650
|
|
75,000
|
|
Open
Text, Inc., Sr. Unsecd. Note, 144A, 4.125%, 2/15/2030 |
68,760
|
|
175,000
|
|
Open
Text, Inc., Sr. Unsecd. Note, 144A, 4.125%, 12/1/2031 |
153,745
|
|
200,000
|
|
PR
RNO Property Owner 1, Secured Note, 144A, 6.500%, 5/1/2031 |
199,849
|
|
250,000
|
|
Rocket
Software, Inc., Sr. Secd. Note, 144A, 9.000%, 11/28/2028 |
248,717
|
|
350,000
|
|
Rocket
Software, Inc., Sr. Unsecd. Note, 144A, 6.500%, 2/15/2029 |
315,454
|
|
75,000
|
|
Science
Applications International Corp., Sr. Unsecd. Note, 144A, 4.875%, 4/1/2028 |
74,507
|
|
150,000
|
|
Science
Applications International Corp., Sr. Unsecd. Note, 144A, 5.875%, 11/1/2033 |
147,874
|
|
250,000
|
|
SE
Cosmos LLC, Sr. Secd. Note, 144A, 8.875%, 5/1/2031 |
257,224
|
|
25,000
|
|
Seagate
Data Storage Technology Pte. Ltd., Sr. Unsecd. Note, 5.875%, 7/15/2030 |
25,459
|
|
125,000
|
|
Seagate
Data Storage Technology Pte. Ltd., Sr. Unsecd. Note, 144A, 8.500%, 7/15/2031 |
130,701
|
|
106,000
|
|
Seagate
Data Storage Technology Pte. Ltd., Sr. Unsecd. Note, 144A, 9.625%, 12/1/2032 |
116,951
|
|
75,000
|
|
Sensata
Technologies, Inc., Sr. Unsecd. Note, 144A, 3.750%, 2/15/2031 |
70,174
|
|
200,000
|
|
Sensata
Technologies, Inc., Sr. Unsecd. Note, 144A, 6.625%, 7/15/2032 |
205,833
|
|
75,000
|
|
Shift4
Payments, Inc., Sr. Unsecd. Note, 144A, 6.750%, 8/15/2032 |
75,196
|
|
200,000
|
|
SS&C
Technologies, Inc., Sr. Unsecd. Note, 144A, 5.500%, 9/30/2027 |
200,064
|
|
100,000
|
|
SS&C
Technologies, Inc., Sr. Unsecd. Note, 144A, 6.500%, 6/1/2032 |
100,920
|
|
50,000
|
|
Stingray
Compute LLC, Secured Note, 144A, 6.000%, 6/15/2031 |
50,161
|
|
150,000
|
|
SV
RNO Property Owner 1 LLC, Secured Note, 144A, 5.875%, 3/1/2031 |
147,933
|
|
175,000
|
|
TTM
Technologies, Inc., Sr. Unsecd. Note, 144A, 4.000%, 3/1/2029 |
169,153
|
|
250,000
|
|
UKG,
Inc., Sr. Secd. Note, 144A, 6.875%, 2/1/2031 |
243,032
|
|
250,000
|
|
Viavi
Solutions, Inc., Sr. Unsecd. Note, 144A, 3.750%, 10/1/2029 |
238,620
|
|
225,000
|
|
WULF
Compute LLC, Secured Note, 144A, 7.750%, 10/15/2030 |
236,467
|
|
150,000
|
|
Yondr
JK 1, LLC, 144A, 6.875%, 6/30/2031 |
150,488
|
|
50,000
|
|
ZipRecruiter,
Inc., Sr. Unsecd. Note, 144A, 5.000%, 1/15/2030 |
38,885
|
|
|
|
TOTAL
|
11,652,914
|
|
|
|
Transportation
Services—0.5% |
|
|
175,000
|
|
GB
AIT Buyer, Inc., Sr. Unsecd. Note, 144A, 8.750%, 4/30/2034 |
175,684
|
|
175,000
|
|
Watco
Cos. LLC/Finance Co., Sr. Unsecd. Note, 144A, 7.125%, 8/1/2032 |
179,807
|
|
|
|
TOTAL
|
355,491
|
|
|
|
Utility
- Electric—2.6% |
|
|
39,000
|
|
NRG
Energy, Inc., Sr. Unsecd. Note, 144A, 3.875%, 2/15/2032 |
35,877
|
|
250,000
|
|
NRG
Energy, Inc., Sr. Unsecd. Note, 144A, 5.250%, 6/15/2029 |
249,473
|
Semi-Annual
Financial Statements and Additional Information
9
|
Principal
Amount
or
Shares |
|
|
Value
|
|
|
|
CORPORATE
BONDS—continued |
|
|
|
|
Utility
- Electric—continued |
|
|
$ 50,000
|
|
NRG
Energy, Inc., Sr. Unsecd. Note, 144A, 5.750%, 1/15/2034 |
$ 49,636
|
|
250,000
|
|
NRG
Energy, Inc., Sr. Unsecd. Note, 144A, 6.000%, 1/15/2036 |
249,345
|
|
100,000
|
|
NRG
Energy, Inc., Sr. Unsecd. Note, 144A, 6.125%, 5/15/2036 |
100,089
|
|
50,000
|
|
TerraForm
Power Operating LLC, Sr. Unsecd. Note, 144A, 4.750%, 1/15/2030 |
48,401
|
|
175,000
|
|
TerraForm
Power Operating LLC, Sr. Unsecd. Note, 144A, 5.000%, 1/31/2028 |
174,005
|
|
125,000
|
|
TransAlta
Corp., Sr. Unsecd. Note, 5.875%, 2/1/2034 |
123,208
|
|
250,000
|
|
Vistra
Operations Co., LLC, Sr. Unsecd. Note, 144A, 7.750%, 10/15/2031 |
261,666
|
|
250,000
|
|
Voltagrid
LLC, 144A, 7.375%, 11/1/2030 |
259,664
|
|
150,000
|
|
XPLR
Infrastructure Operating Partners, LP, Sr. Unsecd. Note, 144A, 7.250%, 1/15/2029 |
155,294
|
|
75,000
|
|
XPLR
Infrastructure Operating Partners, LP, Sr. Unsecd. Note, 144A, 7.750%, 4/15/2034 |
78,985
|
|
50,000
|
|
XPLR
Infrastructure Operating Partners, LP, Sr. Unsecd. Note, 144A, 8.375%, 1/15/2031 |
53,352
|
|
125,000
|
|
XPLR
Infrastructure Operating Partners, LP, Sr. Unsecd. Note, 144A, 8.625%, 3/15/2033 |
134,093
|
|
|
|
TOTAL
|
1,973,088
|
|
|
|
TOTAL
CORPORATE BONDS
(IDENTIFIED
COST $72,559,985) |
71,853,310
|
|
|
|
REPURCHASE
AGREEMENT—2.3% |
|
|
1,686,000
|
|
Interest
in $584,000,000 joint repurchase agreement 3.65%, dated 6/30/2026 under which Bank of America, N.A. will
repurchase
securities provided as collateral for $584,059,211 on 7/1/2026. The securities provided as collateral at the end of
the
period held with BNY Mellon as tri-party agent, were U.S. Government Agency securities with various maturities to
12/1/2047
and the market value of those underlying securities was $595,740,395.
(IDENTIFIED
COST $1,686,000) |
1,686,000
|
|
|
|
COMMON
STOCK—0.0% |
|
|
|
|
Media
Entertainment—0.0% |
|
|
1,050
|
2,3
|
Audacy
Capital Corp.
(IDENTIFIED
COST $714,852) |
9,303
|
|
|
|
WARRANTS—0.0%
|
|
|
|
|
Media
Entertainment—0.0% |
|
|
1,272
|
2,3
|
Audacy
Capital Corp., Warrants 9/30/2028 |
13
|
|
212
|
2,3
|
Audacy
Capital Corp., Warrants 9/30/2028 |
2
|
|
|
|
TOTAL
WARRANTS
(IDENTIFIED
COST $429) |
15
|
|
|
|
TOTAL
INVESTMENT IN SECURITIES—98.8%
(IDENTIFIED
COST $74,961,266)4
|
73,548,628
|
|
|
|
OTHER
ASSETS AND LIABILITIES - NET—1.2%5
|
885,848
|
|
|
|
NET
ASSETS—100% |
$74,434,476
|
|
1
|
Issuer
in default. |
|
2
|
Market
quotations and price evaluations are not available. Fair value determined using significant unobservable inputs in accordance with procedures
established
by
and under the general supervision of the Fund’s Adviser acting through its Valuation Committee. |
|
3
|
Non-income-producing
security. |
|
4
|
Also
represents cost of investments for federal tax purposes. |
|
5
|
Assets,
other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
Note: The categories of investments are
shown as a percentage of net assets at June 30, 2026.
Various inputs are used in determining the
value of the Fund’s investments. These inputs are summarized in the three broad levels listed
below:
Level 1—quoted prices in active markets
for identical securities.
Level 2—other significant observable
inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk,
etc.). Also includes securities valued at amortized cost.
Level 3—significant unobservable inputs
(including the Fund’s own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing
securities are not an indication of the risk associated with investing in those securities.
Semi-Annual
Financial Statements and Additional Information
10
The following is a summary of the inputs used, as of June 30, 2026, 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 |
$—
|
$71,853,310
|
$0
|
$71,853,310
|
|
Equity
Security: |
|
|
|
|
|
Common
Stock |
|
|
|
|
|
Domestic
|
—
|
—
|
9,303
|
9,303
|
|
Warrants
|
—
|
—
|
15
|
15
|
|
Repurchase
Agreement |
—
|
1,686,000
|
—
|
1,686,000
|
|
TOTAL
SECURITIES |
$—
|
$73,539,310
|
$9,318
|
$73,548,628
|
|
The
following acronym(s) are used throughout this portfolio: |
| |
|
PIK
|
—Payment
in Kind | |
See Notes which are an integral part of
the Financial Statements
Semi-Annual
Financial Statements and Additional Information
11
Financial
Highlights–Primary
Shares
(For a Share Outstanding Throughout Each
Period)
|
|
Six
Months
Ended
(unaudited)
6/30/2026
|
Year Ended December 31,
| ||||
|
|
2025
|
2024
|
2023
|
2022
|
2021
| |
|
Net Asset
Value, Beginning of Period |
$5.78
|
$5.68
|
$5.66
|
$5.34
|
$6.39
|
$6.41
|
|
Income
From Investment Operations: |
|
|
|
|
|
|
|
Net
investment income (loss)1
|
0.15
|
0.31
|
0.31
|
0.30
|
0.29
|
0.28
|
|
Net
realized and unrealized gain (loss) |
(0.08)
|
0.13
|
0.03
|
0.34
|
(1.02)
|
0.02
|
|
Total
From Investment Operations |
0.07
|
0.44
|
0.34
|
0.64
|
(0.73)
|
0.30
|
|
Less Distributions:
|
|
|
|
|
|
|
|
Distributions
from net investment income |
(0.49)
|
(0.34)
|
(0.32)
|
(0.32)
|
(0.32)
|
(0.32)
|
|
Net
Asset Value, End of Period |
$5.36
|
$5.78
|
$5.68
|
$5.66
|
$5.34
|
$6.39
|
|
Total
Return2
|
1.39%
|
8.23%
|
6.27%
|
12.71%
|
(11.78)%
|
4.85%
|
|
Ratios
to Average Net Assets: |
|
|
|
|
|
|
|
Net
expenses3
|
0.81%4
|
0.81%
|
0.83%
|
0.81%
|
0.81%
|
0.81%
|
|
Net
investment income |
5.44%4
|
5.51%
|
5.53%
|
5.69%
|
5.15%
|
4.42%
|
|
Expense
waiver/reimbursement5
|
0.18%4
|
0.08%
|
0.04%
|
0.06%
|
0.05%
|
0.04%
|
|
Supplemental
Data: |
|
|
|
|
|
|
|
Net
assets, end of period (000 omitted) |
$61,566
|
$68,273
|
$68,370
|
$72,987
|
$68,740
|
$103,152
|
|
Portfolio
turnover6
|
14%
|
28%
|
28%
|
16%
|
13%
|
39%
|
|
1
|
Per
share numbers have been calculated using the average shares method. |
|
2
|
Based
on net asset value. Total returns do not reflect any additional fees or expenses that may be imposed by separate accounts of insurance
companies or in
connection
with any variable annuity or variable life insurance contract. Total returns for periods of less than one year are not annualized.
|
|
3
|
Amount
does not reflect net expenses incurred by investment companies in which the Fund may invest. |
|
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. Amount does not reflect expense
waiver/
reimbursement
recorded by investment companies in which the Fund may invest. |
|
6
|
Securities
that mature are considered sales for purposes of this calculation. |
See Notes which are an integral part of
the Financial Statements
Semi-Annual
Financial Statements and Additional Information
12
Financial
Highlights–Service
Shares
(For a Share Outstanding Throughout Each
Period)
|
|
Six
Months
Ended
(unaudited)
6/30/2026
|
Year Ended December 31,
| ||||
|
|
2025
|
2024
|
2023
|
2022
|
2021
| |
|
Net Asset
Value, Beginning of Period |
$5.75
|
$5.64
|
$5.63
|
$5.31
|
$6.35
|
$6.38
|
|
Income
From Investment Operations: |
|
|
|
|
|
|
|
Net
investment income (loss)1
|
0.14
|
0.28
|
0.29
|
0.29
|
0.27
|
0.26
|
|
Net
realized and unrealized gain (loss) |
(0.08)
|
0.16
|
0.02
|
0.34
|
(1.00)
|
0.01
|
|
Total
From Investment Operations |
0.06
|
0.44
|
0.31
|
0.63
|
(0.73)
|
0.27
|
|
Less Distributions:
|
|
|
|
|
|
|
|
Distributions
from net investment income |
(0.44)
|
(0.33)
|
(0.30)
|
(0.31)
|
(0.31)
|
(0.30)
|
|
Net
Asset Value, End of Period |
$5.37
|
$5.75
|
$5.64
|
$5.63
|
$5.31
|
$6.35
|
|
Total
Return2
|
1.23%
|
8.18%
|
5.85%
|
12.47%
|
(11.92)%
|
4.44%
|
|
Ratios
to Average Net Assets: |
|
|
|
|
|
|
|
Net
expenses3
|
1.06%4
|
1.06%
|
1.08%
|
1.06%
|
1.06%
|
1.06%
|
|
Net
investment income |
5.19%4
|
4.96%
|
5.27%
|
5.44%
|
4.92%
|
4.16%
|
|
Expense
waiver/reimbursement5
|
0.18%4
|
0.08%
|
0.04%
|
0.06%
|
0.05%
|
0.04%
|
|
Supplemental
Data: |
|
|
|
|
|
|
|
Net
assets, end of period (000 omitted) |
$12,868
|
$13,489
|
$50,281
|
$50,747
|
$47,172
|
$57,578
|
|
Portfolio
turnover6
|
14%
|
28%
|
28%
|
16%
|
13%
|
39%
|
|
1
|
Per
share numbers have been calculated using the average shares method. |
|
2
|
Based
on net asset value. Total returns do not reflect any additional fees or expenses that may be imposed by separate accounts of insurance
companies or in
connection
with any variable annuity or variable life insurance contract. Total returns for periods of less than one year are not annualized.
|
|
3
|
Amount
does not reflect net expenses incurred by investment companies in which the Fund may invest. |
|
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. Amount does not reflect expense
waiver/
reimbursement
recorded by investment companies in which the Fund may invest. |
|
6
|
Securities
that mature are considered sales for purposes of this calculation. |
See Notes which are an integral part of
the Financial Statements
Semi-Annual
Financial Statements and Additional Information
13
Statement
of Assets and Liabilities
June 30, 2026 (unaudited)
|
Assets:
|
|
|
Investment
in securities, at value (identified
cost $74,961,266) |
$73,548,628
|
|
Cash
|
107
|
|
Income
receivable |
1,214,991
|
|
Receivable
for shares sold |
30,097
|
|
Total
Assets |
74,793,823
|
|
Liabilities:
|
|
|
Payable
for investments purchased |
299,714
|
|
Payable
for shares redeemed |
12,013
|
|
Payable
for investment adviser fee (Note 5)
|
832
|
|
Payable
for administrative fee (Note 5)
|
157
|
|
Payable
for legal fees |
6,444
|
|
Payable
for portfolio accounting fees |
22,965
|
|
Payable
for distribution services fee (Note 5)
|
2,665
|
|
Accrued
expenses (Note 5)
|
14,557
|
|
Total
Liabilities |
359,347
|
|
Net
assets for 13,881,233 shares outstanding |
$74,434,476
|
|
Net Assets
Consist of: |
|
|
Paid-in
capital |
$98,277,525
|
|
Total
distributable earnings (loss) |
(23,843,049)
|
|
Net
Assets |
$74,434,476
|
|
Net Asset
Value, Offering Price and Redemption Proceeds Per Share: |
|
|
Primary
Shares: |
|
|
$61,566,008
÷ 11,485,038 shares outstanding, no par value, unlimited shares authorized |
$5.36
|
|
Service
Shares: |
|
|
$12,868,468
÷ 2,396,195 shares outstanding, no par value, unlimited shares authorized |
$5.37
|
See Notes which are an integral part of
the Financial Statements
Semi-Annual
Financial Statements and Additional Information
14
Statement
of Operations
Six Months Ended June
30, 2026 (unaudited)
|
Investment
Income: |
|
|
Interest
|
$2,394,153
|
|
Expenses:
|
|
|
Investment
adviser fee (Note 5)
|
229,732
|
|
Administrative
fee (Note 5)
|
33,944
|
|
Custodian
fees |
8,673
|
|
Transfer
agent fees |
6,084
|
|
Directors’/Trustees’
fees (Note 5)
|
908
|
|
Auditing
fees |
18,899
|
|
Legal
fees |
5,570
|
|
Portfolio
accounting fees |
46,796
|
|
Distribution
services fee (Note 5)
|
16,265
|
|
Printing
and postage |
17,560
|
|
Miscellaneous
(Note 5)
|
11,322
|
|
TOTAL
EXPENSES |
395,753
|
|
Waiver
of investment adviser fee (Note 5) |
(67,473)
|
|
Net
expenses |
328,280
|
|
Net
investment income |
2,065,873
|
|
Realized
and Unrealized Gain (Loss) on Investments and Foreign Currency Transactions: |
|
|
Net
realized loss on investments |
(765,982)
|
|
Net
realized loss on foreign currency transactions |
(1,691)
|
|
Net
change in unrealized depreciation of investments |
(321,595)
|
|
Net
realized and unrealized gain (loss) on investments and foreign currency transactions |
(1,089,268)
|
|
Change
in net assets resulting from operations |
$976,605
|
See Notes which are an integral part of
the Financial Statements
Semi-Annual
Financial Statements and Additional Information
15
Statement
of Changes in Net Assets
|
|
Six
Months
Ended
(unaudited)
6/30/2026
|
Year
Ended
12/31/2025
|
|
Increase
(Decrease) in Net Assets |
|
|
|
Operations:
|
|
|
|
Net
investment income |
$2,065,873
|
$5,846,705
|
|
Net
realized gain (loss) |
(767,673)
|
(428,870)
|
|
Net
change in unrealized appreciation/depreciation |
(321,595)
|
3,417,337
|
|
CHANGE
IN NET ASSETS RESULTING FROM OPERATIONS |
976,605
|
8,835,172
|
|
Distributions
to Shareholders: |
|
|
|
Primary
Shares |
(5,278,916)
|
(3,796,953)
|
|
Service
Shares |
(996,249)
|
(2,904,084)
|
|
CHANGE
IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS |
(6,275,165)
|
(6,701,037)
|
|
Share Transactions:
|
|
|
|
Proceeds
from sale of shares |
3,600,547
|
19,889,348
|
|
Net
asset value of shares issued to shareholders in payment of distributions declared |
6,275,159
|
6,701,032
|
|
Cost
of shares redeemed |
(11,904,543)
|
(65,614,167)
|
|
CHANGE
IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS |
(2,028,837)
|
(39,023,787)
|
|
Change
in net assets |
(7,327,397)
|
(36,889,652)
|
|
Net Assets:
|
|
|
|
Beginning
of period |
81,761,873
|
118,651,525
|
|
End
of period |
$74,434,476
|
$81,761,873
|
See Notes which are an integral part of
the Financial Statements
Semi-Annual
Financial Statements and Additional Information
16
Notes to
Financial Statements
June 30, 2026 (unaudited)
1. ORGANIZATION
Federated Hermes Insurance Series (the “Trust”)
is registered under the Investment Company Act of 1940, as amended (the “Act”), as an
open-end management investment company. The Trust consists of six portfolios. The financial statements included herein are only those
of Federated Hermes High Income Bond Fund II (the “Fund”), a diversified portfolio. The financial statements of the other
portfolios are presented separately. The assets of each portfolio
are segregated and a shareholder’s interest is limited to the portfolio in which
shares are held. Each portfolio pays its own expenses. The Fund offers two classes of shares: Primary Shares and Service Shares. All
shares of the Fund have equal rights with respect to voting, except on class-specific matters. Fund shares are available exclusively as
a funding vehicle for life insurance companies writing variable
life insurance policies and variable annuity contracts. The investment objective
of the Fund is to seek high current income.
2. SIGNIFICANT
ACCOUNTING POLICIES
The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of its financial statements.
These policies are in conformity with U.S. generally accepted accounting principles (GAAP).
Investment Valuation
In
calculating its net asset value (NAV), the Fund generally values investments as follows:
■
Fixed-income
securities are fair valued using price evaluations provided by a pricing service approved by Federated Investment Management
Company (the “Adviser”).
■
Shares
of other mutual funds or non-exchange-traded investment companies are valued based upon their reported NAVs, or NAV per share
practical expedient, as applicable.
■
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.
■
For
securities that are fair valued in accordance with procedures established by and under the general supervision of the Adviser, certain
factors may be considered, such as: the last traded or purchase price of the security, information obtained by contacting the issuer
or dealers, analysis of the issuer’s financial statements or other available documents, fundamental analytical data, the nature
and duration of restrictions on disposition, the movement of the
market in which the security is normally traded, public trading in similar securities
or derivative contracts of the issuer or comparable issuers, movement of a relevant index, or other factors including but not limited
to industry changes and relevant government actions.
If any price, quotation, price evaluation
or other pricing source is not readily available when the NAV is calculated, if the Fund cannot obtain
price evaluations from a pricing service or from more than one dealer for an investment within a reasonable period of time as set forth
in the Adviser’s valuation policies and procedures for the Fund, or if information furnished by a pricing service, in the opinion
of the Adviser’s valuation committee (“Valuation Committee”),
is deemed not representative of the fair value of such security, the Fund uses the
fair value of the investment determined in accordance with the procedures described below. There can be no assurance that the Fund
could obtain the fair value assigned to an investment if it sold the investment at approximately the time at which the Fund determines
its NAV per share, and the actual value obtained could be materially different.
Fair Valuation and Significant Events Procedures
Pursuant
to Rule 2a-5 under the Act, the Fund’s Board of Trustees (the “Trustees”) has designated the Adviser as the Fund’s
valuation designee to perform any fair value determinations for
securities and other assets held by the Fund. The Adviser is subject to the Trustees’
oversight and certain reporting and other requirements intended to provide the Trustees the information needed to oversee the
Adviser’s fair value determinations.
The Adviser, acting through
its Valuation Committee, is responsible for determining the fair value of investments for which market quotations
are not readily available. The Valuation Committee is comprised of officers of the Adviser and certain of the Adviser’s affiliated
companies and determines fair value and oversees the calculation of the NAV. The Valuation Committee is also authorized to use
pricing services to provide fair value evaluations of the current value of certain investments for purposes of calculating the NAV. The
Valuation Committee employs various methods for reviewing third-party
pricing-service evaluations including periodic reviews of third-party
pricing services’ policies, procedures and valuation methods (including key inputs, methods, models and assumptions), transactional
back-testing, comparisons of evaluations of different pricing services, and review of price challenges by the Adviser based on
recent market activity. In the event that market quotations and price evaluations are not available for an investment, the Valuation Committee
determines the fair value of the investment in accordance with procedures adopted by the Adviser. The Trustees periodically review
the fair valuations made by the Valuation Committee. The Trustees have also approved the Adviser’s fair valuation and significant
events procedures as part of the Fund’s compliance program
and will review any changes made to the procedures.
Factors considered by
pricing services in evaluating an investment include the yields or prices of investments of comparable quality, coupon,
maturity, call rights and other potential prepayments, terms and type, reported transactions, indications as to values from dealers
and general market conditions. Some pricing services provide a single price evaluation reflecting the bid-side of the market for an
investment (a “bid” evaluation). Other pricing services offer both bid evaluations and price evaluations indicative of a price
between
Semi-Annual
Financial Statements and Additional Information
17
the prices bid and
ask for the investment (a “mid” evaluation). The Fund normally uses bid evaluations for any U.S. Treasury and Agency securities,
mortgage-backed securities and municipal securities. The Fund normally uses mid evaluations for any other types of fixed-income
securities and any OTC derivative contracts. In the event that market quotations and price evaluations are not available for an investment,
the fair value of the investment is determined in accordance with procedures adopted by the Adviser.
The Adviser has also
adopted procedures requiring an investment to be priced at its fair value whenever the Valuation Committee determines
that a significant event affecting the value of the investment has occurred between the time as of which the price of the investment
would otherwise be determined and the time as of which the NAV is computed. An event is considered significant if there is both
an affirmative expectation that the investment’s value will change in response to the event and a reasonable basis for quantifying
the resulting change in value. Examples of significant events
that may occur after the close of the principal market on which a security is traded,
or after the time of a price evaluation provided by a pricing service or a dealer, include:
■
With
respect to securities traded principally in foreign markets, significant trends in U.S. equity markets or in the trading of foreign securities
index futures contracts;
■
Political
or other developments affecting the economy or markets in which an issuer conducts its operations or its securities are
traded;
■
Announcements
concerning matters such as acquisitions, recapitalizations, litigation developments, or a natural disaster affecting the issuer’s
operations or regulatory changes or market developments affecting the issuer’s industry.
The Adviser has adopted procedures whereby
the Valuation Committee uses a pricing service to provide factors to update the fair value of
equity securities traded principally in foreign markets from the time of the close of their respective foreign stock exchanges to the
pricing time of the Fund. For other significant events, the Fund
may seek to obtain more current quotations or price evaluations from alternative
pricing sources. If a reliable alternative pricing source is not available, the Valuation Committee will determine the fair value of the
investment in accordance with the fair valuation procedures approved by the Adviser. The Trustees periodically review fair valuations
made in response to significant events.
Repurchase Agreements
The
Fund may invest in repurchase agreements for short-term liquidity purposes. It is the policy of the Fund to require the other party to
a repurchase agreement to transfer to the Fund’s custodian
or sub-custodian eligible securities or cash with a market value (after transaction
costs) at least equal to the repurchase price to be paid under the repurchase agreement. The eligible securities are transferred
to accounts with the custodian or sub-custodian in which the Fund holds a “securities entitlement” and exercises “control”
as those terms are defined in the Uniform Commercial Code. Certain
repurchase agreements may be structured as loans secured by a security
interest or lien on the eligible securities. The Fund has established procedures for monitoring the market value of the transferred securities
and requiring the transfer of additional eligible securities if necessary to equal at least the repurchase price. These procedures also
allow the other party to require securities to be transferred from the account to the extent that their market value exceeds the repurchase
price or in exchange for other eligible securities of equivalent market value.
The insolvency of the
other party or other failure to repurchase the securities may delay the disposition of the underlying securities or cause
the Fund to receive less than the full repurchase price. Under the terms of the repurchase agreement, any amounts received by the Fund
in excess of the repurchase price and related transaction costs must be remitted to the other party.
The Fund may enter into
repurchase agreements in which eligible securities are transferred into joint trading accounts maintained by the
custodian or sub-custodian for investment companies and other clients advised by the Fund’s Adviser and its affiliates. The Fund
will participate on a pro rata basis with the other investment
companies and clients in its share of the securities transferred under such repurchase
agreements and in its share of proceeds from any repurchase or other disposition of such securities.
Repurchase agreements
are subject to Master Netting Agreements which are agreements between the Fund and its counterparties that
provide for the net settlement of all transactions and collateral with the Fund, through a single payment, in the event of default or
termination. Amounts presented on the Portfolio of Investments
and Statement of Assets and Liabilities are not net settlement amounts but
gross. As indicated above, the cash or securities to be repurchased, as shown on the Portfolio of Investments, exceeds the repurchase
price to be paid under the agreement reducing the net settlement amount to zero.
Investment Income, Gains and Losses, Expenses and Distributions
Investment
transactions are accounted for on a trade-date basis. Realized gains and losses from investment transactions are recorded on an
identified-cost basis. Interest income and expenses are accrued daily. Dividend income and distributions to shareholders are recorded
on the ex-dividend date. Foreign dividends are recorded on the
ex-dividend date or when the Fund is informed of the ex-dividend date. Distributions
of net investment income and capital gains, if any, are declared and paid at least annually. Non-cash dividends included in dividend
income, if any, are recorded at fair value. Amortization/accretion of premium and discount is included in investment income. Investment
income, realized and unrealized gains and losses and certain fund-level expenses are allocated to each class based on relative average
daily net assets, except that select classes will bear certain expenses unique to those classes. The detail of the total fund expense
waiver of $67,473 is disclosed in Note 5. Dividends are declared separately for each class. No class has preferential dividend rights;
differences in per share dividend rates are generally due to differences in separate class expenses.
Other Service Fees
The
Fund may pay other service fees up to 0.25% of the average daily net assets of the Fund’s Primary Shares and Service Shares to financial
intermediaries or to Federated Shareholder Services Company (FSSC) for providing services to shareholders and maintaining shareholder
accounts. Subject to the terms described in the Expense Limitation note, FSSC may voluntarily reimburse the Fund for other service
fees.
For the six months ended
June 30, 2026, the Fund’s Primary Shares and Service Shares did not incur other service fees; however, it may
begin to incur this fee upon approval of the Trustees.
Semi-Annual
Financial Statements and Additional Information
18
Federal Taxes
It
is the Fund’s policy to comply with the Subchapter M provision of the Internal Revenue Code of 1986 (the “Code”) and
to distribute to shareholders each year substantially all of its
income. Accordingly, no provision for federal income tax is necessary. As of and during the six
months ended June 30, 2026, the Fund did not have a liability for any uncertain tax positions. The Fund recognizes interest and penalties,
if any, related to tax liabilities as income tax expense in the Statement of Operations. As of June 30, 2026, tax years 2022
through 2025 remain subject to examination by the Fund’s major tax jurisdictions, which include the United States of America and
the Commonwealth of Massachusetts.
When-Issued and Delayed-Delivery Transactions
The
Fund may engage in when-issued or delayed-delivery transactions. The Fund records when-issued securities on the trade date and maintains
security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased
on a when-issued or delayed-delivery basis are marked to market daily and begin earning interest on the settlement date. Losses
may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the
contract.
Foreign Currency Translation
The
accounting records of the Fund are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies are translated
into U.S. dollars based on the rates of exchange of such currencies against U.S. dollars on the date of valuation. Purchases and sales
of securities, income and expenses are translated at the rate of exchange quoted on the respective date that such transactions are recorded.
The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments
from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized
and unrealized gain or loss from investments.
Reported net realized
foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between
the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest and foreign
withholding taxes recorded on the Fund’s books, and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at
period end, resulting from changes in the exchange rate.
Restricted Securities
The
Fund may purchase securities which are considered restricted. Restricted securities are securities that either: (a) cannot be offered
for public sale without first being registered, or being able
to take advantage of an exemption from registration, under the Securities Act of
1933; or (b) are subject to contractual restrictions on public sales. In some cases, when a security cannot be offered for public sale
without first being registered, the issuer of the restricted security
has agreed to register such securities for resale, at the issuer’s expense, either
upon demand by the Fund or in connection with another registered offering of the securities. Many such restricted securities may be
resold in the secondary market in transactions exempt from registration. Restricted securities may be determined to be liquid under criteria
established by the Trustees. The Fund will not incur any registration costs upon such resales. The Fund’s restricted securities,
like other securities, are priced in accordance with procedures
established by and under the general supervision of the Adviser.
Other
The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the
amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ materially from
those estimated. The Fund applies investment company accounting
and reporting guidance.
3. SHARES
OF BENEFICIAL INTEREST
The following tables summarize share activity:
|
|
Six
Months Ended
6/30/2026
|
Year
Ended
12/31/2025
| ||
|
Primary
Shares: |
Shares
|
Amount
|
Shares
|
Amount
|
|
Shares
sold |
529,544
|
$2,934,726
|
2,703,547
|
$15,004,706
|
|
Shares
issued to shareholders in payment of distributions declared |
1,009,353
|
5,278,916
|
701,840
|
3,796,953
|
|
Shares
redeemed |
(1,862,878)
|
(10,457,905)
|
(3,643,054)
|
(20,506,728)
|
|
NET
CHANGE RESULTING FROM PRIMARY SHARE TRANSACTIONS |
(323,981)
|
$(2,244,263)
|
(237,667)
|
$(1,705,069)
|
|
|
Six
Months Ended
6/30/2026
|
Year
Ended
12/31/2025
| ||
|
Service
Shares: |
Shares
|
Amount
|
Shares
|
Amount
|
|
Shares
sold |
121,827
|
$665,821
|
873,075
|
$4,884,642
|
|
Shares
issued to shareholders in payment of distributions declared |
190,123
|
996,243
|
538,790
|
2,904,079
|
|
Shares
redeemed |
(261,843)
|
(1,446,638)
|
(7,979,626)
|
(45,107,439)
|
|
NET
CHANGE RESULTING FROM SERVICE SHARE TRANSACTIONS |
50,107
|
$215,426
|
(6,567,761)
|
$(37,318,718)
|
|
NET
CHANGE RESULTING FROM TOTAL FUND SHARE TRANSACTIONS |
(273,874)
|
$(2,028,837)
|
(6,805,428)
|
$(39,023,787)
|
Semi-Annual
Financial Statements and Additional Information
19
4. FEDERAL
TAX INFORMATION
At June 30, 2026, the cost of investments
for federal tax purposes was $74,961,266. The net unrealized depreciation of investments for federal
tax purposes was $1,412,638. This consists of unrealized appreciation from investments for those securities having an excess of value
over cost of $914,068 and unrealized depreciation from investments for those securities having an excess of cost over value of
$2,326,706.
As of December 31, 2025,
the Fund had a capital loss carryforward of $23,680,399 which will reduce the Fund’s taxable income arising from
future net realized gains on investments, if any, to the extent permitted by the Code, thereby reducing the amount of distributions to
shareholders which would otherwise be necessary to relieve the Fund of any liability for federal income tax. Pursuant to the Code, these
net capital losses retain their character as either short-term or long-term and do not expire.
The following schedule summarizes the Fund’s
capital loss carryforwards:
|
Short-Term
|
Long-Term
|
Total
|
|
$—
|
$23,680,399
|
$23,680,399
|
5. INVESTMENT
ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
The
advisory agreement between the Fund and the Adviser provides for an annual fee equal to 0.60% of the Fund’s average daily net assets.
Subject to the terms described in the Expense Limitation note, the Adviser may voluntarily choose to waive any portion of its fee and/or
reimburse certain operating expenses of the Fund for competitive reasons such as to maintain the Fund’s expense ratio, or as and
when appropriate, to maintain positive or zero net yields. For
the six months ended June 30, 2026, the Adviser voluntarily waived $67,473
of its fee.
Administrative Fee
Federated
Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and
services. For purposes of determining the appropriate rate breakpoint, “Investment Complex” is defined as all of the Federated
Hermes Funds subject to a fee under the Administrative Services
Agreement. The fee paid to FAS is based on the average daily net assets
of the Investment Complex as specified below:
|
Administrative
Fee |
Average
Daily Net Assets
of
the Investment Complex |
|
0.100%
|
on
assets up to $50 billion |
|
0.075%
|
on
assets over $50 billion |
Subject to the terms described in the Expense
Limitation note, FAS may voluntarily choose to waive any portion of its fee. For the six months
ended June 30, 2026, the annualized fee paid to FAS was 0.089% of average daily net assets of the Fund.
In addition, FAS may charge certain out-of-pocket
expenses to the Fund.
Distribution Services Fee
The
Fund has adopted a Distribution Plan (the “Plan”) pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund
will compensate Federated Securities Corp. (FSC), the principal
distributor, from the daily net assets of the Fund’s Service Shares to finance activities
intended to result in the sale of these shares. The Plan provides that the Fund may incur distribution expenses at 0.25% of average
daily net assets, annually, to compensate FSC. Subject to the terms described in the Expense Limitation note, FSC may voluntarily
choose to waive any portion of its fee.
For the six months ended June 30, 2026,
distribution services fees for the Fund were as follows:
|
|
Distribution
Services
Fees
Incurred |
|
Service
Shares |
$16,265
|
When FSC receives fees, it may pay some
or all of them to financial intermediaries whose customers purchase shares. For the six months ended
June 30, 2026, FSC did not retain any fees paid by the Fund.
Expense Limitation
The
Adviser and certain of its affiliates (which may include FAS and FSC) on their own initiative have agreed to waive certain amounts of
their respective fees and/or reimburse expenses. Total annual
fund operating expenses (as shown in the financial highlights, excluding interest
expense, extraordinary expenses and proxy-related expenses, if any) paid by the Fund’s Primary Shares and Service Shares (after
the voluntary waivers and/or reimbursements) will not exceed 0.81%
and 1.06% (the “Fee Limit”), respectively, up to but not including the
later of (the “Termination Date”): (a) May 1, 2027; or (b) the date of the Fund’s next effective Prospectus. While the
Adviser and its applicable affiliates currently do not anticipate
terminating or increasing these arrangements prior to the Termination Date, these arrangements
may only be terminated or the Fee Limit increased prior to the Termination Date with the approval of the Trustees.
Semi-Annual
Financial Statements and Additional Information
20
Directors’/Trustees’
and Miscellaneous Fees
Certain
Officers and Trustees of the Fund are Officers and Directors or Trustees of certain of the above companies. To efficiently facilitate
payment, Independent Directors’/Trustees’ fees and
certain expenses related to conducting meetings of the Directors/Trustees and other
miscellaneous expenses are paid by an affiliate of the Adviser which in due course are reimbursed by the Fund. These expenses related
to conducting meetings of the Directors/Trustees and other miscellaneous expenses may be included in Accrued and Miscellaneous
Expenses on the Statement of Assets and Liabilities and Statement of Operations, respectively.
6. INVESTMENT
TRANSACTIONS
Purchases and sales of investments, excluding
long-term U.S. government securities and short-term obligations, for the six months ended
June 30, 2026, were as follows:
|
Purchases
|
$10,236,027
|
|
Sales
|
$15,219,790
|
7. LINE
OF CREDIT
The Fund participates with certain other
Federated Hermes Funds, on a several basis, in an up to $400,000,000 unsecured, 364-day, committed,
revolving line of credit (LOC) agreement dated June 16, 2026. The LOC was made available to temporarily finance the repurchase
or redemption of shares of the Fund, failed trades, payment of dividends, settlement of trades and for other short-term, temporary
or emergency general business purposes. The Fund cannot borrow under the LOC if an inter-fund loan is outstanding. The Fund’s
ability to borrow under the LOC also is subject to the limitations of the Act and various conditions precedent that must be satisfied
before the Fund can borrow. Loans under the LOC are charged interest at a fluctuating rate per annum equal to (a) the highest, on
any day, of (i) the federal funds effective rate, (ii) the published secured overnight financing rate plus an assigned percentage, and
(iii) 0.0%, plus (b) a margin. Any fund eligible to borrow under
the LOC pays its pro rata share of a commitment fee based on the amount of
the lenders’ commitment that has not been utilized, quarterly in arrears and at maturity. As of June 30, 2026, the Fund had no outstanding
loans. During the six months ended June 30, 2026, the Fund did not utilize the LOC.
8. INTERFUND
LENDING
Pursuant to an Exemptive Order issued by
the Securities and Exchange Commission, the Fund, along with other funds advised by subsidiaries
of Federated Hermes, Inc., may participate in an interfund lending program. This program provides an alternative credit facility
allowing the Fund to borrow from other participating affiliated funds. As of June 30, 2026, there were no outstanding loans. During
the six months ended June 30, 2026, the program was not utilized.
9. Operating
Segments
An operating segment is defined as a component
of a public entity that engages in business activities from which it may recognize revenues
and incur expenses, has operating results that are regularly reviewed by the public entity’s chief operating decision maker (CODM)
to make decisions about resources to be allocated to the segment and assess its performance, and has discrete financial information
available. A management committee of the Adviser acts as the CODM. The Fund represents a single operating segment, as the
CODM monitors the operating results of the Fund as a whole and the strategic asset allocation is determined based on the investment
objective of the Fund and executed by the Fund’s portfolio management team. The financial information in the form of the Fund’s
portfolio composition, total returns, expense ratios and changes in net assets (i.e., changes in net assets resulting from operations,
subscriptions and redemptions) which is reviewed by the CODM to assess the Fund’s performance in comparison to the Fund’s
benchmarks and to make resource allocation decisions for the Fund’s single segment is consistent with the information presented
in these financial statements. Segment assets are reflected on
the accompanying Statement of Assets and Liabilities as “total assets” and significant
segment expenses are listed on the accompanying Statement of Operations.
10. INDEMNIFICATIONS
Under the Fund’s organizational documents,
its Officers and Directors/Trustees are indemnified against certain liabilities arising out of the
performance of their duties to the Fund (other than liabilities arising out of their willful misfeasance, bad faith, gross negligence
or reckless disregard of their duties to the Fund). In addition,
in the normal course of business, the Fund provides certain indemnifications under
arrangements with third parties. Typically, obligations to indemnify a third party arise in the context of an arrangement entered into
by the Fund under which the Fund agrees to indemnify such third party for certain liabilities arising out of actions taken pursuant to
the arrangement, provided the third party’s actions are
not deemed to have breached an agreed-upon standard of care (such as willful misfeasance,
bad faith, gross negligence or reckless disregard of their duties under the contract). The Fund’s maximum exposure under these
arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet arisen. The Fund
does not anticipate any material claims or losses pursuant to these arrangements at this time, and accordingly, expects the risk of loss
to be remote.
Semi-Annual
Financial Statements and Additional Information
21
Evaluation
and Approval of Advisory Contract–May
2026
Federated Hermes High Income
Bond Fund II (the “Fund”)
At its meetings in May 2026 (the
“May Meetings”), the Fund’s Board of Trustees (the “Board”), including those Trustees who
are not “interested persons” of the Fund, as defined in the Investment Company Act of 1940, as amended (the
“Independent Trustees”), reviewed and unanimously approved the continuation of the investment advisory contract between
the Fund and Federated Investment Management Company (the “Adviser”) (the “Contract”) for an additional one-year
term. The Board’s determination to approve the continuation of the Contract reflects the exercise of its business judgment
after considering such information deemed necessary to evaluate the terms of the Contract and to approve the continuation
of the existing arrangement. The information, factors and conclusions that formed the basis for the Board’s approval
are summarized below.
Information Received
and Review Process
At the request
of the Independent Trustees, the Fund’s Chief Compliance Officer (the “CCO”) furnished to the Board in advance
of its May Meetings an independent written report regarding data related to the Fund’s management fee (the
“CCO Management Fee Report”). The Board considered the CCO Management Fee Report, along with other information,
in evaluating the reasonableness of the Fund’s management fee and in determining to approve the continuation
of the Contract.
In addition
to the CCO Management Fee Report, the Board considered information specifically prepared in connection with
the approval of the continuation of the Contract that was presented at the May Meetings. In this regard, in the months preceding
the May Meetings, the Board requested and reviewed written responses and supporting materials prepared by the
Adviser and its affiliates (collectively, “Federated Hermes”) in response to requests posed to Federated Hermes by independent
legal counsel on behalf of the Independent Trustees encompassing a wide variety of topics, including those summarized
below. The Board also considered such additional matters as the Independent Trustees deemed reasonably necessary
to evaluate the Contract, which included detailed information about the Fund and Federated Hermes furnished to the
Board at its meetings throughout the year.
The Board’s
consideration of the Contract included review of materials and information covering the following matters, among
others: (1) a copy of the Contract; (2) the nature, quality and extent of the advisory and other services provided to the
Fund by Federated Hermes; (3) Federated Hermes’ business and operations; (4) the Adviser’s investment philosophy, personnel
and processes; (5) the Fund’s investment objective and strategies; (6) the Fund’s short-term and long-term performance
- in absolute terms (both on a gross basis and net of expenses) and relative to an appropriate group of peer funds
and its benchmark; (7) the Fund’s fees and expenses, including the advisory fee and the overall expense structure of the
Fund - in absolute terms and relative to an appropriate group of peer funds, with due regard for contractual or voluntary
expense limitations (if any); (8) the financial condition of Federated Hermes; (9) the Adviser’s profitability with respect
to managing the Fund; (10) distribution and sales activity for the Fund; and (11) the use and allocation of brokerage
commissions derived from trading the Fund’s portfolio securities (if any).
The Board
also considered judicial decisions concerning allegedly excessive investment advisory fees charged to other registered
funds in evaluating the Contract. Using these judicial decisions as a guide, the Board considered several factors it
deemed relevant to an adviser’s fiduciary duty with respect to its receipt of compensation from a fund, including: (1) the nature
and quality of the services provided by the adviser to the fund and its shareholders, including the performance of the
fund, its benchmark and comparable funds; (2) the adviser’s cost of providing the services and the profitability to the adviser
of providing advisory services to the fund; (3) the extent to which the adviser may realize “economies of scale” as the
fund grows larger and, if such economies of scale exist, whether they have been appropriately shared with the fund and its
shareholders or the family of funds; (4) any “fall-out” benefits that accrue to the adviser because of its relationship with
the fund, including research services received from
brokers that execute fund trades and any fees paid to affiliates of the adviser
for services rendered to the fund; (5) comparative fees and expenses, including a comparison of management fees paid
to the adviser with those paid by similar funds managed by the same adviser or other advisers as well as management fees
charged to institutional and other advisory clients of the same adviser for what might be viewed as like services; and (6)
the extent of care, conscientiousness and independence with which the fund’s board members perform their duties and their
expertise, including whether they are fully informed about all facts the board deems relevant to its consideration of the
adviser’s services and fees. The Board considered that the Securities and Exchange Commission (“SEC”) disclosure requirements
regarding the basis for a fund board’s approval of the fund’s investment advisory contract generally align with
the factors listed above. The Board was guided by these factors in its evaluation of the Contract to the extent it considered
them to be appropriate and relevant, as discussed further below. The Board considered and weighed these factors
in light of its substantial accumulated experience in governing the Fund and working with Federated Hermes on matters
relating to the oversight of the other funds advised by Federated Hermes (each, a “Federated Hermes Fund” and, collectively,
the “Federated Hermes Funds”).
Semi-Annual
Financial Statements and Additional Information
22
In
addition, the Board considered the preferences and expectations of Fund shareholders and the potential disruptions of the
Fund’s operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate
or not renew the Contract. In particular, the Board recognized that many shareholders likely have invested in the Fund
based on the strength of Federated Hermes’ industry standing and reputation and with the expectation that Federated Hermes
will have a continuing role in providing advisory services to the Fund. Thus, the Board observed that there are a range
of investment options available to the Fund’s shareholders in the marketplace, and such shareholders, having had the opportunity
to consider other investment options, have effectively selected Federated Hermes by virtue of investing in the
Fund.
In determining
to approve the continuation of the Contract, the members of the Board reviewed and evaluated information
and factors they believed to be relevant and appropriate through the exercise of their reasonable business judgment.
While individual members of the Board may have weighed certain factors differently, the Board’s determination
to approve the continuation of the Contract was based on a comprehensive consideration of all information provided
to the Board throughout the year. The Board recognized that its evaluation process is evolutionary and that the factors
considered and the emphasis placed on relevant factors may change in recognition of changing circumstances in the
registered fund marketplace. The Independent Trustees were assisted throughout the evaluation process by independent legal
counsel. In connection with their deliberations at the May Meetings, the Independent Trustees met separately in executive
session with their independent legal counsel and without management present to review the relevant materials and
consider their responsibilities under applicable laws. In addition, senior management representatives of Federated Hermes
also met with the Independent Trustees and their independent legal counsel to discuss the materials and presentations
furnished to the Board at the May Meetings. The Board considered the approval of the Contract for the Fund as
part of its consideration of agreements for funds across the family of Federated Hermes Funds, but its approvals were made
on a fund-by-fund basis.
Nature, Extent and
Quality of Services
The Board
considered the nature, extent and quality of the services provided to the Fund by the Adviser and the resources
of Federated Hermes dedicated to the Fund. In this regard, the Board evaluated, among other things, the terms of the
Contract and the full range of services provided to the Fund by Federated Hermes. The Board considered the Adviser’s personnel,
investment philosophy and process, investment research capabilities and resources, trade operations capabilities,
experience and performance track record. The Board reviewed the qualifications, backgrounds and responsibilities
of the portfolio management team primarily responsible for the day-to-day management of the Fund and evaluated
Federated Hermes’ ability and experience in attracting and retaining qualified personnel to service the Fund. The Board
considered the trading operations by the Adviser, including the execution of portfolio transactions and the selection of
brokers for those transactions. The Board also considered the Adviser’s ability to deliver competitive investment performance
for the Fund when compared to the Fund’s Performance Peer Group (as defined below).
In addition,
the Board considered the financial resources and overall reputation of Federated Hermes and its willingness to
consider and make investments in personnel, infrastructure, technology, cybersecurity, business continuity planning and operational
enhancements that are designed to benefit the Federated Hermes Funds. The Board considered Federated Hermes’
oversight of the securities lending program for the Federated Hermes Funds that engage in securities lending and noted
the income earned by the Federated Hermes Funds that participate in such program. In addition, the Board considered
the quality of Federated Hermes’ communications with the Board and responsiveness to Board inquiries and requests
made from time to time with respect to the Federated Hermes Funds. The Board also considered that Federated Hermes
is responsible for providing the Federated Hermes Funds’ officers.
The Board
received and evaluated information regarding Federated Hermes’ regulatory and compliance environment. The
Board considered Federated Hermes’ compliance program and compliance history and reports from the CCO about Federated
Hermes’ compliance with applicable laws and regulations, including responses to regulatory developments and any
compliance or other issues raised by regulatory agencies. The Board also noted Federated Hermes’ support of the Federated
Hermes Funds’ compliance control structure and the compliance-related resources devoted by Federated Hermes
in support of the Fund’s obligations pursuant to Rule 38a-1 under the Investment Company Act of 1940, as amended,
including Federated Hermes’ commitment to respond to rulemaking and other regulatory initiatives of the SEC. The
Board considered Federated Hermes’ approach to internal audits and risk management with respect to the Federated Hermes
Funds and its day-to-day oversight of the Federated Hermes Funds’ compliance with their investment objectives and
policies as well as with applicable laws and regulations, noting that regulatory and other developments had over time led,
and continue to lead, to an increase in the scope of Federated Hermes’ oversight in this regard. In addition, the Board noted
Federated Hermes’ commitment to maintaining high quality systems and expending substantial resources to prepare for
and respond to ongoing changes due to the market, regulatory and control environments in which the Fund and its service
providers operate.
Semi-Annual
Financial Statements and Additional Information
23
The
Board considered Federated Hermes’ efforts to provide shareholders in the Federated Hermes Funds with a comprehensive
array of funds with different investment objectives, policies and strategies. The Board considered the expenses
that Federated Hermes had incurred, as well as the entrepreneurial and other risks assumed by Federated Hermes, in
sponsoring and providing on-going services to new funds to expand these opportunities for shareholders. The Board noted
the benefits to shareholders of being part of the family of Federated Hermes Funds, which include the general right to
exchange investments between the same class of shares without the incurrence of additional sales charges.
Based on
these considerations, the Board concluded that it was satisfied with the nature, extent and quality of the services
provided by the Adviser to the Fund.
Fund Investment Performance
The Board
considered the investment performance of the Fund. In evaluating the Fund’s investment performance, the Board
considered performance results in light of the Fund’s investment objective, strategies and risks. The Board considered
detailed investment reports on, and the Adviser’s analysis of, the Fund’s performance over different time periods
that were provided to the Board throughout the year and in connection with the May Meetings. These reports included,
among other items, information on the Fund’s gross and net returns, the Fund’s investment performance compared
to one or more relevant categories or groups of peer funds and the Fund’s benchmark, performance attribution information
and commentary on the effect of market conditions. The Board noted that it evaluated investment performance at
meetings throughout the year and received reports from Federated Hermes regarding the performance of certain Federated
Hermes Funds as well as Federated Hermes’ explanations for less favorable performance and any specific actions
Federated Hermes had taken, or had determined to take, to seek to enhance Fund investment performance and the results
of those actions.
The Board
also reviewed comparative information regarding the performance of other registered funds in the category of
peer funds selected by Morningstar, Inc. (“Morningstar”), an independent fund ranking organization (the “Performance
Peer Group”). The Board noted the CCO’s
statement that comparisons to fund peer groups may be helpful, though not conclusive,
in evaluating the performance of the Adviser in managing the Fund.
The Board
also considered comparative performance data from Lipper, Inc. that was included in reports provided to the Board
throughout the year.
The Board
considered that the Fund’s performance fell below the median of the Performance Peer Group for the one-year,
three-year and five-year periods ended December 31, 2025. The Board discussed the Fund’s performance with the Adviser
and recognized the efforts being taken by the Adviser in the context of other factors considered relevant by the
Board.
Based on
these considerations, the Board concluded that it had continued confidence in the Adviser’s overall capabilities
to manage the Fund.
Fund Expenses
The Board
considered the advisory fee and overall expense structure of the Fund and the comparative fee and expense information
that had been provided in connection with the May Meetings. In this regard, the Board was presented with, and
considered, information regarding the contractual advisory fee rates, total expense ratios and each element of the Fund’s
total expense ratio (i.e., gross and net advisory fees, administrative fees, custody fees, portfolio accounting fees and transfer
agency fees) relative to an appropriate group of peer funds compiled by Federated Hermes from the overall category
of peer funds selected by Morningstar (the “Expense Peer Group”). The Board received a description of the methodology
used to select the Expense Peer Group from the overall Morningstar category. The Board also reviewed comparative
information regarding the fees and expenses of the broader group of funds in the overall Morningstar
category.
While mindful
that courts have cautioned against giving too much weight to comparative information concerning fees charged
to funds by other advisers, the use of comparisons between the Fund and its Expense Peer Group assisted the Board
in its evaluation of the Fund’s fees and expenses. The Board focused on comparisons with other registered funds more
heavily than non-registered fund products or services because such comparisons are believed to be more relevant. The
Board considered that other registered funds are the products most like the Fund, in that they are readily available to Fund
shareholders as alternative investment vehicles, and they are the type of investment vehicle, in fact, chosen and maintained
by the Fund’s shareholders. The Board noted that the range of such other registered funds’ fees and expenses, therefore,
appears to be a relevant indicator of what investors have found to be reasonable in the marketplace in which the Fund
competes.
The Board
reviewed the contractual advisory fee rate, net advisory fee rate and other expenses of the Fund and noted the position
of the Fund’s contractual advisory fee rate and other expenses relative to its Expense Peer Group. In this regard, the
Board noted that the contractual advisory fee rate was at the median of the Expense Peer Group, and the Board was satisfied
that the overall expense structure of the Fund remained competitive.
Semi-Annual
Financial Statements and Additional Information
24
The
Board also received and considered information about the nature and extent of services offered and fees charged by Federated
Hermes to other types of clients with investment strategies similar to those of the Federated Hermes Funds, including
non-registered fund clients (such as institutional separate accounts) and third-party unaffiliated registered funds for
which the Adviser or its affiliates serve as sub-adviser. The Board noted the CCO’s statement that non-registered fund clients
are inherently different products due to the following differences, among others: (i) types of targeted investors; (ii)
applicable laws and regulations; (iii) legal structures; (iv) average account sizes; (v) portfolio management techniques made
necessary by different cash flows and different associated costs; (vi) the time spent by portfolio managers and their teams
(among other personnel across various departments, including legal, compliance and risk management) in reviewing securities
pricing; (vii) SEC mandated risk management programs with respect to fund liquidity and use of derivatives; (viii)
questions on regulatory reporting; (ix) a variety of different administrative responsibilities; and (x) degrees of risk associated
with management. The Board also considered information regarding the differences in the nature of the services required
for Federated Hermes to manage its proprietary registered fund business versus managing a discrete pool of assets as
a sub-adviser to another institution’s registered fund, noting the CCO’s statement that Federated Hermes generally performs
significant additional services and assumes substantially greater risks in managing the Fund and other Federated Hermes
Funds than in its role as sub-adviser to an unaffiliated third-party registered fund. The Board noted that the CCO emphasized
that differences in fees for providing advisory services to other types of clients may not be appropriate when judging
the appropriateness of the Federated Hermes Funds’ advisory fees because of the different services provided.
In the case
of the Fund, the Board noted that Federated Hermes does not manage any other types of clients that are comparable
to the Fund.
Based on
these considerations, the Board concluded that the fees and total operating expenses of the Fund, in conjunction
with other matters considered, are reasonable in light of the services provided.
Profitability
The Board
received and considered profitability information furnished by Federated Hermes. Such profitability information
included revenues reported on a fund-by-fund basis and estimates of the allocation of expenses made on a fund-by-fund
basis, using allocation methodologies specified by the CCO and described to the Board. The Board considered
the CCO’s statement that, while the cost allocation report applies consistent allocation processes for purposes of
general comparison of funds, the inherent difficulties in arbitrarily allocating costs lack precision and may cause the report
to be unreliable because a single change in an allocation estimate can dramatically alter the resulting estimate of cost
and/or profitability of a Federated Hermes Fund and may produce unintended consequences. In addition, the Board considered
the CCO’s statement that the allocation methodologies used by Federated Hermes in estimating profitability for purposes
of reporting to the Board in connection with the continuation of the Contract are consistent with the methodologies
previously reviewed by an independent consultant. The Board noted that the independent consultant had previously
conducted a review of the allocation methodologies and reported to the Board that, although there is no single best
method to allocate expenses, the methodologies used by Federated Hermes are reasonable. The Board considered the CCO’s
statement that the estimated profitability to the Adviser from its relationship with the Fund was not unreasonable in relation
to the services provided.
The Board
also reviewed information compiled by Federated Hermes comparing its profitability information to other publicly-held
fund management companies, including information regarding profitability trends over time. The Board recognized
that profitability comparisons among fund management companies are difficult because of the variation in the type
of comparative information that is publicly available, and the profitability of any fund management company is affected
by numerous factors. The Board considered the CCO’s statement that, based on such profitability information, Federated
Hermes’ profit margins did not appear to be excessive and that Federated Hermes appeared financially sound, with
the resources available to fulfill its contractual obligations.
Economies of Scale
The Board
received and considered information about the notion of possible realization of “economies of scale” as a fund
grows larger, the difficulties of isolating and quantifying economies of scale at an individual fund level, and the extent
to which potential scale benefits are shared with shareholders. In this regard, the Board considered that Federated Hermes
has made significant and long-term investments in areas that support all of the Federated Hermes Funds, such as: portfolio
management, investment research and trading operations; shareholder services; compliance; business continuity, cybersecurity
and information security programs; internal audit and risk management functions; and technology, systems capabilities
and use of data. The Board noted that Federated Hermes’ investments in these areas are extensive and are designed
to provide enhanced or expanded services to the Federated Hermes Funds and their shareholders. The Board considered
that the benefits of these investments are likely to be shared with the family of Federated Hermes Funds as a whole.
In addition, the Board considered that fee waivers and expense reimbursements are another means for potential economies
of scale to be shared with shareholders and can provide protection from an increase in expenses if a Federated Hermes
Fund’s assets decline. The Board considered that, in order for the Federated Hermes Funds to remain competitive
Semi-Annual
Financial Statements and Additional Information
25
in the marketplace,
Federated Hermes has frequently waived fees and/or reimbursed expenses for the Federated Hermes Funds
and has disclosed to shareholders and/or reported to the Board its intention to do so (or continue to do so) in the future.
The Board also considered that Federated Hermes has been active in managing expenses of the Federated Hermes Funds
in recent years, which has resulted in benefits being realized by shareholders.
The Board
also received and considered information on adviser-paid fees (commonly referred to as “revenue sharing” payments)
that was provided to the Board throughout the year and in connection with the May Meetings. The Board considered
that Federated Hermes believes that this information is relevant to consider whether Federated Hermes had an incentive
to either not apply breakpoints, or to apply breakpoints at higher levels, but should not be considered when evaluating
the reasonableness of advisory fees. The Board also noted the absence of any applicable regulatory or industry guidelines
on economies of scale, which is compounded by the lack of any uniform methodology or pattern with respect to structuring
fund advisory fees with breakpoints that serve to reduce the fees as a fund attains a certain size.
Other Benefits
The Board
considered information regarding the compensation and other ancillary (or “fall-out”) benefits that Federated Hermes
derived from its relationships with the Federated Hermes Funds. The Board considered that Federated Hermes may
derive a benefit to its reputation as an adviser to the Fund, which may help in attracting other clients and investment personnel.
The Board noted that, in addition to receiving advisory fees under the Federated Hermes Funds’ investment advisory
contracts, Federated Hermes’ affiliates also receive fees for providing other services to the Federated Hermes Funds
under separate service contracts, including for serving as the Federated Hermes Funds’ administrator and distributor.
In this regard, the Board considered that Federated Hermes’ affiliates provide distribution and shareholder services
to the Federated Hermes Funds, for which they may be compensated through distribution and servicing fees paid pursuant
to Rule 12b-1 plans or otherwise. The Board also received and considered information detailing the benefits, if any,
that Federated Hermes may derive from its receipt of research services from brokers who execute portfolio trades for the
Federated Hermes Funds.
Conclusions
The Board
considered the CCO’s presentation and statements and the information accompanying the CCO Management Fee
Report. The Board recognized that its evaluation of the Federated Hermes Funds’ advisory and sub-advisory arrangements
is a continuing and ongoing process that is informed by the information that the Board requests and receives from
management throughout the course of the year.
On the basis
of the information and factors summarized above, among other information and factors deemed relevant by the
Board, and the evaluation thereof, the Board, including the Independent Trustees, unanimously voted to approve the continuation
of the Contract. The Board based its determination to approve the Contract on the totality of the circumstances
and relevant factors and with a view of past and future long-term considerations. Not all of the factors and considerations
identified above were necessarily deemed to be relevant to the Fund, nor did the Board consider any one of them
to be determinative.
Semi-Annual
Financial Statements and Additional Information
26
Variable
investment options are not bank deposits or obligations, are not guaranteed by any bank and are not insured or guaranteed
by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government
agency. Investment in variable investment options involves investment risk, including the possible loss of
principal.
This information is authorized
for distribution to prospective investors only when preceded or accompanied by the Fund’s Prospectus,
which contains facts concerning its objective and policies, management fees, expenses and other information.
In an effort to reduce costs
and avoid duplicate mailings, the Fund(s) intend to deliver a single copy of certain documents
to each household in which more 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 of Additional
Information, and supplements to each, as well as Semi-Annual and 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 shareholder as having given consent (“implied consent”) if (i)
shareholders with the same last name, or believed to be members of the same family, reside at the same street address
or receive mail at the same post office box, (ii) the Fund gives notice of its intent to “household” at least sixty (60)
days before it begins “householding” and (iii) none of the shareholders in the household have notified the Fund(s)
or their agent of the desire to “opt out” of “householding.” Shareholders who have granted written consent, or
have been deemed to have granted implied consent, can
revoke that consent and opt out of “householding” at any time:
shareholders who purchased shares through an intermediary should contact their representative; other shareholders
may call the Fund at 1-800-341-7400, Option #4.
Federated Hermes High Income Bond Fund
II
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us at
FederatedHermes.com/us
or call 1-800-341-7400.
or call 1-800-341-7400.
Federated Securities Corp., Distributor
CUSIP 313916306
CUSIP 313916843
CUSIP 313916843
G00433-02 (8/26)
©
2026 Federated Hermes, Inc.
Semi-Annual Financial Statements
and Additional Information
and Additional Information
June 30, 2026
|
Share
Class |
Primary
|
Service
|
|
|
Federated Hermes Kaufmann Fund II
A Portfolio of Federated Hermes Insurance Series
Not FDIC Insured ▪ May
Lose Value ▪ No Bank Guarantee
Portfolio
of Investments
June 30, 2026 (unaudited)
|
Shares
or
Principal
Amount
|
|
|
Value
|
|
|
|
COMMON
STOCKS—98.2% |
|
|
|
|
Communication
Services—2.7% |
|
|
9,987
|
1
|
Liftoff
Mobile, Inc. |
$ 239,888
|
|
9,329
|
1
|
Space
Exploration Technologies Corp. |
1,593,953
|
|
2,549
|
1
|
Spotify
Technology S.A. |
1,170,322
|
|
|
|
TOTAL
|
3,004,163
|
|
|
|
Consumer
Discretionary—6.5% |
|
|
7,344
|
1
|
Amazon.com,
Inc. |
1,750,369
|
|
3,225
|
1
|
DoorDash,
Inc. |
595,109
|
|
535
|
|
Hilton
Worldwide Holdings, Inc. |
176,796
|
|
318
|
1
|
Mercadolibre,
Inc. |
539,770
|
|
6,184
|
|
Moncler
SpA |
358,804
|
|
8,720
|
1
|
On
Holding AG |
308,863
|
|
910
|
|
Texas
Roadhouse, Inc. |
175,839
|
|
4,618
|
|
TJX
Cos., Inc. |
699,627
|
|
18,691
|
1
|
Viking
Holdings Ltd. |
1,956,387
|
|
2,880
|
|
Wingstop,
Inc. |
499,421
|
|
1,665
|
|
Yum!
Brands, Inc. |
266,167
|
|
|
|
TOTAL
|
7,327,152
|
|
|
|
Consumer
Staples—2.8% |
|
|
842
|
|
Casey’s
General Stores, Inc. |
669,213
|
|
1,045
|
|
Costco
Wholesale Corp. |
977,566
|
|
8,468
|
|
Philip
Morris International, Inc. |
1,531,946
|
|
|
|
TOTAL
|
3,178,725
|
|
|
|
Energy—0.5%
|
|
|
2,032
|
|
Targa
Resources, Inc. |
544,861
|
|
|
|
Financials—3.3%
|
|
|
2,156
|
|
Apollo
Global Management, Inc. |
255,076
|
|
863
|
|
BlackRock,
Inc. |
829,826
|
|
21,652
|
1
|
Chime
Financial, Inc. |
443,433
|
|
6,424
|
1,2
|
Figure
Technology Solutions, Inc. |
197,281
|
|
1,190
|
|
JPMorgan
Chase & Co. |
389,523
|
|
842
|
|
MSCI,
Inc., Class A |
471,554
|
|
2,103
|
|
S&P
Global, Inc. |
856,468
|
|
10,539
|
1
|
Toast,
Inc. |
293,195
|
|
|
|
TOTAL
|
3,736,356
|
|
|
|
Health
Care—21.7% |
|
|
21,108
|
1,2
|
AgomAb
Therapeutics NV, ADR |
273,982
|
|
58,700
|
1,3
|
Albireo
Pharma CVR, Rights |
126,205
|
|
44,440
|
1,2
|
Arcturus
Therapeutics Holdings, Inc. |
298,637
|
|
3,738
|
1
|
Argenx
SE |
3,467,434
|
|
161,911
|
1,2,3
|
AstraZeneca
PLC, Rights |
89,051
|
|
81,100
|
1
|
aTyr
Pharma, Inc. |
48,401
|
|
6,557
|
1
|
Celldex
Therapeutics, Inc. |
243,986
|
|
56,475
|
1,3
|
Contra
Akouos, Inc., Rights |
29,706
|
|
6,813
|
1
|
Cytokinetics,
Inc. |
580,399
|
|
4,200
|
1
|
Erasca,
Inc. |
76,944
|
|
58,633
|
1
|
EyePoint,
Inc. |
838,452
|
|
26,916
|
1,2
|
Forte
Biosciences, Inc. |
571,965
|
|
11,372
|
1
|
Genmab
A/S, ADR |
312,389
|
|
19,423
|
1
|
Guardant
Health, Inc. |
2,914,033
|
Semi-Annual
Financial Statements and Additional Information
1
|
Shares
or
Principal
Amount
|
|
|
Value
|
|
|
|
COMMON
STOCKS—continued |
|
|
|
|
Health
Care—continued |
|
|
18,954
|
1
|
IDEAYA
Biosciences, Inc. |
$ 706,416
|
|
1,867
|
1
|
Intuitive
Surgical, Inc. |
742,469
|
|
9,820
|
1
|
Kymera
Therapeutics, Inc. |
1,126,059
|
|
6,140
|
1,2
|
Medline,
Inc. |
242,162
|
|
74,093
|
1
|
Minerva
Neurosciences, Inc. |
411,216
|
|
7,316
|
1
|
Natera,
Inc. |
1,985,928
|
|
3,053
|
1
|
Newamsterdam
Pharma Co. NV |
103,466
|
|
435,683
|
1,3
|
Novartis
AG, Rights |
505,392
|
|
5,959
|
1,2
|
Palvella
Therapeutics, Inc. |
910,654
|
|
3,200
|
1,2
|
Parabilis
Medicines, Inc. |
87,584
|
|
165,799
|
1
|
Rezolute,
Inc. |
862,155
|
|
22,082
|
1
|
Rhythm
Pharmaceuticals, Inc. |
2,451,764
|
|
8,613
|
1
|
Scholar
Rock Holding Corp. |
473,715
|
|
1,734
|
|
Stryker
Corp. |
545,933
|
|
11,328
|
1
|
Tango
Therapeutics, Inc. |
354,113
|
|
1,967
|
|
UCB
S.A. |
588,983
|
|
6,365
|
1
|
Vaxcyte,
Inc. |
369,997
|
|
1,507
|
1
|
Veeva
Systems, Inc. |
267,447
|
|
11,237
|
1
|
Xenon
Pharmaceuticals, Inc. |
678,265
|
|
42,155
|
1,2
|
Zenas
Biopharma, Inc. |
1,069,894
|
|
|
|
TOTAL
|
24,355,196
|
|
|
|
Industrials—28.1%
|
|
|
2,507
|
|
Applied
Industrial Technologies, Inc. |
847,742
|
|
1,401
|
1
|
Axon
Enterprise, Inc. |
785,415
|
|
1,737
|
|
Comfort
Systems USA, Inc. |
3,442,647
|
|
24,044
|
1,2
|
EquipmentShare.com,
Inc. |
472,705
|
|
8,167
|
|
GE
Aerospace |
3,052,253
|
|
3,668
|
|
GE
Vernova, Inc. |
4,309,386
|
|
4,024
|
|
HEICO
Corp. |
1,433,308
|
|
3,030
|
|
Howmet
Aerospace, Inc. |
814,646
|
|
17,635
|
1,2
|
Innio
Holding GmbH |
697,464
|
|
5,223
|
|
ITG,
Inc. |
83,568
|
|
4,229
|
1
|
Karman
Holdings, Inc. |
211,112
|
|
19,889
|
1
|
Loar
Holdings, Inc. |
1,603,252
|
|
407
|
|
Parker-Hannifin
Corp. |
398,095
|
|
8,017
|
|
Quanta
Services, Inc. |
5,772,561
|
|
39,100
|
1,2
|
QXO,
Inc. |
675,648
|
|
835
|
1
|
RBC
Bearings, Inc. |
537,790
|
|
2,773
|
|
Trane
Technologies PLC |
1,361,987
|
|
10,655
|
1
|
Uber
Technologies, Inc. |
768,865
|
|
8,969
|
|
UL
Solutions, Inc. |
913,582
|
|
3,701
|
|
Vertiv
Holdings Co. |
1,239,169
|
|
6,590
|
|
Westinghouse
Air Brake Technologies Corp. |
1,776,664
|
|
2,069
|
1
|
XPO,
Inc. |
424,745
|
|
|
|
TOTAL
|
31,622,604
|
|
|
|
Information
Technology—26.3% |
|
|
3,900
|
1
|
Advanced
Micro Devices, Inc. |
2,265,549
|
|
2,822
|
|
Advantest
Corp. |
573,644
|
|
2,857
|
1
|
Astera
Labs, Inc. |
1,379,988
|
|
750
|
|
BE
Semiconductor Industries N.V. |
246,273
|
|
1,077
|
1
|
Celestica,
Inc. |
392,890
|
|
502
|
1
|
CloudFlare,
Inc. |
123,131
|
Semi-Annual
Financial Statements and Additional Information
2
|
Shares
or
Principal
Amount
|
|
|
Value
|
|
|
|
COMMON
STOCKS—continued |
|
|
|
|
Information
Technology—continued |
|
|
2,145
|
1
|
Crowdstrike
Holdings, Inc. |
$ 1,636,935
|
|
6,596
|
1
|
Datadog,
Inc. |
1,717,335
|
|
1,285
|
1
|
Digitalocean
Holdings, Inc. |
201,784
|
|
1,508
|
1
|
Fabrinet
|
847,617
|
|
110
|
1
|
Impinj,
Inc. |
15,755
|
|
14,243
|
1
|
JFrog
Ltd. |
1,294,404
|
|
9,730
|
|
KLA
Corp. |
2,935,638
|
|
707
|
1
|
Lumentum
Holdings, Inc. |
606,648
|
|
2,635
|
|
Micron
Technology, Inc. |
3,041,554
|
|
1,666
|
1
|
MongoDB,
Inc. |
559,609
|
|
103
|
|
Monolithic
Power Systems, Inc. |
142,383
|
|
1,616
|
|
Motorola
Solutions, Inc. |
671,109
|
|
6,425
|
|
NVIDIA
Corp. |
1,285,578
|
|
6,278
|
1
|
Q2
Holdings, Inc. |
301,972
|
|
4,303
|
1
|
Quantinuum,
Inc. |
351,727
|
|
15,300
|
1
|
Rubrik,
Inc. |
1,228,284
|
|
2,600
|
|
Samsung
Electronics Co. Ltd. |
568,404
|
|
259
|
1
|
Sandisk
Corp. |
588,896
|
|
887
|
|
Seagate
Technology Holdings PLC |
855,955
|
|
5,925
|
1
|
ServiceNow,
Inc. |
588,234
|
|
10,207
|
1
|
Shopify,
Inc. |
1,165,435
|
|
5,673
|
1
|
Snowflake,
Inc. |
1,443,778
|
|
4,710
|
|
Taiwan
Semiconductor Manufacturing Co. Ltd. ADR |
2,249,355
|
|
1,025
|
1
|
Tyler
Technologies, Inc. |
299,771
|
|
218
|
1
|
Vertex,
Inc. |
2,503
|
|
|
|
TOTAL
|
29,582,138
|
|
|
|
Materials—2.4%
|
|
|
8,645
|
|
Agnico
Eagle Mines Ltd. |
1,341,099
|
|
1,733
|
|
Martin
Marietta Materials |
999,421
|
|
928
|
|
Sherwin-Williams
Co. |
319,529
|
|
|
|
TOTAL
|
2,660,049
|
|
|
|
Real
Estate—1.9% |
|
|
1,830
|
1
|
CBRE
Group, Inc. |
246,483
|
|
20,743
|
1
|
CoStar
Group, Inc. |
587,442
|
|
6,382
|
|
Gaming
and Leisure Properties, Inc. |
284,190
|
|
4,216
|
|
Ryman
Hospitality Properties, Inc. |
541,967
|
|
19,061
|
|
VICI
Properties, Inc. |
506,069
|
|
|
|
TOTAL
|
2,166,151
|
|
|
|
Utilities—2.0%
|
|
|
4,220
|
|
American
Electric Power Co., Inc. |
577,338
|
|
4,243
|
|
Duke
Energy Corp. |
537,079
|
|
10,137
|
|
NextEra
Energy, Inc. |
889,725
|
|
1,878
|
|
Vistra
Corp. |
297,907
|
|
|
|
TOTAL
|
2,302,049
|
|
|
|
TOTAL
COMMON STOCKS
(IDENTIFIED
COST $50,851,192) |
110,479,444
|
|
|
|
REPURCHASE
AGREEMENT—0.6% |
|
|
$ 609,000
|
|
Interest
in $584,000,000 joint repurchase agreement 3.65%, dated 6/30/2026 under which Bank of America, N.A. will
repurchase
securities provided as collateral for $584,059,211 on 7/1/2026. The securities provided as collateral at the end of
the
period held with BNY Mellon as tri-party agent, were U.S. Government Agency securities with various maturities to
12/1/2047
and the market value of those underlying securities was $595,740,395.
(IDENTIFIED
COST $609,000) |
609,000
|
Semi-Annual
Financial Statements and Additional Information
3
|
Shares
or
Principal
Amount
|
|
|
Value
|
|
|
|
PREFERRED
STOCKS—0.5% |
|
|
|
|
Health
Care—0.4% |
|
|
60,006
|
3,4
|
CeQur
S.A. |
$ 303,461
|
|
4,307
|
3,4
|
Sail
Biomedicines, Inc. |
150,649
|
|
|
|
TOTAL
|
454,110
|
|
|
|
Industrials—0.1%
|
|
|
17
|
3
|
QXO,
Inc. |
139,144
|
|
|
|
TOTAL
PREFERRED STOCKS
(IDENTIFIED
COST $611,870) |
593,254
|
|
|
|
WARRANTS—1.1%
|
|
|
|
|
Health
Care—1.1% |
|
|
138
|
1,3,4
|
Minerva
Neurosciences, Inc., Tranche A Warrants 12/31/2099 |
253,785
|
|
69
|
1,3,4
|
Minerva
Neurosciences, Inc., Tranche B Warrants 12/31/2099 |
150,803
|
|
5,250
|
1
|
Minerva
Neurosciences, Inc., Warrants 12/31/2099 |
29,137
|
|
5,696
|
1
|
Rezolute,
Inc., Warrants 10/8/2027 |
14,677
|
|
1,400
|
1
|
Rezolute,
Inc., Warrants 1/1/2099 |
7,280
|
|
68,385
|
1
|
Rezolute,
Inc., Warrants 4/30/2099 |
355,602
|
|
25,100
|
1
|
Rezolute,
Inc., Warrants 6/24/2099 |
130,520
|
|
44,952
|
1
|
Rezolute,
Inc., Warrants 12/31/2099 |
233,750
|
|
81
|
1
|
Scynexis,
Inc., Warrants 4/26/2029 |
35
|
|
6,625
|
1
|
Scynexis,
Inc., Warrants 1/1/2099 |
26,964
|
|
|
|
TOTAL
WARRANTS
(IDENTIFIED
COST $886,061) |
1,202,553
|
|
|
|
INVESTMENT
COMPANY—3.5% |
|
|
3,971,186
|
|
Federated
Hermes Government Obligations Fund, Premier Shares, 3.55%5
(IDENTIFIED
COST $3,971,186) |
3,971,186
|
|
|
|
TOTAL
INVESTMENT IN SECURITIES—103.9%
(IDENTIFIED
COST $56,929,309)6
|
116,855,437
|
|
|
|
OTHER
ASSETS AND LIABILITIES - NET—(3.9)%7
|
(4,375,715)
|
|
|
|
NET
ASSETS—100% |
$112,479,722
|
An affiliated company is a company in which
the Fund, alone or in combination with other Federated Hermes funds, has ownership of at least
5% of the voting shares. Transactions with affiliated companies during the period ended June 30, 2026, were as follows:
|
Affiliated
|
Value
as of
12/31/2025
|
Purchases
at
Cost* |
Proceeds
from
Sales* |
Change
in
Unrealized
Appreciation/
(Depreciation)*
|
Net
Realized
Gain/
(Loss)*
|
Value
as of
6/30/2026
|
Shares
Held
as of
6/30/2026
|
Dividend
Income*
|
|
Health
Care: |
|
|
|
|
|
|
|
|
|
Arcturus
Therapeutics Holdings, Inc. |
$272,417
|
$—
|
$—
|
$26,220
|
$—
|
$298,637
|
44,440
|
$—
|
|
aTyr
Pharma, Inc. |
$92,250
|
$—
|
$(16,840)
|
$38,456
|
$(65,465)
|
$48,401
|
81,100
|
$—
|
|
EyePoint,
Inc. |
$1,071,225
|
$—
|
$—
|
$(232,773)
|
$—
|
$838,452
|
58,633
|
$—
|
|
Forte
Biosciences, Inc. |
$605,830
|
$123,470
|
$—
|
$(157,335)
|
$—
|
$571,965
|
26,916
|
$—
|
|
Minerva
Neurosciences, Inc. |
$313,214
|
$—
|
$(77,440)
|
$722,821
|
$(547,379)
|
$411,216
|
74,093
|
$—
|
|
Minerva
Neurosciences, Inc., Tranche A Warrants
12/31/2099
|
$146,384
|
$—
|
$—
|
$107,401
|
$—
|
$253,785
|
138
|
$—
|
|
Minerva
Neurosciences, Inc., Tranche B Warrants
12/31/2099
|
$89,875
|
$—
|
$—
|
$60,928
|
$—
|
$150,803
|
69
|
$—
|
|
Minerva
Neurosciences, Inc., Warrants 12/31/2099 |
$21,105
|
$—
|
$—
|
$8,032
|
$—
|
$29,137
|
5,250
|
$—
|
|
Rezolute,
Inc. |
$391,286
|
$—
|
$—
|
$470,869
|
$—
|
$862,155
|
165,799
|
$—
|
|
Rezolute,
Inc., Warrants 10/8/2027 |
$6,712
|
$—
|
$—
|
$7,965
|
$—
|
$14,677
|
5,696
|
$—
|
|
Rezolute,
Inc., Warrants 1/1/2099 |
$3,304
|
$—
|
$—
|
$3,976
|
$—
|
$7,280
|
1,400
|
$—
|
|
Rezolute,
Inc., Warrants 4/30/2099 |
$161,388
|
$—
|
$—
|
$194,214
|
$—
|
$355,602
|
68,385
|
$—
|
|
Rezolute,
Inc., Warrants 6/24/2099 |
$59,236
|
$—
|
$—
|
$71,284
|
$—
|
$130,520
|
25,100
|
$—
|
|
Rezolute,
Inc., Warrants 12/31/2099 |
$106,087
|
$—
|
$—
|
$127,663
|
$—
|
$233,750
|
44,952
|
$—
|
|
Scynexis,
Inc., Warrants 4/26/2029 ** |
$62
|
$—
|
$—
|
$(27)
|
$—
|
$35
|
81
|
$—
|
|
Scynexis,
Inc., Warrants 1/1/2099 ** |
$33,517
|
$—
|
$—
|
$(6,553)
|
$—
|
$26,964
|
6,625
|
$—
|
|
TOTAL
OF AFFILIATED COMPANIES
TRANSACTIONS
|
$3,373,892
|
$123,470
|
$(94,280)
|
$1,443,141
|
$(612,844)
|
$4,233,379
|
608,677
|
$—
|
Semi-Annual
Financial Statements and Additional Information
4
|
*
|
A
portion of the amount shown may have been recorded when the Fund no longer had ownership of at least 5% of the voting shares.
|
|
**
|
At
June 30, 2026, the Fund no longer has ownership of at least 5% of the voting shares. |
Transactions with affiliated investment
companies, which are funds managed by the Adviser or an affiliate of the Adviser, during the period
ended June 30, 2026, were as follows:
|
|
Federated
Hermes
Government
Obligations
Fund,
Premier
Shares* |
|
Value
as of 12/31/2025 |
$1,361,567
|
|
Purchases
at Cost |
$15,804,243
|
|
Proceeds
from Sales |
$(13,194,624)
|
|
Change
in Unrealized Appreciation/Depreciation |
$—
|
|
Net
Realized Gain/(Loss) |
$—
|
|
Value
as of 6/30/2026 |
$3,971,186
|
|
Shares
Held as of 6/30/2026 |
3,971,186
|
|
Dividend
Income |
$24,969
|
|
*
|
All
or a portion of the balance/activity for the fund relates to cash collateral received on securities lending transactions.
|
|
1
|
Non-income-producing
security. |
|
2
|
All
or a portion of these securities are temporarily on loan to unaffiliated broker/dealers. |
|
3
|
Market
quotations and price evaluations are not available. Fair value determined using significant unobservable inputs in accordance with procedures
established
by
and under the general supervision of the Fund’s Adviser acting through its Valuation Committee. |
|
4
|
Denotes
a restricted security that either: (a) cannot be offered for public sale without first being registered, or availing of an exemption from
registration, under
the
Securities Act of 1933; or (b) is subject to a contractual restriction on public sales. At June 30, 2026, these restricted securities
amounted to $858,698, which
represented
0.8% of net assets. |
|
5
|
7-day
net yield. |
|
6
|
Also
represents cost of investments for federal tax purposes. |
|
7
|
Assets,
other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
Note: The categories of investments are
shown as a percentage of net assets at June 30, 2026.
Various inputs are used in determining the
value of the Fund’s investments. These inputs are summarized in the three broad levels listed
below:
Level 1—quoted prices in active markets
for identical securities.
Level 2—other significant observable
inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk,
etc.). Also includes securities valued at amortized cost.
Level 3—significant unobservable inputs
(including the Fund’s own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing
securities are not an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used, as of June 30, 2026, 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
|
|
Equity
Securities: |
|
|
|
|
|
Common
Stocks |
|
|
|
|
|
Domestic
|
$93,844,631
|
$—
|
$661,303
|
$94,505,934
|
|
International
|
10,080,917
|
5,803,542
|
89,051
|
15,973,510
|
|
Preferred
Stocks |
|
|
|
|
|
Domestic
|
—
|
—
|
289,793
|
289,793
|
|
International
|
—
|
—
|
303,461
|
303,461
|
|
Debt
Securities: |
|
|
|
|
|
Warrants
|
756,289
|
41,676
|
404,588
|
1,202,553
|
|
Repurchase
Agreement |
—
|
609,000
|
—
|
609,000
|
|
Investment
Company |
3,971,186
|
—
|
—
|
3,971,186
|
|
TOTAL
SECURITIES |
$108,653,023
|
$6,454,218
|
$1,748,196
|
$116,855,437
|
Semi-Annual
Financial Statements and Additional Information
5
Following is a reconciliation
of assets in which significant unobservable inputs (Level 3) were used in determining fair value:
|
|
Investments
in
Securities
|
|
Balance
as of 12/31/2025 |
$1,659,014
|
|
Change
in unrealized appreciation/depreciation |
146,871
|
|
Purchases
|
170,000
|
|
Transfers
out of Level 3 |
(227,689)
|
|
Balance
as of 6/30/2026 |
$1,748,196
|
|
Total
change in unrealized appreciation/depreciation attributable to
investments
still held at 6/30/2026 |
$146,871
|
|
The
following acronym(s) are used throughout this portfolio: |
| |
|
ADR
|
—American
Depositary Receipt | |
|
CVR
|
—Contingent
Value Right | |
See Notes which are an integral part of
the Financial Statements
Semi-Annual
Financial Statements and Additional Information
6
Financial
Highlights–Primary
Shares
(For a Share Outstanding Throughout Each
Period)
|
|
Six
Months
Ended
(unaudited)
6/30/2026
|
Year Ended December 31,
| ||||
|
|
2025
|
2024
|
2023
|
2022
|
2021
| |
|
Net Asset
Value, Beginning of Period |
$19.50
|
$19.64
|
$17.40
|
$15.10
|
$24.31
|
$25.46
|
|
Income
From Investment Operations: |
|
|
|
|
|
|
|
Net
investment income (loss)1
|
(0.08)
|
(0.18)
|
(0.16)
|
(0.02)
|
(0.08)
|
(0.24)
|
|
Net
realized and unrealized gain (loss) |
2.17
|
2.07
|
3.07
|
2.32
|
(6.87)
|
0.83
|
|
Total
From Investment Operations |
2.09
|
1.89
|
2.91
|
2.30
|
(6.95)
|
0.59
|
|
Less Distributions:
|
|
|
|
|
|
|
|
Distributions
from net investment income |
—
|
—
|
(0.16)
|
—
|
—
|
—
|
|
Distributions
from net realized gain |
(3.80)
|
(2.03)
|
(0.51)
|
—
|
(2.26)
|
(1.74)
|
|
Total
Distributions |
(3.80)
|
(2.03)
|
(0.67)
|
—
|
(2.26)
|
(1.74)
|
|
Net
Asset Value, End of Period |
$17.79
|
$19.50
|
$19.64
|
$17.40
|
$15.10
|
$24.31
|
|
Total
Return2
|
15.71%
|
11.52%
|
17.05%
|
15.23%
|
(30.09)%
|
2.51%
|
|
Ratios
to Average Net Assets: |
|
|
|
|
|
|
|
Net
expenses3
|
1.54%4
|
1.54%
|
1.56%
|
1.54%
|
1.54%
|
1.50%
|
|
Net
investment loss |
(1.00)%4
|
(0.97)%
|
(0.89)%
|
(0.15)%
|
(0.51)%
|
(0.99)%
|
|
Expense
waiver/reimbursement5
|
0.07%4
|
0.00%6
|
0.00%6
|
0.02%
|
0.00%6
|
—%
|
|
Supplemental
Data: |
|
|
|
|
|
|
|
Net
assets, end of period (000 omitted) |
$34,350
|
$31,680
|
$33,718
|
$33,266
|
$34,430
|
$55,366
|
|
Portfolio
turnover7
|
21%
|
25%
|
47%
|
56%
|
41%
|
34%
|
|
1
|
Per
share numbers have been calculated using the average shares method. |
|
2
|
Based
on net asset value. Total returns do not reflect any additional fees or expenses that may be imposed by separate accounts of insurance
companies or in
connection
with any variable annuity or variable life insurance contract. Total returns for periods of less than one year are not annualized.
|
|
3
|
Amount
does not reflect net expenses incurred by investment companies in which the Fund may invest. |
|
4
|
Computed
on an annualized basis. |
|
5
|
This
expense decrease is reflected in both the net expense and the net investment income (loss) ratios shown above. Amount does not reflect
expense waiver/
reimbursement
recorded by investment companies in which the Fund may invest. |
|
6
|
Represents
less than 0.01%. |
|
7
|
Securities
that mature are considered sales for purposes of this calculation. |
See Notes which are an integral part of
the Financial Statements
Semi-Annual
Financial Statements and Additional Information
7
Financial
Highlights–Service
Shares
(For a Share Outstanding Throughout Each
Period)
|
|
Six
Months
Ended
(unaudited)
6/30/2026
|
Year Ended December 31,
| ||||
|
|
2025
|
2024
|
2023
|
2022
|
2021
| |
|
Net Asset
Value, Beginning of Period |
$17.34
|
$17.74
|
$15.78
|
$13.73
|
$22.40
|
$23.65
|
|
Income
From Investment Operations: |
|
|
|
|
|
|
|
Net
investment income (loss)1
|
(0.09)
|
(0.21)
|
(0.19)
|
(0.05)
|
(0.11)
|
(0.28)
|
|
Net
realized and unrealized gain (loss) |
1.82
|
1.84
|
2.77
|
2.10
|
(6.30)
|
0.77
|
|
Total
From Investment Operations |
1.73
|
1.63
|
2.58
|
2.05
|
(6.41)
|
0.49
|
|
Less Distributions:
|
|
|
|
|
|
|
|
Distributions
from net investment income |
—
|
—
|
(0.11)
|
—
|
—
|
—
|
|
Distributions
from net realized gain |
(3.80)
|
(2.03)
|
(0.51)
|
—
|
(2.26)
|
(1.74)
|
|
Total
Distributions |
(3.80)
|
(2.03)
|
(0.62)
|
—
|
(2.26)
|
(1.74)
|
|
Net
Asset Value, End of Period |
$15.27
|
$17.34
|
$17.74
|
$15.78
|
$13.73
|
$22.40
|
|
Total
Return2
|
15.54%
|
11.26%
|
16.70%
|
14.93%
|
(30.26)%
|
2.26%
|
|
Ratios
to Average Net Assets: |
|
|
|
|
|
|
|
Net
expenses3
|
1.79%4
|
1.79%
|
1.81%
|
1.79%
|
1.79%
|
1.75%
|
|
Net
investment loss |
(1.25)%4
|
(1.22)%
|
(1.14)%
|
(0.38)%
|
(0.73)%
|
(1.24)%
|
|
Expense
waiver/reimbursement5
|
0.07%4
|
0.00%6
|
0.00%6
|
0.02%
|
0.00%6
|
—%
|
|
Supplemental
Data: |
|
|
|
|
|
|
|
Net
assets, end of period (000 omitted) |
$78,130
|
$72,809
|
$104,963
|
$90,210
|
$108,981
|
$150,983
|
|
Portfolio
turnover7
|
21%
|
25%
|
47%
|
56%
|
41%
|
34%
|
|
1
|
Per
share numbers have been calculated using the average shares method. |
|
2
|
Based
on net asset value. Total returns do not reflect any additional fees or expenses that may be imposed by separate accounts of insurance
companies or in
connection
with any variable annuity or variable life insurance contract. Total returns for periods of less than one year are not annualized.
|
|
3
|
Amount
does not reflect net expenses incurred by investment companies in which the Fund may invest. |
|
4
|
Computed
on an annualized basis. |
|
5
|
This
expense decrease is reflected in both the net expense and the net investment income (loss) ratios shown above. Amount does not reflect
expense waiver/
reimbursement
recorded by investment companies in which the Fund may invest. |
|
6
|
Represents
less than 0.01%. |
|
7
|
Securities
that mature are considered sales for purposes of this calculation. |
See Notes which are an integral part of
the Financial Statements
Semi-Annual
Financial Statements and Additional Information
8
Statement
of Assets and Liabilities
June 30, 2026 (unaudited)
|
Assets:
|
|
|
Investment
in securities, at value including $3,893,472 of securities loaned and $8,204,565 of investments in affiliated holdings* (identified
cost
$56,929,309,
including $8,353,383 of identified cost in affiliated holdings) |
$116,855,437
|
|
Cash
|
3,848
|
|
Income
receivable |
38,996
|
|
Receivable
for shares sold |
3,818
|
|
Security
commitments (Note 2) |
67,087
|
|
Total
Assets |
116,969,186
|
|
Liabilities:
|
|
|
Payable
for investments purchased |
98,159
|
|
Payable
for shares redeemed |
235,308
|
|
Due
on security commitments (Note 2) |
90,000
|
|
Payable
for collateral due to broker for securities lending (Note 2) |
3,971,186
|
|
Payable
for investment adviser fee (Note 5)
|
3,805
|
|
Payable
for administrative fee (Note 5)
|
235
|
|
Payable
for distribution services fee (Note 5)
|
15,207
|
|
Accrued
expenses (Note 5)
|
75,564
|
|
Total
Liabilities |
4,489,464
|
|
Net
assets for 7,046,400 shares outstanding |
$112,479,722
|
|
Net Assets
Consist of: |
|
|
Paid-in
capital |
$45,974,541
|
|
Total
distributable earnings (loss) |
66,505,181
|
|
Net
Assets |
$112,479,722
|
|
Net Asset
Value, Offering Price and Redemption Proceeds Per Share: |
|
|
Primary
Shares: |
|
|
$34,349,700
÷ 1,930,992 shares outstanding, no par value, unlimited shares authorized |
$17.79
|
|
Service
Shares: |
|
|
$78,130,022
÷ 5,115,408 shares outstanding, no par value, unlimited shares authorized |
$15.27
|
|
*
|
See
information listed after the Fund’s Portfolio of Investments. |
See Notes which are an integral part of
the Financial Statements
Semi-Annual
Financial Statements and Additional Information
9
Statement
of Operations
Six Months Ended June
30, 2026 (unaudited)
|
Investment
Income: |
|
|
Dividends
(net of foreign taxes withheld of $5,193) |
$235,878
|
|
Interest
|
37,280
|
|
Net
income on securities loaned (includes $24,969 earned from affiliated holdings related to cash collateral balances*) (Note 2)
|
3,303
|
|
TOTAL
INCOME |
276,461
|
|
Expenses:
|
|
|
Investment
adviser fee (Note 5)
|
656,782
|
|
Administrative
fee (Note 5)
|
40,381
|
|
Custodian
fees |
13,087
|
|
Transfer
agent fees |
5,614
|
|
Directors’/Trustees’
fees (Note 5)
|
962
|
|
Auditing
fees |
20,571
|
|
Legal
fees |
5,221
|
|
Portfolio
accounting fees |
32,838
|
|
Distribution
services fee (Note 5)
|
88,036
|
|
Printing
and postage |
28,197
|
|
Miscellaneous
(Note 5)
|
14,002
|
|
TOTAL
EXPENSES |
905,691
|
|
Waiver
of investment adviser fee (Note 5) |
(37,145)
|
|
Net
expenses |
868,546
|
|
Net
investment income (loss) |
(592,085)
|
|
Realized
and Unrealized Gain (Loss) on Investments and Foreign Currency Transactions: |
|
|
Net
realized gain on investments (including net realized loss of $(612,844) on sales of investments in affiliated holdings*)
|
7,327,513
|
|
Net
realized loss on foreign currency transactions |
(2,571)
|
|
Net
change in unrealized appreciation of investments (including net change in unrealized depreciation of $1,443,141 on investments in affiliated
holdings*)
|
8,670,757
|
|
Net
change in unrealized appreciation of translation of assets and liabilities in foreign currency |
(1,127)
|
|
Net
realized and unrealized gain (loss) on investments and foreign currency transactions |
15,994,572
|
|
Change
in net assets resulting from operations |
$15,402,487
|
|
*
|
See
information listed after the Fund’s Portfolio of Investments. |
See Notes which are an integral part of
the Financial Statements
Semi-Annual
Financial Statements and Additional Information
10
Statement
of Changes in Net Assets
|
|
Six
Months
Ended
(unaudited)
6/30/2026
|
Year
Ended
12/31/2025
|
|
Increase
(Decrease) in Net Assets |
|
|
|
Operations:
|
|
|
|
Net
investment loss |
$(592,085)
|
$(1,519,354)
|
|
Net
realized gain (loss) |
7,324,942
|
22,544,607
|
|
Net
change in unrealized appreciation/depreciation |
8,669,630
|
(5,402,706)
|
|
CHANGE
IN NET ASSETS RESULTING FROM OPERATIONS |
15,402,487
|
15,622,547
|
|
Distributions
to Shareholders: |
|
|
|
Primary
Shares |
(6,013,618)
|
(3,377,137)
|
|
Service
Shares |
(15,599,176)
|
(11,803,131)
|
|
CHANGE
IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS |
(21,612,794)
|
(15,180,268)
|
|
Share Transactions:
|
|
|
|
Proceeds
from sale of shares |
2,750,510
|
6,930,866
|
|
Net
asset value of shares issued to shareholders in payment of distributions declared |
21,612,767
|
15,180,253
|
|
Cost
of shares redeemed |
(10,162,152)
|
(56,744,712)
|
|
CHANGE
IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS |
14,201,125
|
(34,633,593)
|
|
Change
in net assets |
7,990,818
|
(34,191,314)
|
|
Net Assets:
|
|
|
|
Beginning
of period |
104,488,904
|
138,680,218
|
|
End
of period |
$112,479,722
|
$104,488,904
|
See Notes which are an integral part of
the Financial Statements
Semi-Annual
Financial Statements and Additional Information
11
Notes to
Financial Statements
June 30, 2026 (unaudited)
1. ORGANIZATION
Federated Hermes Insurance Series (the “Trust”)
is registered under the Investment Company Act of 1940, as amended (the “Act”), as an
open-end management investment company. The Trust consists of six portfolios. The financial statements included herein are only those
of Federated Hermes Kaufmann Fund II (the “Fund”), a diversified portfolio. The financial statements of the other portfolios
are presented separately. The assets of each portfolio are segregated
and a shareholder’s interest is limited to the portfolio in which shares are
held. Each portfolio pays its own expenses. The Fund offers two classes of shares: Primary Shares and Service Shares. All shares of the
Fund have equal rights with respect to voting, except on class-specific matters. Fund shares are available exclusively as a funding vehicle
for life insurance companies writing variable life insurance policies and variable annuity contracts. The investment objective of the
Fund is capital appreciation.
2. SIGNIFICANT
ACCOUNTING POLICIES
The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of its financial statements.
These policies are in conformity with U.S. generally accepted accounting principles (GAAP).
Investment Valuation
In
calculating its net asset value (NAV), the Fund generally values investments as follows:
■
Equity
securities listed on an exchange or traded through a regulated market system are valued at their last reported sale price or official
closing price in their principal exchange or market.
■
Shares
of other mutual funds or non-exchange-traded investment companies are valued based upon their reported NAVs, or NAV per share
practical expedient, as applicable.
■
Fixed-income
securities are fair valued using price evaluations provided by a pricing service approved by Federated Global Investment
Management Corp. (the “Adviser”).
■
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.
■
For
securities that are fair valued in accordance with procedures established by and under the general supervision of the Adviser, certain
factors may be considered, such as: the last traded or purchase price of the security, information obtained by contacting the issuer
or dealers, analysis of the issuer’s financial statements or other available documents, fundamental analytical data, the nature
and duration of restrictions on disposition, the movement of the
market in which the security is normally traded, public trading in similar securities
or derivative contracts of the issuer or comparable issuers, movement of a relevant index, or other factors including but not limited
to industry changes and relevant government actions.
If any price, quotation, price evaluation
or other pricing source is not readily available when the NAV is calculated, if the Fund cannot obtain
price evaluations from a pricing service or from more than one dealer for an investment within a reasonable period of time as set forth
in the Adviser’s valuation policies and procedures for the Fund, or if information furnished by a pricing service, in the opinion
of the Adviser’s valuation committee (“Valuation Committee”),
is deemed not representative of the fair value of such security, the Fund uses the
fair value of the investment determined in accordance with the procedures described below. There can be no assurance that the Fund
could obtain the fair value assigned to an investment if it sold the investment at approximately the time at which the Fund determines
its NAV per share, and the actual value obtained could be materially different.
Fair Valuation and Significant Events Procedures
Pursuant
to Rule 2a-5 under the Act, the Fund’s Board of Trustees (the “Trustees”) has designated the Adviser as the Fund’s
valuation designee to perform any fair value determinations for
securities and other assets held by the Fund. The Adviser is subject to the Trustees’
oversight and certain reporting and other requirements intended to provide the Trustees the information needed to oversee the
Adviser’s fair value determinations.
The Adviser, acting through
its Valuation Committee, is responsible for determining the fair value of investments for which market quotations
are not readily available. The Valuation Committee is comprised of officers of the Adviser and certain of the Adviser’s affiliated
companies and determines fair value and oversees the calculation of the NAV. The Valuation Committee is also authorized to use
pricing services to provide fair value evaluations of the current value of certain investments for purposes of calculating the NAV. The
Valuation Committee employs various methods for reviewing third-party
pricing-service evaluations including periodic reviews of third-party
pricing services’ policies, procedures and valuation methods (including key inputs, methods, models and assumptions), transactional
back-testing, comparisons of evaluations of different pricing services, and review of price challenges by the Adviser based on
recent market activity. In the event that market quotations and price evaluations are not available for an investment, the Valuation Committee
determines the fair value of the investment in accordance with procedures adopted by the Adviser. The Trustees periodically review
the fair valuations made by the Valuation Committee. The Trustees have also approved the Adviser’s fair valuation and significant
events procedures as part of the Fund’s compliance program
and will review any changes made to the procedures.
As of June 30, 2026,
investments valued at $1,748,196 were fair valued utilizing significant unobservable inputs. The Fund’s investments
in these securities are illiquid and executed trade prices are unavailable to utilize as a source for evaluations, therefore the inputs
utilized are less observable. Inputs considered by the Adviser in evaluating these investments include the following:
■
Contingent
Value Rights–values
reflect the probability that the contingencies will be resolved and payment received.
Semi-Annual
Financial Statements and Additional Information
12
■
Private
Investment in Public Equities–any
unregistered shares are valued based on the common shares public price less a discount factor
to reflect the illiquidity of the shares held.
■
Warrants
related to Private Investment in Public Equity–warrants
received are valued based on the Black-Sholes warrant model less a discount
factor to reflect the illiquidity of the underlying shares.
■
Private
Equity Shares–investments
in non-public entities are valued at their initial investment adjusted for an applicable index movement
or implied value based on current fundraising.
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 traded principally in foreign markets, significant trends in U.S. equity markets or in the trading of foreign securities
index futures contracts;
■
Political
or other developments affecting the economy or markets in which an issuer conducts its operations or its securities are
traded;
■
Announcements
concerning matters such as acquisitions, recapitalizations, litigation developments, or a natural disaster affecting the issuer’s
operations or regulatory changes or market developments affecting the issuer’s industry.
The Adviser has adopted procedures whereby
the Valuation Committee uses a pricing service to provide factors to update the fair value of
equity securities traded principally in foreign markets from the time of the close of their respective foreign stock exchanges to the
pricing time of the Fund. For other significant events, the Fund
may seek to obtain more current quotations or price evaluations from alternative
pricing sources. If a reliable alternative pricing source is not available, the Valuation Committee will determine the fair value of the
investment in accordance with the fair valuation procedures approved by the Adviser. The Trustees periodically review fair valuations
made in response to significant events.
Repurchase Agreements
The
Fund may invest in repurchase agreements for short-term liquidity purposes. It is the policy of the Fund to require the other party to
a repurchase agreement to transfer to the Fund’s custodian
or sub-custodian eligible securities or cash with a market value (after transaction
costs) at least equal to the repurchase price to be paid under the repurchase agreement. The eligible securities are transferred
to accounts with the custodian or sub-custodian in which the Fund holds a “securities entitlement” and exercises “control”
as those terms are defined in the Uniform Commercial Code. Certain
repurchase agreements may be structured as loans secured by a security
interest or lien on the eligible securities. The Fund has established procedures for monitoring the market value of the transferred securities
and requiring the transfer of additional eligible securities if necessary to equal at least the repurchase price. These procedures also
allow the other party to require securities to be transferred from the account to the extent that their market value exceeds the repurchase
price or in exchange for other eligible securities of equivalent market value.
The insolvency of the
other party or other failure to repurchase the securities may delay the disposition of the underlying securities or cause
the Fund to receive less than the full repurchase price. Under the terms of the repurchase agreement, any amounts received by the Fund
in excess of the repurchase price and related transaction costs must be remitted to the other party.
The Fund may enter into
repurchase agreements in which eligible securities are transferred into joint trading accounts maintained by the
custodian or sub-custodian for investment companies and other clients advised by the Fund’s Adviser and its affiliates. The Fund
will participate on a pro rata basis with the other investment
companies and clients in its share of the securities transferred under such repurchase
agreements and in its share of proceeds from any repurchase or other disposition of such securities.
Repurchase agreements
are subject to Master Netting Agreements (MNA) which are agreements between the Fund and its counterparties
that provide for the net settlement of all transactions and collateral with the Fund, through a single payment, in the event of
default or termination. Amounts presented on the Portfolio of Investments and Statement of Assets and Liabilities are not net settlement
amounts but gross. As indicated above, the cash or securities to be repurchased, as shown on the Portfolio of Investments, exceeds
the repurchase price to be paid under the agreement reducing the net settlement amount to zero.
Investment Income, Gains and Losses, Expenses and Distributions
Investment
transactions are accounted for on a trade-date basis. Realized gains and losses from investment transactions are recorded on an
identified-cost basis. Interest income and expenses are accrued daily. Dividend income and distributions to shareholders are recorded
on the ex-dividend date. Foreign dividends are recorded on the
ex-dividend date or when the Fund is informed of the ex-dividend date. Amortization/accretion
of premium and discount is included in investment income. Distributions of net investment income and capital gains,
if any, are declared and paid at least annually. Non-cash dividends included in dividend income, if any, are recorded at fair value.
Semi-Annual
Financial Statements and Additional Information
13
Investment income,
realized and unrealized gains and losses, and certain fund-level expenses are allocated to each class based on relative
average daily net assets, except that select classes will bear certain expenses unique to those classes. Dividends are declared separately
for each class. No class has preferential dividend rights; differences in per share dividend rates are generally due to differences
in separate class expenses. The detail of the total fund expense waiver of $37,145 is disclosed in Note 5.
Federal Taxes
It
is the Fund’s policy to comply with the Subchapter M provision of the Internal Revenue Code of 1986 and to distribute to shareholders
each year substantially all of its income. Accordingly, no provision
for federal income tax is necessary. As of and during the six months ended
June 30, 2026, the Fund did not have a liability for any uncertain tax positions. The Fund recognizes interest and penalties, if any,
related to tax liabilities as income tax expense in the Statement
of Operations. As of June 30, 2026, tax years 2022 through 2025 remain subject
to examination by the Fund’s major tax jurisdictions, which include the United States of America and the Commonwealth of
Massachusetts.
The Fund may be subject
to taxes imposed by governments of countries in which it invests. Such taxes are generally based on either income
or gains earned or repatriated. The Fund accrues and applies such taxes to net investment income, net realized gains and net unrealized
gains as income and/or gains are earned.
When-Issued and Delayed-Delivery Transactions
The
Fund may engage in when-issued or delayed-delivery transactions. The Fund records when-issued securities on the trade date and maintains
security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased
on a when-issued or delayed-delivery basis are marked to market daily and begin earning interest on the settlement date. Losses
may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the
contract.
Foreign Currency Translation
The
accounting records of the Fund are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies are translated
into U.S. dollars based on the rates of exchange of such currencies against U.S. dollars on the date of valuation. Purchases and sales
of securities, income and expenses are translated at the rate of exchange quoted on the respective date that such transactions are recorded.
The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments
from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized
and unrealized gain or loss from investments.
Reported net realized
foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between
the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest and foreign
withholding taxes recorded on the Fund’s books, and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at
period end, resulting from changes in the exchange rate.
Securities Lending
The
Fund participates in a securities lending program providing for the lending of equity securities to qualified brokers. The term of the
loans within the program is one year or less. The Fund receives
cash collateral for securities loaned, which generally is invested in an affiliated
money market fund. Collateral is maintained at a minimum level of 100% of the market value of investments loaned, plus interest,
if applicable. In accordance with the Fund’s securities lending agreement, the market value of securities on loan is determined
each day at the close of business and any additional collateral
required to cover the value of securities on loan is delivered to the Fund on
the next business day. Earnings from collateral invested in affiliated holdings as presented parenthetically on the Statement of Operations
do not reflect fees and rebates and are allocated between the borrower of the security, the securities lending agent, as a fee for
its services under the program and the Fund, according to agreed-upon rates. The Fund will not have the right to vote on securities while
they are on loan. However, the Fund will attempt to terminate a loan in an effort to reacquire the securities in time to vote on matters
that are deemed to be material by the Adviser. There can be no assurance that the Fund will have sufficient notice of such matters
to be able to terminate the loan in time to vote thereon.
Securities lending transactions
are subject to MNA. Amounts presented on the Portfolio of Investments and Statement of Assets and Liabilities
are not net settlement amounts but gross. As indicated below, the cash collateral received by the Fund exceeds the market value
of the securities loaned reducing the net settlement amount to zero. The chart below identifies the amount of collateral received as well
as the market value of securities on loan. Additionally, the securities lending agreement executed by the Fund includes an indemnification
clause. This clause stipulates that the borrower will reimburse the Fund for any losses as a result of any failure of the borrower
to return equivalent securities to the Fund.
As of June 30, 2026, securities subject
to this type of arrangement and related collateral were as follows:
|
Fair
Value of
Securities
Loaned |
Collateral
Received
|
|
$3,893,472
|
$3,971,186
|
Semi-Annual
Financial Statements and Additional Information
14
Restricted Securities
The
Fund may purchase securities which are considered restricted. Restricted securities are securities that either: (a) cannot be offered
for public sale without first being registered, or being able
to take advantage of an exemption from registration, under the Securities Act of
1933; or (b) are subject to contractual restrictions on public sales. In some cases, when a security cannot be offered for public sale
without first being registered, the issuer of the restricted security
has agreed to register such securities for resale, at the issuer’s expense, either
upon demand by the Fund or in connection with another registered offering of the securities. Many such restricted securities may be
resold in the secondary market in transactions exempt from registration. Restricted securities may be determined to be liquid under criteria
established by the Trustees. The Fund will not incur any registration costs upon such resales. The Fund’s restricted securities,
like other securities, are priced in accordance with procedures
established by and under the general supervision of the Adviser.
Additional information on restricted securities
held at June 30, 2026, is as follows:
|
Security
|
Acquisition
Date
|
Cost
|
Value
|
|
CeQur
S.A. |
3/26/2021
|
$321,274
|
$303,461
|
|
Minerva
Neurosciences, Inc., Tranche A Warrants 12/31/2099 |
10/21/2025
|
$0
|
$253,785
|
|
Minerva
Neurosciences, Inc., Tranche B Warrants 12/31/2099 |
10/21/2025
|
$0
|
$150,803
|
|
Sail
Biomedicines, Inc. |
7/28/2021
|
$120,596
|
$150,649
|
Commitments
In
the course of pursuing its investment objective, the Fund may enter into commitments to make investments at a future date. At June
30, 2026, the Fund had a commitment to invest $90,000 in QXO, Inc. securities issued in connection with its merger with TopBuild.
Other
The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the
amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ materially from
those estimated. The Fund applies investment company accounting
and reporting guidance.
3. SHARES
OF BENEFICIAL INTEREST
The following tables summarize share activity:
|
|
Six
Months Ended
6/30/2026
|
Year
Ended
12/31/2025
| ||
|
Primary
Shares: |
Shares
|
Amount
|
Shares
|
Amount
|
|
Shares
sold |
21,836
|
$372,659
|
51,365
|
$964,372
|
|
Shares
issued to shareholders in payment of distributions declared |
424,091
|
6,013,615
|
204,551
|
3,377,135
|
|
Shares
redeemed |
(139,572)
|
(2,405,149)
|
(348,180)
|
(6,608,929)
|
|
NET
CHANGE RESULTING FROM PRIMARY SHARE TRANSACTIONS |
306,355
|
$3,981,125
|
(92,264)
|
$(2,267,422)
|
|
|
Six
Months Ended
6/30/2026
|
Year
Ended
12/31/2025
| ||
|
Service
Shares: |
Shares
|
Amount
|
Shares
|
Amount
|
|
Shares
sold |
164,085
|
$2,377,851
|
358,621
|
$5,966,494
|
|
Shares
issued to shareholders in payment of distributions declared |
1,279,668
|
15,599,152
|
802,387
|
11,803,118
|
|
Shares
redeemed |
(526,743)
|
(7,757,003)
|
(2,878,286)
|
(50,135,783)
|
|
NET
CHANGE RESULTING FROM SERVICE SHARE TRANSACTIONS |
917,010
|
$10,220,000
|
(1,717,278)
|
$(32,366,171)
|
|
NET
CHANGE RESULTING FROM TOTAL FUND SHARE TRANSACTIONS |
1,223,365
|
$14,201,125
|
(1,809,542)
|
$(34,633,593)
|
4. FEDERAL
TAX INFORMATION
At June 30, 2026, the cost of investments
for federal tax purposes was $56,929,309. The net unrealized appreciation of investments for federal
tax purposes was $59,926,128. This consists of unrealized appreciation from investments for those securities having an excess of value
over cost of $62,124,874 and unrealized depreciation from investments for those securities having an excess of cost over value of
$2,198,746.
5. INVESTMENT
ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
The
advisory agreement between the Fund and the Adviser provides for an annual fee equal to 1.30% of the Fund’s average daily net assets.
The Adviser may voluntarily choose to waive any portion of its fee and/or reimburse certain operating expenses of the Fund for competitive
reasons such as to maintain the Fund’s expense ratio, or as and when appropriate, to maintain positive or zero net yields. For
the six months ended June 30, 2026, the Adviser voluntarily waived $37,145 of its fee.
Semi-Annual
Financial Statements and Additional Information
15
Administrative Fee
Federated
Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and
services. For purposes of determining the appropriate rate breakpoint, “Investment Complex” is defined as all of the Federated
Hermes Funds subject to a fee under the Administrative Services
Agreement. The fee paid to FAS is based on the average daily net assets
of the Investment Complex as specified below:
|
Administrative
Fee |
Average
Daily Net Assets
of
the Investment Complex |
|
0.100%
|
on
assets up to $50 billion |
|
0.075%
|
on
assets over $50 billion |
FAS may voluntarily choose to waive any
portion of its fee. For the six months ended June 30, 2026, the annualized fee paid to FAS was 0.080%
of average daily net assets of the Fund.
In addition, FAS may charge certain out-of-pocket
expenses to the Fund.
Distribution Services Fee
The
Fund has adopted a Distribution Plan (the “Plan”) pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund
will compensate Federated Securities Corp. (FSC), the principal
distributor, from the daily net assets of the Fund’s Primary Shares and Service Shares
to finance activities intended to result in the sale of these shares. The Plan provides that the Fund may incur distribution expenses
at the following percentages of average daily net assets annually,
to compensate FSC:
|
|
Percentage
of Average Daily
Net
Assets of Class |
|
Primary
Shares |
0.25%
|
|
Service
Shares |
0.25%
|
FSC may voluntarily choose to waive any
portion of its fee. For the six months ended June 30, 2026, distribution services fees for the Fund
were as follows:
|
|
Distribution
Services
Fees
Incurred |
|
Service
Shares |
$88,036
|
When FSC receives fees, it may pay some
or all of them to financial intermediaries whose customers purchase shares. For the six months ended
June 30, 2026, FSC did not retain any fees paid by the Fund. For the six months ended June 30, 2026, the Fund’s Primary Shares did
not incur a distribution services fee; however, it may begin to incur this fee upon approval of the Trustees.
Expense Limitation
The
Adviser and certain of its affiliates (which may include FSC and FAS) on their own initiative have agreed to waive certain amounts of
their respective fees and/or reimburse expenses. Total annual
fund operating expenses (as shown in the financial highlights, excluding interest
expense, extraordinary expenses and proxy-related expenses, if any) paid by the Fund’s Primary Shares and Service Shares (after
the voluntary waivers and/or reimbursements) will not exceed 1.54%
and 1.79% (the “Fee Limit”), respectively, up to but not including the
later of (the “Termination Date”): (a) May 1, 2027 or (b) the date of the Fund’s next effective Prospectus. While the
Adviser and its affiliates currently do not anticipate terminating
or increasing these arrangements prior to the Termination Date, these arrangements may
only be terminated or the Fee Limit increased prior to the Termination Date with the approval of the Trustees.
Directors’/Trustees’ and Miscellaneous Fees
Certain
Officers and Trustees of the Fund are Officers and Directors or Trustees of certain of the above companies. To efficiently facilitate
payment, Independent Directors’/Trustees’ fees and
certain expenses related to conducting meetings of the Directors/Trustees and other
miscellaneous expenses are paid by an affiliate of the Adviser which in due course are reimbursed by the Fund. These expenses related
to conducting meetings of the Directors/Trustees and other miscellaneous expenses may be included in Accrued and Miscellaneous
Expenses on the Statement of Assets and Liabilities and Statement of Operations, respectively.
6. INVESTMENT
TRANSACTIONS
Purchases and sales of investments, excluding
long-term U.S. government securities and short-term obligations, for the six months ended
June 30, 2026, were as follows:
|
Purchases
|
$21,260,911
|
|
Sales
|
$28,082,114
|
Semi-Annual
Financial Statements and Additional Information
16
7. CONCENTRATION
OF RISK
The Fund may invest a portion of its assets
in securities of companies that are deemed by the Fund’s management to be classified in similar
business sectors. Economic developments may have an effect on the liquidity and volatility of the portfolio securities. A substantial
portion of the Fund’s portfolio may be comprised of entities in the Health Care, Industrials and Information Technology sectors.
As a result, the Fund may be more susceptible to any economic, business, political or other developments which generally affect these
entities.
8. LINE
OF CREDIT
The Fund participates with certain other
Federated Hermes Funds, on a several basis, in an up to $400,000,000 unsecured, 364-day, committed,
revolving line of credit (LOC) agreement dated June 16, 2026. The LOC was made available to temporarily finance the repurchase
or redemption of shares of the Fund, failed trades, payment of dividends, settlement of trades and for other short-term, temporary
or emergency general business purposes. The Fund cannot borrow under the LOC if an inter-fund loan is outstanding. The Fund’s
ability to borrow under the LOC also is subject to the limitations of the Act and various conditions precedent that must be satisfied
before the Fund can borrow. Loans under the LOC are charged interest at a fluctuating rate per annum equal to (a) the highest, on
any day, of (i) the federal funds effective rate, (ii) the published secured overnight financing rate plus an assigned percentage, and
(iii) 0.0%, plus (b) a margin. Any fund eligible to borrow under
the LOC pays its pro rata share of a commitment fee based on the amount of
the lenders’ commitment that has not been utilized, quarterly in arrears and at maturity. As of June 30, 2026, the Fund had no outstanding
loans. During the six months ended June 30, 2026, the Fund did not utilize the LOC.
9. INTERFUND
LENDING
Pursuant to an Exemptive Order issued by
the Securities and Exchange Commission, the Fund, along with other funds advised by subsidiaries
of Federated Hermes, Inc., may participate in an interfund lending program. This program provides an alternative credit facility
allowing the Fund to borrow from other participating affiliated funds. As of June 30, 2026, there were no outstanding loans. During
the six months ended June 30, 2026, the program was not utilized.
10. Operating
Segments
An operating segment is defined as a component
of a public entity that engages in business activities from which it may recognize revenues
and incur expenses, has operating results that are regularly reviewed by the public entity’s chief operating decision maker (CODM)
to make decisions about resources to be allocated to the segment and assess its performance, and has discrete financial information
available. A management committee of the Adviser acts as the CODM. The Fund represents a single operating segment, as the
CODM monitors the operating results of the Fund as a whole and the strategic asset allocation is determined based on the investment
objective of the Fund and executed by the Fund’s portfolio management team. The financial information in the form of the Fund’s
portfolio composition, total returns, expense ratios and changes in net assets (i.e., changes in net assets resulting from operations,
subscriptions and redemptions) which is reviewed by the CODM to assess the Fund’s performance in comparison to the Fund’s
benchmarks and to make resource allocation decisions for the Fund’s single segment is consistent with the information presented
in these financial statements. Segment assets are reflected on
the accompanying Statement of Assets and Liabilities as “total assets” and significant
segment expenses are listed on the accompanying Statement of Operations.
11. INDEMNIFICATIONS
Under the Fund’s organizational documents,
its Officers and Directors/Trustees are indemnified against certain liabilities arising out of the
performance of their duties to the Fund (other than liabilities arising out of their willful misfeasance, bad faith, gross negligence
or reckless disregard of their duties to the Fund). In addition,
in the normal course of business, the Fund provides certain indemnifications under
arrangements with third parties. Typically, obligations to indemnify a third party arise in the context of an arrangement entered into
by the Fund under which the Fund agrees to indemnify such third party for certain liabilities arising out of actions taken pursuant to
the arrangement, provided the third party’s actions are
not deemed to have breached an agreed-upon standard of care (such as willful misfeasance,
bad faith, gross negligence or reckless disregard of their duties under the contract). The Fund’s maximum exposure under these
arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet arisen. The Fund
does not anticipate any material claims or losses pursuant to these arrangements at this time, and accordingly, expects the risk of loss
to be remote.
Semi-Annual
Financial Statements and Additional Information
17
Evaluation
and Approval of Advisory Contract–May
2026
Federated Hermes Kaufmann Fund
II (the “Fund”)
At its meetings in May 2026 (the
“May Meetings”), the Fund’s Board of Trustees (the “Board”), including those Trustees who
are not “interested persons” of the Fund, as defined in the Investment Company Act of 1940, as amended (the
“Independent Trustees”), reviewed and unanimously approved the continuation of the investment advisory contract between
the Fund and Federated Global Investment Management Corp. (the “Adviser”) (the “Contract”) for an additional one-year
term. The Board’s determination to approve the continuation of the Contract reflects the exercise of its business judgment
after considering such information deemed necessary to evaluate the terms of the Contract and to approve the continuation
of the existing arrangement. The information, factors and conclusions that formed the basis for the Board’s approval
are summarized below.
Information Received
and Review Process
At the request
of the Independent Trustees, the Fund’s Chief Compliance Officer (the “CCO”) furnished to the Board in advance
of its May Meetings an independent written report regarding data related to the Fund’s management fee (the
“CCO Management Fee Report”). The Board considered the CCO Management Fee Report, along with other information,
in evaluating the reasonableness of the Fund’s management fee and in determining to approve the continuation
of the Contract.
In addition
to the CCO Management Fee Report, the Board considered information specifically prepared in connection with
the approval of the continuation of the Contract that was presented at the May Meetings. In this regard, in the months preceding
the May Meetings, the Board requested and reviewed written responses and supporting materials prepared by the
Adviser and its affiliates (collectively, “Federated Hermes”) in response to requests posed to Federated Hermes by independent
legal counsel on behalf of the Independent Trustees encompassing a wide variety of topics, including those summarized
below. The Board also considered such additional matters as the Independent Trustees deemed reasonably necessary
to evaluate the Contract, which included detailed information about the Fund and Federated Hermes furnished to the
Board at its meetings throughout the year. The Independent Trustees also considered the presentation from Federated Hermes’
Chief Investment Officer of Equities received at previous meetings regarding the results and status of the performance
plans for the Fund.
The Board’s
consideration of the Contract included review of materials and information covering the following matters, among
others: (1) a copy of the Contract; (2) the nature, quality and extent of the advisory and other services provided to the
Fund by Federated Hermes; (3) Federated Hermes’ business and operations; (4) the Adviser’s investment philosophy, personnel
and processes; (5) the Fund’s investment objective and strategies; (6) the Fund’s short-term and long-term performance–in
absolute terms (both on a gross basis and net of expenses) and relative to an appropriate group of peer funds
and its benchmark; (7) the Fund’s fees and expenses, including the advisory fee and the overall expense structure of the
Fund–in
absolute terms and relative to an appropriate group of peer funds, with due regard for contractual or voluntary
expense limitations (if any); (8) the financial condition of Federated Hermes; (9) the Adviser’s profitability with respect
to managing the Fund; (10) distribution and sales activity for the Fund; and (11) the use and allocation of brokerage
commissions derived from trading the Fund’s portfolio securities (if any).
The Board
also considered judicial decisions concerning allegedly excessive investment advisory fees charged to other registered
funds in evaluating the Contract. Using these judicial decisions as a guide, the Board considered several factors it
deemed relevant to an adviser’s fiduciary duty with respect to its receipt of compensation from a fund, including: (1) the nature
and quality of the services provided by the adviser to the fund and its shareholders, including the performance of the
fund, its benchmark and comparable funds; (2) the adviser’s cost of providing the services and the profitability to the adviser
of providing advisory services to the fund; (3) the extent to which the adviser may realize “economies of scale” as the
fund grows larger and, if such economies of scale exist, whether they have been appropriately shared with the fund and its
shareholders or the family of funds; (4) any “fall-out” benefits that accrue to the adviser because of its relationship with
the fund, including research services received from
brokers that execute fund trades and any fees paid to affiliates of the adviser
for services rendered to the fund; (5) comparative fees and expenses, including a comparison of management fees paid
to the adviser with those paid by similar funds managed by the same adviser or other advisers as well as management fees
charged to institutional and other advisory clients of the same adviser for what might be viewed as like services; and (6)
the extent of care, conscientiousness and independence with which the fund’s board members perform their duties and their
expertise, including whether they are fully informed about all facts the board deems relevant to its consideration of the
adviser’s services and fees. The Board considered that the Securities and Exchange Commission (“SEC”) disclosure requirements
regarding the basis for a fund board’s approval of the fund’s investment advisory contract generally align with
the factors listed above. The Board was guided by these factors in its evaluation of the Contract to the extent it
Semi-Annual
Financial Statements and Additional Information
18
considered
them to be appropriate and relevant, as discussed further below. The Board considered and weighed these factors
in light of its substantial accumulated experience in governing the Fund and working with Federated Hermes on matters
relating to the oversight of the other funds advised by Federated Hermes (each, a “Federated Hermes Fund” and, collectively,
the “Federated Hermes Funds”).
In addition,
the Board considered the preferences and expectations of Fund shareholders and the potential disruptions of the
Fund’s operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate
or not renew the Contract. In particular, the Board recognized that many shareholders likely have invested in the Fund
based on the strength of Federated Hermes’ industry standing and reputation and with the expectation that Federated Hermes
will have a continuing role in providing advisory services to the Fund. Thus, the Board observed that there are a range
of investment options available to the Fund’s shareholders in the marketplace and such shareholders, having had the opportunity
to consider other investment options, have effectively selected Federated Hermes by virtue of investing in the
Fund.
In determining
to approve the continuation of the Contract, the members of the Board reviewed and evaluated information
and factors they believed to be relevant and appropriate through the exercise of their reasonable business judgment.
While individual members of the Board may have weighed certain factors differently, the Board’s determination
to approve the continuation of the Contract was based on a comprehensive consideration of all information provided
to the Board throughout the year. The Board recognized that its evaluation process is evolutionary and that the factors
considered and the emphasis placed on relevant factors may change in recognition of changing circumstances in the
registered fund marketplace. The Independent Trustees were assisted throughout the evaluation process by independent legal
counsel. In connection with their deliberations at the May Meetings, the Independent Trustees met separately in executive
session with their independent legal counsel and without management present to review the relevant materials and
consider their responsibilities under applicable laws. In addition, senior management representatives of Federated Hermes
also met with the Independent Trustees and their independent legal counsel to discuss the materials and presentations
furnished to the Board at the May Meetings. The Board considered the approval of the Contract for the Fund as
part of its consideration of agreements for funds across the family of Federated Hermes Funds, but its approvals were made
on a fund-by-fund basis.
Nature, Extent and
Quality of Services
The Board
considered the nature, extent and quality of the services provided to the Fund by the Adviser and the resources
of Federated Hermes dedicated to the Fund. In this regard, the Board evaluated, among other things, the terms of the
Contract and the full range of services provided to the Fund by Federated Hermes. The Board considered the Adviser’s personnel,
investment philosophy and process, investment research capabilities and resources, trade operations capabilities,
experience and performance track record. The Board reviewed the qualifications, backgrounds and responsibilities
of the portfolio management team primarily responsible for the day-to-day management of the Fund and evaluated
Federated Hermes’ ability and experience in attracting and retaining qualified personnel to service the Fund. The Board
considered the trading operations by the Adviser, including the execution of portfolio transactions and the selection of
brokers for those transactions. The Board also considered the Adviser’s ability to deliver competitive investment performance
for the Fund when compared to the Fund’s Performance Peer Group (as defined below).
In addition,
the Board considered the financial resources and overall reputation of Federated Hermes and its willingness to
consider and make investments in personnel, infrastructure, technology, cybersecurity, business continuity planning and operational
enhancements that are designed to benefit the Federated Hermes Funds. The Board considered Federated Hermes’
oversight of the securities lending program for the Federated Hermes Funds that engage in securities lending and noted
the income earned by the Federated Hermes Funds that participate in such program. In addition, the Board considered
the quality of Federated Hermes’ communications with the Board and responsiveness to Board inquiries and requests
made from time to time with respect to the Federated Hermes Funds. The Board also considered that Federated Hermes
is responsible for providing the Federated Hermes Funds’ officers.
The Board
received and evaluated information regarding Federated Hermes’ regulatory and compliance environment. The
Board considered Federated Hermes’ compliance program and compliance history and reports from the CCO about Federated
Hermes’ compliance with applicable laws and regulations, including responses to regulatory developments and any
compliance or other issues raised by regulatory agencies. The Board also noted Federated Hermes’ support of the Federated
Hermes Funds’ compliance control structure and the compliance-related resources devoted by Federated Hermes
in support of the Fund’s obligations pursuant to Rule 38a-1 under the Investment Company Act of 1940, as amended,
including Federated Hermes’ commitment to respond to rulemaking and other regulatory initiatives of the SEC. The
Board considered Federated Hermes’ approach to internal audits and risk management with respect to the Federated Hermes
Funds and its day-to-day oversight of the Federated Hermes Funds’ compliance with their investment objectives and
policies as well as with applicable laws and regulations, noting that regulatory and other developments had over time
Semi-Annual
Financial Statements and Additional Information
19
led, and
continue to lead, to an increase in the scope of Federated Hermes’ oversight in this regard. In addition, the Board noted
Federated Hermes’ commitment to maintaining high quality systems and expending substantial resources to prepare for
and respond to ongoing changes due to the market, regulatory and control environments in which the Fund and its service
providers operate.
The Board
considered Federated Hermes’ efforts to provide shareholders in the Federated Hermes Funds with a comprehensive
array of funds with different investment objectives, policies and strategies. The Board considered the expenses
that Federated Hermes had incurred, as well as the entrepreneurial and other risks assumed by Federated Hermes, in
sponsoring and providing on-going services to new funds to expand these opportunities for shareholders. The Board noted
the benefits to shareholders of being part of the family of Federated Hermes Funds, which include the general right to
exchange investments between the same class of shares without the incurrence of additional sales charges.
Based on
these considerations, the Board concluded that it was satisfied with the nature, extent and quality of the services
provided by the Adviser to the Fund.
Fund Investment Performance
The Board
considered the investment performance of the Fund. In evaluating the Fund’s investment performance, the Board
considered performance results in light of the Fund’s investment objective, strategies and risks. The Board considered
the Fund’s unique investment strategies. The Board considered detailed investment reports on, and the Adviser’s
analysis of, the Fund’s performance over different time periods that were provided to the Board throughout the year
and in connection with the May Meetings. These reports included, among other items, information on the Fund’s gross
and net returns, the Fund’s investment performance compared to one or more relevant categories or groups of peer funds
and the Fund’s benchmark, performance attribution information and commentary on the effect of market conditions. The
Board noted that it evaluated investment performance at meetings throughout the year and received reports from Federated
Hermes regarding the performance of certain Federated Hermes Funds as well as Federated Hermes’ explanations
for less favorable performance and any specific actions Federated Hermes had taken, or had determined to take,
to seek to enhance Fund investment performance and the results of those actions.
The Board
also reviewed comparative information regarding the performance of other registered funds in the category of
peer funds selected by Morningstar, Inc. (“Morningstar”), an independent fund ranking organization (the “Performance
Peer Group”). The Board noted the CCO’s
statement that comparisons to fund peer groups may be helpful, though not conclusive,
in evaluating the performance of the Adviser in managing the Fund.
The Board
also considered comparative performance data from Lipper, Inc. that was included in reports provided to the Board
throughout the year.
For the
periods ended December 31, 2025, the Fund’s performance fell below the Performance Peer Group median for the
five-year period, and was above the Performance Peer Group median for the one-year and three-year periods. The Board
discussed the Fund’s performance with the Adviser and recognized the efforts being taken by the Adviser in the context
of other factors considered relevant by the Board.
Based on
these considerations, the Board concluded that it had continued confidence in the Adviser’s overall capabilities
to manage the Fund.
Fund Expenses
The Board
considered the advisory fee and overall expense structure of the Fund and the comparative fee and expense information
that had been provided in connection with the May Meetings. In this regard, the Board was presented with, and
considered, information regarding the contractual advisory fee rates, total expense ratios and each element of the Fund’s
total expense ratio (i.e., gross and net advisory fees, administrative fees, custody fees, portfolio accounting fees and transfer
agency fees) relative to an appropriate group of peer funds compiled by Federated Hermes from the overall category
of peer funds selected by Morningstar (the “Expense Peer Group”). The Board received a description of the methodology
used to select the Expense Peer Group from the overall Morningstar category. The Board also reviewed comparative
information regarding the fees and expenses of the broader group of funds in the overall Morningstar
category.
While mindful
that courts have cautioned against giving too much weight to comparative information concerning fees charged
to funds by other advisers, the Board found that the use of comparisons between the Fund and its Expense Peer Group
assisted the Board in its evaluation of the Fund’s fees and expenses. The Board focused on comparisons with other registered
funds more heavily than non-registered fund products or services because such comparisons are believed to be more
relevant. The Board considered that other registered funds are the products most like the Fund, in that they are readily
available to Fund shareholders as alternative investment vehicles, and they are the type of investment vehicle, in fact,
chosen and maintained by the Fund’s shareholders. The Board noted that the range of such other registered funds’ fees
and expenses, therefore, appears to be a relevant indicator of what investors have found to be reasonable in the marketplace
in which the Fund competes.
Semi-Annual
Financial Statements and Additional Information
20
The
Board reviewed the contractual advisory fee rate, net advisory fee rate and other expenses of the Fund and noted the position
of the Fund’s contractual advisory fee rate and other expenses relative to its Expense Peer Group. In this regard, the
Board noted that the contractual advisory fee rate was above the median of the Expense Peer Group, but the Board noted
the applicable waivers and reimbursements, and that the overall expense structure of the Fund remained competitive in
the context of other factors considered by the Board.
The Board
also received and considered information about the nature and extent of services offered and fees charged by Federated
Hermes to other types of clients with investment strategies similar to those of the Federated Hermes Funds, including
non-registered fund clients (such as institutional separate accounts) and third-party unaffiliated registered funds for
which the Adviser or its affiliates serve as sub-adviser. The Board noted the CCO’s statement that non-registered fund clients
are inherently different products due to the following differences, among others: (i) types of targeted investors; (ii)
applicable laws and regulations; (iii) legal structures; (iv) average account sizes; (v) portfolio management techniques made
necessary by different cash flows and different associated costs; (vi) the time spent by portfolio managers and their teams
(among other personnel across various departments, including legal, compliance and risk management) in reviewing securities
pricing; (vii) SEC mandated risk management programs with respect to fund liquidity and use of derivatives; (viii)
questions on regulatory reporting; (ix) a variety of different administrative responsibilities; and (x) degrees of risk associated
with management. The Board also considered information regarding the differences in the nature of the services required
for Federated Hermes to manage its proprietary registered fund business versus managing a discrete pool of assets as
a sub-adviser to another institution’s registered fund, noting the CCO’s statement that Federated Hermes generally performs
significant additional services and assumes substantially greater risks in managing the Fund and other Federated Hermes
Funds than in its role as sub-adviser to an unaffiliated third-party registered fund. The Board noted that the CCO emphasized
that differences in fees for providing advisory services to other types of clients may not be appropriate when judging
the appropriateness of the Federated Hermes Funds’ advisory fees because of the different services provided.
In the case
of the Fund, the Board noted that Federated Hermes does not manage any other types of clients that are comparable
to the Fund.
Based on
these considerations, the Board concluded that the fees and total operating expenses of the Fund, in conjunction
with other matters considered, are reasonable in light of the services provided.
Profitability
The Board
received and considered profitability information furnished by Federated Hermes. Such profitability information
included revenues reported on a fund-by-fund basis and estimates of the allocation of expenses made on a fund-by-fund
basis, using allocation methodologies specified by the CCO and described to the Board. The Board considered
the CCO’s statement that, while the cost allocation report applies consistent allocation processes for purposes of
general comparison of funds, the inherent difficulties in arbitrarily allocating costs lack precision and may cause the report
to be unreliable because a single change in an allocation estimate can dramatically alter the resulting estimate of cost
and/or profitability of a Federated Hermes Fund and may produce unintended consequences. In addition, the Board considered
the CCO’s statement that the allocation methodologies used by Federated Hermes in estimating profitability for purposes
of reporting to the Board in connection with the continuation of the Contract are consistent with the methodologies
previously reviewed by an independent consultant. The Board noted that the independent consultant had previously
conducted a review of the allocation methodologies and reported to the Board that, although there is no single best
method to allocate expenses, the methodologies used by Federated Hermes are reasonable. The Board considered the CCO’s
statement that the estimated profitability to the Adviser from its relationship with the Fund was not unreasonable in relation
to the services provided.
The Board
also reviewed information compiled by Federated Hermes comparing its profitability information to other publicly-held
fund management companies, including information regarding profitability trends over time. The Board recognized
that profitability comparisons among fund management companies are difficult because of the variation in the type
of comparative information that is publicly available, and the profitability of any fund management company is affected
by numerous factors. The Board considered the CCO’s statement that, based on such profitability information, Federated
Hermes’ profit margins did not appear to be excessive and that Federated Hermes appeared financially sound, with
the resources available to fulfill its contractual obligations.
Economies of Scale
The Board
received and considered information about the notion of possible realization of “economies of scale” as a fund
grows larger, the difficulties of isolating and quantifying economies of scale at an individual fund level, and the extent
to which potential scale benefits are shared with shareholders. In this regard, the Board considered that Federated Hermes
has made significant and long-term investments in areas that support all of the Federated Hermes Funds, such as: portfolio
management, investment research and trading operations; shareholder services; compliance; business continuity,
Semi-Annual
Financial Statements and Additional Information
21
cybersecurity
and information security programs; internal audit and risk management functions; and technology, systems capabilities
and use of data. The Board noted that Federated Hermes’ investments in these areas are extensive and are designed
to provide enhanced or expanded services to the Federated Hermes Funds and their shareholders. The Board considered
that the benefits of these investments are likely to be shared with the family of Federated Hermes Funds as a
whole.
In addition,
the Board considered that fee waivers and expense reimbursements are another means for potential economies
of scale to be shared with shareholders and can provide protection from an increase in expenses if a Federated Hermes
Fund’s assets decline. The Board considered that, in order for the Federated Hermes Funds to remain competitive in
the marketplace, Federated Hermes has frequently waived fees and/or reimbursed expenses for the Federated Hermes Funds
and has disclosed to shareholders and/or reported to the Board its intention to do so (or continue to do so) in the future.
The Board also considered that Federated Hermes has been active in managing expenses of the Federated Hermes Funds
in recent years, which has resulted in benefits being realized by shareholders.
The Board
also received and considered information on adviser-paid fees (commonly referred to as “revenue sharing” payments)
that was provided to the Board throughout the year and in connection with the May Meetings. The Board considered
that Federated Hermes believes that this information is relevant to consider whether Federated Hermes had an incentive
either not to apply breakpoints or to apply breakpoints at higher levels, but should not be considered when evaluating
the reasonableness of advisory fees. The Board also noted the absence of any applicable regulatory or industry guidelines
on economies of scale, which is compounded by the lack of any uniform methodology or pattern with respect to structuring
fund advisory fees with breakpoints that serve to reduce the fees as a fund attains a certain size.
Other Benefits
The Board
considered information regarding the compensation and other ancillary (or “fall-out”) benefits that Federated Hermes
derived from its relationships with the Federated Hermes Funds. The Board considered that Federated Hermes may
derive a benefit to its reputation as an adviser to the Fund, which may help in attracting other clients and investment personnel.
The Board noted that, in addition to receiving advisory fees under the Federated Hermes Funds’ investment advisory
contracts, Federated Hermes’ affiliates also receive fees for providing other services to the Federated Hermes Funds
under separate service contracts, including for serving as the Federated Hermes Funds’ administrator and distributor.
In this regard, the Board considered that Federated Hermes’ affiliates provide distribution and shareholder services
to the Federated Hermes Funds, for which they may be compensated through distribution and servicing fees paid pursuant
to Rule 12b-1 plans or otherwise. The Board also received and considered information detailing the benefits, if any,
that Federated Hermes may derive from its receipt of research services from brokers who execute portfolio trades for the
Federated Hermes Funds.
Conclusions
The Board
considered the CCO’s presentation and statements and the information accompanying the CCO Management Fee
Report. The Board recognized that its evaluation of the Federated Hermes Funds’ advisory and sub-advisory arrangements
is a continuing and ongoing process that is informed by the information that the Board requests and receives from
management throughout the course of the year.
On the basis
of the information and factors summarized above, among other information and factors deemed relevant by the
Board, and the evaluation thereof, the Board, including the Independent Trustees, unanimously voted to approve the continuation
of the Contract. The Board based its determination to approve the Contract on the totality of the circumstances
and relevant factors and with a view of past and future long-term considerations. Not all of the factors and considerations
identified above were necessarily deemed to be relevant to the Fund, nor did the Board consider any one of them
to be determinative.
Semi-Annual
Financial Statements and Additional Information
22
Variable
investment options are not bank deposits or obligations, are not guaranteed by any bank and are not insured or guaranteed
by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government
agency. Investment in variable investment options involves investment risk, including the possible loss of
principal.
This information is authorized
for distribution to prospective investors only when preceded or accompanied by the Fund’s Prospectus,
which contains facts concerning its objective and policies, management fees, expenses and other information.
In an effort to reduce costs
and avoid duplicate mailings, the Fund(s) intend to deliver a single copy of certain documents
to each household in which more 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 of Additional
Information, and supplements to each, as well as Semi-Annual and 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 shareholder as having given consent (“implied consent”) if (i)
shareholders with the same last name, or believed to be members of the same family, reside at the same street address
or receive mail at the same post office box, (ii) the Fund gives notice of its intent to “household” at least sixty (60)
days before it begins “householding” and (iii) none of the shareholders in the household have notified the Fund(s)
or their agent of the desire to “opt out” of “householding.” Shareholders who have granted written consent, or
have been deemed to have granted implied consent, can
revoke that consent and opt out of “householding” at any time:
shareholders who purchased shares through an intermediary should contact their representative; other shareholders
may call the Fund at 1-800-341-7400, Option #4.
Federated Hermes Kaufmann Fund II
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us at
FederatedHermes.com/us
or call 1-800-341-7400.
or call 1-800-341-7400.
Federated Securities Corp., Distributor
CUSIP 313916827
CUSIP 313916777
CUSIP 313916777
27619 (8/26)
©
2026 Federated Hermes, Inc.
Semi-Annual Financial Statements
and Additional Information
and Additional Information
June 30, 2026
|
Share
Class |
Primary
|
Service
|
|
|
Federated Hermes Managed Volatility Fund II
A Portfolio of Federated Hermes Insurance Series
Not FDIC Insured ▪ May
Lose Value ▪ No Bank Guarantee
Portfolio
of Investments
June 30, 2026 (unaudited)
|
Shares,
Principal
Amount
or
Contracts |
|
|
Value
|
|
|
|
COMMON
STOCKS—43.3% |
|
|
|
|
Communication
Services—1.7% |
|
|
213
|
1
|
AST
SpaceMobile, Inc. |
$ 18,927
|
|
20,443
|
|
AT&T,
Inc. |
423,170
|
|
9,279
|
|
Comcast
Corp., Class A |
227,799
|
|
10,000
|
1
|
Criteo
S.A., ADR |
182,800
|
|
90
|
1
|
Echostar
Holding Corp. |
9,135
|
|
1,903
|
|
Electronic
Arts, Inc. |
390,191
|
|
703
|
|
Meta
Platforms, Inc. |
395,993
|
|
188
|
|
Millicom
International Cellular S.A. |
17,063
|
|
44,000
|
1
|
MNTN,
Inc. |
404,800
|
|
4,576
|
1
|
Pinterest,
Inc. |
96,233
|
|
1,465
|
1
|
Space
Exploration Technologies Corp. |
250,310
|
|
168
|
|
T-Mobile
USA, Inc. |
28,179
|
|
5,988
|
|
Verizon
Communications, Inc. |
253,532
|
|
3,199
|
|
Walt
Disney Co. |
307,904
|
|
5,320
|
1
|
Warner
Bros. Discovery, Inc. |
141,831
|
|
|
|
TOTAL
|
3,147,867
|
|
|
|
Consumer
Discretionary—4.5% |
|
|
41,675
|
|
ADT,
Inc. |
270,887
|
|
1,500
|
|
Alibaba
Group Holding Ltd., ADR |
143,970
|
|
16,122
|
1
|
Amazon.com,
Inc. |
3,842,517
|
|
33
|
1
|
AutoZone,
Inc. |
105,466
|
|
6,992
|
|
Bath
& Body Works, Inc. |
161,725
|
|
1,052
|
|
BorgWarner,
Inc. |
69,853
|
|
2,210
|
1
|
CarMax,
Inc. |
116,887
|
|
12
|
|
Carnival
Corp. Ltd. |
343
|
|
421
|
|
Churchill
Downs, Inc. |
37,738
|
|
9,600
|
1
|
Cirsa
Enterprises S.A. |
136,041
|
|
474
|
1
|
Crocs,
Inc. |
57,183
|
|
59
|
|
D.
R. Horton, Inc. |
9,610
|
|
638
|
1
|
Deckers
Outdoor Corp. |
63,347
|
|
1,830
|
1
|
Etsy,
Inc. |
137,854
|
|
871
|
1
|
Five
Below, Inc. |
156,597
|
|
1,735
|
|
Ford
Motor Co. |
24,117
|
|
3,078
|
|
General
Motors Co. |
237,252
|
|
3,406
|
|
Hasbro,
Inc. |
281,302
|
|
36,000
|
|
HBX
Group International PLC |
279,095
|
|
594
|
|
Home
Depot, Inc. |
209,492
|
|
1,598
|
1
|
Liberty
Live Holdings, Inc. |
161,813
|
|
1,420
|
1
|
Liberty
Live Holdings, Inc. |
150,009
|
|
1,305
|
|
Lowe’s
Cos., Inc. |
287,739
|
|
7,813
|
|
Macy’s,
Inc. |
183,996
|
|
926
|
|
McDonald’s
Corp. |
250,307
|
|
565
|
1
|
O’Reilly
Automotive, Inc. |
52,031
|
|
997
|
|
Ross
Stores, Inc. |
212,211
|
|
24,000
|
1
|
Savers
Value Village, Inc. |
242,160
|
|
52
|
1
|
TopBuild
Corp. |
18,436
|
Semi-Annual
Financial Statements and Additional Information
1
|
Shares,
Principal
Amount
or
Contracts |
|
|
Value
|
|
|
|
COMMON
STOCKS—continued |
|
|
|
|
Consumer
Discretionary—continued |
|
|
2,154
|
|
Travel
+ Leisure Co. |
$ 164,630
|
|
40
|
1
|
Wayfair,
Inc. |
3,697
|
|
3,162
|
1
|
YETI
Holdings, Inc. |
156,709
|
|
|
|
TOTAL
|
8,225,014
|
|
|
|
Consumer
Staples—3.1% |
|
|
5,118
|
|
Archer-Daniels-Midland
Co. |
391,015
|
|
201
|
|
Casey’s
General Stores, Inc. |
159,753
|
|
3,242
|
|
Colgate-Palmolive
Co. |
297,227
|
|
123
|
|
Costco
Wholesale Corp. |
115,063
|
|
1,098
|
1
|
Darling
Ingredients, Inc. |
59,973
|
|
1,303
|
|
Dollar
General Corp. |
149,988
|
|
556
|
1
|
Dollar
Tree, Inc. |
67,248
|
|
1,900
|
|
Estee
Lauder Cos., Inc., Class A |
150,005
|
|
11,430
|
|
Kraft
Heinz Co./The |
269,977
|
|
7,198
|
|
Kroger
Co. |
399,705
|
|
1,498
|
|
Lamb
Weston Holdings, Inc. |
64,684
|
|
1,437
|
1
|
Maplebear,
Inc. |
68,042
|
|
9,000
|
1
|
Mission
Produce, Inc. |
106,110
|
|
752
|
|
Molson
Coors Beverage Co., Class B |
29,298
|
|
1,027
|
|
PepsiCo,
Inc. |
139,056
|
|
2,272
|
|
Philip
Morris International, Inc. |
411,027
|
|
3,954
|
|
Procter
& Gamble Co. |
579,814
|
|
2,339
|
|
Smucker
(J.M.) Co. |
263,137
|
|
15,000
|
1
|
Suja
Life, Inc. |
152,400
|
|
11,214
|
|
The
Coca-Cola Co. |
911,362
|
|
7,865
|
|
WalMart,
Inc. |
890,790
|
|
|
|
TOTAL
|
5,675,674
|
|
|
|
Energy—2.1%
|
|
|
3,686
|
|
Antero
Midstream Corp. |
83,857
|
|
103
|
|
Cheniere
Energy, Inc. |
24,618
|
|
1,646
|
|
Chevron
Corp. |
272,841
|
|
2,851
|
|
ConocoPhillips
|
296,390
|
|
10,499
|
|
Devon
Energy Corp. |
433,819
|
|
2,308
|
|
Diamondback
Energy, Inc. |
405,700
|
|
4,813
|
|
EQT
Corp. |
255,907
|
|
801
|
|
Expand
Energy Corp. |
73,043
|
|
7,860
|
|
Exxon
Mobil Corp. |
1,074,619
|
|
5,560
|
|
Kinder
Morgan, Inc. |
177,753
|
|
3,937
|
|
Ovintiv,
Inc. |
207,283
|
|
5,438
|
|
TechnipFMC
PLC |
360,540
|
|
2,568
|
|
Williams
Cos., Inc. |
190,905
|
|
|
|
TOTAL
|
3,857,275
|
|
|
|
Financials—8.2%
|
|
|
7
|
|
American
Express Co. |
2,368
|
|
8,400
|
1
|
American
Integrity Insurance Group, Inc. |
158,172
|
|
2,425
|
|
American
International Group, Inc. |
180,735
|
|
774
|
|
Apollo
Global Management, Inc. |
91,572
|
|
3,233
|
1
|
Arch
Capital Group Ltd. |
313,795
|
|
3,199
|
|
Axis
Capital Holdings Ltd. |
343,700
|
Semi-Annual
Financial Statements and Additional Information
2
|
Shares,
Principal
Amount
or
Contracts |
|
|
Value
|
|
|
|
COMMON
STOCKS—continued |
|
|
|
|
Financials—continued
|
|
|
13,754
|
|
Bank
of America Corp. |
$ 783,703
|
|
3,698
|
|
Bank
of New York Mellon Corp. |
534,768
|
|
4,423
|
1
|
Berkshire
Hathaway, Inc., Class B |
2,213,225
|
|
103
|
|
BlackRock,
Inc. |
99,041
|
|
326
|
|
Capital
One Financial Co. |
65,402
|
|
407
|
|
Cboe
Global Markets, Inc. |
98,767
|
|
533
|
|
Charles
Schwab Corp. |
49,180
|
|
2,760
|
|
Citigroup,
Inc. |
386,290
|
|
5,837
|
|
Equitable
Holdings, Inc. |
256,128
|
|
10,000
|
1
|
Ethos
Technologies, Inc. |
181,400
|
|
461
|
|
Everest
Group Ltd. |
164,683
|
|
24,000
|
1
|
Exzeo
Group, Inc. |
404,880
|
|
5,808
|
|
Fidelity
National Information Services, Inc. |
225,815
|
|
4,800
|
1
|
Figure
Technology Solutions, Inc. |
147,408
|
|
3,045
|
1
|
Fiserv,
Inc. |
149,357
|
|
4,782
|
|
Global
Payments, Inc. |
346,982
|
|
243
|
|
Goldman
Sachs Group, Inc. |
245,763
|
|
3,921
|
|
Janus
Henderson Group PLC |
203,696
|
|
6,365
|
|
JPMorgan
Chase & Co. |
2,083,455
|
|
2,494
|
|
KKR
& Co., Inc. |
228,899
|
|
4,332
|
|
MetLife,
Inc. |
366,530
|
|
2,971
|
|
Morgan
Stanley |
621,058
|
|
784
|
|
Morningstar,
Inc. |
122,320
|
|
1,314
|
|
PayPal
Holdings, Inc. |
56,738
|
|
36,000
|
1
|
Pics
NV |
382,680
|
|
50
|
|
PNC
Financial Services Group, Inc. |
12,311
|
|
2,455
|
|
Progressive
Corp., OH |
536,295
|
|
436
|
|
Prudential
Financial, Inc. |
47,057
|
|
503
|
|
RenaissanceRe
Holdings Ltd. |
159,401
|
|
184
|
1
|
Robinhood
Markets, Inc. |
18,451
|
|
599
|
|
S&P
Global, Inc. |
243,949
|
|
1,006
|
|
South
State Corp. |
100,499
|
|
1,713
|
|
State
Street Corp. |
290,525
|
|
669
|
|
The
Hartford Insurance Group, Inc. |
88,656
|
|
3,092
|
|
U.S.
Bancorp |
186,757
|
|
698
|
|
Unum
Group |
62,401
|
|
1,985
|
|
VOYA
Financial, Inc.. |
179,702
|
|
18,000
|
1
|
Wealthfront
Corp. |
160,920
|
|
10,241
|
|
Wells
Fargo & Co. |
846,316
|
|
2,528
|
|
Western
Alliance Bancorp |
207,802
|
|
32,450
|
|
Western
Union Co. |
249,865
|
|
246
|
1
|
WEX,
Inc. |
34,708
|
|
2,857
|
|
XP,
Inc. |
46,455
|
|
|
|
TOTAL
|
14,980,580
|
|
|
|
Health
Care—5.7% |
|
|
1,049
|
|
Abbott
Laboratories |
95,186
|
|
3,067
|
|
AbbVie,
Inc. |
771,780
|
|
745
|
|
Agilent
Technologies, Inc. |
98,958
|
|
113
|
1
|
Ascendis
Pharma A/S, ADR |
30,139
|
Semi-Annual
Financial Statements and Additional Information
3
|
Shares,
Principal
Amount
or
Contracts |
|
|
Value
|
|
|
|
COMMON
STOCKS—continued |
|
|
|
|
Health
Care—continued |
|
|
2,590
|
1
|
Avantor,
Inc. |
$ 25,641
|
|
1,158
|
|
Becton
Dickinson & Co. |
175,240
|
|
273
|
1
|
Biogen,
Inc. |
58,984
|
|
8,702
|
|
Bristol-Myers
Squibb Co. |
501,409
|
|
1,440
|
1,2
|
Bristol-Myers
Squibb Co., Rights |
1,008
|
|
1,646
|
|
Cardinal
Health, Inc. |
391,024
|
|
544
|
1
|
Caris
Life Sciences, Inc. |
9,694
|
|
5,628
|
1
|
Centene
Corp. |
361,261
|
|
222
|
1
|
Charles
River Laboratories International, Inc. |
50,347
|
|
231
|
|
Chemed
Corp. |
107,586
|
|
757
|
|
CVS
Health Corp. |
78,312
|
|
1,456
|
|
Danaher
Corp. |
277,339
|
|
2,345
|
1
|
Edwards
Lifesciences Corp. |
212,129
|
|
952
|
1
|
Elanco
Animal Health, Inc. |
23,429
|
|
38
|
|
Elevance
Health, Inc. |
14,696
|
|
3,000
|
1
|
Generate
Biomedicines, Inc. |
50,610
|
|
3,485
|
|
Gilead
Sciences, Inc. |
440,295
|
|
1,206
|
|
HCA
Healthcare, Inc. |
470,207
|
|
548
|
1
|
Incyte
Corp. |
62,121
|
|
198
|
1
|
IQVIA
Holdings, Inc. |
38,258
|
|
1,042
|
1
|
Jazz
Pharmaceuticals PLC |
251,091
|
|
6,136
|
|
Johnson
& Johnson |
1,558,360
|
|
18,000
|
1
|
Kyverna
Therapeutics, Inc. |
160,380
|
|
1,500
|
1
|
LB
Pharmaceuticals, Inc. |
48,683
|
|
4,500
|
1
|
Legend
Biotech Corp., ADR |
129,960
|
|
36,000
|
1
|
Lumexa
Imaging Holdings, Inc. |
406,080
|
|
184
|
|
McKesson
Corp. |
139,030
|
|
1,819
|
|
Medtronic
PLC |
142,300
|
|
5,397
|
|
Merck
& Co., Inc. |
693,515
|
|
3,600
|
1
|
Mineralys
Therapeutics, Inc. |
97,128
|
|
83
|
1
|
Moderna,
Inc. |
5,812
|
|
3,745
|
|
Pfizer,
Inc. |
90,180
|
|
1,308
|
|
Qiagen
NV |
51,143
|
|
420
|
|
Regeneron
Pharmaceuticals, Inc. |
261,887
|
|
4,000
|
1
|
Relay
Therapeutics, Inc. |
74,840
|
|
89,195
|
1
|
Sophia
Genetics S.A. |
514,655
|
|
333
|
|
STERIS
PLC |
70,120
|
|
1,644
|
1
|
Tenet
Healthcare Corp. |
307,560
|
|
556
|
|
Thermo
Fisher Scientific, Inc. |
278,756
|
|
1,518
|
|
UnitedHealth
Group, Inc. |
630,926
|
|
1,025
|
1
|
Veeva
Systems, Inc. |
181,907
|
|
1,250
|
|
Viatris,
Inc. |
19,850
|
|
|
|
TOTAL
|
10,459,816
|
|
|
|
Industrials—5.7%
|
|
|
795
|
|
Advanced
Drainage System, Inc. |
124,783
|
|
9,000
|
1
|
AIRO
Group Holdings, Inc. |
66,510
|
|
15,000
|
1
|
BETA
Technologies, Inc. |
251,250
|
|
536
|
|
Broadridge
Financial Solutions, Inc. |
73,405
|
|
544
|
1
|
Builders
Firstsource, Inc. |
48,677
|
Semi-Annual
Financial Statements and Additional Information
4
|
Shares,
Principal
Amount
or
Contracts |
|
|
Value
|
|
|
|
COMMON
STOCKS—continued |
|
|
|
|
Industrials—continued
|
|
|
240
|
|
BWX
Technologies, Inc. |
$ 46,716
|
|
18,000
|
1
|
Byrna
Technologies, Inc. |
120,780
|
|
1,553
|
|
C.H.
Robinson Worldwide, Inc. |
292,492
|
|
7,555
|
|
CNH
Industrial NV |
84,843
|
|
338
|
|
Crane
Co. |
75,398
|
|
35,000
|
1
|
CSG
B.V. |
510,973
|
|
393
|
|
Cummins,
Inc. |
280,291
|
|
494
|
|
Curtiss-Wright
Corp. |
374,333
|
|
375
|
|
DELTA
AIR LINES 2020-1 CLASS |
35,122
|
|
371
|
|
Eaton
Corp. PLC |
158,090
|
|
12,000
|
1
|
EquipmentShare.com,
Inc. |
235,920
|
|
11,000
|
1
|
ERock,
Inc. |
159,500
|
|
153
|
|
Expeditors
International of Washington, Inc. |
24,936
|
|
105
|
|
FedEx
Corp. |
32,879
|
|
52
|
1
|
Fedex
Freight Holding Co., Inc. |
7,852
|
|
46
|
|
Fortive
Corp. |
2,810
|
|
1,214
|
|
General
Dynamics Corp. |
430,047
|
|
9,500
|
1
|
GO,
Inc. |
128,774
|
|
3,364
|
|
Graco,
Inc. |
254,352
|
|
9,000
|
1
|
Grupo
Aeromexico SAB de CV, ADR |
162,000
|
|
6,213
|
1
|
Hawkeye
360, Inc. |
125,627
|
|
1,000
|
1
|
Honeywell
Aerospace, Inc. |
221,080
|
|
1,000
|
|
Honeywell
International, Inc. |
223,900
|
|
427
|
|
Huntington
Ingalls Industries, Inc. |
119,513
|
|
1,430
|
|
J.
B. Hunt Transportation Services, Inc. |
413,885
|
|
215
|
|
Johnson
Controls International PLC |
31,414
|
|
2,400
|
1
|
Karman
Holdings, Inc. |
119,808
|
|
136
|
1
|
Kirby
Corp. |
18,492
|
|
827
|
|
L3Harris
Technologies, Inc. |
240,318
|
|
882
|
|
Landstar
System, Inc. |
182,406
|
|
1,274
|
|
Leidos
Holdings, Inc. |
131,184
|
|
1,009
|
1
|
Middleby
Corp. |
173,558
|
|
12
|
|
Northrop
Grumman Corp. |
6,112
|
|
433
|
|
Oshkosh
Corp. |
66,457
|
|
2,740
|
|
Owens
Corning, Inc. |
435,550
|
|
286
|
|
Parker-Hannifin
Corp. |
279,742
|
|
79
|
|
Paycom
Software, Inc. |
9,929
|
|
2,988
|
|
Pentair
PLC |
229,060
|
|
1,768
|
|
Republic
Services, Inc. |
376,725
|
|
184
|
|
Rockwell
Automation, Inc. |
91,095
|
|
2,712
|
|
RTX
Corp. |
514,548
|
|
1,388
|
|
Ryder
System, Inc. |
366,113
|
|
273
|
1
|
Saia,
Inc. |
114,977
|
|
4,413
|
|
Sensata
Technologies Holdings PLC |
210,677
|
|
3,659
|
|
Southwest
Airlines Co. |
188,146
|
|
2,702
|
|
Tetra
Tech, Inc. |
78,061
|
|
3,815
|
|
Toro
Co. |
371,657
|
|
1,399
|
1,2
|
TPG,
Inc., Rights |
14
|
|
2,379
|
1
|
Trex
Co., Inc. |
119,045
|
Semi-Annual
Financial Statements and Additional Information
5
|
Shares,
Principal
Amount
or
Contracts |
|
|
Value
|
|
|
|
COMMON
STOCKS—continued |
|
|
|
|
Industrials—continued
|
|
|
467
|
1
|
Uber
Technologies, Inc. |
$ 33,699
|
|
1,789
|
|
UL
Solutions, Inc. |
182,228
|
|
45
|
|
United
Parcel Service, Inc. |
4,837
|
|
149
|
|
United
Rentals, Inc. |
168,801
|
|
90
|
|
Valmont
Industries, Inc. |
51,984
|
|
438
|
|
Verisk
Analytics, Inc. |
78,634
|
|
12,000
|
1
|
Vincorion
SE |
229,837
|
|
502
|
|
Xylem,
Inc. |
59,341
|
|
3,000
|
1
|
York
Space Systems, Inc. |
73,860
|
|
|
|
TOTAL
|
10,325,047
|
|
|
|
Information
Technology—7.7% |
|
|
1,103
|
|
Accenture
PLC |
137,257
|
|
1,286
|
1
|
Adobe,
Inc. |
263,656
|
|
75
|
|
Analog
Devices, Inc. |
29,788
|
|
12,575
|
|
Apple,
Inc. |
3,638,702
|
|
4,050
|
|
BitMine
Immersion Technologies, Inc. |
53,906
|
|
131
|
1
|
Circle
Internet Finance PLC |
8,205
|
|
1,758
|
1
|
Cirrus
Logic, Inc. |
261,116
|
|
8,568
|
|
Cisco
Systems, Inc. |
1,006,397
|
|
338
|
|
Dell
Technologies, Inc. |
145,834
|
|
2,563
|
1
|
DocuSign,
Inc. |
113,848
|
|
1,194
|
1
|
Everpure,
Inc. |
94,075
|
|
489
|
1
|
F5,
Inc. |
203,404
|
|
2,671
|
1
|
Figma,
Inc. |
48,318
|
|
539
|
1
|
First
Solar, Inc. |
127,182
|
|
4,431
|
|
Hewlett
Packard Enterprise Co. |
199,882
|
|
1,691
|
|
IBM
Corp. |
475,526
|
|
11,129
|
1
|
Innoscripta
SE |
973,264
|
|
9,642
|
1
|
Intel
Corp. |
1,346,313
|
|
643
|
|
Intuit,
Inc. |
167,823
|
|
452
|
1
|
IonQ,
Inc. |
24,074
|
|
1,123
|
1
|
Keysight
Technologies, Inc. |
393,129
|
|
7,097
|
|
Microsoft
Corp. |
2,647,323
|
|
522
|
1
|
MongoDB,
Inc. |
175,340
|
|
890
|
1
|
Nutanix,
Inc. |
45,354
|
|
36
|
1
|
Okta,
Inc. |
4,912
|
|
13
|
1
|
Onto
Innovation, Inc. |
4,920
|
|
416
|
|
Pegasystems,
Inc. |
12,468
|
|
1,727
|
1
|
Qorvo,
Inc. |
161,077
|
|
2,718
|
|
Qualcomm,
Inc. |
502,259
|
|
2,183
|
1
|
Ralliant
Corp. |
160,734
|
|
561
|
1
|
Rubrik,
Inc. |
45,037
|
|
1,993
|
|
Salesforce,
Inc. |
312,223
|
|
495
|
1
|
Twilio,
Inc. |
102,133
|
|
98
|
1
|
Tyler
Technologies, Inc. |
28,661
|
|
427
|
1
|
Unity
Software, Inc. |
12,204
|
|
689
|
|
Verisign,
Inc. |
173,325
|
|
143
|
1
|
Zebra
Technologies Corp., Class A |
37,646
|
|
|
|
TOTAL
|
14,137,315
|
Semi-Annual
Financial Statements and Additional Information
6
|
Shares,
Principal
Amount
or
Contracts |
|
|
Value
|
|
|
|
COMMON
STOCKS—continued |
|
|
|
|
Materials—1.5%
|
|
|
658
|
|
Albemarle
Corp. |
$ 88,850
|
|
130
|
|
Alcoa
Corp. |
6,778
|
|
3,169
|
|
AngloGold
Ashanti PLC |
256,340
|
|
990
|
|
Aptargroup,
Inc. |
123,948
|
|
198
|
|
Avery
Dennison Corp. |
32,145
|
|
1,520
|
|
Celanese
Corp. |
69,920
|
|
1,497
|
|
Corteva,
Inc. |
126,781
|
|
3,095
|
|
CRH
PLC |
331,165
|
|
954
|
|
Crown
Holdings, Inc. |
106,676
|
|
1,108
|
|
Ecolab,
Inc. |
308,700
|
|
64
|
|
Freeport-McMoRan,
Inc. |
4,025
|
|
8,804
|
|
Hecla
Mining Co. |
135,846
|
|
1,193
|
|
Linde
PLC |
619,096
|
|
5,132
|
|
Newmont
Corp. |
479,329
|
|
|
|
TOTAL
|
2,689,599
|
|
|
|
Real
Estate—1.6% |
|
|
57
|
|
Avalonbay
Communities, Inc. |
10,755
|
|
1,059
|
1
|
CBRE
Group, Inc. |
142,637
|
|
2,285
|
|
Crown
Castle, Inc. |
173,043
|
|
59
|
|
Digital
Realty Trust, Inc. |
10,595
|
|
389
|
|
Equinix,
Inc. |
405,490
|
|
4,589
|
|
Host
Hotels & Resorts, Inc. |
108,805
|
|
87
|
|
Jones
Lang LaSalle, Inc. |
26,966
|
|
30,000
|
1
|
NS
Group, Inc. |
271,402
|
|
3,985
|
|
ProLogis,
Inc. |
539,848
|
|
1,141
|
|
Public
Storage |
363,192
|
|
1,540
|
|
Regency
Centers Corp. |
122,800
|
|
1,355
|
|
SBA
Communications, Corp. |
239,103
|
|
970
|
|
Welltower,
Inc. |
220,161
|
|
3,711
|
|
WP
Carey, Inc. |
265,336
|
|
|
|
TOTAL
|
2,900,133
|
|
|
|
Utilities—1.5%
|
|
|
12,414
|
|
AES
Corp. |
181,989
|
|
5,588
|
|
Brookfield
Renewable Corp. |
207,427
|
|
6,037
|
|
Clearway
Energy, Inc. |
206,345
|
|
109
|
|
Constellation
Energy Corp. |
27,072
|
|
1,173
|
|
DTE
Energy Co. |
178,730
|
|
3,477
|
|
Duke
Energy Corp. |
440,119
|
|
5,284
|
|
EverSource
Energy |
381,875
|
|
7,272
|
|
NextEra
Energy, Inc. |
638,263
|
|
132
|
|
NiSource,
Inc. |
6,277
|
|
1,987
|
|
OGE
Energy Corp. |
96,687
|
|
2,793
|
|
Public
Service Enterprises Group, Inc. |
226,680
|
|
544
|
1
|
Talen
Energy Corp. |
209,037
|
|
|
|
TOTAL
|
2,800,501
|
|
|
|
TOTAL
COMMON STOCKS
(IDENTIFIED
COST $62,812,147) |
79,198,821
|
Semi-Annual
Financial Statements and Additional Information
7
|
Shares,
Principal
Amount
or
Contracts |
|
|
Value
|
|
|
|
U.S.
TREASURIES—19.6% |
|
|
|
|
Treasury
Inflation-Indexed Note—0.0% |
|
|
$ 14,051
|
|
U.S.
Treasury Inflation-Protected Notes, 1.000%, 2/15/2046 |
$ 10,315
|
|
|
|
U.S.
Treasury Bond—3.9% |
|
|
150,000
|
|
United
States Treasury Bond, 1.375%, 11/15/2040 |
96,938
|
|
760,000
|
|
United
States Treasury Bond, 1.625%, 11/15/2050 |
397,219
|
|
660,000
|
|
United
States Treasury Bond, 2.375%, 2/15/2042 |
481,284
|
|
20,000
|
|
United
States Treasury Bond, 2.750%, 11/15/2047 |
14,097
|
|
1,000
|
|
United
States Treasury Bond, 3.000%, 11/15/2044 |
765
|
|
900,000
|
|
United
States Treasury Bond, 3.000%, 2/15/2049 |
655,875
|
|
1,100,000
|
|
United
States Treasury Bond, 3.125%, 5/15/2048 |
826,031
|
|
475,000
|
|
United
States Treasury Bond, 4.250%, 2/15/2054 |
423,789
|
|
2,720,000
|
|
United
States Treasury Bond, 4.250%, 8/15/2054 |
2,428,025
|
|
370,000
|
|
United
States Treasury Bond, 4.500%, 2/15/2044 |
352,367
|
|
310,000
|
|
United
States Treasury Bond, 4.625%, 5/15/2044 |
299,441
|
|
1,200,000
|
|
United
States Treasury Bond, 4.625%, 2/15/2055 |
1,140,187
|
|
|
|
TOTAL
|
7,116,018
|
|
|
|
U.S.
Treasury Note—15.7% |
|
|
330,000
|
|
United
States Treasury Note, 0.625%, 7/31/2026 |
329,147
|
|
200,000
|
|
United
States Treasury Note, 0.875%, 11/15/2030 |
173,653
|
|
675,000
|
|
United
States Treasury Note, 1.250%, 12/31/2026 |
666,062
|
|
300,000
|
|
United
States Treasury Note, 1.375%, 11/15/2031 |
259,031
|
|
400,000
|
|
United
States Treasury Note, 1.500%, 1/31/2027 |
394,231
|
|
200,000
|
|
United
States Treasury Note, 1.625%, 5/15/2031 |
177,406
|
|
50,000
|
|
United
States Treasury Note, 2.250%, 11/15/2027 |
48,732
|
|
3,800,000
|
|
United
States Treasury Note, 2.625%, 5/31/2027 |
3,749,500
|
|
4,150,000
|
|
United
States Treasury Note, 2.750%, 7/31/2027 |
4,089,161
|
|
110,000
|
|
United
States Treasury Note, 3.125%, 8/31/2027 |
108,735
|
|
900,000
|
|
United
States Treasury Note, 3.375%, 2/29/2028 |
888,804
|
|
1,600,000
|
|
United
States Treasury Note, 3.500%, 9/30/2027 |
1,587,463
|
|
950,000
|
|
United
States Treasury Note, 3.500%, 2/28/2031 |
922,094
|
|
250,000
|
|
United
States Treasury Note, 3.625%, 3/31/2028 |
247,689
|
|
150,000
|
|
United
States Treasury Note, 3.875%, 11/30/2027 |
149,403
|
|
1,000,000
|
|
United
States Treasury Note, 3.875%, 3/15/2028 |
995,226
|
|
225,000
|
|
United
States Treasury Note, 3.875%, 6/30/2030 |
222,381
|
|
2,835,000
|
|
United
States Treasury Note, 4.000%, 7/31/2029 |
2,821,842
|
|
300,000
|
|
United
States Treasury Note, 4.125%, 7/31/2028 |
299,765
|
|
760,000
|
|
United
States Treasury Note, 4.125%, 11/30/2029 |
758,842
|
|
270,000
|
|
United
States Treasury Note, 4.125%, 3/31/2031 |
268,987
|
|
225,000
|
|
United
States Treasury Note, 4.125%, 7/31/2031 |
224,051
|
|
600,000
|
|
United
States Treasury Note, 4.125%, 10/31/2031 |
597,000
|
|
600,000
|
|
United
States Treasury Note, 4.125%, 5/31/2032 |
595,734
|
|
500,000
|
|
United
States Treasury Note, 4.125%, 2/15/2036 |
487,883
|
|
400,000
|
|
United
States Treasury Note, 4.250%, 12/31/2026 |
400,558
|
|
2,600,000
|
|
United
States Treasury Note, 4.250%, 11/15/2034 |
2,574,406
|
|
345,000
|
|
United
States Treasury Note, 4.375%, 7/31/2026 |
345,188
|
|
300,000
|
|
United
States Treasury Note, 4.500%, 5/31/2029 |
302,712
|
|
3,900,000
|
|
United
States Treasury Note, 4.625%, 2/15/2035 |
3,962,136
|
|
|
|
TOTAL
|
28,647,822
|
|
|
|
TOTAL
U.S. TREASURIES
(IDENTIFIED
COST $37,600,413) |
35,774,155
|
Semi-Annual
Financial Statements and Additional Information
8
|
Shares,
Principal
Amount
or
Contracts |
|
|
Value
|
|
|
|
CORPORATE
BONDS—14.6% |
|
|
|
|
Basic
Industry - Chemicals—0.1% |
|
|
$ 105,000
|
|
RPM
International, Inc., Sr. Unsecd. Note, 4.550%, 3/1/2029 |
$ 104,733
|
|
|
|
Basic
Industry - Metals & Mining—0.1% |
|
|
75,000
|
|
Freeport-McMoRan,
Inc., Sr. Unsecd. Note, 5.400%, 11/14/2034 |
76,321
|
|
30,000
|
|
Glencore
Funding LLC, Sr. Unsecd. Note, 144A, 4.900%, 7/1/2031 |
30,015
|
|
|
|
TOTAL
|
106,336
|
|
|
|
Capital
Goods - Aerospace & Defense—0.5% |
|
|
125,000
|
|
Boeing
Co., Sr. Unsecd. Note, 2.700%, 2/1/2027 |
123,651
|
|
55,000
|
|
Boeing
Co., Sr. Unsecd. Note, 6.528%, 5/1/2034 |
59,855
|
|
70,000
|
|
Boeing
Co., Sr. Unsecd. Note, 6.858%, 5/1/2054 |
78,730
|
|
70,000
|
|
HEICO
Corp., Sr. Unsecd. Note, 5.350%, 8/1/2033 |
71,187
|
|
15,000
|
|
Honeywell
Aerospace, Inc., Sr. Unsecd. Note, 144A, 4.300%, 3/16/2031 |
14,745
|
|
35,000
|
|
Honeywell
Aerospace, Inc., Sr. Unsecd. Note, 144A, 4.950%, 3/16/2036 |
34,479
|
|
35,000
|
|
Honeywell
Aerospace, Inc., Sr. Unsecd. Note, 144A, 5.732%, 3/16/2056 |
35,023
|
|
130,000
|
|
Huntington
Ingalls Industries, Inc., Sr. Unsecd. Note, 3.483%, 12/1/2027 |
127,986
|
|
120,000
|
|
Lockheed
Martin Corp., Sr. Unsecd. Note, 4.750%, 2/15/2034 |
119,187
|
|
125,000
|
|
Northrop
Grumman Corp., Sr. Unsecd. Note, 4.700%, 3/15/2033 |
124,172
|
|
115,000
|
|
RTX
Corp., Sr. Unsecd. Note, 5.150%, 2/27/2033 |
117,135
|
|
100,000
|
|
Textron,
Inc., Sr. Unsecd. Note, 3.650%, 3/15/2027 |
99,478
|
|
|
|
TOTAL
|
1,005,628
|
|
|
|
Capital
Goods - Building Materials—0.0% |
|
|
30,000
|
|
Carrier
Global Corp., Sr. Unsecd. Note, 5.900%, 3/15/2034 |
31,639
|
|
30,000
|
|
Carrier
Global Corp., Sr. Unsecd. Note, 6.200%, 3/15/2054 |
32,205
|
|
|
|
TOTAL
|
63,844
|
|
|
|
Capital
Goods - Construction Machinery—0.2% |
|
|
125,000
|
|
Caterpillar
Financial Services Corp., Sr. Unsecd. Note, 3.950%, 11/14/2028 |
123,796
|
|
75,000
|
|
CNH
Industrial Capital America LLC, Sr. Unsecd. Note, 4.375%, 3/7/2031 |
73,425
|
|
50,000
|
|
CNH
Industrial NV, Sr. Unsecd. Note, Series MTN, 3.850%, 11/15/2027 |
49,462
|
|
145,000
|
|
John
Deere Capital Corp., Sr. Unsecd. Note, Series MTN, 2.800%, 7/18/2029 |
138,307
|
|
|
|
TOTAL
|
384,990
|
|
|
|
Capital
Goods - Diversified Manufacturing—0.1% |
|
|
80,000
|
|
Honeywell
International, Inc., Sr. Unsecd. Note, 2.800%, 6/1/2050 |
51,626
|
|
75,000
|
|
Honeywell
International, Inc., Sr. Unsecd. Note, 4.500%, 1/15/2034 |
73,300
|
|
60,000
|
|
Ingersoll-Rand,
Inc., Sr. Unsecd. Note, 5.450%, 6/15/2034 |
61,127
|
|
60,000
|
|
Xylem,
Inc., Sr. Unsecd. Note, 2.250%, 1/30/2031 |
54,076
|
|
|
|
TOTAL
|
240,129
|
|
|
|
Capital
Goods - Environmental—0.1% |
|
|
40,000
|
|
Republic
Services, Inc., Sr. Unsecd. Note, 2.375%, 3/15/2033 |
34,668
|
|
55,000
|
|
Republic
Services, Inc., Sr. Unsecd. Note, 4.875%, 4/1/2029 |
55,511
|
|
60,000
|
|
Waste
Connections, Inc., Sr. Unsecd. Note, 2.600%, 2/1/2030 |
56,163
|
|
40,000
|
|
Waste
Connections, Inc., Sr. Unsecd. Note, 4.200%, 1/15/2033 |
38,503
|
|
|
|
TOTAL
|
184,845
|
|
|
|
Communications
- Cable & Satellite—0.3% |
|
|
75,000
|
|
Charter
Communications Operating, LLC/Charter Communications Operating Capital Corp., Sec. Fac. Bond,
3.850%,
4/1/2061 |
44,083
|
|
50,000
|
|
Charter
Communications Operating, LLC/Charter Communications Operating Capital Corp., Sec. Fac. Bond,
4.800%,
3/1/2050 |
37,332
|
|
100,000
|
|
Charter
Communications Operating, LLC/Charter Communications Operating Capital Corp., Term Loan - 1st Lien,
3.900%,
6/1/2052 |
63,806
|
|
275,000
|
|
Comcast
Corp., Sr. Unsecd. Note, 3.300%, 2/1/2027 |
273,495
|
|
180,000
|
|
Comcast
Corp., Sr. Unsecd. Note, 5.350%, 5/15/2053 |
155,308
|
Semi-Annual
Financial Statements and Additional Information
9
|
Shares,
Principal
Amount
or
Contracts |
|
|
Value
|
|
|
|
CORPORATE
BONDS—continued |
|
|
|
|
Communications
- Cable & Satellite—continued |
|
|
$ 40,000
|
|
Comcast
Corp., Sr. Unsecd. Note, 5.650%, 6/1/2054 |
$ 35,882
|
|
|
|
TOTAL
|
609,906
|
|
|
|
Communications
- Media & Entertainment—0.4% |
|
|
60,000
|
|
AppLovin
Corp., Sr. Unsecd. Note, 5.500%, 12/1/2034 |
60,563
|
|
100,000
|
|
Meta
Platforms, Inc., Sr. Unsecd. Note, 3.500%, 8/15/2027 |
99,180
|
|
75,000
|
|
Meta
Platforms, Inc., Sr. Unsecd. Note, 3.850%, 8/15/2032 |
70,991
|
|
100,000
|
|
Meta
Platforms, Inc., Sr. Unsecd. Note, 5.250%, 5/15/2036 |
99,332
|
|
100,000
|
|
Meta
Platforms, Inc., Sr. Unsecd. Note, 5.550%, 8/15/2064 |
87,451
|
|
95,000
|
|
Meta
Platforms, Inc., Sr. Unsecd. Note, 6.300%, 5/15/2056 |
94,628
|
|
100,000
|
|
Omnicom
Group, Inc., Sr. Unsecd. Note, 5.300%, 6/2/2036 |
97,524
|
|
90,000
|
|
Walt
Disney Co., Sr. Unsecd. Note, 3.600%, 1/13/2051 |
65,800
|
|
45,000
|
|
Walt
Disney Co., Sr. Unsecd. Note, 3.800%, 5/13/2060 |
32,576
|
|
|
|
TOTAL
|
708,045
|
|
|
|
Communications
- Telecom Wireless—0.4% |
|
|
60,000
|
|
American
Tower Corp., Sr. Unsecd. Note, 2.700%, 4/15/2031 |
54,614
|
|
110,000
|
|
American
Tower Corp., Sr. Unsecd. Note, 3.100%, 6/15/2050 |
71,745
|
|
20,000
|
|
Space
Exploration Technologies Corp., Sr. Unsecd. Note, 144A, 5.350%, 7/15/2031 |
19,953
|
|
30,000
|
|
Space
Exploration Technologies Corp., Sr. Unsecd. Note, 144A, 5.875%, 7/15/2036 |
29,620
|
|
30,000
|
|
Space
Exploration Technologies Corp., Sr. Unsecd. Note, 144A, 6.650%, 7/15/2056 |
28,963
|
|
100,000
|
|
T-Mobile
USA, Inc., Series WI, 3.000%, 2/15/2041 |
73,851
|
|
80,000
|
|
T-Mobile
USA, Inc., Sr. Unsecd. Note, 5.050%, 7/15/2033 |
79,893
|
|
65,000
|
|
T-Mobile
USA, Inc., Sr. Unsecd. Note, 5.200%, 1/15/2033 |
65,789
|
|
50,000
|
|
T-Mobile
USA, Inc., Sr. Unsecd. Note, 5.250%, 6/15/2055 |
44,349
|
|
115,000
|
|
Vodafone
Group PLC, Sr. Unsecd. Note, 5.250%, 5/30/2048 |
103,338
|
|
75,000
|
|
Vodafone
Group PLC, Sr. Unsecd. Note, 5.350%, 6/18/2036 |
74,406
|
|
|
|
TOTAL
|
646,521
|
|
|
|
Communications
- Telecom Wirelines—0.5% |
|
|
125,000
|
|
AT&T,
Inc., Sr. Unsecd. Note, 4.900%, 11/1/2035 |
121,162
|
|
25,000
|
|
AT&T,
Inc., Sr. Unsecd. Note, 5.250%, 10/30/2036 |
24,560
|
|
200,000
|
|
AT&T,
Inc., Sr. Unsecd. Note, 5.375%, 8/15/2035 |
200,994
|
|
75,000
|
|
AT&T,
Inc., Sr. Unsecd. Note, 6.000%, 4/30/2056 |
72,534
|
|
25,000
|
|
AT&T,
Inc., Sr. Unsecd. Note, 6.200%, 10/30/2056 |
24,730
|
|
70,000
|
|
Beacon
Point DC LLC, 144A, 6.129%, 11/30/2042 |
70,629
|
|
80,000
|
|
Rogers
Communications, Inc., Sr. Unsecd. Note, 4.500%, 3/15/2042 |
67,972
|
|
80,000
|
|
Rogers
Communications, Inc., Sr. Unsecd. Note, 4.550%, 3/15/2052 |
63,590
|
|
80,000
|
|
Verizon
Communications, Inc., Sr. Unsecd. Note, 3.400%, 3/22/2041 |
61,867
|
|
150,000
|
|
Verizon
Communications, Inc., Sr. Unsecd. Note, 4.125%, 8/15/2046 |
118,632
|
|
90,000
|
|
Verizon
Communications, Inc., Sr. Unsecd. Note, 5.875%, 11/30/2055 |
87,376
|
|
|
|
TOTAL
|
914,046
|
|
|
|
Consumer
Cyclical - Automotive—0.4% |
|
|
150,000
|
|
Daimler
Trucks Financial NA, Sr. Unsecd. Note, 144A, 2.375%, 12/14/2028 |
142,114
|
|
140,000
|
|
Ford
Motor Co., Sr. Unsecd. Note, 3.250%, 2/12/2032 |
123,445
|
|
50,000
|
|
General
Motors Financial Co., Inc., Sr. Unsecd. Note, 2.400%, 4/10/2028 |
48,063
|
|
50,000
|
|
General
Motors Financial Co., Inc., Sr. Unsecd. Note, 5.450%, 1/8/2036 |
49,835
|
|
125,000
|
|
General
Motors Financial Co., Inc., Sr. Unsecd. Note, 5.750%, 2/8/2031 |
128,922
|
|
30,000
|
|
Hyundai
Capital America, Sr. Unsecd. Note, 144A, 5.000%, 4/7/2031 |
29,963
|
|
120,000
|
|
Hyundai
Capital America, Sr. Unsecd. Note, 144A, 5.300%, 1/8/2029 |
121,421
|
|
150,000
|
|
Mercedes-Benz
Finance NA LLC, Sr. Unsecd. Note, 144A, 4.500%, 3/10/2031 |
147,315
|
|
|
|
TOTAL
|
791,078
|
Semi-Annual
Financial Statements and Additional Information
10
|
Shares,
Principal
Amount
or
Contracts |
|
|
Value
|
|
|
|
CORPORATE
BONDS—continued |
|
|
|
|
Consumer
Cyclical - Leisure—0.1% |
|
|
$ 75,000
|
|
Airbnb,
Inc., Sr. Unsecd. Note, 5.250%, 3/16/2036 |
$ 74,717
|
|
100,000
|
|
Royal
Caribbean Cruises Ltd., Sr. Unsecd. Note, 5.250%, 2/27/2038 |
96,899
|
|
|
|
TOTAL
|
171,616
|
|
|
|
Consumer
Cyclical - Retailers—0.1% |
|
|
60,000
|
|
AutoZone,
Inc., Sr. Unsecd. Note, 4.750%, 2/1/2033 |
59,103
|
|
110,000
|
|
Home
Depot, Inc., Sr. Unsecd. Note, 2.950%, 6/15/2029 |
105,658
|
|
100,000
|
|
WalMart,
Inc., Sr. Unsecd. Note, 4.100%, 4/28/2027 |
100,059
|
|
|
|
TOTAL
|
264,820
|
|
|
|
Consumer
Cyclical - Services—0.3% |
|
|
115,000
|
|
Amazon.com,
Inc., Sr. Unsecd. Note, 2.500%, 6/3/2050 |
66,560
|
|
125,000
|
|
Amazon.com,
Inc., Sr. Unsecd. Note, 3.875%, 8/22/2037 |
111,889
|
|
30,000
|
|
Amazon.com,
Inc., Sr. Unsecd. Note, 4.250%, 3/13/2031 |
29,549
|
|
55,000
|
|
Amazon.com,
Inc., Sr. Unsecd. Note, 4.875%, 3/13/2036 |
54,163
|
|
55,000
|
|
Amazon.com,
Inc., Sr. Unsecd. Note, 5.800%, 3/13/2056 |
54,688
|
|
125,000
|
|
Expedia
Group, Inc., Sr. Unsecd. Note, 5.500%, 4/15/2036 |
123,809
|
|
65,000
|
|
Uber
Technologies, Inc., Sr. Unsecd. Note, 4.300%, 1/15/2030 |
64,278
|
|
|
|
TOTAL
|
504,936
|
|
|
|
Consumer
Non-Cyclical - Food/Beverage—0.5% |
|
|
100,000
|
|
Bacardi-MartinI
B.V., Sr. Unsecd. Note, 144A, 6.000%, 2/1/2035 |
102,449
|
|
150,000
|
|
Coca-Cola
Femsa S.A.B. de C.V., Sr. Unsecd. Note, 5.100%, 5/6/2035 |
149,694
|
|
50,000
|
|
Constellation
Brands, Inc., Sr. Unsecd. Note, 3.750%, 5/1/2050 |
37,117
|
|
25,000
|
|
Flowers
Foods, Inc., Sr. Unsecd. Note, 2.400%, 3/15/2031 |
21,698
|
|
125,000
|
|
Flowers
Foods, Inc., Sr. Unsecd. Note, 3.500%, 10/1/2026 |
124,756
|
|
50,000
|
|
Kraft
Heinz Foods Co., Sr. Unsecd. Note, 4.375%, 6/1/2046 |
40,064
|
|
95,000
|
|
Mars,
Inc., Sr. Unsecd. Note, 144A, 5.200%, 3/1/2035 |
95,410
|
|
60,000
|
|
Mars,
Inc., Sr. Unsecd. Note, 144A, 5.700%, 5/1/2055 |
59,152
|
|
70,000
|
|
PepsiCo,
Inc., Sr. Unsecd. Note, 2.750%, 10/21/2051 |
43,691
|
|
85,000
|
|
The
Campbell’s Co., Sr. Unsecd. Note, 5.200%, 3/21/2029 |
85,790
|
|
150,000
|
|
Tyson
Foods, Inc., Sr. Unsecd. Note, 5.700%, 3/15/2034 |
154,395
|
|
|
|
TOTAL
|
914,216
|
|
|
|
Consumer
Non-Cyclical - Health Care—0.4% |
|
|
100,000
|
|
Augusta
SpinCo Corp., Sr. Unsecd. Note, 5.245%, 3/23/2036 |
100,117
|
|
62,000
|
|
Becton
Dickinson & Co., Sr. Unsecd. Note, 3.794%, 5/20/2050 |
45,092
|
|
110,000
|
|
CVS
Health Corp., Sr. Unsecd. Note, 4.250%, 4/1/2050 |
86,576
|
|
85,000
|
|
CVS
Health Corp., Sr. Unsecd. Note, 5.700%, 6/1/2034 |
87,769
|
|
35,000
|
|
CVS
Health Corp., Sr. Unsecd. Note, 6.200%, 9/15/2055 |
35,836
|
|
115,000
|
|
Danaher
Corp., Sr. Unsecd. Note, 2.600%, 10/1/2050 |
69,670
|
|
105,000
|
|
HCA,
Inc., Sec. Fac. Bond, 3.500%, 7/15/2051 |
71,096
|
|
100,000
|
|
HCA,
Inc., Sr. Unsecd. Note, 4.700%, 5/15/2031 |
99,099
|
|
135,000
|
|
Solventum
Corp., Sr. Unsecd. Note, 5.900%, 4/30/2054 |
133,714
|
|
|
|
TOTAL
|
728,969
|
|
|
|
Consumer
Non-Cyclical - Pharmaceuticals—0.5% |
|
|
120,000
|
|
AbbVie,
Inc., Sr. Unsecd. Note, 4.250%, 11/21/2049 |
98,028
|
|
60,000
|
|
AbbVie,
Inc., Sr. Unsecd. Note, 4.875%, 3/15/2030 |
60,673
|
|
124,000
|
|
Amgen,
Inc., Sr. Unsecd. Note, 5.250%, 3/2/2033 |
126,221
|
|
95,000
|
|
Amgen,
Inc., Sr. Unsecd. Note, 5.650%, 3/2/2053 |
92,526
|
|
110,000
|
|
AstraZeneca
PLC, Sr. Unsecd. Note, 1.375%, 8/6/2030 |
97,137
|
|
75,000
|
|
Biogen,
Inc., Sr. Unsecd. Note, 3.150%, 5/1/2050 |
48,981
|
|
75,000
|
|
Bristol-Myers
Squibb Co., Sr. Sub. Secd. Note, 5.550%, 2/22/2054 |
73,294
|
Semi-Annual
Financial Statements and Additional Information
11
|
Shares,
Principal
Amount
or
Contracts |
|
|
Value
|
|
|
|
CORPORATE
BONDS—continued |
|
|
|
|
Consumer
Non-Cyclical - Pharmaceuticals—continued |
|
|
$ 70,000
|
|
Bristol-Myers
Squibb Co., Sr. Unsecd. Note, 3.700%, 3/15/2052 |
$ 51,343
|
|
40,000
|
|
Bristol-Myers
Squibb Co., Sr. Unsecd. Note, Series WI, 4.250%, 10/26/2049 |
32,530
|
|
30,000
|
|
Gilead
Sciences, Inc., Sr. Unsecd. Note, 5.100%, 6/15/2035 |
30,261
|
|
70,000
|
|
Pfizer
Investment Enterprises Pte Ltd., Sr. Unsecd. Note, 4.450%, 5/19/2028 |
70,074
|
|
70,000
|
|
Pfizer
Investment Enterprises Pte Ltd., Sr. Unsecd. Note, 4.750%, 5/19/2033 |
69,349
|
|
60,000
|
|
Pfizer
Investment Enterprises Pte Ltd., Sr. Unsecd. Note, 5.300%, 5/19/2053 |
56,564
|
|
45,000
|
|
Pfizer,
Inc., Sr. Unsecd. Note, 4.200%, 11/15/2030 |
44,432
|
|
71,000
|
|
Regeneron
Pharmaceuticals, Inc., Sr. Unsecd. Note, 2.800%, 9/15/2050 |
43,453
|
|
|
|
TOTAL
|
994,866
|
|
|
|
Consumer
Non-Cyclical - Products—0.1% |
|
|
100,000
|
|
Clorox
Co., Sr. Unsecd. Note, 5.250%, 5/15/2036 |
99,668
|
|
|
|
Consumer
Non-Cyclical - Supermarkets—0.1% |
|
|
120,000
|
|
Kroger
Co., Sr. Unsecd. Note, 5.000%, 9/15/2034 |
118,462
|
|
|
|
Consumer
Non-Cyclical - Tobacco—0.2% |
|
|
50,000
|
|
Altria
Group, Inc., Sr. Unsecd. Note, 3.700%, 2/4/2051 |
34,818
|
|
110,000
|
|
BAT
Capital Corp., Sr. Unsecd. Note, Series WI, 4.540%, 8/15/2047 |
90,755
|
|
125,000
|
|
Philip
Morris International, Inc., Sr. Unsecd. Note, 2.100%, 5/1/2030 |
113,994
|
|
75,000
|
|
Philip
Morris International, Inc., Sr. Unsecd. Note, 5.750%, 11/17/2032 |
78,581
|
|
25,000
|
|
Reynolds
American, Inc., Sr. Unsecd. Note, 7.000%, 8/4/2041 |
27,306
|
|
|
|
TOTAL
|
345,454
|
|
|
|
Energy
- Independent—0.1% |
|
|
35,000
|
|
Canadian
Natural Resources Ltd., Sr. Unsecd. Note, 5.000%, 12/15/2029 |
35,359
|
|
60,000
|
|
Ovintiv,
Inc., Sr. Unsecd. Note, 7.100%, 7/15/2053 |
66,360
|
|
|
|
TOTAL
|
101,719
|
|
|
|
Energy
- Integrated—0.0% |
|
|
35,000
|
|
Cenovus
Energy, Inc., Sr. Unsecd. Note, 5.400%, 3/20/2036 |
34,716
|
|
95,000
|
|
Chevron
Corp., Sr. Unsecd. Note, 3.078%, 5/11/2050 |
63,716
|
|
|
|
TOTAL
|
98,432
|
|
|
|
Energy
- Midstream—0.7% |
|
|
55,000
|
|
Boardwalk
Pipeline Partners LP, Sr. Unsecd. Note, 3.400%, 2/15/2031 |
51,345
|
|
30,000
|
|
Boardwalk
Pipeline Partners LP, Sr. Unsecd. Note, 4.800%, 5/3/2029 |
30,032
|
|
80,000
|
|
Columbia
Pipeline Holding Co. LLC, Sr. Unsecd. Note, 144A, 5.681%, 1/15/2034 |
81,719
|
|
45,000
|
|
Eastern
Gas Transmission & Storage, Inc., Sr. Unsecd. Note, 3.000%, 11/15/2029 |
42,581
|
|
145,000
|
|
Eastern
Gas Transmission & Storage, Inc., Sr. Unsecd. Note, 3.900%, 11/15/2049 |
106,954
|
|
50,000
|
|
Energy
Transfer LP, Sr. Unsecd. Note, 6.300%, 1/15/2056 |
50,200
|
|
110,000
|
|
Energy
Transfer LP, Sr. Unsecd. Note, Series 10Y, 4.950%, 6/15/2028 |
110,613
|
|
75,000
|
|
Kinder
Morgan Energy Partners LP, Sr. Unsecd. Note, 6.375%, 3/1/2041 |
79,367
|
|
100,000
|
|
MPLX
LP, Sr. Unsecd. Note, 4.950%, 9/1/2032 |
99,513
|
|
50,000
|
|
MPLX
LP, Sr. Unsecd. Note, 5.400%, 9/15/2035 |
49,886
|
|
40,000
|
|
National
Fuel Gas Co., Sr. Unsecd. Note, 2.950%, 3/1/2031 |
36,612
|
|
25,000
|
|
ONEOK,
Inc., Sr. Unsecd. Note, 4.950%, 7/13/2047 |
21,539
|
|
25,000
|
|
ONEOK,
Inc., Sr. Unsecd. Note, 6.100%, 11/15/2032 |
26,321
|
|
65,000
|
|
ONEOK,
Inc., Sr. Unsecd. Note, 6.625%, 9/1/2053 |
68,174
|
|
60,000
|
|
Plains
All American Pipeline LP, Sr. Unsecd. Note, 5.150%, 6/1/2042 |
55,117
|
|
160,000
|
|
Targa
Resources, Inc., Sr. Unsecd. Note, 4.200%, 2/1/2033 |
151,699
|
|
80,000
|
|
TransCanada
PipeLines Ltd., Sr. Secd. Note, 5.100%, 3/15/2049 |
75,038
|
|
90,000
|
|
Williams
Cos., Inc., Sr. Unsecd. Note, 5.800%, 11/15/2054 |
88,057
|
|
|
|
TOTAL
|
1,224,767
|
Semi-Annual
Financial Statements and Additional Information
12
|
Shares,
Principal
Amount
or
Contracts |
|
|
Value
|
|
|
|
CORPORATE
BONDS—continued |
|
|
|
|
Energy
- Refining—0.1% |
|
|
$ 60,000
|
|
Marathon
Petroleum Corp., Sr. Unsecd. Note, 4.750%, 9/15/2044 |
$ 52,456
|
|
100,000
|
|
Valero
Energy Corp., Sr. Unsecd. Note, 5.150%, 3/10/2036 |
98,474
|
|
|
|
TOTAL
|
150,930
|
|
|
|
Financial
Institution - Banking—3.3% |
|
|
150,000
|
|
AerCap
Funding DAC, Sr. Unsecd. Note, 4.875%, 7/7/2031 |
149,323
|
|
20,000
|
|
American
Express Co., Sr. Unsecd. Note, 4.444%, 5/3/2030 |
19,879
|
|
25,000
|
|
American
Express Co., Sr. Unsecd. Note, 4.918%, 7/20/2033 |
24,993
|
|
90,000
|
|
American
Express Co., Sr. Unsecd. Note, 5.085%, 1/30/2031 |
91,096
|
|
160,000
|
|
Bank
of America Corp., Sr. Unsecd. Note, 2.299%, 7/21/2032 |
141,373
|
|
385,000
|
|
Bank
of America Corp., Sr. Unsecd. Note, 3.419%, 12/20/2028 |
378,618
|
|
30,000
|
|
Bank
of America Corp., Sr. Unsecd. Note, 4.477%, 4/23/2030 |
29,815
|
|
30,000
|
|
Bank
of America Corp., Sr. Unsecd. Note, 4.695%, 4/23/2032 |
29,754
|
|
140,000
|
|
Bank
of America Corp., Sr. Unsecd. Note, 5.468%, 1/23/2035 |
142,793
|
|
125,000
|
|
Bank
of America Corp., Sr. Unsecd. Note, 5.511%, 1/24/2036 |
127,695
|
|
30,000
|
|
Bank
of America Corp., Sub. Note, 5.489%, 4/23/2037 |
29,893
|
|
80,000
|
|
Bank
of New York Mellon Corp., Sr. Unsecd. Note, 4.540%, 4/23/2032 |
79,255
|
|
50,000
|
|
Bank
of New York Mellon Corp., Sr. Unsecd. Note, Series MTN, 3.992%, 6/13/2028 |
49,810
|
|
25,000
|
|
Capital
One Financial Co., Sr. Unsecd. Note, 4.722%, 1/30/2032 |
24,669
|
|
85,000
|
|
Capital
One Financial Co., Sr. Unsecd. Note, 5.197%, 9/11/2036 |
82,773
|
|
110,000
|
|
Citigroup,
Inc., Sr. Unsecd. Note, 3.668%, 7/24/2028 |
109,046
|
|
125,000
|
|
Citigroup,
Inc., Sr. Unsecd. Note, 5.174%, 9/11/2036 |
124,349
|
|
195,000
|
|
Citigroup,
Inc., Sub. Note, 6.020%, 1/24/2036 |
200,925
|
|
120,000
|
|
Citizens
Financial Group, Inc., Sr. Unsecd. Note, 5.718%, 7/23/2032 |
123,208
|
|
120,000
|
|
Fifth
Third Bancorp, Sr. Unsecd. Note, 6.361%, 10/27/2028 |
122,703
|
|
60,000
|
|
Fifth
Third Bancorp, Sr. Unsecd. Note, 144A, 5.982%, 1/30/2030 |
61,660
|
|
75,000
|
|
FNB
Corp. (PA), 5.722%, 12/11/2030 |
75,628
|
|
100,000
|
|
Goldman
Sachs Group, Inc., Sr. Unsecd. Note, 1.948%, 10/21/2027 |
99,227
|
|
275,000
|
|
Goldman
Sachs Group, Inc., Sr. Unsecd. Note, 1.992%, 1/27/2032 |
241,966
|
|
40,000
|
|
Goldman
Sachs Group, Inc., Sr. Unsecd. Note, 4.594%, 4/20/2030 |
39,779
|
|
135,000
|
|
Goldman
Sachs Group, Inc., Sr. Unsecd. Note, 4.939%, 10/21/2036 |
131,141
|
|
40,000
|
|
Goldman
Sachs Group, Inc., Sr. Unsecd. Note, 5.094%, 4/20/2034 |
39,851
|
|
150,000
|
|
Huntington
Bancshares, Inc., Sr. Unsecd. Note, 4.623%, 1/28/2032 |
147,551
|
|
100,000
|
|
JPMorgan
Chase & Co., Sr. Unsecd. Note, 2.963%, 1/25/2033 |
90,558
|
|
360,000
|
|
JPMorgan
Chase & Co., Sr. Unsecd. Note, 3.509%, 1/23/2029 |
354,101
|
|
25,000
|
|
JPMorgan
Chase & Co., Sr. Unsecd. Note, 4.408%, 4/23/2030 |
24,791
|
|
65,000
|
|
JPMorgan
Chase & Co., Sr. Unsecd. Note, 4.622%, 4/23/2032 |
64,264
|
|
65,000
|
|
JPMorgan
Chase & Co., Sr. Unsecd. Note, 5.148%, 4/23/2037 |
64,556
|
|
90,000
|
|
JPMorgan
Chase & Co., Sr. Unsecd. Note, 5.350%, 6/1/2034 |
91,537
|
|
125,000
|
|
JPMorgan
Chase & Co., Sub., 5.576%, 7/23/2036 |
126,952
|
|
95,000
|
|
KeyCorp,
Sr. Unsecd. Note, 6.401%, 3/6/2035 |
101,192
|
|
120,000
|
|
M&T
Bank Corp., Sr. Unsecd. Note, 5.053%, 1/27/2034 |
119,019
|
|
50,000
|
|
Morgan
Stanley, Sr. Unsecd. Note, 4.555%, 4/10/2030 |
49,689
|
|
50,000
|
|
Morgan
Stanley, Sr. Unsecd. Note, 4.809%, 4/16/2032 |
49,622
|
|
50,000
|
|
Morgan
Stanley, Sr. Unsecd. Note, 5.296%, 4/10/2037 |
49,770
|
|
75,000
|
|
Morgan
Stanley, Sr. Unsecd. Note, 5.466%, 1/18/2035 |
76,170
|
|
90,000
|
|
Morgan
Stanley, Sr. Unsecd. Note, 5.831%, 4/19/2035 |
93,410
|
|
290,000
|
|
Morgan
Stanley, Sr. Unsecd. Note, Series GMTN, 3.772%, 1/24/2029 |
286,097
|
|
40,000
|
|
Morgan
Stanley, Sr. Unsecd. Note, Series MTN, 1.794%, 2/13/2032 |
34,804
|
|
75,000
|
|
Morgan
Stanley, Sr. Unsecd. Note, Series MTN, 1.928%, 4/28/2032 |
65,224
|
Semi-Annual
Financial Statements and Additional Information
13
|
Shares,
Principal
Amount
or
Contracts |
|
|
Value
|
|
|
|
CORPORATE
BONDS—continued |
|
|
|
|
Financial
Institution - Banking—continued |
|
|
$ 125,000
|
|
Northern
Trust Corp., Sub., 6.125%, 11/2/2032 |
$ 133,752
|
|
50,000
|
|
Pinnacle
Financial Partners, Inc., Sr. Unsecd. Note, 5.596%, 5/19/2032 |
50,172
|
|
80,000
|
|
PNC
Financial Services Group, Inc., 5.575%, 1/29/2036 |
82,052
|
|
135,000
|
|
PNC
Financial Services Group, Inc., Sub., 4.626%, 6/6/2033 |
131,416
|
|
60,000
|
|
Regions
Financial Corp., Sr. Unsecd. Note, 5.722%, 6/6/2030 |
61,592
|
|
55,000
|
|
State
Street Corp., Sr. Unsecd. Note, 4.558%, 4/23/2032 |
54,387
|
|
40,000
|
|
Truist
Financial Corp., Sr. Unsecd. Note, Series I, 4.680%, 4/23/2032 |
39,493
|
|
65,000
|
|
Truist
Financial Corp., Sr. Unsecd. Note, Series I, 4.964%, 10/23/2036 |
63,249
|
|
25,000
|
|
Truist
Financial Corp., Sr. Unsecd. Note, Series I, 5.281%, 4/23/2037 |
24,767
|
|
20,000
|
|
Truist
Financial Corp., Sr. Unsecd. Note, Series MTN, 5.122%, 1/26/2034 |
19,976
|
|
40,000
|
|
Truist
Financial Corp., Sr. Unsecd. Note, Series MTN, 5.867%, 6/8/2034 |
41,626
|
|
175,000
|
|
U.S.
Bancorp, 4.967%, 7/22/2033 |
173,450
|
|
100,000
|
|
Wells
Fargo & Co., Sr. Unsecd. Note, 4.960%, 1/23/2037 |
97,665
|
|
30,000
|
|
Wells
Fargo & Co., Sr. Unsecd. Note, 5.244%, 1/24/2031 |
30,415
|
|
75,000
|
|
Wells
Fargo & Co., Sr. Unsecd. Note, 5.499%, 1/23/2035 |
76,473
|
|
120,000
|
|
Wells
Fargo & Co., Sr. Unsecd. Note, 5.707%, 4/22/2028 |
121,096
|
|
100,000
|
|
Wells
Fargo & Co., Sr. Unsecd. Note, 6.491%, 10/23/2034 |
107,972
|
|
100,000
|
|
Wells
Fargo & Co., Sr. Unsecd. Note, Series MTN, 3.584%, 5/22/2028 |
99,176
|
|
|
|
TOTAL
|
6,069,258
|
|
|
|
Financial
Institution - Broker/Asset Mgr/Exchange—0.2% |
|
|
40,000
|
|
BlackRock,
Inc., Sr. Unsecd. Note, 4.750%, 5/25/2033 |
40,065
|
|
125,000
|
|
Jefferies
Financial Group, Inc., Sr. Unsecd. Note, 2.750%, 10/15/2032 |
106,855
|
|
50,000
|
|
Jefferies
Financial Group, Inc., Sr. Unsecd. Note, 5.125%, 4/28/2031 |
49,371
|
|
100,000
|
|
Raymond
James Financial, Inc., Sr. Unsecd. Note, 4.900%, 9/11/2035 |
97,556
|
|
|
|
TOTAL
|
293,847
|
|
|
|
Financial
Institution - Finance Companies—0.1% |
|
|
150,000
|
|
Aircastle
Ltd., Sr. Unsecd. Note, 144A, 5.000%, 5/15/2031 |
148,679
|
|
60,000
|
|
Takeoff
Merger Sub., Inc., Sr. Unsecd. Note, 144A, 4.500%, 3/24/2029 |
59,506
|
|
|
|
TOTAL
|
208,185
|
|
|
|
Financial
Institution - Insurance - Health—0.1% |
|
|
120,000
|
|
Elevance
Health, Inc., Sr. Unsecd. Note, 4.750%, 2/15/2033 |
118,318
|
|
50,000
|
|
Elevance
Health, Inc., Sr. Unsecd. Note, 5.700%, 2/15/2055 |
48,637
|
|
150,000
|
|
UnitedHealth
Group, Inc., Sr. Unsecd. Note, 3.050%, 5/15/2041 |
113,236
|
|
|
|
TOTAL
|
280,191
|
|
|
|
Financial
Institution - Insurance - Life—0.4% |
|
|
110,000
|
|
CoreBridge
Global Funding, Secured Note, 144A, 4.900%, 12/3/2029 |
110,062
|
|
65,000
|
|
Lincoln
National Corp., Sr. Unsecd. Note, 3.400%, 1/15/2031 |
61,126
|
|
100,000
|
|
Massachusetts
Mutual Life Insurance Co., Sub. Note, 144A, 4.900%, 4/1/2077 |
79,982
|
|
100,000
|
|
Northwestern
Mutual Life Insurance Co., Sub., 144A, 6.050%, 6/30/2056 |
101,839
|
|
50,000
|
|
Pacific
Life Global Funding II, Sr. Secd. Note, 144A, 4.900%, 1/11/2029 |
50,304
|
|
70,000
|
|
Pacific
Life Insurance Co., Sub. Note, 144A, 4.300%, 10/24/2067 |
55,537
|
|
120,000
|
|
Principal
Life Global Funding II, 144A, 1.625%, 11/19/2030 |
104,722
|
|
100,000
|
|
Prudential
Financial, Inc., Sr. Unsecd. Note, Series MTN, 4.600%, 5/15/2044 |
87,491
|
|
|
|
TOTAL
|
651,063
|
|
|
|
Financial
Institution - Insurance - P&C—0.4% |
|
|
130,000
|
|
Aon
North America, Inc., 5.750%, 3/1/2054 |
127,641
|
|
100,000
|
|
Chubb
INA Holdings LLC., Sr. Unsecd. Note, 1.375%, 9/15/2030 |
87,708
|
|
120,000
|
|
CNA
Financial Corp., Sr. Unsecd. Note, 5.500%, 6/15/2033 |
121,727
|
|
70,000
|
|
Marsh
& McLennan Cos., Inc., Sr. Unsecd. Note, 4.650%, 3/15/2030 |
69,959
|
Semi-Annual
Financial Statements and Additional Information
14
|
Shares,
Principal
Amount
or
Contracts |
|
|
Value
|
|
|
|
CORPORATE
BONDS—continued |
|
|
|
|
Financial
Institution - Insurance - P&C—continued |
|
|
$ 200,000
|
|
Nationwide
Mutual Insurance Co., Sub. Note, 144A, 9.375%, 8/15/2039 |
$ 259,543
|
|
60,000
|
|
The
Travelers Cos., Inc., Sr. Unsecd. Note, 5.450%, 5/25/2053 |
58,274
|
|
|
|
TOTAL
|
724,852
|
|
|
|
Financial
Institution - REIT - Apartment—0.2% |
|
|
135,000
|
|
Avalonbay
Communities, Inc., Sr. Unsecd. Note, Series MTN, 3.350%, 5/15/2027 |
133,978
|
|
125,000
|
|
Camden
Property Trust, Sr. Unsecd. Note, 4.900%, 1/15/2034 |
124,562
|
|
85,000
|
|
Mid-America
Apartment Communities LP, Sr. Unsecd. Note, 5.300%, 2/15/2032 |
86,908
|
|
100,000
|
|
UDR,
Inc., Sr. Unsecd. Note, Series GMTN, 3.500%, 1/15/2028 |
98,431
|
|
|
|
TOTAL
|
443,879
|
|
|
|
Financial
Institution - REIT - Healthcare—0.2% |
|
|
100,000
|
|
Healthcare
Trust of America, Sr. Unsecd. Note, 2.000%, 3/15/2031 |
87,384
|
|
125,000
|
|
Physicians
Realty Trust, Sr. Unsecd. Note, 3.950%, 1/15/2028 |
123,862
|
|
60,000
|
|
Welltower
OP LLC, Sr. Unsecd. Note, 5.125%, 7/1/2035 |
60,249
|
|
90,000
|
|
Welltower,
Inc., Sr. Unsecd. Note, 2.800%, 6/1/2031 |
82,571
|
|
|
|
TOTAL
|
354,066
|
|
|
|
Financial
Institution - REIT - Office—0.1% |
|
|
125,000
|
|
Alexandria
Real Estate Equities, Inc., Sr. Unsecd. Note, 1.875%, 2/1/2033 |
102,068
|
|
40,000
|
|
Piedmont
Operating Partnership, LP, Sr. Unsecd. Note, 2.750%, 4/1/2032 |
34,291
|
|
|
|
TOTAL
|
136,359
|
|
|
|
Financial
Institution - REIT - Other—0.1% |
|
|
150,000
|
|
WP
Carey, Inc., Sr. Unsecd. Note, 5.200%, 9/15/2036 |
148,086
|
|
|
|
Financial
Institution - REIT - Retail—0.2% |
|
|
125,000
|
|
Kimco
Realty Corp., Sr. Unsecd. Note, 6.400%, 3/1/2034 |
135,284
|
|
30,000
|
|
Phillips
Edison Grocery Center Operating Partnership I, LP, Sr. Unsecd. Note, 4.750%, 3/15/2033 |
29,460
|
|
120,000
|
|
Regency
Centers LP, Sr. Unsecd. Note, 4.125%, 3/15/2028 |
119,278
|
|
|
|
TOTAL
|
284,022
|
|
|
|
Technology—1.5%
|
|
|
115,000
|
|
Alphabet,
Inc., Sr. Unsecd. Note, 2.050%, 8/15/2050 |
61,460
|
|
15,000
|
|
Alphabet,
Inc., Sr. Unsecd. Note, 4.100%, 2/15/2031 |
14,742
|
|
40,000
|
|
Alphabet,
Inc., Sr. Unsecd. Note, 4.800%, 2/15/2036 |
39,337
|
|
25,000
|
|
Alphabet,
Inc., Sr. Unsecd. Note, 5.650%, 2/15/2056 |
24,685
|
|
215,000
|
|
Apple,
Inc., Sr. Unsecd. Note, 2.375%, 2/8/2041 |
152,145
|
|
65,000
|
|
Apple,
Inc., Sr. Unsecd. Note, 2.400%, 8/20/2050 |
37,602
|
|
80,000
|
|
Apple,
Inc., Sr. Unsecd. Note, 4.000%, 5/10/2028 |
79,713
|
|
60,000
|
|
Autodesk,
Inc., Sr. Unsecd. Note, 5.300%, 6/15/2035 |
60,053
|
|
20,000
|
|
Broadcom,
Inc., Sr. Unsecd. Note, 4.150%, 11/15/2030 |
19,583
|
|
80,000
|
|
Broadcom,
Inc., Sr. Unsecd. Note, 144A, 3.187%, 11/15/2036 |
67,057
|
|
65,000
|
|
CDW
LLC/ CDW Finance Corp., Sr. Unsecd. Note, 5.550%, 8/22/2034 |
64,207
|
|
75,000
|
|
Cisco
Systems, Inc., Sr. Unsecd. Note, 4.750%, 2/24/2030 |
75,668
|
|
75,000
|
|
Cisco
Systems, Inc., Sr. Unsecd. Note, 4.800%, 2/26/2027 |
75,277
|
|
65,000
|
|
Dell
International LLC / EMC Corp., Sr. Unsecd. Note, 5.000%, 4/1/2030 |
65,564
|
|
60,000
|
|
Dell
International LLC / EMC Corp., Sr. Unsecd. Note, 5.100%, 2/15/2036 |
59,163
|
|
155,000
|
|
Fidelity
National Information Services, Inc., Sr. Unsecd. Note, 4.550%, 3/10/2029 |
153,831
|
|
125,000
|
|
Fiserv,
Inc., Sr. Unsecd. Note, 3.500%, 7/1/2029 |
120,000
|
|
150,000
|
|
Global
Payments, Inc., Sr. Unsecd. Note, 5.550%, 11/15/2035 |
145,482
|
|
45,000
|
|
Hewlett
Packard Enterprise Co., 5.600%, 10/15/2054 |
41,745
|
|
75,000
|
|
Hewlett
Packard Enterprise Co., Sr. Unsecd. Note, 4.400%, 10/15/2030 |
73,651
|
|
50,000
|
|
Hewlett
Packard Enterprise Co., Sr. Unsecd. Note, 5.000%, 10/15/2034 |
49,005
|
|
20,000
|
|
Hewlett
Packard Enterprise Co., Sr. Unsecd. Note, 5.250%, 4/1/2033 |
20,067
|
Semi-Annual
Financial Statements and Additional Information
15
|
Shares,
Principal
Amount
or
Contracts |
|
|
Value
|
|
|
|
CORPORATE
BONDS—continued |
|
|
|
|
Technology—continued
|
|
|
$ 80,000
|
|
Intel
Corp., Sr. Unsecd. Note, 4.650%, 6/1/2031 |
$ 79,249
|
|
75,000
|
|
Intel
Corp., Sr. Unsecd. Note, 5.300%, 5/15/2036 |
74,659
|
|
60,000
|
|
Keysight
Technologies, Inc., Sr. Unsecd. Note, 4.950%, 10/15/2034 |
59,367
|
|
65,000
|
|
Keysight
Technologies, Inc., Sr. Unsecd. Note, 5.350%, 7/30/2030 |
66,257
|
|
100,000
|
|
Lam
Research Corp., Sr. Unsecd. Note, 4.000%, 3/15/2029 |
98,916
|
|
65,000
|
|
Microsoft
Corp., Sr. Unsecd. Note, 2.525%, 6/1/2050 |
38,683
|
|
105,000
|
|
Oracle
Corp., Sr. Unsecd. Note, 5.200%, 9/26/2035 |
98,345
|
|
105,000
|
|
Oracle
Corp., Sr. Unsecd. Note, 5.375%, 9/27/2054 |
82,422
|
|
125,000
|
|
Oracle
Corp., Sr. Unsecd. Note, 5.700%, 2/4/2036 |
121,101
|
|
20,000
|
|
Oracle
Corp., Sr. Unsecd. Note, 5.950%, 9/26/2055 |
17,007
|
|
80,000
|
|
Oracle
Corp., Sr. Unsecd. Note, 6.700%, 2/4/2056 |
75,343
|
|
125,000
|
|
Roper
Technologies, Inc., Sr. Unsecd. Note, 4.900%, 10/15/2034 |
120,852
|
|
60,000
|
|
Trimble,
Inc., Sr. Unsecd. Note, 6.100%, 3/15/2033 |
62,672
|
|
120,000
|
|
Verisign,
Inc., Sr. Unsecd. Note, 2.700%, 6/15/2031 |
107,807
|
|
130,000
|
|
Verisk
Analytics, Inc., Sr. Unsecd. Note, 4.125%, 3/15/2029 |
128,449
|
|
40,000
|
|
VMware,
Inc., Sr. Unsecd. Note, 1.400%, 8/15/2026 |
39,849
|
|
50,000
|
|
VMware,
Inc., Sr. Unsecd. Note, 2.200%, 8/15/2031 |
44,047
|
|
|
|
TOTAL
|
2,815,062
|
|
|
|
Transportation
- Railroads—0.2% |
|
|
90,000
|
3
|
Burlington
Northern Santa Fe LLC, Sr. Unsecd. Note, 5.200% (180-DAY AVERAGE SOFR +0.000%), 4/15/2054 |
83,835
|
|
135,000
|
|
Canadian
Pacific Railway Co., Sr. Unsecd. Note, 3.500%, 5/1/2050 |
96,102
|
|
65,000
|
|
Union
Pacific Corp., Sr. Unsecd. Note, 2.375%, 5/20/2031 |
58,715
|
|
125,000
|
|
Union
Pacific Corp., Sr. Unsecd. Note, 2.400%, 2/5/2030 |
116,264
|
|
|
|
TOTAL
|
354,916
|
|
|
|
Transportation
- Services—0.1% |
|
|
75,000
|
|
Enterprise
Rent-A-Car USA Finance Co., Sr. Unsecd. Note, 144A, 4.700%, 4/30/2031 |
74,794
|
|
65,000
|
|
Enterprise
Rent-A-Car USA Finance Co., Sr. Unsecd. Note, 144A, 4.900%, 5/1/2033 |
64,537
|
|
80,000
|
|
FedEx
Corp., Sr. Unsecd. Note, 3.250%, 5/15/2041 |
62,797
|
|
75,000
|
|
Ryder
System, Inc., Sr. Unsecd. Note, Series MTN, 2.850%, 3/1/2027 |
74,220
|
|
|
|
TOTAL
|
276,348
|
|
|
|
Utility
- Electric—1.1% |
|
|
165,000
|
|
Ameren
Corp., Sr. Unsecd. Note, 1.750%, 3/15/2028 |
157,339
|
|
100,000
|
|
Black
Hills Corp., Sr. Unsecd. Note, 2.500%, 6/15/2030 |
91,471
|
|
75,000
|
|
Constellation
Energy Generation LLC, Sr. Unsecd. Note, 5.800%, 3/1/2033 |
78,308
|
|
25,000
|
|
Constellation
Energy Generation LLC, Sr. Unsecd. Note, 6.500%, 10/1/2053 |
26,843
|
|
125,000
|
|
Duke
Energy Corp., Sr. Unsecd. Note, 2.650%, 9/1/2026 |
124,656
|
|
125,000
|
|
Duke
Energy Corp., Sr. Unsecd. Note, 3.750%, 9/1/2046 |
93,870
|
|
100,000
|
|
Duke
Energy Corp., Sr. Unsecd. Note, 5.700%, 9/15/2055 |
96,292
|
|
50,000
|
|
Emera
US Finance LP, Sr. Unsecd. Note, 4.750%, 6/15/2046 |
42,735
|
|
50,000
|
|
Emera
US Finance, LLC, Sr. Unsecd. Note, 4.500%, 4/1/2029 |
49,666
|
|
50,000
|
|
Emera
US Finance, LLC, Sr. Unsecd. Note, 5.200%, 4/1/2033 |
49,803
|
|
100,000
|
|
Enel
Finance International NV, Co. Guarantee, 144A, 6.000%, 10/7/2039 |
102,226
|
|
190,000
|
|
Evergy
Metro, Inc., Sr. Unsecd. Note, 4.200%, 3/15/2048 |
152,987
|
|
25,000
|
|
Exelon
Corp., Sr. Unsecd. Note, 4.100%, 3/15/2052 |
19,161
|
|
125,000
|
|
Exelon
Corp., Sr. Unsecd. Note, 4.700%, 4/15/2050 |
105,157
|
|
120,000
|
|
FirstEnergy
Transmission LLC, Sr. Unsecd. Note, 144A, 4.550%, 4/1/2049 |
100,548
|
|
93,000
|
|
Fortis,
Inc. / Canada, Sr. Unsecd. Note, 3.055%, 10/4/2026 |
92,659
|
|
235,000
|
|
NextEra
Energy Capital Holdings, Inc., Sr. Unsecd. Note, 2.250%, 6/1/2030 |
214,427
|
|
75,000
|
|
NextEra
Energy Capital Holdings, Inc., Sr. Unsecd. Note, 5.050%, 3/15/2030 |
75,987
|
Semi-Annual
Financial Statements and Additional Information
16
|
Shares,
Principal
Amount
or
Contracts |
|
|
Value
|
|
|
|
CORPORATE
BONDS—continued |
|
|
|
|
Utility
- Electric—continued |
|
|
$ 80,000
|
|
NiSource,
Inc., Sr. Unsecd. Note, 4.375%, 5/15/2047 |
$ 65,884
|
|
10,000
|
|
NiSource,
Inc., Sr. Unsecd. Note, 5.250%, 3/30/2028 |
10,114
|
|
125,000
|
|
Puget
Energy, Inc., Sec. Fac. Bond, 2.379%, 6/15/2028 |
119,502
|
|
185,000
|
|
Southwestern
Electric Power Co., Sr. Unsecd. Note, 5.900%, 4/1/2056 |
182,812
|
|
20,000
|
|
WEC
Energy Group, Inc., Sr. Unsecd. Note, 5.150%, 10/1/2027 |
20,147
|
|
|
|
TOTAL
|
2,072,594
|
|
|
|
Utility
- Natural Gas—0.1% |
|
|
155,000
|
|
Sempra
Energy, Sr. Unsecd. Note, 3.700%, 4/1/2029 |
151,308
|
|
|
|
TOTAL
CORPORATE BONDS
(IDENTIFIED
COST $27,640,221) |
26,742,992
|
|
|
|
REPURCHASE
AGREEMENT—3.4% |
|
|
6,285,000
|
|
Interest
in $584,000,000 joint repurchase agreement 3.65%, dated 6/30/2026 under which Bank of America, N.A. will
repurchase
securities provided as collateral for $584,059,211 on 7/1/2026. The securities provided as collateral at the end of
the
period held with BNY Mellon as tri-party agent, were U.S. Government Agency securities with various maturities to
12/1/2047
and the market value of those underlying securities was $595,740,395.
(IDENTIFIED
COST $6,285,000) |
6,285,000
|
|
|
|
COMMERCIAL
MORTGAGE-BACKED SECURITIES—0.5% |
|
|
|
|
Commercial
Mortgage—0.4% |
|
|
110,000
|
|
Bank
2022-BNK40, Class A4, 3.502%, 3/15/2064 |
101,772
|
|
85,000
|
|
Bank,
Class A4, 3.488%, 11/15/2050 |
82,855
|
|
250,000
|
|
Barclays
Commercial Mortgage S 2026-5C42, Class A2, 5.114%, 7/15/2033 |
252,039
|
|
200,000
|
|
Benchmark
Mortgage Trust 2020-B19, Class A5, 1.850%, 9/15/2053 |
177,747
|
|
16,036
|
|
Commercial
Mortgage Trust 2015-DC1, Class AM, 3.724%, 2/10/2048 |
15,748
|
|
80,048
|
|
JPMDB
Commercial Mortgage Securities Trust 2016-C4, Class A3, 3.141%, 12/15/2049 |
79,368
|
|
|
|
TOTAL
|
709,529
|
|
|
|
Federal
Home Loan Mortgage Corporation—0.1% |
|
|
159,528
|
|
FHLMC
REMIC, Series K105, Class A1, 1.536%, 9/25/2029 |
151,600
|
|
|
|
TOTAL
COMMERCIAL MORTGAGE-BACKED SECURITIES
(IDENTIFIED
COST $915,210) |
861,129
|
|
|
|
FOREIGN
GOVERNMENTS/AGENCIES—0.2% |
|
|
|
|
Sovereign—0.2%
|
|
|
300,000
|
|
Mexico,
Government of, Series 10, 5.625%, 9/22/2035 |
291,450
|
|
100,000
|
|
Peru,
Government of, Sr. Unsecd. Note, 5.500%, 3/30/2036 |
100,965
|
|
|
|
TOTAL
FOREIGN GOVERNMENTS/AGENCIES
(IDENTIFIED
COST $394,872) |
392,415
|
|
|
|
MORTGAGE-BACKED
SECURITIES—0.0% |
|
|
|
|
Government
National Mortgage Association—0.0% |
|
|
1,132
|
|
Government
National Mortgage Association, Pool 2796, 7.000%, 8/20/2029 |
1,166
|
|
855
|
|
Government
National Mortgage Association, Pool 3040, 7.000%, 2/20/2031 |
881
|
|
2,696
|
|
Government
National Mortgage Association, Pool 3188, 6.500%, 1/20/2032 |
2,795
|
|
3,590
|
|
Government
National Mortgage Association, Pool 3239, 6.500%, 5/20/2032 |
3,722
|
|
|
|
TOTAL
MORTGAGE-BACKED SECURITIES
(IDENTIFIED
COST $8,248) |
8,564
|
|
|
|
ADJUSTABLE
RATE MORTGAGE—0.0% |
|
|
|
|
Federal
National Mortgage Association—0.0% |
|
|
1,320
|
3
|
Federal
National Mortgage Association ARM, 6.594%, 9/1/2037
(IDENTIFIED
COST $1,322) |
1,374
|
|
|
|
PURCHASED
PUT OPTIONS—0.1% |
|
|
40,000
|
|
State
Street SPDR S&P 500 ETF Trust (PUT-Option), Exercise Price $740, Notional Amount $29,870,800, Expiration
Date
7/2/2026 |
36,420
|
|
60,000
|
|
State
Street SPDR S&P 500 ETF Trust (PUT-Option), Exercise Price $720, Notional Amount $44,806,200, Expiration
Date
7/10/2026 |
53,700
|
Semi-Annual
Financial Statements and Additional Information
17
|
Shares,
Principal
Amount
or
Contracts |
|
|
Value
|
|
|
|
PURCHASED
PUT OPTIONS—continued
|
|
|
60,000
|
|
State
Street SPDR S&P 500 ETF Trust (PUT-Option), Exercise Price $730, Notional Amount $44,806,200, Expiration
Date
7/2/2026 |
$ 18,900
|
|
|
|
TOTAL
PURCHASED PUT OPTIONS
(IDENTIFIED
COST $220,948) |
109,020
|
|
|
|
INVESTMENT
COMPANIES—17.9% |
|
|
36,480
|
|
Bank
Loan Core Fund |
304,613
|
|
195,698
|
|
Emerging
Markets Core Fund |
1,794,548
|
|
527,578
|
|
Federated
Hermes High Income Bond Fund II, Class P |
2,827,816
|
|
1,235
|
|
Federated
Hermes Short-Intermediate Government Fund, Institutional Shares |
11,915
|
|
2,443,295
|
|
Mortgage
Core Fund |
20,450,384
|
|
807,435
|
|
Project
and Trade Finance Core Fund |
7,226,546
|
|
|
|
TOTAL
INVESTMENT COMPANIES
(IDENTIFIED
COST $32,155,489) |
32,615,822
|
|
|
|
TOTAL
INVESTMENT IN SECURITIES—99.6%
(IDENTIFIED
COST $168,033,870)4
|
181,989,292
|
|
|
|
OTHER
ASSETS AND LIABILITIES - NET—0.4%5
|
690,548
|
|
|
|
NET
ASSETS—100% |
$182,679,840
|
At June 30, 2026, the Fund had the following
outstanding futures contracts:
|
Description
|
Number
of
Contracts
|
Notional
Value
|
Expiration
Date
|
Value
and
Unrealized
Appreciation
(Depreciation)
|
|
Long
Futures: |
|
|
|
|
|
S&P
500 E-Mini Long Futures |
140
|
$52,837,750
|
September
2026 |
$(362,212)
|
|
United
States Treasury Notes 2-Year Long Futures |
27
|
$5,565,586
|
September
2026 |
$(6,993)
|
|
United
States Treasury Notes 5-Year Long Futures |
49
|
$5,245,297
|
September
2026 |
$3,137
|
|
United
States Treasury Notes 10-Year Ultra Long Futures |
5
|
$562,344
|
September
2026 |
$(2,121)
|
|
Short
Futures: |
|
|
|
|
|
United
States Treasury Notes 10-Year Short Futures |
100
|
$10,989,063
|
September
2026 |
$(25,511)
|
|
United
States Treasury Ultra Bond Short Futures |
5
|
$580,781
|
September
2026 |
$3,988
|
|
NET
UNREALIZED DEPRECIATION ON FUTURES CONTRACTS |
$(389,712)
| |||
Net Unrealized Depreciation on Futures Contracts
is included in “Other Assets and Liabilities—Net.”
Affiliated fund holdings are investment
companies which are managed by Federated Investment Management Company and Federated Equity
Management Company of Pennsylvania (collectively, the “Co-Advisers”) or an affiliate of the Co-Advisers. Transactions with
affiliated fund holdings during the period ended June 30, 2026,
were as follows:
|
Affiliates
|
Value
as of
12/31/2025
|
Purchases
at
Cost |
Proceeds
from
Sales |
Change
in
Unrealized
Appreciation/
Depreciation
|
Net
Realized
Gain/
(Loss)
|
Value
as of
6/30/2026
|
Shares
Held
as of
6/30/2026
|
Dividend
Income
|
|
Bank
Loan Core Fund |
$1,006,210
|
$21,680
|
$(700,000)
|
$(8,404)
|
$(14,873)
|
$304,613
|
36,480
|
$21,680
|
|
Emerging
Markets Core Fund |
$1,717,623
|
$59,205
|
$—
|
$17,720
|
$—
|
$1,794,548
|
195,698
|
$59,227
|
|
Federated
Hermes High Income Bond Fund II, Class P |
$2,789,101
|
$235,529
|
$—
|
$(196,814)
|
$—
|
$2,827,816
|
527,578
|
$235,529
|
|
Federated
Hermes Short-Intermediate Government
Fund,
Institutional Shares |
$11,904
|
$207
|
$—
|
$(196)
|
$—
|
$11,915
|
1,235
|
$243
|
|
Mortgage
Core Fund |
$20,210,080
|
$507,181
|
$—
|
$(266,877)
|
$—
|
$20,450,384
|
2,443,295
|
$507,182
|
|
Project
and Trade Finance Core Fund |
$6,992,318
|
$210,339
|
$—
|
$23,889
|
$—
|
$7,226,546
|
807,435
|
$210,383
|
|
TOTAL
OF AFFILIATED TRANSACTIONS |
$32,727,236
|
$1,034,141
|
$(700,000)
|
$(430,682)
|
$(14,873)
|
$32,615,822
|
4,011,721
|
$1,034,244
|
Semi-Annual
Financial Statements and Additional Information
18
|
1
|
Non-income-producing
security. |
|
2
|
Market
quotations and price evaluations are not available. Fair value determined using significant unobservable inputs in accordance with procedures
established
by
and under the general supervision of the Fund’s Adviser acting through its Valuation Committee. |
|
3
|
Floating/adjustable
note with current rate and current maturity or next reset date shown. Adjustable rate mortgage security coupons are based on the weighted
average
note rates of the underlying mortgages less the guarantee and servicing fees and do not indicate an index and spread in their description
above. |
|
4
|
The
cost of investments for federal tax purposes amounts to $167,867,942. |
|
5
|
Assets,
other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
Note: The categories of investments are
shown as a percentage of net assets at June 30, 2026.
Various inputs are used in determining the
value of the Fund’s investments. These inputs are summarized in the three broad levels listed
below:
Level 1—quoted prices in active markets
for identical securities.
Level 2—other significant observable
inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk,
etc.). Also includes securities valued at amortized cost.
Level 3—significant unobservable inputs
(including the Fund’s own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing
securities are not an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used, as of June 30, 2026, 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
|
|
Equity
Securities: |
|
|
|
|
|
Common
Stocks |
|
|
|
|
|
Domestic
|
$74,204,943
|
$—
|
$1,022
|
$74,205,965
|
|
International
|
2,592,244
|
2,400,612
|
—
|
4,992,856
|
|
Debt
Securities: |
|
|
|
|
|
U.S.
Treasuries |
—
|
35,774,155
|
—
|
35,774,155
|
|
Corporate
Bonds |
—
|
26,742,992
|
—
|
26,742,992
|
|
Commercial
Mortgage-Backed Securities |
—
|
861,129
|
—
|
861,129
|
|
Foreign
Governments/Agencies |
—
|
392,415
|
—
|
392,415
|
|
Mortgage-Backed
Securities |
—
|
8,564
|
—
|
8,564
|
|
Adjustable
Rate Mortgage |
—
|
1,374
|
—
|
1,374
|
|
Purchased
Put Options |
109,020
|
—
|
—
|
109,020
|
|
Investment
Companies |
25,389,276
|
—
|
—
|
25,389,276
|
|
Other
Investments1
|
—
|
—
|
—
|
7,226,546
|
|
Repurchase
Agreement |
—
|
6,285,000
|
—
|
6,285,000
|
|
TOTAL
SECURITIES |
$102,295,483
|
$72,466,241
|
$1,022
|
$181,989,292
|
|
Other
Financial Instruments:2
|
|
|
|
|
|
Assets
|
$7,125
|
$—
|
$—
|
$7,125
|
|
Liabilities
|
(396,837)
|
—
|
—
|
(396,837)
|
|
TOTAL
OTHER FINANCIAL INSTRUMENTS |
$(389,712)
|
$—
|
$—
|
$(389,712)
|
|
1
|
As
permitted by U.S. generally accepted accounting principles (GAAP), an Investment Company valued at $7,226,546 is measured at fair value
using the net asset
value
(NAV) per share practical expedient and has not been categorized in the fair value hierarchy chart above. The price of shares redeemed
of Project and Trade
Finance
Core Fund (PTCORE), a portfolio of Federated Hermes Core Trust III, may be determined as of the closing NAV of the fund up to twenty-four
days after
receipt
of a shareholder redemption request. The investment objective of PTCORE is to provide total return. Copies of the PTCORE financial statements
are
available
on the EDGAR database on the SEC’s website or upon request from the Fund. |
|
2
|
Other
financial instruments are futures contracts. |
Semi-Annual
Financial Statements and Additional Information
19
|
The
following acronym(s) are used throughout this portfolio: |
| |
|
ADR
|
—American
Depositary Receipt | |
|
ARM
|
—Adjustable
Rate Mortgage | |
|
ETF
|
—Exchange-Traded
Fund | |
|
FHLMC
|
—Federal
Home Loan Mortgage Corporation | |
|
GMTN
|
—Global
Medium Term Note | |
|
MTN
|
—Medium
Term Note | |
|
REIT
|
—Real
Estate Investment Trust | |
|
REMIC
|
—Real
Estate Mortgage Investment Conduit | |
|
SOFR
|
—Secured
Overnight Financing Rate | |
|
SPDR
|
—Standard
& Poor’s Depositary Receipt | |
See Notes which are an integral part of
the Financial Statements
Semi-Annual
Financial Statements and Additional Information
20
Financial
Highlights–Primary
Shares
(For a Share Outstanding Throughout Each
Period)
|
|
Six
Months
Ended
(unaudited)
6/30/2026
|
Year Ended December 31,
| ||||
|
|
2025
|
2024
|
2023
|
2022
|
2021
| |
|
Net Asset
Value, Beginning of Period |
$10.39
|
$10.19
|
$9.02
|
$8.46
|
$12.90
|
$11.09
|
|
Income
From Investment Operations: |
|
|
|
|
|
|
|
Net
investment income (loss)1
|
0.13
|
0.24
|
0.25
|
0.20
|
0.16
|
0.19
|
|
Net
realized and unrealized gain (loss) |
0.64
|
0.43
|
1.13
|
0.52
|
(1.72)
|
1.83
|
|
Total
From Investment Operations |
0.77
|
0.67
|
1.38
|
0.72
|
(1.56)
|
2.02
|
|
Less Distributions:
|
|
|
|
|
|
|
|
Distributions
from net investment income |
(0.28)
|
(0.29)
|
(0.21)
|
(0.16)
|
(0.21)
|
(0.21)
|
|
Distributions
from net realized gain |
—
|
(0.18)
|
—
|
—
|
(2.67)
|
—
|
|
Total
Distributions |
(0.28)
|
(0.47)
|
(0.21)
|
(0.16)
|
(2.88)
|
(0.21)
|
|
Net
Asset Value, End of Period |
$10.88
|
$10.39
|
$10.19
|
$9.02
|
$8.46
|
$12.90
|
|
Total
Return2
|
7.65%
|
6.93%
|
15.56%
|
8.68%
|
(13.75)%
|
18.51%
|
|
Ratios
to Average Net Assets: |
|
|
|
|
|
|
|
Net
expenses3
|
0.95%4
|
0.95%
|
0.98%
|
0.95%
|
0.95%
|
0.93%
|
|
Net
investment income |
2.51%4
|
2.42%
|
2.55%
|
2.39%
|
1.72%
|
1.58%
|
|
Expense
waiver/reimbursement5
|
0.13%4
|
0.14%
|
0.12%
|
0.13%
|
0.11%
|
0.02%
|
|
Supplemental
Data: |
|
|
|
|
|
|
|
Net
assets, end of period (000 omitted) |
$181,000
|
$176,017
|
$185,398
|
$174,228
|
$173,194
|
$217,682
|
|
Portfolio
turnover6
|
37%
|
60%
|
69%
|
47%
|
51%
|
60%
|
|
1
|
Per
share numbers have been calculated using the average shares method. |
|
2
|
Based
on net asset value. Total returns do not reflect any additional fees or expenses that may be imposed by separate accounts of insurance
companies or in
connection
with any variable annuity or variable life insurance contract. Total returns for periods of less than one year are not annualized.
|
|
3
|
Amount
does not reflect net expenses incurred by investment companies in which the Fund may invest. |
|
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. Amount does not reflect expense
waiver/
reimbursement
recorded by investment companies in which the Fund may invest. |
|
6
|
Securities
that mature are considered sales for purposes of this calculation. |
See Notes which are an integral part of
the Financial Statements
Semi-Annual
Financial Statements and Additional Information
21
Financial
Highlights–Service
Shares
(For a Share Outstanding Throughout Each
Period)
|
|
Six
Months
Ended
(unaudited)
6/30/2026
|
Year Ended December 31,
| ||||
|
|
2025
|
2024
|
2023
|
2022
|
2021
| |
|
Net Asset
Value, Beginning of Period |
$10.61
|
$10.41
|
$9.20
|
$8.63
|
$12.90
|
$11.09
|
|
Income
From Investment Operations: |
|
|
|
|
|
|
|
Net
investment income (loss)1
|
0.12
|
0.22
|
0.23
|
0.19
|
0.14
|
0.16
|
|
Net
realized and unrealized gain (loss) |
0.66
|
0.43
|
1.17
|
0.52
|
(1.74)
|
1.84
|
|
Total
From Investment Operations |
0.78
|
0.65
|
1.40
|
0.71
|
(1.60)
|
2.00
|
|
Less Distributions:
|
|
|
|
|
|
|
|
Distributions
from net investment income |
(0.25)
|
(0.27)
|
(0.19)
|
(0.14)
|
—
|
(0.19)
|
|
Distributions
from net realized gain |
—
|
(0.18)
|
—
|
—
|
(2.67)
|
—
|
|
Total
Distributions |
(0.25)
|
(0.45)
|
(0.19)
|
(0.14)
|
(2.67)
|
(0.19)
|
|
Net
Asset Value, End of Period |
$11.14
|
$10.61
|
$10.41
|
$9.20
|
$8.63
|
$12.90
|
|
Total
Return2
|
7.60%
|
6.53%
|
15.41%
|
8.33%
|
(14.00)%
|
18.25%
|
|
Ratios
to Average Net Assets: |
|
|
|
|
|
|
|
Net
expenses3
|
1.20%4
|
1.20%
|
1.23%
|
1.20%
|
1.20%
|
1.16%
|
|
Net
investment income |
2.27%4
|
2.17%
|
2.30%
|
2.14%
|
1.47%
|
1.38%
|
|
Expense
waiver/reimbursement5
|
0.13%4
|
0.14%
|
0.12%
|
0.13%
|
0.11%
|
0.02%
|
|
Supplemental
Data: |
|
|
|
|
|
|
|
Net
assets, end of period (000 omitted) |
$1,680
|
$1,726
|
$1,523
|
$1,581
|
$1,576
|
$1,949
|
|
Portfolio
turnover6
|
37%
|
60%
|
69%
|
47%
|
51%
|
60%
|
|
1
|
Per
share numbers have been calculated using the average shares method. |
|
2
|
Based
on net asset value. Total returns do not reflect any additional fees or expenses that may be imposed by separate accounts of insurance
companies or in
connection
with any variable annuity or variable life insurance contract. Total returns for periods of less than one year are not annualized.
|
|
3
|
Amount
does not reflect net expenses incurred by investment companies in which the Fund may invest. |
|
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. Amount does not reflect expense
waiver/
reimbursement
recorded by investment companies in which the Fund may invest. |
|
6
|
Securities
that mature are considered sales for purposes of this calculation. |
See Notes which are an integral part of
the Financial Statements
Semi-Annual
Financial Statements and Additional Information
22
Statement
of Assets and Liabilities
June 30, 2026 (unaudited)
|
Assets:
|
|
|
Investment
in securities, at value including $32,615,822 of investments in affiliated holdings* (identified
cost $168,033,870, including
$32,155,489
of identified cost in affiliated holdings) |
$181,989,292
|
|
Cash
|
32,352
|
|
Cash
denominated in foreign currencies (identified cost $3,084) |
3,085
|
|
Due
from broker (Note 2)
|
1,999
|
|
Income
receivable |
768,635
|
|
Income
receivable from affiliated holdings |
128,330
|
|
Receivable
for investments sold |
114,187
|
|
Receivable
for shares sold |
10,797
|
|
Receivable
for variation margin on futures contracts |
355,156
|
|
Total
Assets |
183,403,833
|
|
Liabilities:
|
|
|
Payable
for investments purchased |
569,931
|
|
Payable
for shares redeemed |
29,059
|
|
Payable
for investment adviser fee (Note 5)
|
3,117
|
|
Payable
for administrative fee (Note 5)
|
729
|
|
Payable
for auditing fees |
20,570
|
|
Payable
for portfolio accounting fees |
70,301
|
|
Payable
for distribution services fee (Note 5)
|
366
|
|
Accrued
expenses (Note 5)
|
29,920
|
|
Total
Liabilities |
723,993
|
|
Net
assets for 16,787,499 shares outstanding |
$182,679,840
|
|
Net Assets
Consist of: |
|
|
Paid-in
capital |
$154,393,400
|
|
Total
distributable earnings (loss) |
28,286,440
|
|
Net
Assets |
$182,679,840
|
|
Net Asset
Value, Offering Price and Redemption Proceeds Per Share: |
|
|
Primary
Shares: |
|
|
$180,999,923
÷ 16,636,675 shares outstanding, no par value, unlimited shares authorized |
$10.88
|
|
Service
Shares: |
|
|
$1,679,917
÷ 150,824 shares outstanding, no par value, unlimited shares authorized |
$11.14
|
|
*
|
See
information listed after the Fund’s Portfolio of Investments. |
See Notes which are an integral part of
the Financial Statements
Semi-Annual
Financial Statements and Additional Information
23
Statement
of Operations
Six Months Ended June
30, 2026 (unaudited)
|
Investment
Income: |
|
|
Dividends
(including $1,034,244 received from affiliated holdings* and net of foreign taxes withheld of $9,208) |
$1,692,643
|
|
Interest
|
1,369,667
|
|
TOTAL
INCOME |
3,062,310
|
|
Expenses:
|
|
|
Investment
adviser fee (Note 5)
|
662,367
|
|
Administrative
fee (Note 5)
|
136,630
|
|
Custodian
fees |
20,149
|
|
Transfer
agent fees |
8,555
|
|
Directors’/Trustees’
fees (Note 5)
|
1,095
|
|
Auditing
fees |
20,571
|
|
Legal
fees |
5,801
|
|
Portfolio
accounting fees |
69,595
|
|
Distribution
services fee (Note 5)
|
2,196
|
|
Printing
and postage |
20,848
|
|
Miscellaneous
(Note 5)
|
14,815
|
|
TOTAL
EXPENSES |
962,622
|
|
Waiver
and Reimbursement: |
|
|
Waiver/reimbursement
of investment adviser fee (Note 5) |
(117,101)
|
|
Net
expenses |
845,521
|
|
Net
investment income |
2,216,789
|
|
Realized
and Unrealized Gain (Loss) on Investments, Foreign Currency Transactions and Futures Contracts: |
|
|
Net
realized gain on investments (including net realized loss of $(14,873) on sales of investments in affiliated holdings*) |
12,850,485
|
|
Net
realized loss on foreign currency transactions |
(898)
|
|
Net
realized gain on futures contracts |
2,488,808
|
|
Net
change in unrealized appreciation of investments (including net change in unrealized appreciation of $(430,682) on investments in affiliated
holdings*)
|
(3,469,920)
|
|
Net
change in unrealized appreciation of futures contracts |
(829,550)
|
|
Net
realized and unrealized gain (loss) on investments, foreign currency transactions and futures contracts |
11,038,925
|
|
Change
in net assets resulting from operations |
$13,255,714
|
|
*
|
See
information listed after the Fund’s Portfolio of Investments. |
See Notes which are an integral part of
the Financial Statements
Semi-Annual
Financial Statements and Additional Information
24
Statement
of Changes in Net Assets
|
|
Six
Months
Ended
(unaudited)
6/30/2026
|
Year
Ended
12/31/2025
|
|
Increase
(Decrease) in Net Assets |
|
|
|
Operations:
|
|
|
|
Net
investment income |
$2,216,789
|
$4,321,632
|
|
Net
realized gain (loss) |
15,338,395
|
(3,296,017)
|
|
Net
change in unrealized appreciation/depreciation |
(4,299,470)
|
10,589,159
|
|
CHANGE
IN NET ASSETS RESULTING FROM OPERATIONS |
13,255,714
|
11,614,774
|
|
Distributions
to Shareholders: |
|
|
|
Primary
Shares |
(4,577,268)
|
(8,402,350)
|
|
Service
Shares |
(41,398)
|
(72,878)
|
|
CHANGE
IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS |
(4,618,666)
|
(8,475,228)
|
|
Share Transactions:
|
|
|
|
Proceeds
from sale of shares |
1,280,970
|
3,689,363
|
|
Net
asset value of shares issued to shareholders in payment of distributions declared |
4,618,664
|
8,475,223
|
|
Cost
of shares redeemed |
(9,600,196)
|
(24,481,688)
|
|
CHANGE
IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS |
(3,700,562)
|
(12,317,102)
|
|
Change
in net assets |
4,936,486
|
(9,177,556)
|
|
Net Assets:
|
|
|
|
Beginning
of period |
177,743,354
|
186,920,910
|
|
End
of period |
$182,679,840
|
$177,743,354
|
See Notes which are an integral part of
the Financial Statements
Semi-Annual
Financial Statements and Additional Information
25
Notes to
Financial Statements
June 30, 2026 (unaudited)
1. ORGANIZATION
Federated Hermes Insurance Series (the “Trust”)
is registered under the Investment Company Act of 1940, as amended (the “Act”), as an
open-end management investment company. The Trust consists of six portfolios. The financial statements included herein are only those
of Federated Hermes Managed Volatility Fund II (the “Fund”), a diversified portfolio. The financial statements of the other
portfolios are presented separately. The assets of each portfolio
are segregated and a shareholder’s interest is limited to the portfolio in which
shares are held. Each portfolio pays its own expenses. The Fund offers two classes of shares: Primary Shares and Service Shares. All
shares of the Fund have equal rights with respect to voting, except on class-specific matters. Fund shares are available exclusively as
a funding vehicle for life insurance companies writing variable
life insurance policies and variable annuity contracts. The investment objective
of the Fund is to achieve high current income and moderate capital appreciation. The Co-Advisers each are registered as a “commodity
pool operator” with respect to operation of the Fund.
2. SIGNIFICANT
ACCOUNTING POLICIES
The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of its financial statements.
These policies are in conformity with U.S. generally accepted accounting principles (GAAP).
Investment Valuation
In
calculating its net asset value (NAV), the Fund generally values investments as follows:
■
Equity
securities listed on an exchange or traded through a regulated market system are valued at their last reported sale price or official
closing price in their principal exchange or market.
■
Shares
of other mutual funds or non-exchange-traded investment companies are valued based upon their reported NAVs, or NAV per share
practical expedient, as applicable.
■
Fixed-income
securities are fair valued using price evaluations provided by a pricing service approved by the Co-Advisers.
■
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
Co-Advisers.
■
For
securities that are fair valued in accordance with procedures established by and under the general supervision of the Co-Advisers, 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 Co-Advisers’ valuation policies and procedures for the Fund, or if information furnished by a pricing service, in the opinion
of the Co-Advisers’ valuation committee (“Valuation
Committee”), is deemed not representative of the fair value of such security, the Fund uses
the fair value of the investment determined in accordance with the procedures described below. There can be no assurance that the Fund
could obtain the fair value assigned to an investment if it sold the investment at approximately the time at which the Fund determines
its NAV per share, and the actual value obtained could be materially different.
Fair Valuation and Significant Events Procedures
Pursuant
to Rule 2a-5 under the Act, the Fund’s Board of Trustees (the “Trustees”) has designated the Co-Advisers as the Fund’s
valuation designee to perform any fair value determinations for
securities and other assets held by the Fund. The Co-Advisers are subject to
the Trustees oversight and certain reporting and other requirements intended to provide the Trustees the information needed to oversee
the Co-Advisers’ fair value determinations.
The Co-Advisers acting
through their Valuation Committee, are 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 Co-Advisers and certain of the Co-Advisers’
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 Co-Advisers
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 Co-Advisers.
The Trustees periodically review the fair valuations made by the Valuation Committee. The Trustees have also approved the Co-Advisers’
fair valuation and significant events procedures as part of the Fund’s compliance program and will review any changes made
to the procedures.
Factors considered by
pricing services in evaluating an investment include the yields or prices of investments of comparable quality, coupon,
maturity, call rights and other potential prepayments, terms and type, reported transactions, indications as to values from dealers
and general market conditions. Some pricing services provide a single price evaluation reflecting the bid-side of the market for an
investment (a “bid” evaluation). Other pricing services offer both bid evaluations and price evaluations indicative of a price
between
Semi-Annual
Financial Statements and Additional Information
26
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 Co-Advisers.
The Co-Advisers have
also adopted procedures requiring an investment to be priced at its fair value whenever the Valuation Committee
determines that a significant event affecting the value of the investment has occurred between the time as of which the price of
the investment would otherwise be determined and the time as of which the NAV is computed. An event is considered significant if there
is both an affirmative expectation that the investment’s value will change in response to the event and a reasonable basis for quantifying
the resulting change in value. Examples of significant events that may occur after the close of the principal market on which a security
is traded, or after the time of a price evaluation provided by a pricing service or a dealer, include:
■
With
respect to securities traded principally in foreign markets, significant trends in U.S. equity markets or in the trading of foreign securities
index futures contracts;
■
Political
or other developments affecting the economy or markets in which an issuer conducts its operations or its securities are
traded;
■
Announcements
concerning matters such as acquisitions, recapitalizations, litigation developments, or a natural disaster affecting the issuer’s
operations or regulatory changes or market developments affecting the issuer’s industry.
The Co-Advisers have 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 Co-Advisers. The Trustees periodically review fair valuations
made in response to significant events.
Repurchase Agreements
The
Fund may invest in repurchase agreements for short-term liquidity purposes. It is the policy of the Fund to require the other party to
a repurchase agreement to transfer to the Fund’s custodian
or sub-custodian eligible securities or cash with a market value (after transaction
costs) at least equal to the repurchase price to be paid under the repurchase agreement. The eligible securities are transferred
to accounts with the custodian or sub-custodian in which the Fund holds a “securities entitlement” and exercises “control”
as those terms are defined in the Uniform Commercial Code. Certain
repurchase agreements may be structured as loans secured by a security
interest or lien on the eligible securities. The Fund has established procedures for monitoring the market value of the transferred securities
and requiring the transfer of additional eligible securities if necessary to equal at least the repurchase price. These procedures also
allow the other party to require securities to be transferred from the account to the extent that their market value exceeds the repurchase
price or in exchange for other eligible securities of equivalent market value.
The insolvency of the
other party or other failure to repurchase the securities may delay the disposition of the underlying securities or cause
the Fund to receive less than the full repurchase price. Under the terms of the repurchase agreement, any amounts received by the Fund
in excess of the repurchase price and related transaction costs must be remitted to the other party.
The Fund may enter into
repurchase agreements in which eligible securities are transferred into joint trading accounts maintained by the
custodian or sub-custodian for investment companies and other clients advised by the Fund’s Co-Advisers and their affiliates. The
Fund will participate on a pro rata basis with the other investment
companies and clients in its share of the securities transferred under such
repurchase agreements and in its share of proceeds from any repurchase or other disposition of such securities.
Repurchase agreements
are subject to Master Netting Agreements which are agreements between the Fund and its counterparties that
provide for the net settlement of all transactions and collateral with the Fund, through a single payment, in the event of default or
termination. Amounts presented on the Portfolio of Investments
and Statement of Assets and Liabilities are not net settlement amounts but
gross. As indicated above, the cash or securities to be repurchased, as shown on the Portfolio of Investments, exceeds the repurchase
price to be paid under the agreement reducing the net settlement amount to zero.
Investment Income, Gains and Losses, Expenses and Distributions
Investment
transactions are accounted for on a trade-date basis. Realized gains and losses from investment transactions are recorded on an
identified-cost basis. Interest income and expenses are accrued daily. Dividend income and distributions to shareholders are recorded
on the ex-dividend date. Foreign dividends are recorded on the
ex-dividend date or when the Fund is informed of the ex-dividend date. Positive
or negative inflation adjustments on Treasury Inflation-Protected Securities are included in interest income. Distributions of net investment
income and capital gains, if any, are declared and paid at least annually. Non-cash dividends included in dividend income, if any,
are recorded at fair value. Amortization/accretion of premium and discount is included in investment income. 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 to each class based on relative average
daily net assets, except that select classes will bear certain expenses unique to those classes. The detail of the total fund expense
waiver/reimbursement of $117,101 is disclosed in Note 5.
Dividends are declared
separately for each class. No class has preferential dividend rights; differences in per share dividend rates are generally
due to differences in separate class expenses.
Semi-Annual
Financial Statements and Additional Information
27
Federal Taxes
It
is the Fund’s policy to comply with the Subchapter M provision of the Internal Revenue Code of 1986 (the “Code”) and
to distribute to shareholders each year substantially all of its
income. Accordingly, no provision for federal income tax is necessary. As of and during the six
months ended June 30, 2026, the Fund did not have a liability for any uncertain tax positions. The Fund recognizes interest and penalties,
if any, related to tax liabilities as income tax expense in the Statement of Operations. As of June 30, 2026, tax years 2022
through 2025 remain subject to examination by the Fund’s major tax jurisdictions, which include the United States of America and
the Commonwealth of Massachusetts.
The Fund may be subject
to taxes imposed by governments of countries in which it invests. Such taxes are generally based on either income
or gains earned or repatriated. The Fund accrues and applies such taxes to net investment income, net realized gains and net unrealized
gains as income and/or gains are earned.
When-Issued and Delayed-Delivery Transactions
The
Fund may engage in when-issued or delayed-delivery transactions. The Fund records when-issued securities on the trade date and maintains
security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased
on a when-issued or delayed-delivery basis are marked to market daily and begin earning interest on the settlement date. Losses
may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the
contract.
Futures Contracts
The
Fund purchases and sells financial futures contracts to seek to increase return and to manage duration, market and yield curve risks.
Upon entering into a financial futures contract with a broker,
the Fund is required to deposit with a broker, either U.S. government securities
or a specified amount of cash, which is shown as due from broker in the Statement of Assets and Liabilities. Futures contracts are
valued daily and unrealized gains or losses are recorded in a “variation margin” account. The Fund receives from or pays to
the broker a specified amount of cash based upon changes in the
variation margin account. When a contract is closed, the Fund recognizes a realized
gain or loss. Futures contracts have market risks, including the risk that the change in the value of the contract may not correlate with
the changes in the value of the underlying securities. There is minimal counterparty risk to the Fund since futures contracts are exchange-traded
and the exchange’s clearinghouse, as counterparty to all exchange-traded futures contracts, guarantees the futures contracts
against default.
Futures contracts outstanding at period
end are listed after the Fund’s Portfolio of Investments.
The average notional
value of long and short futures contracts held by the Fund throughout the period was $64,511,729 and $21,389,600,
respectively. This is based on amounts held as of each month-end throughout the six-month period.
Foreign Currency Translation
The
accounting records of the Fund are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies are translated
into U.S. dollars based on the rates of exchange of such currencies against U.S. dollars on the date of valuation. Purchases and sales
of securities, income and expenses are translated at the rate of exchange quoted on the respective date that such transactions are recorded.
The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments
from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized
and unrealized gain or loss from investments.
Reported net realized
foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between
the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest and foreign
withholding taxes recorded on the Fund’s books, and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at
period end, resulting from changes in the exchange rate.
Option Contracts
The
Fund buys or sells put and call options to seek to increase return and to manage market risk. The seller (“writer”) of an
option receives a payment or premium, from the buyer, which the
writer keeps regardless of whether the buyer exercises the option. When the Fund
writes a put or call option, an amount equal to the premium received is recorded as a liability and subsequently marked to market to
reflect the current value of the option written. Premiums received from writing options which expire are treated as realized gains. The
Fund, as a writer of an option, bears the market risk of an unfavorable
change in the price of the underlying reference instrument. When the
Fund purchases a put or call option, an amount equal to the premium paid is recorded as an increase to the cost of the investment and
subsequently marked to market to reflect the current value of the option purchased. Premiums paid for purchasing options which expire
are treated as realized losses. Premiums received/paid for writing/purchasing options which are exercised or closed are added to the
proceeds or offset against amounts paid on the underlying reference instrument to determine the realized gain or loss. The risk associated
with purchasing put and call options is limited to the premium paid. Options can trade on securities or commodities exchanges.
In this case, the exchange sets all the terms of the contract except for the price. Most exchanges require investors to maintain
margin accounts through their brokers to cover their potential obligations to the exchange. This protects investors against potential
defaults by the counterparty.
Purchased option contracts outstanding at
period-end are listed in the Fund’s Portfolio of Investments.
At June 30, 2026, the Fund had no outstanding
written option contracts.
The average market value
of purchased put options held by the Fund throughout the period was $65,042. This is based on amounts held
as of each month-end throughout the six-month period.
Semi-Annual
Financial Statements and Additional Information
28
Restricted Securities
The
Fund may purchase securities which are considered restricted. Restricted securities are securities that either: (a) cannot be offered
for public sale without first being registered, or being able
to take advantage of an exemption from registration, under the Securities Act of
1933; or (b) are subject to contractual restrictions on public sales. In some cases, when a security cannot be offered for public sale
without first being registered, the issuer of the restricted security
has agreed to register such securities for resale, at the issuer’s expense, either
upon demand by the Fund or in connection with another registered offering of the securities. Many such restricted securities may be
resold in the secondary market in transactions exempt from registration. Restricted securities may be determined to be liquid under criteria
established by the Trustees. The Fund will not incur any registration costs upon such resales. The Fund’s restricted securities,
like other securities, are priced in accordance with procedures
established by and under the general supervision of the Co-Advisers.
Additional Disclosure Related to Derivative Instruments
|
Fair
Value of Derivative Instruments | ||
|
|
Assets
| |
|
|
Statement
of
Assets
and
Liabilities
Location
|
Fair
Value
|
|
Derivatives
not accounted for as hedging
instruments
under ASC Topic 815 |
|
|
|
Interest
rate contracts |
Receivable
for variation
margin
on futures contracts |
$(27,500)*
|
|
Equity
contracts |
Receivable
for variation
margin
on futures contracts |
(362,212)*
|
|
Equity
contracts |
Purchased
options, within
Investment
in securities, at value |
109,020
|
|
Total
derivatives not accounted for as hedging instruments under ASC Topic 815 |
|
$(280,692)
|
|
*
|
Includes
cumulative appreciation/(depreciation) of futures contracts as reported in the footnotes to the Portfolio of Investments. Only the current
day’s variation
margin
is reported within the Statement of Assets and Liabilities. |
The Effect of Derivative Instruments on the Statement
of Operations for the Six Months Ended June 30, 2026
|
Amount
of Realized Gain or (Loss) on Derivatives Recognized in Income | |||
|
|
Futures
Contracts
|
Purchased
Options
Contracts1
|
Total
|
|
Interest
rate contracts |
$350,486
|
$—
|
$350,486
|
|
Equity
contracts |
2,138,322
|
(193,975)
|
1,944,347
|
|
TOTAL
|
$2,488,808
|
$(193,975)
|
$2,294,833
|
|
1
|
The
net realized loss on Purchased Options Contracts is found within the Net realized gain on investments on the Statement of Operations.
|
|
Change
in Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income | |||
|
|
Futures
Contracts
|
Purchased
Options
Contracts1
|
Total
|
|
Interest
rate contracts |
$(259,064)
|
$—
|
$(259,064)
|
|
Equity
contracts |
(570,486)
|
(111,928)
|
(682,414)
|
|
TOTAL
|
$(829,550)
|
$(111,928)
|
$(941,478)
|
|
1
|
The
net change in unrealized depreciation of Purchased Options Contracts is found within the Net change in unrealized appreciation of investments
on the
Statement
of Operations. |
Other
The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the
amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ materially from
those estimated. The Fund applies investment company accounting
and reporting guidance.
Semi-Annual
Financial Statements and Additional Information
29
3. SHARES
OF BENEFICIAL INTEREST
The following tables summarize share activity:
|
|
Six
Months Ended
6/30/2026
|
Year
Ended
12/31/2025
| ||
|
Primary
Shares: |
Shares
|
Amount
|
Shares
|
Amount
|
|
Shares
sold |
113,288
|
$1,185,017
|
344,280
|
$3,399,650
|
|
Shares
issued to shareholders in payment of distributions declared |
464,697
|
4,577,268
|
868,012
|
8,402,351
|
|
Shares
redeemed |
(887,555)
|
(9,326,443)
|
(2,451,236)
|
(24,289,959)
|
|
NET
CHANGE RESULTING FROM PRIMARY SHARE TRANSACTIONS |
(309,570)
|
$(3,564,158)
|
(1,238,944)
|
$(12,487,958)
|
|
|
Six
Months Ended
6/30/2026
|
Year
Ended
12/31/2025
| ||
|
Service
Shares: |
Shares
|
Amount
|
Shares
|
Amount
|
|
Shares
sold |
8,893
|
$95,953
|
28,153
|
$289,713
|
|
Shares
issued to shareholders in payment of distributions declared |
4,103
|
41,396
|
7,353
|
72,872
|
|
Shares
redeemed |
(24,815)
|
(273,753)
|
(19,191)
|
(191,729)
|
|
NET
CHANGE RESULTING FROM SERVICE SHARE TRANSACTIONS |
(11,819)
|
$(136,404)
|
16,315
|
$170,856
|
|
NET
CHANGE RESULTING FROM TOTAL FUND SHARE TRANSACTIONS |
(321,389)
|
$(3,700,562)
|
(1,222,629)
|
$(12,317,102)
|
4. FEDERAL
TAX INFORMATION
At June 30, 2026, the cost of investments
for federal tax purposes was $167,867,942. The net unrealized appreciation of investments for federal
tax purposes was $13,731,638. This consists of unrealized appreciation from investments for those securities having an excess of value
over cost of $19,907,066 and unrealized depreciation from investments for those securities having an excess of cost over value of $6,175,428.
The amounts presented are inclusive of derivative contracts.
As of December 31, 2025,
the Fund had a capital loss carryforward of $655,624 which will reduce the Fund’s taxable income arising from
future net realized gains on investments, if any, to the extent permitted by the Code, thereby reducing the amount of distributions to
shareholders which would otherwise be necessary to relieve the Fund of any liability for federal income tax. Pursuant to the Code, these
net capital losses retain their character as either short-term or long-term and do not expire.
|
Short-Term
|
Long-Term
|
Total
|
|
$628,871
|
$26,753
|
$655,624
|
At December 31, 2025, for federal income
tax purposes, the Fund had $11,437 in straddle loss deferrals.
5. INVESTMENT
ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
The
co-advisory agreement between the Fund and the Co-Advisers provides for an annual fee equal to 0.75% of the Fund’s average daily
net assets. Subject to the terms described in the Expense Limitation
note, the Co-Advisers may voluntarily choose to waive any portion of
their fee and/or reimburse certain operating expenses of the Fund for competitive reasons such as to maintain the Fund’s expense
ratio, or as and when appropriate, to maintain positive or zero
net yields. For the six months ended June 30, 2026, the Co-Advisers voluntarily
waived $111,407 of their fee.
The Co-Advisers have
agreed to reimburse the Fund for certain investment adviser fees as a result of transactions in other affiliated investment
companies. For the six months ended June 30, 2026, the Co-Advisers reimbursed $5,694.
Administrative Fee
Federated
Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and
services. For purposes of determining the appropriate rate breakpoint, “Investment Complex” is defined as all of the Federated
Hermes Funds subject to a fee under the Administrative Services
Agreement. The fee paid to FAS is based on the average daily net assets
of the Investment Complex as specified below:
|
Administrative
Fee |
Average
Daily Net Assets
of
the Investment Complex |
|
0.100%
|
on
assets up to $50 billion |
|
0.075%
|
on
assets over $50 billion |
In addition to the fees described above,
the Fund agrees to pay FAS an annual Administrative Service Charge of $125,000 for administrative
and compliance services related to commodities Futures Trading Commission Rule 4.5. For the six months ended June
30, 2026, the annualized fee paid to FAS was 0.155% of average daily net assets of the Fund.
In addition, FAS may charge certain out-of-pocket
expenses to the Fund.
Semi-Annual
Financial Statements and Additional Information
30
Expense Limitation
The
Co-Advisers and certain of their affiliates (which may include, FAS and FSC) on their own initiative have agreed to waive certain amounts
of their respective fees and/or reimburse expenses. Total annual fund operating expenses (as shown in the financial highlights, excluding
interest expense, proxy-related expenses and extraordinary expenses, if any) paid by the Fund’s Primary Shares and Service Shares
(after the voluntary waivers and/or reimbursements) will not exceed 0.95% and 1.20% (the “Fee Limit”), respectively, up to
but not including the later of (the “Termination Date”):
(a) May 1, 2027; or (b) the date of the Fund’s next effective Prospectus. While the Co-Advisers
and their applicable affiliates currently do not anticipate terminating or increasing these arrangements prior to the Termination Date,
these arrangements may only be terminated or the Fee Limit increased prior to the Termination Date with the approval of the
Trustees.
Distribution Services Fee
The
Fund has adopted a Distribution Plan (the “Plan”) pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund
will compensate Federated Securities Corp. (FSC), the principal
distributor, from the daily net assets of the Fund’s Service Shares to finance activities
intended to result in the sale of these shares. The Plan provides that the Fund may incur distribution expenses at 0.25% of average
daily net assets, annually, to compensate FSC. For the six months ended June 30, 2026, distribution services fees for the Fund were
as follows:
|
|
Distribution
Services
Fees
Incurred |
|
Service
Shares |
$2,196
|
When FSC receives fees, it may pay some
or all of them to financial intermediaries whose customers purchase shares. For the six months ended
June 30, 2026, FSC did not retain any fees paid by the Fund.
Directors’/Trustees’ and Miscellaneous Fees
Certain
Officers and Trustees of the Fund are Officers and Directors or Trustees of certain of the above companies. To efficiently facilitate
payment, Independent Directors’/Trustees’ fees and
certain expenses related to conducting meetings of the Directors/Trustees and other
miscellaneous expenses are paid by an affiliate of the Co-Advisers which in due course are reimbursed by the Fund. These expenses
related to conducting meetings of the Directors/Trustees and other miscellaneous expenses may be included in Accrued and Miscellaneous
Expenses on the Statement of Assets and Liabilities and Statement of Operations, respectively.
6. INVESTMENT
TRANSACTIONS
Purchases and sales of investments, excluding
long-term U.S. government securities and short-term obligations, for the six months ended
June 30, 2026, were as follows:
|
Purchases
|
$53,470,329
|
|
Sales
|
$55,230,813
|
7. LINE
OF CREDIT
The Fund participates with certain other
Federated Hermes Funds, on a several basis, in an up to $400,000,000 unsecured, 364-day, committed,
revolving line of credit (LOC) agreement dated June 16, 2026. The LOC was made available to temporarily finance the repurchase
or redemption of shares of the Fund, failed trades, payment of dividends, settlement of trades and for other short-term, temporary
or emergency general business purposes. The Fund cannot borrow under the LOC if an inter-fund loan is outstanding. The Fund’s
ability to borrow under the LOC also is subject to the limitations of the Act and various conditions precedent that must be satisfied
before the Fund can borrow. Loans under the LOC are charged interest at a fluctuating rate per annum equal to (a) the highest, on
any day, of (i) the federal funds effective rate, (ii) the published secured overnight financing rate plus an assigned percentage, and
(iii) 0.0%, plus (b) a margin. Any fund eligible to borrow under
the LOC pays its pro rata share of a commitment fee based on the amount of
the lenders’ commitment that has not been utilized, quarterly in arrears and at maturity. As of June 30, 2026, the Fund had no outstanding
loans. During the six months ended June 30, 2026, the Fund did not utilize the LOC.
8. INTERFUND
LENDING
Pursuant to an Exemptive Order issued by
the Securities and Exchange Commission, the Fund, along with other funds advised by subsidiaries
of Federated Hermes, Inc., may participate in an interfund lending program. This program provides an alternative credit facility
allowing the Fund to borrow from other participating affiliated funds. As of June 30, 2026, there were no outstanding loans. During
the six months ended June 30, 2026, the program was not utilized.
9. Operating
Segments
An operating segment is defined as a component
of a public entity that engages in business activities from which it may recognize revenues
and incur expenses, has operating results that are regularly reviewed by the public entity’s chief operating decision maker (CODM)
to make decisions about resources to be allocated to the segment and assess its performance, and has discrete financial information
available. A management committee of the Adviser acts as the CODM. The Fund represents a single operating segment, as the
CODM monitors the operating results of the Fund as a whole and the strategic asset allocation is determined based on the investment
objective of the Fund and executed by the Fund’s portfolio management team. The financial information in the form of the Fund’s
portfolio composition, total returns, expense ratios and changes in net assets (i.e., changes in net assets resulting from
Semi-Annual
Financial Statements and Additional Information
31
operations, subscriptions
and redemptions) which is reviewed by the CODM to assess the Fund’s performance in comparison to the Fund’s
benchmarks and to make resource allocation decisions for the Fund’s single segment is consistent with the information presented
in these financial statements. Segment assets are reflected on
the accompanying Statement of Assets and Liabilities as “total assets” and significant
segment expenses are listed on the accompanying Statement of Operations.
10. INDEMNIFICATIONS
Under the Fund’s organizational documents,
its Officers and Directors/Trustees are indemnified against certain liabilities arising out of the
performance of their duties to the Fund (other than liabilities arising out of their willful misfeasance, bad faith, gross negligence
or reckless disregard of their duties to the Fund). In addition,
in the normal course of business, the Fund provides certain indemnifications under
arrangements with third parties. Typically, obligations to indemnify a third party arise in the context of an arrangement entered into
by the Fund under which the Fund agrees to indemnify such third party for certain liabilities arising out of actions taken pursuant to
the arrangement, provided the third party’s actions are
not deemed to have breached an agreed-upon standard of care (such as willful misfeasance,
bad faith, gross negligence or reckless disregard of their duties under the contract). The Fund’s maximum exposure under these
arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet arisen. The Fund
does not anticipate any material claims or losses pursuant to these arrangements at this time, and accordingly, expects the risk of loss
to be remote.
Semi-Annual
Financial Statements and Additional Information
32
Evaluation
and Approval of Advisory Contract–May
2026
Federated Hermes Managed Volatility
Fund II (the “Fund”)
At its meetings in May 2026 (the
“May Meetings”), the Fund’s Board of Trustees (the “Board”), including those Trustees who
are not “interested persons” of the Fund, as defined in the Investment Company Act of 1940, as amended (the
“Independent Trustees”), reviewed and unanimously approved the continuation of the investment advisory contract between
the Fund and each of Federated Investment Management Company and Federated Equity Management Company of
Pennsylvania (each, an “Adviser” and together, the “Co-Advisers”) (the “Contract”) for an additional
one-year term. The Board’s determination to approve
the continuation of the Contract reflects the exercise of its business judgment after considering
such information deemed necessary to evaluate the terms of the Contract and to approve the continuation of the
existing arrangement. The information, factors and conclusions that formed the basis for the Board’s approval are summarized
below.
Information Received
and Review Process
At the request
of the Independent Trustees, the Fund’s Chief Compliance Officer (the “CCO”) furnished to the Board in advance
of its May Meetings an independent written report regarding data related to the Fund’s management fee (the
“CCO Management Fee Report”). The Board considered the CCO Management Fee Report, along with other information,
in evaluating the reasonableness of the Fund’s management fee and in determining to approve the continuation
of the Contract.
In addition
to the CCO Management Fee Report, the Board considered information specifically prepared in connection with
the approval of the continuation of the Contract that was presented at the May Meetings. In this regard, in the months preceding
the May Meetings, the Board requested and reviewed written responses and supporting materials prepared by the
Co-Advisers and their affiliates (collectively, “Federated Hermes”) in response to requests posed to Federated Hermes by
independent legal counsel on behalf of the Independent Trustees encompassing a wide variety of topics, including those summarized
below. The Board also considered such additional matters as the Independent Trustees deemed reasonably necessary
to evaluate the Contract, which included detailed information about the Fund and Federated Hermes furnished to the
Board at its meetings throughout the year.
The Board’s
consideration of the Contract included review of materials and information covering the following matters, among
others: (1) copies of the Contract; (2) the nature, quality and extent of the advisory and other services provided to the
Fund by Federated Hermes; (3) Federated Hermes’ business and operations; (4) the Co-Advisers’ investment philosophy,
personnel and processes; (5) the Fund’s investment objective and strategies; (6) the Fund’s short-term and long-term
performance - in absolute terms (both on a gross basis and net of expenses) and relative to an appropriate group of
peer funds and its benchmark; (7) the Fund’s fees and expenses, including the advisory fee and the overall expense structure
of the Fund - in absolute terms and relative to an appropriate group of peer funds, with due regard for contractual or
voluntary expense limitations (if any); (8) the financial condition of Federated Hermes; (9) the Co-Advisers’ profitability
with respect to managing the Fund; (10) distribution and sales activity for the Fund; and (11) the use and allocation
of brokerage commissions derived from trading the Fund’s portfolio securities (if any).
The Board
also considered judicial decisions concerning allegedly excessive investment advisory fees charged to other registered
funds in evaluating the Contract. Using these judicial decisions as a guide, the Board considered several factors it
deemed relevant to an adviser’s fiduciary duty with respect to its receipt of compensation from a fund, including: (1) the nature
and quality of the services provided by the adviser to the fund and its shareholders, including the performance of the
fund, its benchmark and comparable funds; (2) the adviser’s cost of providing the services and the profitability to the adviser
of providing advisory services to the fund; (3) the extent to which the adviser may realize “economies of scale” as the
fund grows larger and, if such economies of scale exist, whether they have been appropriately shared with the fund and its
shareholders or the family of funds; (4) any “fall-out” benefits that accrue to the adviser because of its relationship with
the fund, including research services received from
brokers that execute fund trades and any fees paid to affiliates of the adviser
for services rendered to the fund; (5) comparative fees and expenses, including a comparison of management fees paid
to the adviser with those paid by similar funds managed by the same adviser or other advisers as well as management fees
charged to institutional and other advisory clients of the same adviser for what might be viewed as like services; and (6)
the extent of care, conscientiousness and independence with which the fund’s board members perform their duties and their
expertise, including whether they are fully informed about all facts the board deems relevant to its consideration of the
adviser’s services and fees. The Board considered that the Securities and Exchange Commission (“SEC”) disclosure requirements
regarding the basis for a fund board’s approval of the fund’s investment advisory contract generally align with
the factors listed above. The Board was guided by these factors in its evaluation of the Contract to the extent it considered
them to be appropriate and relevant, as discussed further below. Also, in weighing these factors, the Board considered
the aggregate advisory fee paid by the Fund for the services of the Co-Advisers in addition to considering the
Semi-Annual
Financial Statements and Additional Information
33
allocation
of that aggregate fee among the Co-Advisers and the rationale for that allocation. The Board considered and weighed
these factors in light of its substantial accumulated experience in governing the Fund and working with Federated Hermes
on matters relating to the oversight of the other funds advised by Federated Hermes (each, a “Federated Hermes Fund”
and, collectively, the “Federated Hermes Funds”).
In addition,
the Board considered the preferences and expectations of Fund shareholders and the potential disruptions of the
Fund’s operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate
or not renew the Contract. In particular, the Board recognized that many shareholders likely have invested in the Fund
based on the strength of Federated Hermes’ industry standing and reputation and with the expectation that Federated Hermes
will have a continuing role in providing advisory services to the Fund. Thus, the Board observed that there are a range
of investment options available to the Fund’s shareholders in the marketplace and such shareholders, having had the opportunity
to consider other investment options, have effectively selected Federated Hermes by virtue of investing in the
Fund.
In determining
to approve the continuation of the Contract, the members of the Board reviewed and evaluated information
and factors they believed to be relevant and appropriate through the exercise of their reasonable business judgment.
While individual members of the Board may have weighed certain factors differently, the Board’s determination
to approve the continuation of the Contract was based on a comprehensive consideration of all information provided
to the Board throughout the year. The Board recognized that its evaluation process is evolutionary and that the factors
considered and the emphasis placed on relevant factors may change in recognition of changing circumstances in the
registered fund marketplace. The Independent Trustees were assisted throughout the evaluation process by independent legal
counsel. In connection with their deliberations at the May Meetings, the Independent Trustees met separately in executive
session with their independent legal counsel and without management present to review the relevant materials and
consider their responsibilities under applicable laws. In addition, senior management representatives of Federated Hermes
also met with the Independent Trustees and their independent legal counsel to discuss the materials and presentations
furnished to the Board at the May Meetings. The Board considered the approval of the Contract for the Fund as
part of its consideration of agreements for funds across the family of Federated Hermes Funds, but its approvals were made
on a fund-by-fund basis.
Nature, Extent and
Quality of Services
The Board
considered the nature, extent and quality of the services provided to the Fund by the Co-Advisers and the resources
of Federated Hermes dedicated to the Fund. In this regard, the Board evaluated, among other things, the terms of the
Contract and the full range of services provided to the Fund by Federated Hermes. In particular, the Board considered the
services provided by the Co-Advisers in the aggregate, to the extent that the Co-Advisers collaborate in the implementation
of the Fund’s strategy, as well as separately, to the extent to which specific services provided by a Co-Adviser
are distinguishable and subject to meaningful assessment. The Board considered the Co-Advisers’ personnel, investment
philosophy and process, investment research capabilities and resources, trade operations capabilities, experience
and performance track record. The Board reviewed the qualifications, backgrounds and responsibilities of the portfolio
management team primarily responsible for the day-to-day management of the Fund and evaluated Federated Hermes’
ability and experience in attracting and retaining qualified personnel to service the Fund. The Board considered the
trading operations by the Co-Advisers, including the execution of portfolio transactions and the selection of brokers for those
transactions. The Board also considered the Co-Advisers’ ability to deliver competitive investment performance for the
Fund when compared to the Fund’s Performance Peer Group (as defined below), which was deemed by the Board to be
a useful indicator of how the Co-Advisers are executing the Fund’s investment program.
In addition,
the Board considered the financial resources and overall reputation of Federated Hermes and its willingness to
consider and make investments in personnel, infrastructure, technology, cybersecurity, business continuity planning and operational
enhancements that are designed to benefit the Federated Hermes Funds. The Board considered Federated Hermes’
oversight of the securities lending program for the Federated Hermes Funds that engage in securities lending and noted
the income earned by the Federated Hermes Funds that participate in such program. In addition, the Board considered
the quality of Federated Hermes’ communications with the Board and responsiveness to Board inquiries and requests
made from time to time with respect to the Federated Hermes Funds. The Board also considered that Federated Hermes
is responsible for providing the Federated Hermes Funds’ officers.
The Board
received and evaluated information regarding Federated Hermes’ regulatory and compliance environment. The
Board considered Federated Hermes’ compliance program and compliance history and reports from the CCO about Federated
Hermes’ compliance with applicable laws and regulations, including responses to regulatory developments and any
compliance or other issues raised by regulatory agencies. The Board also noted Federated Hermes’ support of the Federated
Hermes Funds’ compliance control structure and the compliance-related resources devoted by Federated Hermes
in support of the Fund’s obligations pursuant to Rule 38a-1 under the Investment Company Act of 1940, as amended,
including Federated Hermes’ commitment to respond to rulemaking and other regulatory initiatives of the SEC.
Semi-Annual
Financial Statements and Additional Information
34
The Board
considered Federated Hermes’ approach to internal audits and risk management with respect to the Federated Hermes
Funds and its day-to-day oversight of the Federated Hermes Funds’ compliance with their investment objectives and
policies as well as with applicable laws and regulations, noting that regulatory and other developments had over time led,
and continue to lead, to an increase in the scope of Federated Hermes’ oversight in this regard.
In addition,
the Board noted Federated Hermes’ commitment to maintaining high quality systems and expending substantial
resources to prepare for and respond to ongoing changes due to the market, regulatory and control environments
in which the Fund and its service providers operate.
The Board
considered Federated Hermes’ efforts to provide shareholders in the Federated Hermes Funds with a comprehensive
array of funds with different investment objectives, policies and strategies. The Board considered the expenses
that Federated Hermes had incurred, as well as the entrepreneurial and other risks assumed by Federated Hermes, in
sponsoring and providing on-going services to new funds to expand these opportunities for shareholders. The Board noted
the benefits to shareholders of being part of the family of Federated Hermes Funds, which include the general right to
exchange investments between the same class of shares without the incurrence of additional sales charges.
Based on
these considerations, the Board concluded that it was satisfied with the nature, extent, and quality of the services
provided by the Co-Advisers to the Fund.
Fund Investment Performance
The Board
considered the investment performance of the Fund. In evaluating the Fund’s investment performance, the Board
considered performance results in light of the Fund’s investment objective, strategies and risks. The Board considered
detailed investment reports on, and the Co-Advisers’ analysis of, the Fund’s performance over different time periods
that were provided to the Board throughout the year and in connection with the May Meetings. These reports included,
among other items, information on the Fund’s gross and net returns, the Fund’s investment performance compared
to one or more relevant categories or groups of peer funds and the Fund’s benchmark, performance attribution information
and commentary on the effect of market conditions. The Board noted that it evaluated investment performance at
meetings throughout the year and received reports from Federated Hermes regarding the performance of certain Federated
Hermes Funds as well as Federated Hermes’ explanations for less favorable performance and any specific actions
Federated Hermes had taken, or had determined to take, to seek to enhance Fund investment performance and the results
of those actions.
The Board
also reviewed comparative information regarding the performance of other registered funds in the category of
peer funds selected by Morningstar, Inc. (“Morningstar”), an independent fund ranking organization (the “Performance
Peer Group”). The Board noted the CCO’s
statement that comparisons to fund peer groups may be helpful, though not conclusive,
in evaluating the performance of the Co-Advisers in managing the Fund.
The Board
also considered comparative performance data from Lipper, Inc. that was included in reports provided to the Board
throughout the year.
For the
periods ended December 31, 2025, the Fund’s performance fell below the Performance Peer Group median for the
one-year period, was at the Performance Peer Group median for the three-year period and was above the Performance Peer
Group median for the five-year period. The Board discussed the Fund’s performance with the Co-Advisers and recognized
the efforts being taken by the Co-Advisers in the context of other factors considered relevant by the Board.
Based on
these considerations, the Board concluded that it had continued confidence in the Co-Advisers’ overall capabilities
to manage the Fund.
Fund Expenses
The Board
considered the advisory fee and overall expense structure of the Fund and the comparative fee and expense information
that had been provided in connection with the May Meetings. In this regard, the Board was presented with, and
considered, information regarding the contractual advisory fee rates, total expense ratios and each element of the Fund’s
total expense ratio (i.e., gross advisory fees, administrative fees, custody fees, portfolio accounting fees and transfer
agency fees) relative to an appropriate group of peer funds compiled by Federated Hermes from the overall category
of peer funds selected by Morningstar (the “Expense Peer Group”). The Board received a description of the methodology
used to select the Expense Peer Group from the overall Morningstar category. The Board also reviewed comparative
information regarding the fees and expenses of the broader group of funds in the overall Morningstar
category.
While mindful
that courts have cautioned against giving too much weight to comparative information concerning fees charged
to funds by other advisers, the use of comparisons between the Fund and its Expense Peer Group assisted the Board
in its evaluation of the Fund’s fees and expenses. The Board focused on comparisons with other registered funds more
heavily than non-registered fund products or services because such comparisons are believed to be more relevant.
Semi-Annual
Financial Statements and Additional Information
35
The Board
considered that other registered funds are the products most like the Fund, in that they are readily available to Fund
shareholders as alternative investment vehicles, and they are the type of investment vehicle, in fact, chosen and maintained
by the Fund’s shareholders. The Board noted that the range of such other registered funds’ fees and expenses, therefore,
appears to be a relevant indicator of what investors have found to be reasonable in the marketplace in which the Fund
competes.
The Board
reviewed the contractual advisory fee rate, and other expenses of the Fund and noted the position of the Fund’s
contractual advisory fee rate and other expenses relative to its Expense Peer Group. In this regard, the Board noted that
the contractual advisory fee rate was above the median of the Expense Peer Group, but the Board noted the applicable waivers
and reimbursements, and that the overall expense structure of the Fund remained competitive in the context of other
factors considered by the Board.
The Board
also received and considered information about the nature and extent of services offered and fees charged by Federated
Hermes to other types of clients with investment strategies similar to those of the Federated Hermes Funds, including
non-registered fund clients (such as institutional separate accounts) and third-party unaffiliated registered funds for
which any of the Co-Advisers or their affiliates serve as sub-adviser. The Board noted the CCO’s statement that non-registered
fund clients are inherently different products due to the following differences, among others: (i) types of targeted
investors; (ii) applicable laws and regulations; (iii) legal structures; (iv) average account sizes; (v) portfolio management
techniques made necessary by different cash flows and different associated costs; (vi) the time spent by portfolio
managers and their teams (among other personnel across various departments, including legal, compliance and risk
management) in reviewing securities pricing; (vii) SEC mandated risk management programs with respect to fund liquidity
and use of derivatives; (viii) questions on regulatory reporting; (ix) a variety of different administrative responsibilities;
and (x) degrees of risk associated with management. The Board also considered information regarding the differences
in the nature of the services required for Federated Hermes to manage its proprietary registered fund business versus
managing a discrete pool of assets as a sub-adviser to another institution’s registered fund, noting the CCO’s statement
that Federated Hermes generally performs significant additional services and assumes substantially greater risks in
managing the Fund and other Federated Hermes Funds than in its role as sub-adviser to an unaffiliated third-party registered
fund. The Board noted that the CCO emphasized that differences in fees for providing advisory services to other types
of clients may not be appropriate when judging the appropriateness of the Federated Hermes Funds’ advisory fees because
of the different services provided.
In the case
of the Fund, the Board noted that Federated Hermes does not manage any other types of clients that are comparable
to the Fund.
Based on
these considerations, the Board concluded that the fees and total operating expenses of the Fund, in conjunction
with other matters considered, are reasonable in light of the services provided.
Profitability
The Board
received and considered profitability information furnished by Federated Hermes. Such profitability information
included revenues reported on a fund-by-fund basis and estimates of the allocation of expenses made on a fund-by-fund
basis, using allocation methodologies specified by the CCO and described to the Board. The Board considered
the CCO’s statement that, while the cost allocation report applies consistent allocation processes for purposes of
general comparison of funds, the inherent difficulties in arbitrarily allocating costs lack precision and may cause the report
to be unreliable because a single change in an allocation estimate can dramatically alter the resulting estimate of cost
and/or profitability of a Federated Hermes Fund and may produce unintended consequences. In addition, the Board considered
the CCO’s statement that the allocation methodologies used by Federated Hermes in estimating profitability for purposes
of reporting to the Board in connection with the continuation of the Contract are consistent with the methodologies
previously reviewed by an independent consultant. The Board noted that the independent consultant had previously
conducted a review of the allocation methodologies and reported to the Board that, although there is no single best
method to allocate expenses, the methodologies used by Federated Hermes are reasonable. The Board considered the CCO’s
statement that the estimated profitability to the Co-Advisers from their relationships with the Fund was not unreasonable
in relation to the services provided.
The Board
considered that the Contract provides for payment of a single advisory fee by the Fund for all services provided
by the Co-Advisers. The Board further considered that the Contract permits the Co-Advisers to allocate the advisory
fee in a manner commensurate with the services they provide to the Fund. Throughout the year, as well as in connection
with its May Meetings, the Board considered the fee allocation and the Co-Advisers’ analysis as to whether the allocation
of fees among the Co-Advisers continued to be a reasonable proxy for and measurement of the level of resources
and services provided by each Co-Adviser toward the management of the Fund.
Semi-Annual
Financial Statements and Additional Information
36
The
Board also reviewed information compiled by Federated Hermes comparing its profitability information to other publicly-held
fund management companies, including information regarding profitability trends over time. The Board recognized
that profitability comparisons among fund management companies are difficult because of the variation in the type
of comparative information that is publicly available, and the profitability of any fund management company is affected
by numerous factors. The Board considered the CCO’s statement that, based on such profitability information, Federated
Hermes’ profit margins did not appear to be excessive and that Federated Hermes appeared financially sound, with
the resources available to fulfill its contractual obligations.
Economies of Scale
The Board
received and considered information about the notion of possible realization of “economies of scale” as a fund
grows larger, the difficulties of isolating and quantifying economies of scale at an individual fund level, and the extent
to which potential scale benefits are shared with shareholders. In this regard, the Board considered that Federated Hermes
has made significant and long-term investments in areas that support all of the Federated Hermes Funds, such as: portfolio
management, investment research and trading operations; shareholder services; compliance; business continuity, cybersecurity
and information security programs; internal audit and risk management functions; and technology, systems capabilities
and use of data. The Board noted that Federated Hermes’ investments in these areas are extensive and are designed
to provide enhanced or expanded services to the Federated Hermes Funds and their shareholders. The Board considered
that the benefits of these investments are likely to be shared with the family of Federated Hermes Funds as a whole.
In addition, the Board considered that fee waivers and expense reimbursements are another means for potential economies
of scale to be shared with shareholders and can provide protection from an increase in expenses if a Federated Hermes
Fund’s assets decline. The Board considered that, in order for the Federated Hermes Funds to remain competitive in
the marketplace, Federated Hermes has frequently waived fees and/or reimbursed expenses for the Federated Hermes Funds
and has disclosed to shareholders and/or reported to the Board its intention to do so (or continue to do so) in the future.
The Board also considered that Federated Hermes has been active in managing expenses of the Federated Hermes Funds
in recent years, which has resulted in benefits being realized by shareholders.
The Board
also received and considered information on adviser-paid fees (commonly referred to as “revenue sharing” payments)
that was provided to the Board throughout the year and in connection with the May Meetings. The Board considered
that Federated Hermes believes that this information is relevant to consider whether Federated Hermes had an incentive
to either not apply breakpoints, or to apply breakpoints at higher levels, but should not be considered when evaluating
the reasonableness of advisory fees. The Board also noted the absence of any applicable regulatory or industry guidelines
on economies of scale, which is compounded by the lack of any uniform methodology or pattern with respect to structuring
fund advisory fees with breakpoints that serve to reduce the fees as a fund attains a certain size.
Other Benefits
The Board
considered information regarding the compensation and other ancillary (or “fall-out”) benefits that Federated Hermes
derived from its relationships with the Federated Hermes Funds. The Board considered that Federated Hermes may
derive a benefit to its reputation as an adviser to the Fund, which may help in attracting other clients and investment personnel.
The Board noted that, in addition to receiving advisory fees under the Federated Hermes Funds’ investment advisory
contracts, Federated Hermes’ affiliates also receive fees for providing other services to the Federated Hermes Funds
under separate service contracts, including for serving as the Federated Hermes Funds’ administrator and distributor.
In this regard, the Board considered that Federated Hermes’ affiliates provide distribution and shareholder services
to the Federated Hermes Funds, for which they may be compensated through distribution and servicing fees paid pursuant
to Rule 12b-1 plans or otherwise. The Board also received and considered information detailing the benefits, if any,
that Federated Hermes may derive from its receipt of research services from brokers who execute portfolio trades for the
Federated Hermes Funds.
Conclusions
The Board
considered the CCO’s presentation and statements and the information accompanying the CCO Management Fee
Report. The Board recognized that its evaluation of the Federated Hermes Funds’ advisory and sub-advisory arrangements
is a continuing and ongoing process that is informed by the information that the Board requests and receives from
management throughout the course of the year.
On the basis
of the information and factors summarized above, among other information and factors deemed relevant by the
Board, and the evaluation thereof, the Board, including the Independent Trustees, unanimously voted to approve the continuation
of the Contract. The Board based its determination to approve the Contract on the totality of the circumstances
and relevant factors and with a view of past and future long-term considerations. Not all of the factors and considerations
identified above were necessarily deemed to be relevant to the Fund, nor did the Board consider any one of them
to be determinative.
Semi-Annual
Financial Statements and Additional Information
37
Variable
investment options are not bank deposits or obligations, are not guaranteed by any bank and are not insured or guaranteed
by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government
agency. Investment in variable investment options involves investment risk, including the possible loss of
principal.
This information is authorized
for distribution to prospective investors only when preceded or accompanied by the Fund’s Prospectus,
which contains facts concerning its objective and policies, management fees, expenses and other information.
In an effort to reduce costs
and avoid duplicate mailings, the Fund(s) intend to deliver a single copy of certain documents
to each household in which more 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 of Additional
Information, and supplements to each, as well as Semi-Annual and 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 shareholder as having given consent (“implied consent”) if (i)
shareholders with the same last name, or believed to be members of the same family, reside at the same street address
or receive mail at the same post office box, (ii) the Fund gives notice of its intent to “household” at least sixty (60)
days before it begins “householding” and (iii) none of the shareholders in the household have notified the Fund(s)
or their agent of the desire to “opt out” of “householding.” Shareholders who have granted written consent, or
have been deemed to have granted implied consent, can
revoke that consent and opt out of “householding” at any time:
shareholders who purchased shares through an intermediary should contact their representative; other shareholders
may call the Fund at 1-800-341-7400, Option #4.
Federated Hermes Managed Volatility Fund
II
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us at
FederatedHermes.com/us
or call 1-800-341-7400.
or call 1-800-341-7400.
Federated Securities Corp., Distributor
CUSIP 313916108
CUSIP 313916744
CUSIP 313916744
G00433-03 (8/26)
©
2026 Federated Hermes, Inc.
Semi-Annual Financial Statements
and Additional Information
and Additional Information
June 30, 2026
|
Share
Class |
Primary
|
Service
|
|
|
Federated Hermes Quality Bond Fund II
A Portfolio of Federated Hermes Insurance Series
Not FDIC Insured ▪ May
Lose Value ▪ No Bank Guarantee
Portfolio
of Investments
June 30, 2026 (unaudited)
|
Principal
Amount
or
Shares |
|
|
Value
|
|
|
|
CORPORATE
BONDS—98.2% |
|
|
|
|
Basic
Industry - Chemicals—0.4% |
|
|
$ 475,000
|
|
RPM
International, Inc., Sr. Unsecd. Note, 4.550%, 3/1/2029 |
$ 473,791
|
|
|
|
Basic
Industry - Metals & Mining—1.0% |
|
|
335,000
|
|
Anglo
American Capital PLC, Sr. Unsecd. Note, 144A, 2.250%, 3/17/2028 |
319,606
|
|
200,000
|
|
Anglo
American Capital PLC, Sr. Unsecd. Note, 144A, 2.875%, 3/17/2031 |
183,428
|
|
200,000
|
|
Anglo
American Capital PLC, Sr. Unsecd. Note, 144A, 5.500%, 5/2/2033 |
203,727
|
|
340,000
|
|
Glencore
Funding LLC, Sr. Unsecd. Note, 144A, 6.125%, 10/6/2028 |
349,731
|
|
250,000
|
|
Southern
Copper Corp., Sr. Unsecd. Note, 5.350%, 6/24/2036 |
248,938
|
|
|
|
TOTAL
|
1,305,430
|
|
|
|
Basic
Industry - Paper—0.3% |
|
|
380,000
|
|
Smurfit
Kappa Treasury Unlimited Co., Sr. Unsecd. Note, 5.200%, 1/15/2030 |
385,934
|
|
|
|
Capital
Goods - Aerospace & Defense—1.9% |
|
|
200,000
|
|
BAE
Systems PLC, Sr. Unsecd. Note, 144A, 3.400%, 4/15/2030 |
191,368
|
|
470,000
|
|
Boeing
Co., Sr. Unsecd. Note, 3.625%, 2/1/2031 |
447,421
|
|
190,000
|
|
Boeing
Co., Sr. Unsecd. Note, 6.528%, 5/1/2034 |
206,772
|
|
385,000
|
|
Huntington
Ingalls Industries, Inc., Sr. Unsecd. Note, 3.483%, 12/1/2027 |
379,036
|
|
565,000
|
|
Leidos,
Inc., Sr. Unsecd. Note, Series WI, 2.300%, 2/15/2031 |
502,553
|
|
455,000
|
|
RTX
Corp., Sr. Unsecd. Note, 4.125%, 11/16/2028 |
451,555
|
|
300,000
|
|
RTX
Corp., Sr. Unsecd. Note, 5.150%, 2/27/2033 |
305,570
|
|
|
|
TOTAL
|
2,484,275
|
|
|
|
Capital
Goods - Building Materials—1.0% |
|
|
395,000
|
|
Allegion
PLC, Sr. Unsecd. Note, 3.500%, 10/1/2029 |
379,461
|
|
150,000
|
|
Allegion
US Holdings Co., Inc., Sr. Unsecd. Note, 5.600%, 5/29/2034 |
153,227
|
|
140,000
|
|
Carrier
Global Corp., Sr. Unsecd. Note, 5.900%, 3/15/2034 |
147,649
|
|
293,000
|
|
Masco
Corp., Sr. Unsecd. Note, 2.000%, 10/1/2030 |
260,769
|
|
293,000
|
|
Masco
Corp., Sr. Unsecd. Note, 3.500%, 11/15/2027 |
289,003
|
|
|
|
TOTAL
|
1,230,109
|
|
|
|
Capital
Goods - Construction Machinery—1.1% |
|
|
490,000
|
|
Ashtead
Capital, Inc., Sr. Unsecd. Note, 144A, 1.500%, 8/12/2026 |
488,193
|
|
200,000
|
|
Ashtead
Capital, Inc., Sr. Unsecd. Note, 144A, 5.550%, 5/30/2033 |
202,138
|
|
400,000
|
|
CNH
Industrial Capital America LLC, Sr. Unsecd. Note, 4.375%, 3/7/2031 |
391,598
|
|
360,000
|
|
CNH
Industrial NV, Sr. Unsecd. Note, Series MTN, 3.850%, 11/15/2027 |
356,130
|
|
|
|
TOTAL
|
1,438,059
|
|
|
|
Capital
Goods - Diversified Manufacturing—2.0% |
|
|
300,000
|
|
Eaton
Corp., Sr. Unsecd. Note, 4.500%, 3/6/2033 |
293,818
|
|
300,000
|
|
Eaton
Corp., Sr. Unsecd. Note, 4.800%, 3/6/2036 |
294,450
|
|
565,000
|
|
Honeywell
International, Inc., Sr. Unsecd. Note, 1.950%, 6/1/2030 |
511,447
|
|
525,000
|
|
Hubbell,
Inc., Sr. Unsecd. Note, 2.300%, 3/15/2031 |
472,324
|
|
190,000
|
|
Ingersoll-Rand,
Inc., Sr. Unsecd. Note, 5.176%, 6/15/2029 |
193,335
|
|
85,000
|
|
Ingersoll-Rand,
Inc., Sr. Unsecd. Note, 5.450%, 6/15/2034 |
86,595
|
|
100,000
|
|
Vertiv
Holdings Co., Sr. Unsecd. Note, 4.850%, 3/15/2036 |
97,160
|
|
490,000
|
|
Vontier
Corp., Sr. Unsecd. Note, Series WI, 2.400%, 4/1/2028 |
470,772
|
|
125,000
|
|
Wabtec
Corp., Sr. Unsecd. Note, 5.611%, 3/11/2034 |
128,412
|
|
|
|
TOTAL
|
2,548,313
|
|
|
|
Capital
Goods - Environmental—0.2% |
|
|
240,000
|
|
Waste
Connections, Inc., Sr. Unsecd. Note, 5.250%, 9/1/2035 |
243,387
|
Semi-Annual
Financial Statements and Additional Information
1
|
Principal
Amount
or
Shares |
|
|
Value
|
|
|
|
CORPORATE
BONDS—continued |
|
|
|
|
Communications
- Cable & Satellite—1.1% |
|
|
$ 85,000
|
|
Charter
Communications Operating, LLC/Charter Communications Operating Capital Corp., Sec. Fac. Bond,
6.100%,
6/1/2029 |
$ 87,094
|
|
745,000
|
|
Charter
Communications Operating, LLC/Charter Communications Operating Capital Corp., Sec. Fac. Bond,
6.550%,
6/1/2034 |
760,855
|
|
300,000
|
|
Comcast
Corp., Sr. Unsecd. Note, 4.400%, 8/15/2035 |
278,690
|
|
290,000
|
|
Comcast
Corp., Sr. Unsecd. Note, 4.950%, 5/15/2032 |
291,153
|
|
|
|
TOTAL
|
1,417,792
|
|
|
|
Communications
- Media & Entertainment—2.4% |
|
|
335,000
|
1
|
AppLovin
Corp., Sr. Unsecd. Note, 5.375%, 12/1/2031 |
339,783
|
|
230,000
|
|
AppLovin
Corp., Sr. Unsecd. Note, 5.500%, 12/1/2034 |
232,159
|
|
215,000
|
|
Meta
Platforms, Inc., Sr. Unsecd. Note, 3.500%, 8/15/2027 |
213,236
|
|
245,000
|
|
Meta
Platforms, Inc., Sr. Unsecd. Note, 3.850%, 8/15/2032 |
231,903
|
|
250,000
|
|
Meta
Platforms, Inc., Sr. Unsecd. Note, 4.875%, 11/15/2035 |
243,384
|
|
300,000
|
|
Meta
Platforms, Inc., Sr. Unsecd. Note, 5.250%, 5/15/2036 |
297,996
|
|
965,000
|
|
Netflix,
Inc., Sr. Unsecd. Note, 144A, 4.875%, 6/15/2030 |
971,199
|
|
300,000
|
|
Omnicom
Group, Inc., Sr. Unsecd. Note, 5.300%, 6/2/2036 |
292,573
|
|
295,000
|
1
|
Paramount
Global, Sr. Unsecd. Note, 4.200%, 5/19/2032 |
256,081
|
|
|
|
TOTAL
|
3,078,314
|
|
|
|
Communications
- Telecom Wireless—2.8% |
|
|
290,000
|
|
America
Movil S.A.B. de C.V., Sr. Unsecd. Note, 5.000%, 1/20/2033 |
289,455
|
|
505,000
|
|
American
Tower Corp., Sr. Unsecd. Note, 4.700%, 12/15/2032 |
496,942
|
|
225,000
|
|
American
Tower Corp., Sr. Unsecd. Note, 4.900%, 3/15/2030 |
226,096
|
|
120,000
|
|
Crown
Castle, Inc., Sr. Unsecd. Note, 4.800%, 9/1/2028 |
120,372
|
|
360,000
|
|
Crown
Castle, Inc., Sr. Unsecd. Note, 5.100%, 5/1/2033 |
357,148
|
|
200,000
|
|
Orange
S.A., Sr. Unsecd. Note, 144A, 4.750%, 1/13/2033 |
196,265
|
|
200,000
|
|
Orange
S.A., Sr. Unsecd. Note, 144A, 5.000%, 1/13/2036 |
195,449
|
|
200,000
|
|
Space
Exploration Technologies Corp., Sr. Unsecd. Note, 144A, 5.650%, 7/15/2033 |
198,865
|
|
150,000
|
|
Space
Exploration Technologies Corp., Sr. Unsecd. Note, 144A, 5.875%, 7/15/2036 |
148,100
|
|
850,000
|
|
T-Mobile
USA, Inc., Series WI, 3.875%, 4/15/2030 |
823,812
|
|
475,000
|
|
T-Mobile
USA, Inc., Sr. Unsecd. Note, 5.050%, 7/15/2033 |
474,364
|
|
|
|
TOTAL
|
3,526,868
|
|
|
|
Communications
- Telecom Wirelines—2.7% |
|
|
827,000
|
|
AT&T,
Inc., Sr. Unsecd. Note, 2.550%, 12/1/2033 |
694,828
|
|
250,000
|
|
AT&T,
Inc., Sr. Unsecd. Note, 4.900%, 11/1/2035 |
242,325
|
|
245,000
|
|
AT&T,
Inc., Sr. Unsecd. Note, 5.375%, 8/15/2035 |
246,218
|
|
200,000
|
|
NBN
Co. Ltd., Sr. Unsecd. Note, 144A, 4.000%, 10/1/2027 |
198,758
|
|
190,000
|
|
Rogers
Communications, Inc., Sr. Unsecd. Note, 5.000%, 2/15/2029 |
191,201
|
|
190,000
|
|
Rogers
Communications, Inc., Sr. Unsecd. Note, 5.300%, 2/15/2034 |
188,414
|
|
240,000
|
|
Telefonica
S.A., Co. Guarantee, 7.045%, 6/20/2036 |
265,432
|
|
755,000
|
|
Verizon
Communications, Inc., Sr. Unsecd. Note, 1.750%, 1/20/2031 |
663,410
|
|
385,000
|
|
Verizon
Communications, Inc., Sr. Unsecd. Note, 2.550%, 3/21/2031 |
349,612
|
|
165,000
|
|
Verizon
Communications, Inc., Sr. Unsecd. Note, 3.150%, 3/22/2030 |
156,765
|
|
245,000
|
1
|
Verizon
Communications, Inc., Sr. Unsecd. Note, 5.000%, 1/15/2036 |
239,037
|
|
|
|
TOTAL
|
3,436,000
|
|
|
|
Consumer
Cyclical - Automotive—4.0% |
|
|
225,000
|
|
American
Honda Finance Corp., Sr. Unsecd. Note, Series GMTN, 4.400%, 9/5/2029 |
222,677
|
|
285,000
|
|
Daimler
Trucks Financial NA, Sr. Unsecd. Note, 144A, 5.125%, 1/19/2028 |
287,219
|
|
565,000
|
1
|
Daimler
Trucks Financial NA, Sr. Unsecd. Note, 144A, 5.125%, 9/25/2029 |
570,760
|
|
240,000
|
|
Ford
Motor Credit Co. LLC, Sr. Unsecd. Note, 4.000%, 11/13/2030 |
225,628
|
|
200,000
|
|
Ford
Motor Credit Co. LLC, Sr. Unsecd. Note, 5.753%, 4/6/2033 |
198,441
|
|
200,000
|
|
Ford
Motor Credit Co. LLC, Sr. Unsecd. Note, 6.500%, 2/7/2035 |
204,911
|
Semi-Annual
Financial Statements and Additional Information
2
|
Principal
Amount
or
Shares |
|
|
Value
|
|
|
|
CORPORATE
BONDS—continued |
|
|
|
|
Consumer
Cyclical - Automotive—continued |
|
|
$ 275,000
|
|
Ford
Motor Credit Co. LLC, Sr. Unsecd. Note, 6.798%, 11/7/2028 |
$ 283,972
|
|
200,000
|
|
Ford
Motor Credit Co. LLC, Sr. Unsecd. Note, 7.122%, 11/7/2033 |
212,841
|
|
475,000
|
|
General
Motors Financial Co., Inc., Sr. Unsecd. Note, 2.400%, 4/10/2028 |
456,599
|
|
240,000
|
|
General
Motors Financial Co., Inc., Sr. Unsecd. Note, 5.350%, 1/7/2030 |
243,891
|
|
200,000
|
|
General
Motors Financial Co., Inc., Sr. Unsecd. Note, 5.850%, 4/6/2030 |
206,693
|
|
210,000
|
|
Hyundai
Capital America, Sr. Unsecd. Note, 144A, 4.500%, 9/18/2030 |
206,284
|
|
300,000
|
|
Hyundai
Capital America, Sr. Unsecd. Note, 144A, 4.800%, 1/10/2033 |
293,900
|
|
640,000
|
|
Hyundai
Capital America, Sr. Unsecd. Note, 144A, 5.300%, 1/8/2029 |
647,578
|
|
680,000
|
|
Nissan
Motor Co., Ltd., Sr. Unsecd. Note, 144A, 4.345%, 9/17/2027 |
669,361
|
|
200,000
|
1
|
Stellantis
Financial Services US Corp., Sr. Unsecd. Note, 144A, 5.800%, 6/15/2031 |
197,717
|
|
|
|
TOTAL
|
5,128,472
|
|
|
|
Consumer
Cyclical - Leisure—0.2% |
|
|
200,000
|
|
Airbnb,
Inc., Sr. Unsecd. Note, 4.650%, 3/16/2031 |
198,763
|
|
75,000
|
|
Airbnb,
Inc., Sr. Unsecd. Note, 5.250%, 3/16/2036 |
74,717
|
|
|
|
TOTAL
|
273,480
|
|
|
|
Consumer
Cyclical - Retailers—2.9% |
|
|
995,000
|
|
Advance
Auto Parts, Inc., Sr. Unsecd. Note, Series WI, 3.900%, 4/15/2030 |
936,097
|
|
445,000
|
|
Alimentation
Couche-Tard, Inc., Sr. Unsecd. Note, 144A, 2.950%, 1/25/2030 |
419,486
|
|
250,000
|
|
AutoNation,
Inc., Sr. Unsecd. Note, 4.750%, 6/1/2030 |
248,364
|
|
230,000
|
|
AutoZone,
Inc., Sr. Unsecd. Note, 4.750%, 2/1/2033 |
226,561
|
|
240,000
|
1
|
AutoZone,
Inc., Sr. Unsecd. Note, 5.400%, 7/15/2034 |
244,169
|
|
260,000
|
|
Costco
Wholesale Corp., Sr. Unsecd. Note, 1.375%, 6/20/2027 |
253,130
|
|
475,000
|
|
Home
Depot, Inc., Sr. Unsecd. Note, 4.750%, 6/25/2029 |
479,820
|
|
305,000
|
|
O’Reilly
Automotive, Inc., Sr. Unsecd. Note, 1.750%, 3/15/2031 |
266,786
|
|
115,000
|
|
O’Reilly
Automotive, Inc., Sr. Unsecd. Note, 4.200%, 4/1/2030 |
113,187
|
|
545,000
|
|
Tractor
Supply Co., Sr. Unsecd. Note, 1.750%, 11/1/2030 |
480,259
|
|
90,000
|
1
|
Tractor
Supply Co., Sr. Unsecd. Note, 5.250%, 5/15/2033 |
90,578
|
|
|
|
TOTAL
|
3,758,437
|
|
|
|
Consumer
Cyclical - Services—1.1% |
|
|
200,000
|
|
Alibaba
Group Holding Ltd., Sr. Unsecd. Note, 2.125%, 2/9/2031 |
180,294
|
|
475,000
|
|
Alibaba
Group Holding Ltd., Sr. Unsecd. Note, 3.400%, 12/6/2027 |
468,894
|
|
160,000
|
|
Amazon.com,
Inc., Sr. Unsecd. Note, 3.150%, 8/22/2027 |
158,126
|
|
275,000
|
|
Expedia
Group, Inc., Sr. Unsecd. Note, 5.500%, 4/15/2036 |
272,381
|
|
54,000
|
|
Expedia
Group, Inc., Sr. Unsecd. Note, Series WI, 2.950%, 3/15/2031 |
49,641
|
|
235,000
|
|
Uber
Technologies, Inc., Sr. Unsecd. Note, 4.300%, 1/15/2030 |
232,391
|
|
|
|
TOTAL
|
1,361,727
|
|
|
|
Consumer
Non-Cyclical - Food/Beverage—4.6% |
|
|
425,000
|
|
Anheuser-Busch
InBev Worldwide, Inc., Sr. Unsecd. Note, 4.750%, 1/23/2029 |
427,326
|
|
260,000
|
|
Campbells
Co./The, Sr. Unsecd. Note, 4.550%, 3/21/2031 |
253,113
|
|
955,000
|
|
Coca-Cola
Femsa S.A.B. de C.V., Sr. Unsecd. Note, 2.750%, 1/22/2030 |
894,172
|
|
705,000
|
|
Constellation
Brands, Inc., Sr. Unsecd. Note, 4.650%, 11/15/2028 |
705,052
|
|
360,000
|
|
Flowers
Foods, Inc., Sr. Unsecd. Note, 3.500%, 10/1/2026 |
359,296
|
|
265,000
|
1
|
Flowers
Foods, Inc., Sr. Unsecd. Note, 5.750%, 3/15/2035 |
257,917
|
|
730,000
|
|
Keurig
Dr Pepper, Inc., Sr. Unsecd. Note, 3.950%, 4/15/2029 |
714,951
|
|
835,000
|
|
Kraft
Heinz Foods Co., Sr. Unsecd. Note, Series WI, 3.875%, 5/15/2027 |
831,803
|
|
490,000
|
|
Mars,
Inc., Sr. Unsecd. Note, 144A, 5.200%, 3/1/2035 |
492,115
|
|
295,000
|
|
Smithfield
Foods, Inc., Sr. Unsecd. Note, 144A, 2.625%, 9/13/2031 |
260,876
|
|
500,000
|
|
Smithfield
Foods, Inc., Sr. Unsecd. Note, 144A, 3.000%, 10/15/2030 |
459,417
|
|
60,000
|
|
Smithfield
Foods, Inc., Sr. Unsecd. Note, 144A, 4.250%, 2/1/2027 |
59,863
|
Semi-Annual
Financial Statements and Additional Information
3
|
Principal
Amount
or
Shares |
|
|
Value
|
|
|
|
CORPORATE
BONDS—continued |
|
|
|
|
Consumer
Non-Cyclical - Food/Beverage—continued |
|
|
$ 150,000
|
|
Tyson
Foods, Inc., Sr. Unsecd. Note, 5.400%, 3/15/2029 |
$ 152,881
|
|
|
|
TOTAL
|
5,868,782
|
|
|
|
Consumer
Non-Cyclical - Health Care—2.5% |
|
|
490,000
|
|
180
Medical, Inc., Sr. Unsecd. Note, 144A, 5.300%, 10/8/2035 |
481,526
|
|
100,000
|
|
Augusta
SpinCo Corp., Sr. Unsecd. Note, 5.245%, 3/23/2036 |
100,117
|
|
240,000
|
|
Becton
Dickinson & Co., Sr. Unsecd. Note, 3.700%, 6/6/2027 |
238,481
|
|
500,000
|
|
CVS
Health Corp., Sr. Unsecd. Note, 4.300%, 3/25/2028 |
497,489
|
|
200,000
|
1
|
CVS
Health Corp., Sr. Unsecd. Note, 5.450%, 9/15/2035 |
202,670
|
|
485,000
|
|
CVS
Health Corp., Sr. Unsecd. Note, 5.700%, 6/1/2034 |
500,803
|
|
225,000
|
|
DH
Europe Finance II S.a.r.l., Sr. Unsecd. Note, 2.600%, 11/15/2029 |
211,127
|
|
285,000
|
|
GE
HealthCare Technologies, Inc., Sr. Unsecd. Note, 5.905%, 11/22/2032 |
299,902
|
|
560,000
|
|
HCA,
Inc., Sr. Unsecd. Note, 5.500%, 6/1/2033 |
572,353
|
|
113,000
|
|
Solventum
Corp., Sr. Unsecd. Note, Series WI, 5.400%, 3/1/2029 |
114,976
|
|
|
|
TOTAL
|
3,219,444
|
|
|
|
Consumer
Non-Cyclical - Pharmaceuticals—3.0% |
|
|
250,000
|
|
AbbVie,
Inc., Sr. Unsecd. Note, 3.200%, 11/21/2029 |
239,434
|
|
485,000
|
|
AbbVie,
Inc., Sr. Unsecd. Note, 4.750%, 3/15/2036 |
474,680
|
|
67,000
|
|
AbbVie,
Inc., Sr. Unsecd. Note, 4.750%, 3/15/2045 |
60,628
|
|
940,000
|
1
|
Amgen,
Inc., Sr. Unsecd. Note, 5.250%, 3/2/2030 |
957,932
|
|
225,000
|
|
Biogen,
Inc., Sr. Unsecd. Note, 2.250%, 5/1/2030 |
205,440
|
|
395,000
|
1
|
Bristol-Myers
Squibb Co., Sr. Unsecd. Note, 4.900%, 2/22/2029 |
400,412
|
|
147,000
|
|
Bristol-Myers
Squibb Co., Sr. Unsecd. Note, Series WI, 5.000%, 8/15/2045 |
136,405
|
|
400,000
|
|
Pfizer,
Inc., Sr. Unsecd. Note, 4.500%, 11/15/2032 |
394,676
|
|
635,000
|
|
Regeneron
Pharmaceuticals, Inc., Sr. Unsecd. Note, 1.750%, 9/15/2030 |
561,735
|
|
425,000
|
|
Revvity,
Inc., Sr. Unsecd. Note, 3.300%, 9/15/2029 |
406,039
|
|
|
|
TOTAL
|
3,837,381
|
|
|
|
Consumer
Non-Cyclical - Products—0.5% |
|
|
200,000
|
|
Clorox
Co., Sr. Unsecd. Note, 4.950%, 5/15/2033 |
198,110
|
|
200,000
|
|
Clorox
Co., Sr. Unsecd. Note, 5.250%, 5/15/2036 |
199,336
|
|
195,000
|
|
Kenvue,
Inc., Sr. Unsecd. Note, 5.000%, 3/22/2030 |
197,395
|
|
|
|
TOTAL
|
594,841
|
|
|
|
Consumer
Non-Cyclical - Supermarkets—0.5% |
|
|
575,000
|
|
Kroger
Co., Bond, 6.900%, 4/15/2038 |
645,502
|
|
|
|
Consumer
Non-Cyclical - Tobacco—1.7% |
|
|
285,000
|
|
BAT
Capital Corp., Sr. Unsecd. Note, 5.834%, 2/20/2031 |
296,964
|
|
285,000
|
|
BAT
Capital Corp., Sr. Unsecd. Note, 7.750%, 10/19/2032 |
324,932
|
|
300,000
|
|
Philip
Morris International, Inc., Sr. Unsecd. Note, 4.250%, 10/29/2032 |
291,021
|
|
290,000
|
|
Philip
Morris International, Inc., Sr. Unsecd. Note, 4.750%, 11/1/2031 |
291,050
|
|
485,000
|
|
Philip
Morris International, Inc., Sr. Unsecd. Note, 5.125%, 2/15/2030 |
492,433
|
|
135,000
|
1
|
Philip
Morris International, Inc., Sr. Unsecd. Note, 5.625%, 11/17/2029 |
139,217
|
|
345,000
|
|
Reynolds
American, Inc., Sr. Unsecd. Note, 7.000%, 8/4/2041 |
376,819
|
|
|
|
TOTAL
|
2,212,436
|
|
|
|
Energy
- Independent—1.1% |
|
|
210,000
|
|
Devon
Energy Corp., Sr. Unsecd. Note, 144A, 4.375%, 3/15/2029 |
208,346
|
|
190,000
|
1
|
Diamondback
Energy, Inc., Sr. Unsecd. Note, 5.150%, 1/30/2030 |
192,694
|
|
285,000
|
|
Diamondback
Energy, Inc., Sr. Unsecd. Note, 5.400%, 4/18/2034 |
289,178
|
|
150,000
|
|
Diamondback
Energy, Inc., Sr. Unsecd. Note, 6.250%, 3/15/2033 |
159,545
|
|
550,000
|
|
Ovintiv,
Inc., Sr. Unsecd. Note, 6.250%, 7/15/2033 |
578,788
|
|
|
|
TOTAL
|
1,428,551
|
Semi-Annual
Financial Statements and Additional Information
4
|
Principal
Amount
or
Shares |
|
|
Value
|
|
|
|
CORPORATE
BONDS—continued |
|
|
|
|
Energy
- Integrated—1.0% |
|
|
$ 485,000
|
|
BP
Capital Markets America, Inc., Sr. Unsecd. Note, 4.699%, 4/10/2029 |
$ 486,913
|
|
285,000
|
|
Cenovus
Energy, Inc., Sr. Unsecd. Note, 2.650%, 1/15/2032 |
254,528
|
|
85,000
|
|
Cenovus
Energy, Inc., Sr. Unsecd. Note, 5.400%, 3/20/2036 |
84,310
|
|
415,000
|
|
CNPC
Hong Kong Overseas Capital Ltd., Co. Guarantee, 144A, 5.950%, 4/28/2041 |
454,239
|
|
|
|
TOTAL
|
1,279,990
|
|
|
|
Energy
- Midstream—4.2% |
|
|
250,000
|
|
Boardwalk
Pipeline Partners LP, Sr. Unsecd. Note, 3.400%, 2/15/2031 |
233,388
|
|
300,000
|
|
Enbridge,
Inc., Sr. Unsecd. Note, 5.200%, 11/20/2035 |
298,164
|
|
290,000
|
|
Enbridge,
Inc., Sr. Unsecd. Note, 5.550%, 6/20/2035 |
295,053
|
|
285,000
|
|
Energy
Transfer LP, Sr. Unsecd. Note, 3.750%, 5/15/2030 |
274,543
|
|
100,000
|
|
Energy
Transfer LP, Sr. Unsecd. Note, 5.550%, 5/15/2034 |
101,622
|
|
390,000
|
|
MPLX
LP, Sr. Unsecd. Note, 5.000%, 1/15/2033 |
387,594
|
|
600,000
|
|
National
Fuel Gas Co., Sr. Unsecd. Note, 2.950%, 3/1/2031 |
549,187
|
|
330,000
|
|
ONEOK,
Inc., Sr. Unsecd. Note, 4.000%, 7/13/2027 |
328,331
|
|
335,000
|
|
ONEOK,
Inc., Sr. Unsecd. Note, 6.000%, 6/15/2035 |
348,778
|
|
120,000
|
|
ONEOK,
Inc., Sr. Unsecd. Note, 6.100%, 11/15/2032 |
126,343
|
|
475,000
|
|
Plains
All American Pipeline LP, Sr. Unsecd. Note, 3.550%, 12/15/2029 |
457,400
|
|
135,000
|
|
Targa
Resources, Inc., Sr. Unsecd. Note, 4.200%, 2/1/2033 |
127,996
|
|
380,000
|
|
Targa
Resources, Inc., Sr. Unsecd. Note, 6.125%, 3/15/2033 |
400,496
|
|
260,000
|
|
Targa
Resources, Inc., Sr. Unsecd. Note, 6.150%, 3/1/2029 |
269,288
|
|
565,000
|
|
TC
Pipelines LP, Sr. Unsecd. Note, 3.900%, 5/25/2027 |
562,331
|
|
300,000
|
|
Williams
Cos., Inc., Sr. Unsecd. Note, 5.150%, 3/15/2036 |
294,971
|
|
265,000
|
|
Williams
Cos., Inc., Sr. Unsecd. Note, 5.300%, 9/30/2035 |
264,471
|
|
|
|
TOTAL
|
5,319,956
|
|
|
|
Energy
- Refining—0.4% |
|
|
320,000
|
|
Valero
Energy Corp., Sr. Unsecd. Note, 6.625%, 6/15/2037 |
351,824
|
|
205,000
|
|
Valero
Energy Corp., Sr. Unsecd. Note, 7.500%, 4/15/2032 |
231,824
|
|
|
|
TOTAL
|
583,648
|
|
|
|
Financial
Institution - Banking—23.4% |
|
|
175,000
|
|
Ally
Financial, Inc., Sr. Unsecd. Note, 6.992%, 6/13/2029 |
181,510
|
|
400,000
|
|
American
Express Co., Sr. Unsecd. Note, 4.804%, 10/24/2036 |
387,492
|
|
155,000
|
|
American
Express Co., Sr. Unsecd. Note, 5.085%, 1/30/2031 |
156,888
|
|
60,000
|
|
Associated
Banc-Corp., Sr. Unsecd. Note, 6.455%, 8/29/2030 |
61,765
|
|
285,000
|
|
Bank
of America Corp., Sr. Unsecd. Note, 1.734%, 7/22/2027 |
284,570
|
|
1,850,000
|
|
Bank
of America Corp., Sr. Unsecd. Note, 2.592%, 4/29/2031 |
1,707,395
|
|
580,000
|
|
Bank
of America Corp., Sr. Unsecd. Note, 3.705%, 4/24/2028 |
576,146
|
|
500,000
|
|
Bank
of America Corp., Sr. Unsecd. Note, 5.468%, 1/23/2035 |
509,975
|
|
475,000
|
|
Bank
of America Corp., Sr. Unsecd. Note, Series MTN, 3.248%, 10/21/2027 |
469,332
|
|
475,000
|
|
Bank
of America Corp., Sr. Unsecd. Note, Series MTN, 4.271%, 7/23/2029 |
471,305
|
|
220,000
|
|
Bank
of America Corp., Sub. Note, 5.489%, 4/23/2037 |
219,212
|
|
450,000
|
|
Capital
One Financial Co., Sr. Unsecd. Note, 4.493%, 9/11/2031 |
441,681
|
|
160,000
|
|
Capital
One Financial Co., Sr. Unsecd. Note, 4.722%, 1/30/2032 |
157,885
|
|
475,000
|
|
Citigroup,
Inc., 4.125%, 7/25/2028 |
470,126
|
|
1,325,000
|
|
Citigroup,
Inc., Sr. Unsecd. Note, 2.572%, 6/3/2031 |
1,217,697
|
|
475,000
|
|
Citigroup,
Inc., Sr. Unsecd. Note, 4.075%, 4/23/2029 |
470,649
|
|
270,000
|
|
Citigroup,
Inc., Sr. Unsecd. Note, 5.174%, 9/11/2036 |
268,595
|
|
220,000
|
|
Citigroup,
Inc., Sub. Note, 6.020%, 1/24/2036 |
226,685
|
|
90,000
|
|
Citizens
Financial Group, Inc., Sr. Unsecd. Note, 2.500%, 2/6/2030 |
83,225
|
|
142,000
|
|
Citizens
Financial Group, Inc., Sr. Unsecd. Note, 5.841%, 1/23/2030 |
145,564
|
|
250,000
|
|
Citizens
Financial Group, Inc., Sr. Unsecd. Note, 6.645%, 4/25/2035 |
269,821
|
Semi-Annual
Financial Statements and Additional Information
5
|
Principal
Amount
or
Shares |
|
|
Value
|
|
|
|
CORPORATE
BONDS—continued |
|
|
|
|
Financial
Institution - Banking—continued |
|
|
$ 285,000
|
|
Comerica,
Inc., 3.800%, 7/22/2026 |
$ 284,903
|
|
425,000
|
|
Fifth
Third Bancorp, Sr. Unsecd. Note, 4.337%, 4/25/2033 |
410,015
|
|
132,000
|
1
|
Fifth
Third Bancorp, Sr. Unsecd. Note, 4.895%, 9/6/2030 |
132,219
|
|
200,000
|
|
Fifth
Third Bancorp, Sr. Unsecd. Note, 5.141%, 1/29/2037 |
196,398
|
|
150,000
|
|
Fifth
Third Bancorp, Sr. Unsecd. Note, 144A, 5.982%, 1/30/2030 |
154,149
|
|
250,000
|
|
FNB
Corp. (PA), 5.722%, 12/11/2030 |
252,092
|
|
715,000
|
|
Goldman
Sachs Group, Inc., Sr. Unsecd. Note, 1.992%, 1/27/2032 |
629,112
|
|
240,000
|
|
Goldman
Sachs Group, Inc., Sr. Unsecd. Note, 2.640%, 2/24/2028 |
237,130
|
|
475,000
|
|
Goldman
Sachs Group, Inc., Sr. Unsecd. Note, 4.223%, 5/1/2029 |
470,988
|
|
400,000
|
|
Goldman
Sachs Group, Inc., Sr. Unsecd. Note, 4.369%, 10/21/2031 |
391,299
|
|
300,000
|
|
Goldman
Sachs Group, Inc., Sr. Unsecd. Note, 5.065%, 1/21/2037 |
293,015
|
|
385,000
|
|
Goldman
Sachs Group, Inc., Sr. Unsecd. Note, 5.536%, 1/28/2036 |
391,157
|
|
245,000
|
|
Goldman
Sachs Group, Inc., Sr. Unsecd. Note, 5.851%, 4/25/2035 |
254,151
|
|
230,000
|
|
Huntington
Bancshares, Inc., Sr. Unsecd. Note, 2.550%, 2/4/2030 |
212,640
|
|
300,000
|
|
Huntington
Bancshares, Inc., Sr. Unsecd. Note, 4.623%, 1/28/2032 |
295,102
|
|
210,000
|
|
Huntington
Bancshares, Inc., Sr. Unsecd. Note, 6.208%, 8/21/2029 |
216,191
|
|
940,000
|
|
JPMorgan
Chase & Co., Sr. Unsecd. Note, 2.545%, 11/8/2032 |
836,178
|
|
940,000
|
|
JPMorgan
Chase & Co., Sr. Unsecd. Note, 2.580%, 4/22/2032 |
847,360
|
|
475,000
|
|
JPMorgan
Chase & Co., Sr. Unsecd. Note, 4.452%, 12/5/2029 |
472,377
|
|
240,000
|
|
JPMorgan
Chase & Co., Sr. Unsecd. Note, 5.294%, 7/22/2035 |
242,590
|
|
155,000
|
|
JPMorgan
Chase & Co., Sr. Unsecd. Note, 5.336%, 1/23/2035 |
157,373
|
|
390,000
|
|
JPMorgan
Chase & Co., Sr. Unsecd. Note, 5.572%, 4/22/2036 |
401,106
|
|
125,000
|
|
KeyCorp,
Sr. Unsecd. Note, 5.305%, 1/28/2037 |
123,214
|
|
375,000
|
|
KeyCorp,
Sr. Unsecd. Note, 6.401%, 3/6/2035 |
399,444
|
|
385,000
|
|
M&T
Bank Corp., Sr. Unsecd. Note, 4.553%, 8/16/2028 |
384,800
|
|
240,000
|
|
M&T
Bank Corp., Sr. Unsecd. Note, 5.053%, 1/27/2034 |
238,037
|
|
300,000
|
|
M&T
Bank Corp., Sr. Unsecd. Note, Series MTN, 5.385%, 1/16/2036 |
299,947
|
|
250,000
|
|
Morgan
Stanley, Sr. Unsecd. Note, 4.493%, 1/16/2032 |
245,196
|
|
400,000
|
|
Morgan
Stanley, Sr. Unsecd. Note, 4.708%, 3/12/2032 |
395,152
|
|
225,000
|
|
Morgan
Stanley, Sr. Unsecd. Note, 4.892%, 10/22/2036 |
217,981
|
|
475,000
|
|
Morgan
Stanley, Sr. Unsecd. Note, 5.250%, 4/21/2034 |
478,126
|
|
185,000
|
|
Morgan
Stanley, Sr. Unsecd. Note, 5.466%, 1/18/2035 |
187,885
|
|
110,000
|
|
Morgan
Stanley, Sr. Unsecd. Note, 5.587%, 1/18/2036 |
112,369
|
|
195,000
|
|
Morgan
Stanley, Sr. Unsecd. Note, 5.664%, 4/17/2036 |
200,276
|
|
475,000
|
|
Morgan
Stanley, Sr. Unsecd. Note, Series GMTN, 2.239%, 7/21/2032 |
416,797
|
|
155,000
|
|
Morgan
Stanley, Sr. Unsecd. Note, Series GMTN, 2.699%, 1/22/2031 |
143,960
|
|
250,000
|
|
Pinnacle
Financial Partners, Inc., Sr. Unsecd. Note, 5.596%, 5/19/2032 |
250,862
|
|
155,000
|
|
Pinnacle
Financial Partners, Inc., Sr. Unsecd. Note, 6.168%, 11/1/2030 |
158,687
|
|
475,000
|
|
PNC
Financial Services Group, Inc., Sr. Unsecd. Note, 5.068%, 1/24/2034 |
475,654
|
|
395,000
|
|
PNC
Financial Services Group, Inc., Sr. Unsecd. Note, 5.373%, 7/21/2036 |
398,836
|
|
190,000
|
|
PNC
Financial Services Group, Inc., Sr. Unsecd. Note, 5.582%, 6/12/2029 |
193,490
|
|
175,000
|
|
PNC
Financial Services Group, Inc., Sr. Unsecd. Note, 5.676%, 1/22/2035 |
180,403
|
|
535,000
|
|
Regions
Financial Corp., Sr. Unsecd. Note, 5.502%, 9/6/2035 |
541,985
|
|
65,000
|
|
State
Street Corp., Sr. Unsecd. Note, 4.421%, 5/13/2033 |
63,598
|
|
1,130,000
|
1
|
Synovus
Bank GA, Sr. Unsecd. Note, 5.625%, 2/15/2028 |
1,141,885
|
|
330,000
|
|
Truist
Financial Corp., Sr. Unsecd. Note, 4.597%, 1/27/2032 |
325,526
|
|
475,000
|
|
Truist
Financial Corp., Sr. Unsecd. Note, Series MTN, 1.125%, 8/3/2027 |
458,834
|
|
315,000
|
|
Truist
Financial Corp., Sr. Unsecd. Note, Series MTN, 5.071%, 5/20/2031 |
317,995
|
|
380,000
|
|
Truist
Financial Corp., Sr. Unsecd. Note, Series MTN, 5.122%, 1/26/2034 |
379,536
|
|
190,000
|
|
Truist
Financial Corp., Sr. Unsecd. Note, Series MTN, 7.161%, 10/30/2029 |
200,144
|
Semi-Annual
Financial Statements and Additional Information
6
|
Principal
Amount
or
Shares |
|
|
Value
|
|
|
|
CORPORATE
BONDS—continued |
|
|
|
|
Financial
Institution - Banking—continued |
|
|
$ 285,000
|
|
U.S.
Bancorp, Sr. Unsecd. Note, 5.384%, 1/23/2030 |
$ 289,878
|
|
240,000
|
|
U.S.
Bancorp, Sr. Unsecd. Note, 5.836%, 6/12/2034 |
250,523
|
|
1,180,000
|
|
U.S.
Bancorp, Sr. Unsecd. Note, Series MTN, 2.215%, 1/27/2028 |
1,165,101
|
|
300,000
|
|
Wells
Fargo & Co., Sr. Unsecd. Note, 4.892%, 9/15/2036 |
292,790
|
|
300,000
|
|
Wells
Fargo & Co., Sr. Unsecd. Note, 4.960%, 1/23/2037 |
292,994
|
|
225,000
|
|
Wells
Fargo & Co., Sr. Unsecd. Note, 5.389%, 4/24/2034 |
228,501
|
|
240,000
|
|
Wells
Fargo & Co., Sr. Unsecd. Note, 5.574%, 7/25/2029 |
244,078
|
|
707,000
|
|
Wells
Fargo & Co., Sr. Unsecd. Note, Series MTN, 2.393%, 6/2/2028 |
693,031
|
|
1,000,000
|
|
Wells
Fargo & Co., Sr. Unsecd. Note, Series MTN, 2.572%, 2/11/2031 |
925,971
|
|
|
|
TOTAL
|
29,868,549
|
|
|
|
Financial
Institution - Broker/Asset Mgr/Exchange—1.2% |
|
|
475,000
|
|
Jefferies
Financial Group, Inc., Sr. Unsecd. Note, 2.625%, 10/15/2031 |
413,883
|
|
200,000
|
|
Jefferies
Financial Group, Inc., Sr. Unsecd. Note, 5.125%, 4/28/2031 |
197,484
|
|
190,000
|
|
Jefferies
Financial Group, Inc., Sr. Unsecd. Note, 6.500%, 1/20/2043 |
191,505
|
|
235,000
|
|
Nuveen
LLC, Sr. Unsecd. Note, 144A, 4.000%, 11/1/2028 |
232,071
|
|
560,000
|
|
Raymond
James Financial, Inc., Sr. Unsecd. Note, 4.900%, 9/11/2035 |
546,314
|
|
|
|
TOTAL
|
1,581,257
|
|
|
|
Financial
Institution - Finance Companies—2.2% |
|
|
200,000
|
|
AerCap
Ireland Capital Ltd. / AerCap Global Aviation Trust, Sr. Sub. Secd. Note, 4.750%, 1/15/2033 |
195,382
|
|
195,000
|
|
AerCap
Ireland Capital Ltd. / AerCap Global Aviation Trust, Sr. Unsecd. Note, 3.000%, 10/29/2028 |
187,739
|
|
475,000
|
|
AerCap
Ireland Capital Ltd. / AerCap Global Aviation Trust, Sr. Unsecd. Note, 3.300%, 1/30/2032 |
434,308
|
|
525,000
|
|
AerCap
Ireland Capital Ltd. / AerCap Global Aviation Trust, Sr. Unsecd. Note, 4.625%, 10/15/2027 |
525,345
|
|
525,000
|
|
Air
Lease Corp., Sr. Unsecd. Note, 3.625%, 12/1/2027 |
517,824
|
|
130,000
|
|
Air
Lease Corp., Sr. Unsecd. Note, 5.850%, 12/15/2027 |
132,130
|
|
195,000
|
|
Aircastle
Ltd., Sr. Secd. Note, 144A, 5.000%, 9/15/2030 |
194,294
|
|
190,000
|
|
Aircastle
Ltd., Sr. Unsecd. Note, 144A, 5.000%, 5/15/2031 |
188,327
|
|
400,000
|
|
Takeoff
Merger Sub, Inc., Sr. Unsecd. Note, 144A, 4.850%, 3/24/2031 |
395,931
|
|
|
|
TOTAL
|
2,771,280
|
|
|
|
Financial
Institution - Insurance - Health—1.1% |
|
|
610,000
|
|
Centene
Corp., Sr. Unsecd. Note, 2.450%, 7/15/2028 |
579,971
|
|
700,000
|
|
Elevance
Health, Inc., Sr. Unsecd. Note, 4.600%, 9/15/2032 |
688,031
|
|
190,000
|
|
The
Cigna Group, Sr. Unsecd. Note, 4.375%, 10/15/2028 |
189,242
|
|
|
|
TOTAL
|
1,457,244
|
|
|
|
Financial
Institution - Insurance - Life—1.7% |
|
|
340,000
|
|
AIA
Group Ltd., Sr. Unsecd. Note, 144A, 3.600%, 4/9/2029 |
333,048
|
|
485,000
|
|
CoreBridge
Global Funding, Sec. Fac. Bond, 144A, 5.200%, 1/12/2029 |
489,747
|
|
340,000
|
|
CoreBridge
Global Funding, Sr. Secd. Note, 144A, 5.900%, 9/19/2028 |
348,015
|
|
120,000
|
|
Lincoln
Financial Global Funding, Sr. Secd. Note, 144A, 4.200%, 1/12/2029 |
118,391
|
|
755,000
|
1
|
Lincoln
National Corp., Sr. Unsecd. Note, 3.050%, 1/15/2030 |
710,717
|
|
165,000
|
|
Massachusetts
Mutual Life Insurance Co., Sub. Note, 144A, 8.875%, 6/1/2039 |
213,361
|
|
|
|
TOTAL
|
2,213,279
|
|
|
|
Financial
Institution - Insurance - P&C—0.8% |
|
|
285,000
|
|
Aon
North America, Inc., Sr. Unsecd. Note, 5.300%, 3/1/2031 |
290,201
|
|
335,000
|
|
CNA
Financial Corp., Sr. Unsecd. Note, 3.900%, 5/1/2029 |
327,564
|
|
285,000
|
|
Nationwide
Mutual Insurance Co., Sub. Note, 144A, 9.375%, 8/15/2039 |
369,848
|
|
|
|
TOTAL
|
987,613
|
|
|
|
Financial
Institution - REIT - Apartment—1.3% |
|
|
500,000
|
|
Avalonbay
Communities, Inc., Sr. Unsecd. Note, 4.350%, 12/1/2030 |
494,410
|
|
175,000
|
|
Avalonbay
Communities, Inc., Sr. Unsecd. Note, Series MTN, 3.350%, 5/15/2027 |
173,675
|
|
110,000
|
|
Camden
Property Trust, Sr. Unsecd. Note, 2.800%, 5/15/2030 |
102,886
|
Semi-Annual
Financial Statements and Additional Information
7
|
Principal
Amount
or
Shares |
|
|
Value
|
|
|
|
CORPORATE
BONDS—continued |
|
|
|
|
Financial
Institution - REIT - Apartment—continued |
|
|
$ 200,000
|
|
Mid-America
Apartment Communities LP, Sr. Unsecd. Note, 4.650%, 1/15/2033 |
$ 196,600
|
|
305,000
|
|
Mid-America
Apartment Communities LP, Sr. Unsub., 1.700%, 2/15/2031 |
266,597
|
|
475,000
|
|
UDR,
Inc., Sr. Unsecd. Note, Series MTN, 2.100%, 8/1/2032 |
404,414
|
|
|
|
TOTAL
|
1,638,582
|
|
|
|
Financial
Institution - REIT - Healthcare—1.2% |
|
|
420,000
|
|
Healthcare
Trust of America, Sr. Unsecd. Note, 2.000%, 3/15/2031 |
367,013
|
|
400,000
|
|
Healthpeak
Op LLC, Sr. Unsecd. Note, 4.750%, 1/15/2033 |
392,436
|
|
195,000
|
|
Welltower
OP LLC, Sr. Unsecd. Note, 5.125%, 7/1/2035 |
195,810
|
|
355,000
|
|
Welltower,
Inc., Sr. Unsecd. Note, 2.750%, 1/15/2031 |
326,790
|
|
235,000
|
|
Welltower,
Inc., Sr. Unsecd. Note, 3.100%, 1/15/2030 |
223,363
|
|
|
|
TOTAL
|
1,505,412
|
|
|
|
Financial
Institution - REIT - Office—1.1% |
|
|
150,000
|
|
Alexandria
Real Estate Equities, Inc., Sr. Unsecd. Note, 1.875%, 2/1/2033 |
122,482
|
|
90,000
|
|
Alexandria
Real Estate Equities, Inc., Sr. Unsecd. Note, 4.900%, 12/15/2030 |
89,852
|
|
250,000
|
|
Alexandria
Real Estate Equities, Inc., Sr. Unsecd. Note, 5.250%, 3/15/2036 |
245,892
|
|
550,000
|
|
Boston
Properties LP, Sr. Unsecd. Note, 2.550%, 4/1/2032 |
479,189
|
|
80,000
|
|
Boston
Properties LP, Sr. Unsecd. Note, 3.250%, 1/30/2031 |
74,247
|
|
120,000
|
|
Piedmont
Operating Partnership, LP, Sr. Unsecd. Note, 2.750%, 4/1/2032 |
102,873
|
|
245,000
|
|
Piedmont
Operating Partnership, LP, Sr. Unsecd. Note, 9.250%, 7/20/2028 |
263,860
|
|
|
|
TOTAL
|
1,378,395
|
|
|
|
Financial
Institution - REIT - Other—1.2% |
|
|
75,000
|
|
Host
Hotels & Resorts LP, Sr. Unsecd. Note, 4.250%, 12/15/2028 |
74,213
|
|
365,000
|
|
Host
Hotels & Resorts LP, Sr. Unsecd. Note, 5.700%, 7/1/2034 |
373,524
|
|
305,000
|
|
ProLogis
LP, Sr. Unsecd. Note, 4.375%, 2/1/2029 |
304,468
|
|
360,000
|
|
WP
Carey, Inc., Sr. Unsecd. Note, 2.400%, 2/1/2031 |
324,181
|
|
195,000
|
|
WP
Carey, Inc., Sr. Unsecd. Note, 4.650%, 7/15/2030 |
193,838
|
|
240,000
|
|
WP
Carey, Inc., Sr. Unsecd. Note, 5.375%, 6/30/2034 |
242,744
|
|
|
|
TOTAL
|
1,512,968
|
|
|
|
Financial
Institution - REIT - Retail—1.3% |
|
|
685,000
|
|
Kimco
Realty Corp., Sr. Unsecd. Note, 1.900%, 3/1/2028 |
657,506
|
|
240,000
|
|
Kimco
Realty Corp., Sr. Unsecd. Note, 2.700%, 10/1/2030 |
222,983
|
|
115,000
|
|
Phillips
Edison Grocery Center Operating Partnership I, LP, Sr. Unsecd. Note, 4.750%, 3/15/2033 |
112,931
|
|
380,000
|
|
Regency
Centers LP, Sr. Unsecd. Note, 3.700%, 6/15/2030 |
366,949
|
|
285,000
|
|
Regency
Centers LP, Sr. Unsecd. Note, 5.250%, 1/15/2034 |
289,692
|
|
|
|
TOTAL
|
1,650,061
|
|
|
|
Sovereign—0.4%
|
|
|
510,000
|
|
Inter-American
Development Bank, Series MTN, 6.750%, 7/15/2027 |
521,307
|
|
|
|
Technology—9.2%
|
|
|
285,000
|
|
Accenture
Capital, Inc., Sr. Unsecd. Note, 4.050%, 10/4/2029 |
280,475
|
|
300,000
|
|
Alphabet,
Inc., Sr. Unsecd. Note, 4.400%, 2/15/2033 |
293,646
|
|
180,000
|
|
Alphabet,
Inc., Sr. Unsecd. Note, 4.700%, 11/15/2035 |
176,420
|
|
120,000
|
|
Apple,
Inc., Sr. Unsecd. Note, 4.450%, 5/6/2044 |
106,422
|
|
160,000
|
|
Autodesk,
Inc., Sr. Unsecd. Note, 5.300%, 6/15/2035 |
160,142
|
|
440,000
|
|
Broadcom,
Inc., Sr. Unsecd. Note, 4.950%, 1/15/2036 |
432,330
|
|
375,000
|
|
Broadcom,
Inc., Sr. Unsecd. Note, 5.150%, 11/15/2031 |
381,661
|
|
130,000
|
|
Broadcom,
Inc., Sr. Unsecd. Note, Series WI, 3.419%, 4/15/2033 |
118,541
|
|
51,000
|
|
Concentrix
Corp., Sr. Unsecd. Note, 6.650%, 8/2/2026 |
50,985
|
|
180,000
|
|
Fidelity
National Information Services, Inc., Sr. Unsecd. Note, 4.800%, 3/10/2031 |
178,094
|
|
220,000
|
1
|
Fiserv,
Inc., Sr. Secd. Note, 5.250%, 8/11/2035 |
214,411
|
|
240,000
|
|
Fiserv,
Inc., Sr. Unsecd. Note, 2.650%, 6/1/2030 |
219,509
|
Semi-Annual
Financial Statements and Additional Information
8
|
Principal
Amount
or
Shares |
|
|
Value
|
|
|
|
CORPORATE
BONDS—continued |
|
|
|
|
Technology—continued
|
|
|
$ 475,000
|
|
Fiserv,
Inc., Sr. Unsecd. Note, 4.200%, 10/1/2028 |
$ 468,557
|
|
215,000
|
|
Fiserv,
Inc., Sr. Unsecd. Note, 5.450%, 3/2/2028 |
217,182
|
|
285,000
|
|
Global
Payments, Inc., Sr. Unsecd. Note, 2.150%, 1/15/2027 |
281,357
|
|
88,000
|
|
Global
Payments, Inc., Sr. Unsecd. Note, 2.900%, 5/15/2030 |
80,803
|
|
283,000
|
|
Global
Payments, Inc., Sr. Unsecd. Note, 2.900%, 11/15/2031 |
249,518
|
|
300,000
|
|
Global
Payments, Inc., Sr. Unsecd. Note, 5.200%, 11/15/2032 |
293,268
|
|
150,000
|
|
Global
Payments, Inc., Sr. Unsecd. Note, 5.400%, 3/15/2033 |
147,112
|
|
65,000
|
|
Global
Payments, Inc., Sr. Unsecd. Note, 5.550%, 11/15/2035 |
63,042
|
|
400,000
|
|
Hewlett
Packard Enterprise Co., Sr. Unsecd. Note, 4.400%, 10/15/2030 |
392,805
|
|
190,000
|
|
Hewlett
Packard Enterprise Co., Sr. Unsecd. Note, 4.850%, 10/15/2031 |
189,268
|
|
190,000
|
|
Hewlett
Packard Enterprise Co., Sr. Unsecd. Note, 5.000%, 10/15/2034 |
186,218
|
|
375,000
|
|
Intel
Corp., Sr. Unsecd. Note, 5.000%, 2/21/2031 |
378,002
|
|
180,000
|
|
Intel
Corp., Sr. Unsecd. Note, 5.300%, 5/15/2036 |
179,182
|
|
100,000
|
|
Keysight
Technologies, Inc., Sr. Unsecd. Note, 3.000%, 10/30/2029 |
94,832
|
|
230,000
|
|
Keysight
Technologies, Inc., Sr. Unsecd. Note, 4.950%, 10/15/2034 |
227,575
|
|
295,000
|
|
Lam
Research Corp., Sr. Unsecd. Note, 4.000%, 3/15/2029 |
291,804
|
|
190,000
|
|
Microchip
Technology, Inc., Sr. Unsecd. Note, 5.050%, 3/15/2029 |
191,511
|
|
90,000
|
|
Microchip
Technology, Inc., Sr. Unsecd. Note, 5.050%, 2/15/2030 |
90,398
|
|
540,000
|
|
Oracle
Corp., Sr. Unsecd. Note, 2.300%, 3/25/2028 |
516,981
|
|
530,000
|
|
Oracle
Corp., Sr. Unsecd. Note, 5.700%, 2/4/2036 |
513,467
|
|
220,000
|
|
Oracle
Corp., Sr. Unsecd. Note, 6.150%, 11/9/2029 |
225,678
|
|
250,000
|
|
Oracle
Corp., Sr. Unsecd. Note, 6.700%, 2/4/2056 |
235,448
|
|
405,000
|
|
Roper
Technologies, Inc., Sr. Unsecd. Note, 2.000%, 6/30/2030 |
363,598
|
|
825,000
|
1
|
Roper
Technologies, Inc., Sr. Unsecd. Note, 4.750%, 2/15/2032 |
816,996
|
|
290,000
|
|
Roper
Technologies, Inc., Sr. Unsecd. Note, 5.100%, 9/15/2035 |
281,845
|
|
200,000
|
|
Salesforce,
Inc., Sr. Unsecd. Note, 4.500%, 3/15/2028 |
199,819
|
|
200,000
|
|
Salesforce,
Inc., Sr. Unsecd. Note, 4.650%, 3/15/2029 |
199,922
|
|
380,000
|
|
Trimble,
Inc., Sr. Unsecd. Note, 6.100%, 3/15/2033 |
396,921
|
|
520,000
|
|
Verisign,
Inc., Sr. Unsecd. Note, 2.700%, 6/15/2031 |
467,163
|
|
565,000
|
|
Verisk
Analytics, Inc., Sr. Unsecd. Note, 4.125%, 3/15/2029 |
558,260
|
|
100,000
|
|
Verisk
Analytics, Inc., Sr. Unsecd. Note, 4.450%, 3/15/2031 |
97,962
|
|
200,000
|
|
Verisk
Analytics, Inc., Sr. Unsecd. Note, 5.125%, 3/15/2036 |
195,546
|
|
|
|
TOTAL
|
11,704,676
|
|
|
|
Transportation
- Railroads—0.3% |
|
|
475,000
|
|
Canadian
Pacific Railway Co., Sr. Unsecd. Note, 2.450%, 12/2/2031 |
422,597
|
|
|
|
Transportation
- Services—1.9% |
|
|
300,000
|
|
Enterprise
Rent-A-Car USA Finance Co., Sr. Unsecd. Note, 144A, 4.700%, 4/30/2031 |
299,176
|
|
380,000
|
|
Enterprise
Rent-A-Car USA Finance Co., Sr. Unsecd. Note, 144A, 5.000%, 2/15/2029 |
383,658
|
|
195,000
|
|
GXO
Logistics, Inc., Sr. Unsecd. Note, 6.250%, 5/6/2029 |
201,643
|
|
295,000
|
|
GXO
Logistics, Inc., Sr. Unsecd. Note, Series WI, 2.650%, 7/15/2031 |
261,571
|
|
95,000
|
|
Penske
Truck Leasing Co. LP & PTL Finance Corp., Sr. Unsecd. Note, 144A, 4.550%, 1/15/2031 |
94,103
|
|
525,000
|
|
Penske
Truck Leasing Co. LP & PTL Finance Corp., Sr. Unsecd. Note, 144A, 5.250%, 7/1/2029 |
531,653
|
|
285,000
|
|
Penske
Truck Leasing Co. LP & PTL Finance Corp., Sr. Unsecd. Note, 144A, 5.700%, 2/1/2028 |
289,229
|
|
350,000
|
|
Ryder
System, Inc., Sr. Unsecd. Note, 4.300%, 12/1/2030 |
345,372
|
|
|
|
TOTAL
|
2,406,405
|
|
|
|
Utility
- Electric—4.7% |
|
|
240,000
|
|
AEP
Texas, Inc., Sr. Unsecd. Note, 3.950%, 6/1/2028 |
237,386
|
|
400,000
|
|
American
Electric Power Co., Inc., Sr. Unsecd. Note, 2.300%, 3/1/2030 |
367,811
|
|
380,000
|
|
Duke
Energy Corp., Sr. Unsecd. Note, 2.450%, 6/1/2030 |
350,007
|
|
380,000
|
|
EDP
Finance B.V., Sr. Unsecd. Note, 144A, 1.710%, 1/24/2028 |
364,023
|
Semi-Annual
Financial Statements and Additional Information
9
|
Principal
Amount
or
Shares |
|
|
Value
|
|
|
|
CORPORATE
BONDS—continued |
|
|
|
|
Utility
- Electric—continued |
|
|
$ 200,000
|
|
Electricite
de France S.A., Sr. Unsecd. Note, 144A, 5.700%, 5/23/2028 |
$ 203,756
|
|
380,000
|
1
|
EverSource
Energy, Sr. Unsecd. Note, 5.950%, 2/1/2029 |
390,934
|
|
600,000
|
|
Exelon
Corp., Sr. Unsecd. Note, 4.050%, 4/15/2030 |
585,838
|
|
240,000
|
|
Exelon
Corp., Sr. Unsecd. Note, 5.150%, 3/15/2028 |
242,296
|
|
475,000
|
|
National
Rural Utilities Cooperative Finance Corp., Sr. Unsecd. Note, 5.150%, 6/15/2029 |
482,533
|
|
250,000
|
|
NextEra
Energy Capital Holdings, Inc., Sr. Unsecd. Note, 4.625%, 7/15/2027 |
250,370
|
|
565,000
|
1
|
NextEra
Energy Capital Holdings, Inc., Sr. Unsecd. Note, 5.000%, 2/28/2030 |
571,201
|
|
45,000
|
|
NiSource,
Inc., Sr. Unsecd. Note, 5.250%, 3/30/2028 |
45,515
|
|
235,000
|
|
Puget
Energy, Inc., Sec. Fac. Bond, 2.379%, 6/15/2028 |
224,664
|
|
240,000
|
|
Southern
Co., Sr. Unsecd. Note, Series A, 3.700%, 4/30/2030 |
231,993
|
|
700,000
|
|
Southern
Power Co., Sr. Unsecd. Note, Series B, 4.900%, 10/1/2035 |
679,399
|
|
755,000
|
|
WEC
Energy Group, Inc., Sr. Unsecd. Note, 1.800%, 10/15/2030 |
671,943
|
|
150,000
|
|
WEC
Energy Group, Inc., Sr. Unsecd. Note, 2.200%, 12/15/2028 |
141,828
|
|
|
|
TOTAL
|
6,041,497
|
|
|
|
Utility
- Natural Gas—0.4% |
|
|
475,000
|
|
Sempra
Energy, Sr. Unsecd. Note, 3.250%, 6/15/2027 |
469,460
|
|
|
|
Utility
- Natural Gas Distributor—0.2% |
|
|
240,000
|
|
Southern
California Gas Co., Term Loan - 1st Lien, 5.050%, 9/1/2034 |
240,356
|
|
|
|
TOTAL
CORPORATE BONDS
(IDENTIFIED
COST $127,221,098) |
125,451,857
|
|
|
|
REPURCHASE
AGREEMENT—0.7% |
|
|
931,000
|
|
Interest
in $584,000,000 joint repurchase agreement 3.65%, dated 6/30/2026 under which Bank of America, N.A. will
repurchase
securities provided as collateral for $584,059,211 on 7/1/2026. The securities provided as collateral at the end of
the
period held with BNY Mellon as tri-party agent, were U.S. Government Agency securities with various maturities to
12/1/2047
and the market value of those underlying securities was $595,740,395.
(IDENTIFIED
COST $931,000) |
931,000
|
|
|
|
MORTGAGE-BACKED
SECURITIES—0.0% |
|
|
|
|
Federal
Home Loan Mortgage Corporation—0.0% |
|
|
114
|
|
Federal
Home Loan Mortgage Corp., Pool C01051, 8.000%, 9/1/2030 |
118
|
|
|
|
Government
National Mortgage Association—0.0% |
|
|
208
|
|
Government
National Mortgage Association, Pool 2630, 6.500%, 8/20/2028 |
215
|
|
329
|
|
Government
National Mortgage Association, Pool 2631, 7.000%, 8/20/2028 |
339
|
|
452
|
|
Government
National Mortgage Association, Pool 2658, 6.500%, 10/20/2028 |
468
|
|
770
|
|
Government
National Mortgage Association, Pool 2701, 6.500%, 1/20/2029 |
798
|
|
754
|
|
Government
National Mortgage Association, Pool 2796, 7.000%, 8/20/2029 |
778
|
|
186
|
|
Government
National Mortgage Association, Pool 3039, 6.500%, 2/20/2031 |
193
|
|
684
|
|
Government
National Mortgage Association, Pool 3040, 7.000%, 2/20/2031 |
705
|
|
2,696
|
|
Government
National Mortgage Association, Pool 3188, 6.500%, 1/20/2032 |
2,795
|
|
2,144
|
|
Government
National Mortgage Association, Pool 3239, 6.500%, 5/20/2032 |
2,222
|
|
4,864
|
|
Government
National Mortgage Association, Pool 3261, 6.500%, 7/20/2032 |
5,042
|
|
|
|
TOTAL
|
13,555
|
|
|
|
TOTAL
MORTGAGE-BACKED SECURITIES
(IDENTIFIED
COST $13,198) |
13,673
|
|
|
|
INVESTMENT
COMPANY—3.6% |
|
|
4,582,916
|
|
Federated
Hermes Government Obligations Fund, Premier Shares 3.55%2
(IDENTIFIED
COST $4,582,916) |
4,582,916
|
|
|
|
TOTAL
INVESTMENT IN SECURITIES—102.5%
(IDENTIFIED
COST $132,748,212)3
|
130,979,446
|
|
|
|
OTHER
ASSETS AND LIABILITIES - NET—(2.5)%4
|
(3,243,491)
|
|
|
|
NET
ASSETS—100% |
$127,735,955
|
Semi-Annual
Financial Statements and Additional Information
10
At June 30, 2026, the
Fund had the following outstanding futures contracts:
|
Description
|
Number
of
Contracts
|
Notional
Value
|
Expiration
Date
|
Value
and
Unrealized
Appreciation
(Depreciation)
|
|
Short
Futures: |
|
|
|
|
|
United
States Treasury Long Bond Short Futures |
2
|
$227,000
|
September
2026 |
$(3,505)
|
|
United
States Treasury Notes 10-Year Ultra Short Futures |
20
|
$2,249,375
|
September
2026 |
$7,767
|
|
NET
UNREALIZED APPRECIATION ON FUTURES CONTRACTS |
$4,262
| |||
Net Unrealized Appreciation on Futures Contracts
is included in “Other Assets and Liabilities—Net.”
Transactions with affiliated investment
companies, which are funds managed by the Adviser or an affiliate of the Adviser, during the period
ended June 30, 2026, were as follows:
|
|
Federated
Hermes
Government
Obligations
Fund,
Premier
Shares* |
|
Value
as of 12/31/2025 |
$850,558
|
|
Purchases
at Cost |
$17,491,850
|
|
Proceeds
from Sales |
$(13,759,492)
|
|
Change
in Unrealized Appreciation/Depreciation |
$—
|
|
Net
Realized Gain/(Loss) |
$—
|
|
Value
as of 6/30/2026 |
$4,582,916
|
|
Shares
Held as of 6/30/2026 |
4,582,916
|
|
Dividend
Income |
$26,900
|
|
*
|
All
or a portion of the balance/activity for the fund relates to cash collateral received on securities lending transactions.
|
|
1
|
All
or a portion of these securities are temporarily on loan to unaffiliated broker/dealers. |
|
2
|
7-day
net yield. |
|
3
|
Also
represents cost of investments for federal tax purposes. |
|
4
|
Assets,
other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
Note: The categories of investments are
shown as a percentage of net assets at June 30, 2026.
Various inputs are used in determining the
value of the Fund’s investments. These inputs are summarized in the three broad levels listed
below:
Level 1—quoted prices in active markets
for identical securities.
Level 2—other significant observable
inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk,
etc.). Also includes securities valued at amortized cost.
Level 3—significant unobservable inputs
(including the Fund’s own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing
securities are not an indication of the risk associated with investing in those securities.
Semi-Annual
Financial Statements and Additional Information
11
The following is a summary of the inputs used, as of June 30, 2026, 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 |
$—
|
$125,451,857
|
$—
|
$125,451,857
|
|
Mortgage-Backed
Securities |
—
|
13,673
|
—
|
13,673
|
|
Investment
Company |
4,582,916
|
—
|
—
|
4,582,916
|
|
Repurchase
Agreement |
—
|
931,000
|
—
|
931,000
|
|
TOTAL
SECURITIES |
$4,582,916
|
$126,396,530
|
$—
|
$130,979,446
|
|
Other
Financial Instruments:1
|
|
|
|
|
|
Assets
|
$7,767
|
$—
|
$—
|
$7,767
|
|
Liabilities
|
(3,505)
|
—
|
—
|
(3,505)
|
|
TOTAL
OTHER FINANCIAL INSTRUMENTS |
$4,262
|
$—
|
$—
|
$4,262
|
|
1
|
Other
financial instruments are futures contracts. |
|
The
following acronym(s) are used throughout this portfolio: |
| |
|
GMTN
|
—Global
Medium Term Note | |
|
MTN
|
—Medium
Term Note | |
|
REIT
|
—Real
Estate Investment Trust | |
See Notes which are an integral part of
the Financial Statements
Semi-Annual
Financial Statements and Additional Information
12
Financial
Highlights–Primary
Shares
(For a Share Outstanding Throughout Each
Period)
|
|
Six
Months
Ended
(unaudited)
6/30/2026
|
Year Ended December 31,
| ||||
|
|
2025
|
2024
|
2023
|
2022
|
2021
| |
|
Net Asset
Value, Beginning of Period |
$10.58
|
$10.22
|
$10.14
|
$9.81
|
$11.26
|
$11.82
|
|
Income
From Investment Operations: |
|
|
|
|
|
|
|
Net
investment income (loss)1
|
0.19
|
0.35
|
0.32
|
0.29
|
0.25
|
0.25
|
|
Net
realized and unrealized gain (loss) |
(0.14)
|
0.36
|
0.06
|
0.30
|
(1.27)
|
(0.42)
|
|
Total
From Investment Operations |
0.05
|
0.71
|
0.38
|
0.59
|
(1.02)
|
(0.17)
|
|
Less Distributions:
|
|
|
|
|
|
|
|
Distributions
from net investment income |
(0.37)
|
(0.35)
|
(0.30)
|
(0.26)
|
(0.27)
|
(0.29)
|
|
Distributions
from net realized gain |
—
|
—
|
—
|
—
|
(0.16)
|
(0.10)
|
|
Total
Distributions |
(0.37)
|
(0.35)
|
(0.30)
|
(0.26)
|
(0.43)
|
(0.39)
|
|
Net
Asset Value, End of Period |
$10.26
|
$10.58
|
$10.22
|
$10.14
|
$9.81
|
$11.26
|
|
Total
Return2
|
0.56%
|
7.08%
|
3.89%
|
6.14%
|
(9.28)%
|
(1.40)%
|
|
Ratios
to Average Net Assets: |
|
|
|
|
|
|
|
Net
expenses3
|
0.74%4
|
0.74%
|
0.77%
|
0.74%
|
0.74%
|
0.74%
|
|
Net
investment income |
3.65%4
|
3.42%
|
3.19%
|
2.94%
|
2.44%
|
2.17%
|
|
Expense
waiver/reimbursement5
|
0.11%4
|
0.10%
|
0.08%
|
0.08%
|
0.07%
|
0.06%
|
|
Supplemental
Data: |
|
|
|
|
|
|
|
Net
assets, end of period (000 omitted) |
$117,425
|
$122,038
|
$126,866
|
$132,027
|
$134,757
|
$162,034
|
|
Portfolio
turnover6
|
15%
|
19%
|
21%
|
15%
|
15%
|
27%
|
|
1
|
Per
share numbers have been calculated using the average shares method. |
|
2
|
Based
on net asset value. Total returns do not reflect any additional fees or expenses that may be imposed by separate accounts of insurance
companies or in
connection
with any variable annuity or variable life insurance contract. Total returns for periods of less than one year are not annualized.
|
|
3
|
Amount
does not reflect net expenses incurred by investment companies in which the Fund may invest. |
|
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. Amount does not reflect expense
waiver/
reimbursement
recorded by investment companies in which the Fund may invest. |
|
6
|
Securities
that mature are considered sales for purposes of this calculation. |
See Notes which are an integral part of
the Financial Statements
Semi-Annual
Financial Statements and Additional Information
13
Financial
Highlights–Service
Shares
(For a Share Outstanding Throughout Each
Period)
|
|
Six
Months
Ended
(unaudited)
6/30/2026
|
Year Ended December 31,
| ||||
|
|
2025
|
2024
|
2023
|
2022
|
2021
| |
|
Net Asset
Value, Beginning of Period |
$10.56
|
$10.20
|
$10.12
|
$9.79
|
$11.23
|
$11.79
|
|
Income
From Investment Operations: |
|
|
|
|
|
|
|
Net
investment income (loss)1
|
0.18
|
0.33
|
0.30
|
0.26
|
0.22
|
0.22
|
|
Net
realized and unrealized gain (loss) |
(0.14)
|
0.35
|
0.06
|
0.30
|
(1.26)
|
(0.42)
|
|
Total
From Investment Operations |
0.04
|
0.68
|
0.36
|
0.56
|
(1.04)
|
(0.20)
|
|
Less Distributions:
|
|
|
|
|
|
|
|
Distributions
from net investment income |
(0.35)
|
(0.32)
|
(0.28)
|
(0.23)
|
(0.24)
|
(0.26)
|
|
Distributions
from net realized gain |
—
|
—
|
—
|
—
|
(0.16)
|
(0.10)
|
|
Total
Distributions |
(0.35)
|
(0.32)
|
(0.28)
|
(0.23)
|
(0.40)
|
(0.36)
|
|
Net
Asset Value, End of Period |
$10.25
|
$10.56
|
$10.20
|
$10.12
|
$9.79
|
$11.23
|
|
Total
Return2
|
0.39%
|
6.82%
|
3.62%
|
5.85%
|
(9.46)%
|
(1.66)%
|
|
Ratios
to Average Net Assets: |
|
|
|
|
|
|
|
Net
expenses3
|
0.99%4
|
0.99%
|
1.02%
|
0.99%
|
0.99%
|
0.99%
|
|
Net
investment income |
3.40%4
|
3.17%
|
2.94%
|
2.69%
|
2.19%
|
1.92%
|
|
Expense
waiver/reimbursement5
|
0.11%4
|
0.10%
|
0.08%
|
0.08%
|
0.07%
|
0.06%
|
|
Supplemental
Data: |
|
|
|
|
|
|
|
Net
assets, end of period (000 omitted) |
$10,311
|
$11,280
|
$11,669
|
$12,468
|
$12,873
|
$16,287
|
|
Portfolio
turnover6
|
15%
|
19%
|
21%
|
15%
|
15%
|
27%
|
|
1
|
Per
share numbers have been calculated using the average shares method. |
|
2
|
Based
on net asset value. Total returns do not reflect any additional fees or expenses that may be imposed by separate accounts of insurance
companies or in
connection
with any variable annuity or variable life insurance contract. Total returns for periods of less than one year are not annualized.
|
|
3
|
Amount
does not reflect net expenses incurred by investment companies in which the Fund may invest. |
|
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. Amount does not reflect expense
waiver/
reimbursement
recorded by investment companies in which the Fund may invest. |
|
6
|
Securities
that mature are considered sales for purposes of this calculation. |
See Notes which are an integral part of
the Financial Statements
Semi-Annual
Financial Statements and Additional Information
14
Statement
of Assets and Liabilities
June 30, 2026 (unaudited)
|
Assets:
|
|
|
Investment
in securities, at value including $4,480,158 of securities loaned and $4,582,916 of investments in affiliated holdings* (identified
cost
$132,748,212, including $4,582,916 of identified cost in affiliated holdings) |
$130,979,446
|
|
Cash
|
375
|
|
Due
from broker (Note 2)
|
58,400
|
|
Income
receivable |
1,480,443
|
|
Receivable
for shares sold |
45,967
|
|
Receivable
for variation margin on futures contracts |
9,173
|
|
Total
Assets |
132,573,804
|
|
Liabilities:
|
|
|
Payable
for shares redeemed |
176,310
|
|
Payable
for collateral due to broker for securities lending (Note 2) |
4,582,916
|
|
Payable
for investment adviser fee (Note 5)
|
1,731
|
|
Payable
for administrative fee (Note 5)
|
271
|
|
Payable
for distribution services fee (Note 5)
|
2,189
|
|
Accrued
expenses (Note 5)
|
74,432
|
|
Total
Liabilities |
4,837,849
|
|
Net
assets for 12,454,394 shares outstanding |
$127,735,955
|
|
Net Assets
Consist of: |
|
|
Paid-in
capital |
$130,440,527
|
|
Total
distributable earnings (loss) |
(2,704,572)
|
|
Net
Assets |
$127,735,955
|
|
Net Asset
Value, Offering Price and Redemption Proceeds Per Share: |
|
|
Primary
Shares: |
|
|
$117,425,094
÷ 11,448,520 shares outstanding, no par value, unlimited shares authorized |
$10.26
|
|
Service
Shares: |
|
|
$10,310,861
÷ 1,005,874 shares outstanding, no par value, unlimited shares authorized |
$10.25
|
|
*
|
See
information listed after the Fund’s Portfolio of Investments. |
See Notes which are an integral part of
the Financial Statements
Semi-Annual
Financial Statements and Additional Information
15
Statement
of Operations
Six Months Ended June
30, 2026 (unaudited)
|
Investment
Income: |
|
|
Interest
|
$2,844,707
|
|
Net
income on securities loaned (includes $26,900 earned from affiliated holdings related to cash collateral balances*) (Note 2)
|
1,292
|
|
TOTAL
INCOME |
2,845,999
|
|
Expenses:
|
|
|
Investment
adviser fee (Note 5)
|
388,280
|
|
Administrative
fee (Note 5)
|
53,621
|
|
Custodian
fees |
6,610
|
|
Transfer
agent fees |
6,555
|
|
Directors’/Trustees’
fees (Note 5)
|
989
|
|
Auditing
fees |
15,995
|
|
Legal
fees |
5,494
|
|
Portfolio
accounting fees |
44,646
|
|
Distribution
services fee (Note 5)
|
13,591
|
|
Printing
and postage |
16,284
|
|
Miscellaneous
(Note 5)
|
12,839
|
|
TOTAL
EXPENSES |
564,904
|
|
Waiver
of investment adviser fee (Note 5) |
(69,263)
|
|
Net
expenses |
495,641
|
|
Net
investment income |
2,350,358
|
|
Realized
and Unrealized Gain (Loss) on Investments and Futures Contracts: |
|
|
Net
realized loss on investments |
(90,734)
|
|
Net
realized gain on futures contracts |
2,458
|
|
Net
change in unrealized depreciation of investments |
(1,571,871)
|
|
Net
change in unrealized depreciation of futures contracts |
32,522
|
|
Net
realized and unrealized gain (loss) on investments and futures contracts |
(1,627,625)
|
|
Change
in net assets resulting from operations |
$722,733
|
|
*
|
See
information listed after the Fund’s Portfolio of Investments. |
See Notes which are an integral part of
the Financial Statements
Semi-Annual
Financial Statements and Additional Information
16
Statement
of Changes in Net Assets
|
|
Six
Months
Ended
(unaudited)
6/30/2026
|
Year
Ended
12/31/2025
|
|
Increase
(Decrease) in Net Assets |
|
|
|
Operations:
|
|
|
|
Net
investment income |
$2,350,358
|
$4,586,872
|
|
Net
realized gain (loss) |
(88,276)
|
(292,812)
|
|
Net
change in unrealized appreciation/depreciation |
(1,539,349)
|
4,886,409
|
|
CHANGE
IN NET ASSETS RESULTING FROM OPERATIONS |
722,733
|
9,180,469
|
|
Distributions
to Shareholders: |
|
|
|
Primary
Shares |
(4,226,346)
|
(4,166,601)
|
|
Service
Shares |
(360,303)
|
(357,626)
|
|
CHANGE
IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS |
(4,586,649)
|
(4,524,227)
|
|
Share Transactions:
|
|
|
|
Proceeds
from sale of shares |
2,749,052
|
6,008,744
|
|
Net
asset value of shares issued to shareholders in payment of distributions declared |
4,586,645
|
4,524,224
|
|
Cost
of shares redeemed |
(9,053,961)
|
(20,406,132)
|
|
CHANGE
IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS |
(1,718,264)
|
(9,873,164)
|
|
Change
in net assets |
(5,582,180)
|
(5,216,922)
|
|
Net Assets:
|
|
|
|
Beginning
of period |
133,318,135
|
138,535,057
|
|
End
of period |
$127,735,955
|
$133,318,135
|
See Notes which are an integral part of
the Financial Statements
Semi-Annual
Financial Statements and Additional Information
17
Notes to
Financial Statements
June 30, 2026 (unaudited)
1. ORGANIZATION
Federated Hermes Insurance Series (the “Trust”)
is registered under the Investment Company Act of 1940, as amended (the “Act”), as an
open-end management investment company. The Trust consists of six portfolios. The financial statements included herein are only those
of Federated Hermes Quality Bond Fund II (the “Fund”), a diversified portfolio. The financial statements of the other portfolios
are presented separately. The assets of each portfolio are segregated
and a shareholder’s interest is limited to the portfolio in which shares are
held. Each portfolio pays its own expenses. The Fund offers two classes of shares: Primary Shares and Service Shares. All shares of the
Fund have equal rights with respect to voting, except on class-specific matters. Fund shares are available exclusively as a funding vehicle
for life insurance companies writing variable life insurance policies and variable annuity contracts. The investment objective of the
Fund is to provide current income.
2. SIGNIFICANT
ACCOUNTING POLICIES
The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of its financial statements.
These policies are in conformity with U.S. generally accepted accounting principles (GAAP).
Investment Valuation
In
calculating its net asset value (NAV), the Fund generally values investments as follows:
■
Fixed-income
securities are fair valued using price evaluations provided by a pricing service approved by Federated Investment Management
Company (the “Adviser”).
■
Derivative
contracts listed on exchanges are valued at their reported settlement or closing price, except that options are valued at the mean
of closing bid and ask quotations.
■
Over-the-counter
(OTC) derivative contracts are fair valued using price evaluations provided by a pricing service approved by the
Adviser.
■
Shares
of other mutual funds or non-exchange-traded investment companies are valued based upon their reported NAVs, or NAV per share
practical expedient, as applicable.
■
For
securities that are fair valued in accordance with procedures established by and under the general supervision of the Adviser, certain
factors may be considered such as: the last traded or purchase price of the security, information obtained by contacting the issuer
or dealers, analysis of the issuer’s financial statements or other available documents, fundamental analytical data, the nature
and duration of restrictions on disposition, the movement of the
market in which the security is normally traded, public trading in similar securities
or derivative contracts of the issuer or comparable issuers, movement of a relevant index, or other factors including but not limited
to industry changes and relevant government actions.
If any price, quotation, price evaluation
or other pricing source is not readily available when the NAV is calculated, if the Fund cannot obtain
price evaluations from a pricing service or from more than one dealer for an investment within a reasonable period of time as set forth
in the Adviser’s valuation policies and procedures for the Fund, or if information furnished by a pricing service, in the opinion
of the Adviser’s valuation committee (“Valuation Committee”),
is deemed not representative of the fair value of such security, the Fund uses the
fair value of the investment determined in accordance with the procedures described below. There can be no assurance that the Fund
could obtain the fair value assigned to an investment if it sold the investment at approximately the time at which the Fund determines
its NAV per share, and the actual value obtained could be materially different.
Fair Valuation and Significant Events Procedures
Pursuant
to Rule 2a-5 under the Act, the Fund’s Board of Trustees (the “Trustees”) has designated the Adviser as the Fund’s
valuation designee to perform any fair value determinations for
securities and other assets held by the Fund. The Adviser is subject to the Trustees’
oversight and certain reporting and other requirements intended to provide the Trustees the information needed to oversee the
Adviser’s fair value determinations.
The Adviser, acting through
its Valuation Committee, is responsible for determining the fair value of investments for which market quotations
are not readily available. The Valuation Committee is comprised of officers of the Adviser and certain of the Adviser’s affiliated
companies and determines fair value and oversees the calculation of the NAV. The Valuation Committee is also authorized to use
pricing services to provide fair value evaluations of the current value of certain investments for purposes of calculating the NAV. The
Valuation Committee employs various methods for reviewing third-party
pricing-service evaluations including periodic reviews of third-party
pricing services’ policies, procedures and valuation methods (including key inputs, methods, models and assumptions), transactional
back-testing, comparisons of evaluations of different pricing services, and review of price challenges by the Adviser based on
recent market activity. In the event that market quotations and price evaluations are not available for an investment, the Valuation Committee
determines the fair value of the investment in accordance with procedures adopted by the Adviser. The Trustees periodically review
the fair valuations made by the Valuation Committee. The Trustees have also approved the Adviser’s fair valuation and significant
events procedures as part of the Fund’s compliance program
and will review any changes made to the procedures.
Factors considered by
pricing services in evaluating an investment include the yields or prices of investments of comparable quality, coupon,
maturity, call rights and other potential prepayments, terms and type, reported transactions, indications as to values from dealers
and general market conditions. Some pricing services provide a single price evaluation reflecting the bid-side of the market for an
investment (a “bid” evaluation). Other pricing services offer both bid evaluations and price evaluations indicative of a price
between
Semi-Annual
Financial Statements and Additional Information
18
the prices bid and
ask for the investment (a “mid” evaluation). The Fund normally uses bid evaluations for any U.S. Treasury and Agency securities,
mortgage-backed securities and municipal securities. The Fund normally uses mid evaluations for any other types of fixed-income
securities and any OTC derivative contracts. In the event that market quotations and price evaluations are not available for an investment,
the fair value of the investment is determined in accordance with procedures adopted by the Adviser.
The Adviser has also
adopted procedures requiring an investment to be priced at its fair value whenever the Valuation Committee determines
that a significant event affecting the value of the investment has occurred between the time as of which the price of the investment
would otherwise be determined and the time as of which the NAV is computed. An event is considered significant if there is both
an affirmative expectation that the investment’s value will change in response to the event and a reasonable basis for quantifying
the resulting change in value. Examples of significant events
that may occur after the close of the principal market on which a security is traded,
or after the time of a price evaluation provided by a pricing service or a dealer, include:
■
With
respect to securities traded principally in foreign markets, significant trends in U.S. equity markets or in the trading of foreign securities
index futures contracts;
■
Political
or other developments affecting the economy or markets in which an issuer conducts its operations or its securities are
traded;
■
Announcements
concerning matters such as acquisitions, recapitalizations, litigation developments, or a natural disaster affecting the issuer’s
operations or regulatory changes or market developments affecting the issuer’s industry.
The Adviser has adopted procedures whereby
the Valuation Committee uses a pricing service to provide factors to update the fair value of
equity securities traded principally in foreign markets from the time of the close of their respective foreign stock exchanges to the
pricing time of the Fund. For other significant events, the Fund
may seek to obtain more current quotations or price evaluations from alternative
pricing sources. If a reliable alternative pricing source is not available, the Valuation Committee will determine the fair value of the
investment in accordance with the fair valuation procedures approved by the Adviser. The Trustees periodically review fair valuations
made in response to significant events.
Repurchase Agreements
The
Fund may invest in repurchase agreements for short-term liquidity purposes. It is the policy of the Fund to require the other party to
a repurchase agreement to transfer to the Fund’s custodian
or sub-custodian eligible securities or cash with a market value (after transaction
costs) at least equal to the repurchase price to be paid under the repurchase agreement. The eligible securities are transferred
to accounts with the custodian or sub-custodian in which the Fund holds a “securities entitlement” and exercises “control”
as those terms are defined in the Uniform Commercial Code. Certain
repurchase agreements may be structured as loans secured by a security
interest or lien on the eligible securities. The Fund has established procedures for monitoring the market value of the transferred securities
and requiring the transfer of additional eligible securities if necessary to equal at least the repurchase price. These procedures also
allow the other party to require securities to be transferred from the account to the extent that their market value exceeds the repurchase
price or in exchange for other eligible securities of equivalent market value.
The insolvency of the
other party or other failure to repurchase the securities may delay the disposition of the underlying securities or cause
the Fund to receive less than the full repurchase price. Under the terms of the repurchase agreement, any amounts received by the Fund
in excess of the repurchase price and related transaction costs must be remitted to the other party.
The Fund may enter into
repurchase agreements in which eligible securities are transferred into joint trading accounts maintained by the
custodian or sub-custodian for investment companies and other clients advised by the Fund’s Adviser and its affiliates. The Fund
will participate on a pro rata basis with the other investment
companies and clients in its share of the securities transferred under such repurchase
agreements and in its share of proceeds from any repurchase or other disposition of such securities.
Repurchase agreements
are subject to Master Netting Agreements (MNA) which are agreements between the Fund and its counterparties
that provide for the net settlement of all transactions and collateral with the Fund, through a single payment, in the event of
default or termination. Amounts presented on the Portfolio of Investments and Statement of Assets and Liabilities are not net settlement
amounts but gross. As indicated above, the cash or securities to be repurchased, as shown on the Portfolio of Investments, exceeds
the repurchase price to be paid under the agreement reducing the net settlement amount to zero.
Investment Income, Gains and Losses, Expenses and Distributions
Investment
transactions are accounted for on a trade-date basis. Realized gains and losses from investment transactions are recorded on an
identified-cost basis. Interest income and expenses are accrued daily. Dividend income and distributions to shareholders are recorded
on the ex-dividend date. Foreign dividends are recorded on the
ex-dividend date or when the Fund is informed of the ex-dividend date. Distributions
of net investment income and capital gains, if any, are declared and paid at least annually. Non-cash dividends included in dividend
income, if any, are recorded at fair value. Amortization/accretion of premium and discount is included in investment income. 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 to each class
based on relative average daily net assets, except that select classes will bear certain expenses unique to those classes. The detail
of the total fund expense waiver of $69,263 is disclosed in Note
5.
Dividends are declared
separately for each class. No class has preferential dividend rights; differences in per share dividend rates are generally
due to differences in separate class expenses.
Other Service Fees
The
Fund may pay other service fees up to 0.25% of the average daily net assets of the Fund’s Primary Shares and Service Shares to financial
intermediaries or to Federated Shareholder Services Company (FSSC) for providing services to shareholders and maintaining shareholder
accounts. Subject to the terms described in the Expense Limitation note, FSSC may voluntarily reimburse the Fund for other service
fees.
Semi-Annual
Financial Statements and Additional Information
19
For
the six months ended June 30, 2026, the Fund’s Primary Shares and Service Shares did not incur other service fees; however, each
may begin to incur this fee upon approval of the Trustees.
Federal Taxes
It
is the Fund’s policy to comply with the Subchapter M provision of the Internal Revenue Code of 1986 (the “Code”) and
to distribute to shareholders each year substantially all of its
income. Accordingly, no provision for federal income tax is necessary. As of and during the six
months ended June 30, 2026, the Fund did not have a liability for any uncertain tax positions. The Fund recognizes interest and penalties,
if any, related to tax liabilities as income tax expense in the Statement of Operations. As of June 30, 2026, tax years 2022
through 2025 remain subject to examination by the Fund’s major tax jurisdictions, which include the United States of America and
the Commonwealth of Massachusetts.
When-Issued and Delayed-Delivery Transactions
The
Fund may engage in when-issued or delayed-delivery transactions. The Fund records when-issued securities on the trade date and maintains
security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased
on a when-issued or delayed-delivery basis are marked to market daily and begin earning interest on the settlement date. Losses
may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the
contract.
Futures Contracts
The
Fund purchases and sells financial futures contracts to manage duration risk. Upon entering into a financial futures contract with a broker,
the Fund is required to deposit with a broker, either U.S. government securities or a specified amount of cash, which is shown as due
from broker in the Statement of Assets and Liabilities. Futures contracts are valued daily and unrealized gains or losses are recorded
in a “variation margin” account. The Fund receives
from or pays to the broker a specified amount of cash based upon changes in the variation
margin account. When a contract is closed, the Fund recognizes a realized gain or loss. Futures contracts have market risks, including
the risk that the change in the value of the contract may not correlate with the changes in the value of the underlying securities.
There is minimal counterparty risk to the Fund since futures contracts are exchange-traded and the exchange’s clearinghouse, as
counterparty to all exchange-traded futures contracts, guarantees the futures contracts against default.
Futures contracts outstanding at period
end are listed after the Fund’s Portfolio of Investments.
The average notional
value of long and short futures contracts held by the Fund throughout the period was $1,333,393 and $418,071, respectively.
This is based on amounts held as of each month-end throughout the six-month period.
Securities Lending
The
Fund participates in a securities lending program providing for the lending of corporate bonds to qualified brokers. The term of the loans
within the program is one year or less. The Fund receives cash collateral for securities loaned, which generally is invested in an affiliated
money market fund. Collateral is maintained at a minimum level of 100% of the market value of investments loaned, plus interest,
if applicable. In accordance with the Fund’s securities lending agreement, the market value of securities on loan is determined
each day at the close of business and any additional collateral
required to cover the value of securities on loan is delivered to the Fund on
the next business day. Earnings from collateral invested in affiliated holdings as presented parenthetically on the Statement of Operations
do not reflect fees and rebates and are allocated between the borrower of the security, the securities lending agent, as a fee for
its services under the program and the Fund, according to agreed-upon rates. The Fund will not have the right to vote on securities while
they are on loan. However, the Fund will attempt to terminate a loan in an effort to reacquire the securities in time to vote on matters
that are deemed to be material by the Adviser. There can be no assurance that the Fund will have sufficient notice of such matters
to be able to terminate the loan in time to vote thereon.
Securities lending transactions
are subject to MNA. Amounts presented on the Portfolio of Investments and Statement of Assets and Liabilities
are not net settlement amounts but gross. As indicated below, the cash collateral received by the Fund exceeds the market value
of the securities loaned reducing the net settlement amount to zero. The chart below identifies the amount of collateral received as well
as the market value of securities on loan. Additionally, the securities lending agreement executed by the Fund includes an indemnification
clause. This clause stipulates that the borrower will reimburse the Fund for any losses as a result of any failure of the borrower
to return equivalent securities to the Fund.
As of June 30, 2026, securities subject
to this type of arrangement and related collateral were as follows:
|
Fair
Value of
Securities
Loaned |
Collateral
Received
|
|
$4,480,158
|
$4,582,916
|
Restricted Securities
The
Fund may purchase securities which are considered restricted. Restricted securities are securities that either: (a) cannot be offered
for public sale without first being registered, or being able
to take advantage of an exemption from registration, under the Securities Act of
1933; or (b) are subject to contractual restrictions on public sales. In some cases, when a security cannot be offered for public sale
without first being registered, the issuer of the restricted security
has agreed to register such securities for resale, at the issuer’s expense, either
upon demand by the Fund or in connection with another registered offering of the securities. Many such restricted securities may be
resold in the secondary market in transactions exempt from registration. Restricted securities may be determined to be liquid under criteria
established by the Trustees. The Fund will not incur any registration costs upon such resales. The Fund’s restricted securities,
like other securities, are priced in accordance with procedures
established by and under the general supervision of the Adviser.
Semi-Annual
Financial Statements and Additional Information
20
Additional Disclosure Related
to Derivative Instruments
|
Fair
Value of Derivative Instruments | ||
|
|
Assets
| |
|
|
Statement
of
Assets
and
Liabilities
Location
|
Fair
Value
|
|
Derivatives
not accounted for as hedging
instruments
under ASC Topic 815 |
|
|
|
Interest
rate contracts |
Receivable
for variation
margin
on futures contracts |
$4,262*
|
|
*
|
Includes
cumulative net appreciation of futures contracts as reported in the footnotes to the Portfolio of Investments. Only the current day’s
variation margin is
reported
within the Statement of Assets and Liabilities. |
The Effect of Derivative Instruments on the Statement
of Operations for the Six Months Ended June 30, 2026
|
Amount
of Realized Gain or (Loss) on Derivatives Recognized in Income | |
|
|
Futures
Contracts
|
|
Interest
rate contracts |
$2,458
|
|
Change
in Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income | |
|
|
Futures
Contracts
|
|
Interest
rate contracts |
$32,522
|
Other
The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the
amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ materially from
those estimated. The Fund applies investment company accounting
and reporting guidance.
3. SHARES
OF BENEFICIAL INTEREST
The following tables summarize share activity:
|
|
Six
Months Ended
6/30/2026
|
Year
Ended
12/31/2025
| ||
|
Primary
Shares: |
Shares
|
Amount
|
Shares
|
Amount
|
|
Shares
sold |
255,222
|
$2,639,519
|
513,855
|
$5,319,176
|
|
Shares
issued to shareholders in payment of distributions declared |
417,211
|
4,226,346
|
413,764
|
4,166,601
|
|
Shares
redeemed |
(762,662)
|
(7,927,782)
|
(1,804,982)
|
(18,567,351)
|
|
NET
CHANGE RESULTING FROM PRIMARY SHARE TRANSACTIONS |
(90,229)
|
$(1,061,917)
|
(877,363)
|
$(9,081,574)
|
|
|
Six
Months Ended
6/30/2026
|
Year
Ended
12/31/2025
| ||
|
Service
Shares: |
Shares
|
Amount
|
Shares
|
Amount
|
|
Shares
sold |
10,433
|
$109,533
|
66,760
|
$689,568
|
|
Shares
issued to shareholders in payment of distributions declared |
35,568
|
360,299
|
35,514
|
357,623
|
|
Shares
redeemed |
(108,777)
|
(1,126,179)
|
(178,022)
|
(1,838,781)
|
|
NET
CHANGE RESULTING FROM SERVICE SHARE TRANSACTIONS |
(62,776)
|
$(656,347)
|
(75,748)
|
$(791,590)
|
|
NET
CHANGE RESULTING FROM TOTAL FUND SHARE TRANSACTIONS |
(153,005)
|
$(1,718,264)
|
(953,111)
|
$(9,873,164)
|
4. FEDERAL
TAX INFORMATION
At June 30, 2026, the cost of investments
for federal tax purposes was $132,748,212. The net unrealized depreciation of investments for federal
tax purposes was $1,764,504. This consists of unrealized appreciation from investments for those securities having an excess of value
over cost of $934,438 and unrealized depreciation from investments for those securities having an excess of cost over value of $2,698,942.
The amounts presented are inclusive of derivative contracts.
Semi-Annual
Financial Statements and Additional Information
21
As
of December 31, 2025, the Fund had a capital loss carryforward of $3,230,285 which will reduce the Fund’s taxable income arising
from future net realized gains on investments, if any, to the
extent permitted by the Code, thereby reducing the amount of distributions to
shareholders which would otherwise be necessary to relieve the Fund of any liability for federal income tax. Pursuant to the Code, these
net capital losses retain their character as either short-term or long-term and do not expire.
The following schedule summarizes the Fund’s
capital loss carryforwards:
|
Short-Term
|
Long-Term
|
Total
|
|
$149,283
|
$3,081,002
|
$3,230,285
|
5. INVESTMENT
ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
The
advisory agreement between the Fund and the Adviser provides for an annual fee equal to 0.60% of the Fund’s average daily net assets.
Subject to the terms described in the Expense Limitation note, the Adviser may voluntarily choose to waive any portion of its fee and/or
reimburse certain operating expenses of the Fund for competitive reasons such as to maintain the Fund’s expense ratio, or as and
when appropriate, to maintain positive or zero net yields. For
the six months ended June 30, 2026, the Adviser voluntarily waived $69,263
of its fee.
Administrative Fee
Federated
Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and
services. For purposes of determining the appropriate rate breakpoint, “Investment Complex” is defined as all of the Federated
Hermes Funds subject to a fee under the Administrative Services
Agreement. The fee paid to FAS is based on the average daily net assets
of the Investment Complex as specified below:
|
Administrative
Fee |
Average
Daily Net Assets
of
the Investment Complex |
|
0.100%
|
on
assets up to $50 billion |
|
0.075%
|
on
assets over $50 billion |
Subject to the terms described in the Expense
Limitation note, FAS may voluntarily choose to waive any portion of its fee. For the six months
ended June 30, 2026, the annualized fee paid to FAS was 0.083% of average daily net assets of the Fund.
In addition, FAS may charge certain out-of-pocket
expenses to the Fund.
Distribution Services Fee
The
Fund has adopted a Distribution Plan (the “Plan”) pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund
will compensate Federated Securities Corp. (FSC), the principal
distributor, from the daily net assets of the Fund’s Primary Shares and Service Shares
to finance activities intended to result in the sale of these shares. The Plan provides that the Fund may incur distribution expenses
at the following percentages of average daily net assets annually,
to compensate FSC:
|
|
Percentage
of Average Daily
Net
Assets of Class |
|
Primary
Shares |
0.25%
|
|
Service
Shares |
0.25%
|
Subject to the terms described in the Expense
Limitation note, FSC may voluntarily choose to waive any portion of its fee. For the six months
ended June 30, 2026, distribution services fees for the Fund were as follows:
|
|
Distribution
Services
Fees
Incurred |
|
Service
Shares |
$13,591
|
When FSC receives fees, it may pay some
or all of them to financial intermediaries whose customers purchase shares. For the six months ended
June 30, 2026, the Fund’s Primary Shares did not incur a distribution services fee; however, it may begin to incur this fee upon
approval of the Trustees.
Expense Limitation
The
Adviser and certain of its affiliates (which may include FSC, FAS and FSSC) on their own initiative have agreed to waive certain amounts
of their respective fees and/or reimburse expenses. Total annual fund operating expenses (as shown in the financial highlights, excluding
interest expense, extraordinary expenses and proxy-related expenses, if any) paid by the Fund’s Primary Shares and Service Shares
(after the voluntary waivers and/or reimbursements) will not exceed 0.74% and 0.99% (the “Fee Limit”), respectively, up to
but not including the later of (the “Termination Date”):
(a) May 1, 2027; or (b) the date of the Fund’s next effective Prospectus. While the Adviser
and its applicable affiliates currently do not anticipate terminating or increasing these arrangements prior to the Termination Date,
these arrangements may only be terminated or the Fee Limit increased prior to the Termination Date with the approval of the
Trustees.
Semi-Annual
Financial Statements and Additional Information
22
Directors’/Trustees’
and Miscellaneous Fees
Certain
Officers and Trustees of the Fund are Officers and Directors or Trustees of certain of the above companies. To efficiently facilitate
payment, Independent Directors’/Trustees’ fees and
certain expenses related to conducting meetings of the Directors/Trustees and other
miscellaneous expenses are paid by an affiliate of the Adviser which in due course are reimbursed by the Fund. These expenses related
to conducting meetings of the Directors/Trustees and other miscellaneous expenses may be included in Accrued and Miscellaneous
Expenses on the Statement of Assets and Liabilities and Statement of Operations, respectively.
6. INVESTMENT
TRANSACTIONS
Purchases and sales of investments, excluding
long-term U.S. government securities and short-term obligations, for the six months ended
June 30, 2026, were as follows:
|
Purchases
|
$19,177,741
|
|
Sales
|
$19,360,767
|
7. LINE
OF CREDIT
The Fund participates with certain other
Federated Hermes Funds, on a several basis, in an up to $400,000,000 unsecured, 364-day, committed,
revolving line of credit (LOC) agreement dated June 16, 2026. The LOC was made available to temporarily finance the repurchase
or redemption of shares of the Fund, failed trades, payment of dividends, settlement of trades and for other short-term, temporary
or emergency general business purposes. The Fund cannot borrow under the LOC if an inter-fund loan is outstanding. The Fund’s
ability to borrow under the LOC also is subject to the limitations of the Act and various conditions precedent that must be satisfied
before the Fund can borrow. Loans under the LOC are charged interest at a fluctuating rate per annum equal to (a) the highest, on
any day, of (i) the federal funds effective rate, (ii) the published secured overnight financing rate plus an assigned percentage, and
(iii) 0.0%, plus (b) a margin. Any fund eligible to borrow under
the LOC pays its pro rata share of a commitment fee based on the amount of
the lenders’ commitment that has not been utilized, quarterly in arrears and at maturity. As of June 30, 2026, the Fund had no outstanding
loans. During the six months ended June 30, 2026, the Fund did not utilize the LOC.
8. INTERFUND
LENDING
Pursuant to an Exemptive Order issued by
the Securities and Exchange Commission, the Fund, along with other funds advised by subsidiaries
of Federated Hermes, Inc., may participate in an interfund lending program. This program provides an alternative credit facility
allowing the Fund to borrow from other participating affiliated funds. As of June 30, 2026, there were no outstanding loans. During
the six months ended June 30, 2026, the program was not utilized.
9. Operating
Segments
An operating segment is defined as a component
of a public entity that engages in business activities from which it may recognize revenues
and incur expenses, has operating results that are regularly reviewed by the public entity’s chief operating decision maker (CODM)
to make decisions about resources to be allocated to the segment and assess its performance, and has discrete financial information
available. A management committee of the Adviser acts as the CODM. The Fund represents a single operating segment, as the
CODM monitors the operating results of the Fund as a whole and the strategic asset allocation is determined based on the investment
objective of the Fund and executed by the Fund’s portfolio management team. The financial information in the form of the Fund’s
portfolio composition, total returns, expense ratios and changes in net assets (i.e., changes in net assets resulting from operations,
subscriptions and redemptions) which is reviewed by the CODM to assess the Fund’s performance in comparison to the Fund’s
benchmarks and to make resource allocation decisions for the Fund’s single segment is consistent with the information presented
in these financial statements. Segment assets are reflected on
the accompanying Statement of Assets and Liabilities as “total assets” and significant
segment expenses are listed on the accompanying Statement of Operations.
10. INDEMNIFICATIONS
Under the Fund’s organizational documents,
its Officers and Directors/Trustees are indemnified against certain liabilities arising out of the
performance of their duties to the Fund (other than liabilities arising out of their willful misfeasance, bad faith, gross negligence
or reckless disregard of their duties to the Fund). In addition,
in the normal course of business, the Fund provides certain indemnifications under
arrangements with third parties. Typically, obligations to indemnify a third party arise in the context of an arrangement entered into
by the Fund under which the Fund agrees to indemnify such third party for certain liabilities arising out of actions taken pursuant to
the arrangement, provided the third party’s actions are
not deemed to have breached an agreed-upon standard of care (such as willful misfeasance,
bad faith, gross negligence or reckless disregard of their duties under the contract). The Fund’s maximum exposure under these
arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet arisen. The Fund
does not anticipate any material claims or losses pursuant to these arrangements at this time, and accordingly expects the risk of loss
to be remote.
Semi-Annual
Financial Statements and Additional Information
23
Evaluation
and Approval of Advisory Contract–May
2026
Federated Hermes Quality Bond
Fund II (the “Fund”)
At its meetings in May 2026 (the
“May Meetings”), the Fund’s Board of Trustees (the “Board”), including those Trustees who
are not “interested persons” of the Fund, as defined in the Investment Company Act of 1940, as amended (the
“Independent Trustees”), reviewed and unanimously approved the continuation of the investment advisory contract between
the Fund and Federated Investment Management Company (the “Adviser”) (the “Contract”) for an additional one-year
term. The Board’s determination to approve the continuation of the Contract reflects the exercise of its business judgment
after considering such information deemed necessary to evaluate the terms of the Contract and to approve the continuation
of the existing arrangement. The information, factors and conclusions that formed the basis for the Board’s approval
are summarized below.
Information Received
and Review Process
At the request
of the Independent Trustees, the Fund’s Chief Compliance Officer (the “CCO”) furnished to the Board in advance
of its May Meetings an independent written report regarding data related to the Fund’s management fee (the
“CCO Management Fee Report”). The Board considered the CCO Management Fee Report, along with other information,
in evaluating the reasonableness of the Fund’s management fee and in determining to approve the continuation
of the Contract.
In addition
to the CCO Management Fee Report, the Board considered information specifically prepared in connection with
the approval of the continuation of the Contract that was presented at the May Meetings. In this regard, in the months preceding
the May Meetings, the Board requested and reviewed written responses and supporting materials prepared by the
Adviser and its affiliates (collectively, “Federated Hermes”) in response to requests posed to Federated Hermes by independent
legal counsel on behalf of the Independent Trustees encompassing a wide variety of topics, including those summarized
below. The Board also considered such additional matters as the Independent Trustees deemed reasonably necessary
to evaluate the Contract, which included detailed information about the Fund and Federated Hermes furnished to the
Board at its meetings throughout the year.
The Board’s
consideration of the Contract included review of materials and information covering the following matters, among
others: (1) a copy of the Contract; (2) the nature, quality and extent of the advisory and other services provided to the
Fund by Federated Hermes; (3) Federated Hermes’ business and operations; (4) the Adviser’s investment philosophy, personnel
and processes; (5) the Fund’s investment objective and strategies; (6) the Fund’s short-term and long-term performance
- in absolute terms (both on a gross basis and net of expenses) and relative to an appropriate group of peer funds
and its benchmark; (7) the Fund’s fees and expenses, including the advisory fee and the overall expense structure of the
Fund - in absolute terms and relative to an appropriate group of peer funds, with due regard for contractual or voluntary
expense limitations (if any); (8) the financial condition of Federated Hermes; (9) the Adviser’s profitability with respect
to managing the Fund; (10) distribution and sales activity for the Fund; and (11) the use and allocation of brokerage
commissions derived from trading the Fund’s portfolio securities (if any).
The Board
also considered judicial decisions concerning allegedly excessive investment advisory fees charged to other registered
funds in evaluating the Contract. Using these judicial decisions as a guide, the Board considered several factors it
deemed relevant to an adviser’s fiduciary duty with respect to its receipt of compensation from a fund, including: (1) the nature
and quality of the services provided by the adviser to the fund and its shareholders, including the performance of the
fund, its benchmark and comparable funds; (2) the adviser’s cost of providing the services and the profitability to the adviser
of providing advisory services to the fund; (3) the extent to which the adviser may realize “economies of scale” as the
fund grows larger and, if such economies of scale exist, whether they have been appropriately shared with the fund and its
shareholders or the family of funds; (4) any “fall-out” benefits that accrue to the adviser because of its relationship with
the fund, including research services received from
brokers that execute fund trades and any fees paid to affiliates of the adviser
for services rendered to the fund; (5) comparative fees and expenses, including a comparison of management fees paid
to the adviser with those paid by similar funds managed by the same adviser or other advisers as well as management fees
charged to institutional and other advisory clients of the same adviser for what might be viewed as like services; and (6)
the extent of care, conscientiousness and independence with which the fund’s board members perform their duties and their
expertise, including whether they are fully informed about all facts the board deems relevant to its consideration of the
adviser’s services and fees. The Board considered that the Securities and Exchange Commission (“SEC”) disclosure requirements
regarding the basis for a fund board’s approval of the fund’s investment advisory contract generally align with
the factors listed above. The Board was guided by these factors in its evaluation of the Contract to the extent it considered
them to be appropriate and relevant, as discussed further below. The Board considered and weighed these factors
in light of its substantial accumulated experience in governing the Fund and working with Federated Hermes on matters
relating to the oversight of the other funds advised by Federated Hermes (each, a “Federated Hermes Fund” and, collectively,
the “Federated Hermes Funds”).
Semi-Annual
Financial Statements and Additional Information
24
In
addition, the Board considered the preferences and expectations of Fund shareholders and the potential disruptions of the
Fund’s operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate
or not renew the Contract. In particular, the Board recognized that many shareholders likely have invested in the Fund
based on the strength of Federated Hermes’ industry standing and reputation and with the expectation that Federated Hermes
will have a continuing role in providing advisory services to the Fund. Thus, the Board observed that there are a range
of investment options available to the Fund’s shareholders in the marketplace, and such shareholders, having had the opportunity
to consider other investment options, have effectively selected Federated Hermes by virtue of investing in the
Fund.
In determining
to approve the continuation of the Contract, the members of the Board reviewed and evaluated information
and factors they believed to be relevant and appropriate through the exercise of their reasonable business judgment.
While individual members of the Board may have weighed certain factors differently, the Board’s determination
to approve the continuation of the Contract was based on a comprehensive consideration of all information provided
to the Board throughout the year. The Board recognized that its evaluation process is evolutionary and that the factors
considered and the emphasis placed on relevant factors may change in recognition of changing circumstances in the
registered fund marketplace. The Independent Trustees were assisted throughout the evaluation process by independent legal
counsel. In connection with their deliberations at the May Meetings, the Independent Trustees met separately in executive
session with their independent legal counsel and without management present to review the relevant materials and
consider their responsibilities under applicable laws. In addition, senior management representatives of Federated Hermes
also met with the Independent Trustees and their independent legal counsel to discuss the materials and presentations
furnished to the Board at the May Meetings. The Board considered the approval of the Contract for the Fund as
part of its consideration of agreements for funds across the family of Federated Hermes Funds, but its approvals were made
on a fund-by-fund basis.
Nature, Extent and
Quality of Services
The Board
considered the nature, extent and quality of the services provided to the Fund by the Adviser and the resources
of Federated Hermes dedicated to the Fund. In this regard, the Board evaluated, among other things, the terms of the
Contract and the full range of services provided to the Fund by Federated Hermes. The Board considered the Adviser’s personnel,
investment philosophy and process, investment research capabilities and resources, trade operations capabilities,
experience and performance track record. The Board reviewed the qualifications, backgrounds and responsibilities
of the portfolio management team primarily responsible for the day-to-day management of the Fund and evaluated
Federated Hermes’ ability and experience in attracting and retaining qualified personnel to service the Fund. The Board
considered the trading operations by the Adviser, including the execution of portfolio transactions and the selection of
brokers for those transactions. The Board also considered the Adviser’s ability to deliver competitive investment performance
for the Fund when compared to the Fund’s Performance Peer Group (as defined below).
In addition,
the Board considered the financial resources and overall reputation of Federated Hermes and its willingness to
consider and make investments in personnel, infrastructure, technology, cybersecurity, business continuity planning and operational
enhancements that are designed to benefit the Federated Hermes Funds. The Board considered Federated Hermes’
oversight of the securities lending program for the Federated Hermes Funds that engage in securities lending and noted
the income earned by the Federated Hermes Funds that participate in such program. In addition, the Board considered
the quality of Federated Hermes’ communications with the Board and responsiveness to Board inquiries and requests
made from time to time with respect to the Federated Hermes Funds. The Board also considered that Federated Hermes
is responsible for providing the Federated Hermes Funds’ officers.
The Board
received and evaluated information regarding Federated Hermes’ regulatory and compliance environment. The
Board considered Federated Hermes’ compliance program and compliance history and reports from the CCO about Federated
Hermes’ compliance with applicable laws and regulations, including responses to regulatory developments and any
compliance or other issues raised by regulatory agencies. The Board also noted Federated Hermes’ support of the Federated
Hermes Funds’ compliance control structure and the compliance-related resources devoted by Federated Hermes
in support of the Fund’s obligations pursuant to Rule 38a-1 under the Investment Company Act of 1940, as amended,
including Federated Hermes’ commitment to respond to rulemaking and other regulatory initiatives of the SEC. The
Board considered Federated Hermes’ approach to internal audits and risk management with respect to the Federated Hermes
Funds and its day-to-day oversight of the Federated Hermes Funds’ compliance with their investment objectives and
policies as well as with applicable laws and regulations, noting that regulatory and other developments had over time led,
and continue to lead, to an increase in the scope of Federated Hermes’ oversight in this regard. In addition, the Board noted
Federated Hermes’ commitment to maintaining high quality systems and expending substantial resources to prepare for
and respond to ongoing changes due to the market, regulatory and control environments in which the Fund and its service
providers operate.
Semi-Annual
Financial Statements and Additional Information
25
The
Board considered Federated Hermes’ efforts to provide shareholders in the Federated Hermes Funds with a comprehensive
array of funds with different investment objectives, policies and strategies. The Board considered the expenses
that Federated Hermes had incurred, as well as the entrepreneurial and other risks assumed by Federated Hermes, in
sponsoring and providing on-going services to new funds to expand these opportunities for shareholders. The Board noted
the benefits to shareholders of being part of the family of Federated Hermes Funds, which include the general right to
exchange investments between the same class of shares without the incurrence of additional sales charges.
Based on
these considerations, the Board concluded that it was satisfied with the nature, extent and quality of the services
provided by the Adviser to the Fund.
Fund Investment Performance
The Board
considered the investment performance of the Fund. In evaluating the Fund’s investment performance, the Board
considered performance results in light of the Fund’s investment objective, strategies and risks. The Board considered
detailed investment reports on, and the Adviser’s analysis of, the Fund’s performance over different time periods
that were provided to the Board throughout the year and in connection with the May Meetings. These reports included,
among other items, information on the Fund’s gross and net returns, the Fund’s investment performance compared
to one or more relevant categories or groups of peer funds and the Fund’s benchmark, performance attribution information
and commentary on the effect of market conditions. The Board noted that it evaluated investment performance at
meetings throughout the year and received reports from Federated Hermes regarding the performance of certain Federated
Hermes Funds as well as Federated Hermes’ explanations for less favorable performance and any specific actions
Federated Hermes had taken, or had determined to take, to seek to enhance Fund investment performance and the results
of those actions.
The Board
also reviewed comparative information regarding the performance of other registered funds in the category of
peer funds selected by Morningstar, Inc. (“Morningstar”), an independent fund ranking organization (the “Performance
Peer Group”). The Board noted the CCO’s
statement that comparisons to fund peer groups may be helpful, though not conclusive,
in evaluating the performance of the Adviser in managing the Fund.
The Board
also considered comparative performance data from Lipper, Inc. that was included in reports provided to the Board
throughout the year.
For the
periods ended December 31, 2025, the Fund’s performance fell below the Performance Peer Group median for the
five-year period, and was above the Performance Peer Group median for the one-year and three-year periods. The Board
discussed the Fund’s performance with the Adviser and recognized the efforts being taken by the Adviser in the context
of other factors considered relevant by the Board.
Based on
these considerations, the Board concluded that it had continued confidence in the Adviser’s overall capabilities
to manage the Fund.
Fund Expenses
The Board
considered the advisory fee and overall expense structure of the Fund and the comparative fee and expense information
that had been provided in connection with the May Meetings. In this regard, the Board was presented with, and
considered, information regarding the contractual advisory fee rates, total expense ratios and each element of the Fund’s
total expense ratio (i.e., gross and net advisory fees, administrative fees, custody fees, portfolio accounting fees and transfer
agency fees) relative to an appropriate group of peer funds compiled by Federated Hermes from the overall category
of peer funds selected by Morningstar (the “Expense Peer Group”). The Board received a description of the methodology
used to select the Expense Peer Group from the overall Morningstar category. The Board also reviewed comparative
information regarding the fees and expenses of the broader group of funds in the overall Morningstar
category.
While mindful
that courts have cautioned against giving too much weight to comparative information concerning fees charged
to funds by other advisers, the use of comparisons between the Fund and its Expense Peer Group assisted the Board
in its evaluation of the Fund’s fees and expenses. The Board focused on comparisons with other registered funds more
heavily than non-registered fund products or services because such comparisons are believed to be more relevant. The
Board considered that other registered funds are the products most like the Fund, in that they are readily available to Fund
shareholders as alternative investment vehicles, and they are the type of investment vehicle, in fact, chosen and maintained
by the Fund’s shareholders. The Board noted that the range of such other registered funds’ fees and expenses, therefore,
appears to be a relevant indicator of what investors have found to be reasonable in the marketplace in which the Fund
competes.
Semi-Annual
Financial Statements and Additional Information
26
The
Board reviewed the contractual advisory fee rate, and other expenses of the Fund and noted the position of the Fund’s
contractual advisory fee rate and other expenses relative to its Expense Peer Group. In this regard, the Board noted that
the contractual advisory fee rate was above the median of the Expense Peer Group, but the Board noted the applicable waivers
and reimbursements, and that the overall expense structure of the Fund remained competitive in the context of other
factors considered by the Board.
The Board
also received and considered information about the nature and extent of services offered and fees charged by Federated
Hermes to other types of clients with investment strategies similar to those of the Federated Hermes Funds, including
non-registered fund clients (such as institutional separate accounts) and third-party unaffiliated registered funds for
which the Adviser or its affiliates serve as sub-adviser. The Board noted the CCO’s statement that non-registered fund clients
are inherently different products due to the following differences, among others: (i) types of targeted investors; (ii)
applicable laws and regulations; (iii) legal structures; (iv) average account sizes; (v) portfolio management techniques made
necessary by different cash flows and different associated costs; (vi) the time spent by portfolio managers and their teams
(among other personnel across various departments, including legal, compliance and risk management) in reviewing securities
pricing; (vii) SEC mandated risk management programs with respect to fund liquidity and use of derivatives; (viii)
questions on regulatory reporting; (ix) a variety of different administrative responsibilities; and (x) degrees of risk associated
with management. The Board also considered information regarding the differences in the nature of the services required
for Federated Hermes to manage its proprietary registered fund business versus managing a discrete pool of assets as
a sub-adviser to another institution’s registered fund, noting the CCO’s statement that Federated Hermes generally performs
significant additional services and assumes substantially greater risks in managing the Fund and other Federated Hermes
Funds than in its role as sub-adviser to an unaffiliated third-party registered fund. The Board noted that the CCO emphasized
that differences in fees for providing advisory services to other types of clients may not be appropriate when judging
the appropriateness of the Federated Hermes Funds’ advisory fees because of the different services provided.
In the case
of the Fund, the Board noted that Federated Hermes does not manage any other types of clients that are comparable
to the Fund.
Based on
these considerations, the Board concluded that the fees and total operating expenses of the Fund, in conjunction
with other matters considered, are reasonable in light of the services provided.
Profitability
The Board
received and considered profitability information furnished by Federated Hermes. Such profitability information
included revenues reported on a fund-by-fund basis and estimates of the allocation of expenses made on a fund-by-fund
basis, using allocation methodologies specified by the CCO and described to the Board. The Board considered
the CCO’s statement that, while the cost allocation report applies consistent allocation processes for purposes of
general comparison of funds, the inherent difficulties in arbitrarily allocating costs lack precision and may cause the report
to be unreliable because a single change in an allocation estimate can dramatically alter the resulting estimate of cost
and/or profitability of a Federated Hermes Fund and may produce unintended consequences. In addition, the Board considered
the CCO’s statement that the allocation methodologies used by Federated Hermes in estimating profitability for purposes
of reporting to the Board in connection with the continuation of the Contract are consistent with the methodologies
previously reviewed by an independent consultant. The Board noted that the independent consultant had previously
conducted a review of the allocation methodologies and reported to the Board that, although there is no single best
method to allocate expenses, the methodologies used by Federated Hermes are reasonable. The Board considered the CCO’s
statement that the estimated profitability to the Adviser from its relationship with the Fund was not unreasonable in relation
to the services provided.
The Board
also reviewed information compiled by Federated Hermes comparing its profitability information to other publicly-held
fund management companies, including information regarding profitability trends over time. The Board recognized
that profitability comparisons among fund management companies are difficult because of the variation in the type
of comparative information that is publicly available, and the profitability of any fund management company is affected
by numerous factors. The Board considered the CCO’s statement that, based on such profitability information, Federated
Hermes’ profit margins did not appear to be excessive and that Federated Hermes appeared financially sound, with
the resources available to fulfill its contractual obligations.
Economies of Scale
The Board
received and considered information about the notion of possible realization of “economies of scale” as a fund
grows larger, the difficulties of isolating and quantifying economies of scale at an individual fund level, and the extent
to which potential scale benefits are shared with shareholders. In this regard, the Board considered that Federated Hermes
has made significant and long-term investments in areas that support all of the Federated Hermes Funds, such as: portfolio
management, investment research and trading operations; shareholder services; compliance; business continuity, cybersecurity
and information security programs; internal audit and risk management functions; and technology, systems capabilities
and use of data. The Board noted that Federated Hermes’ investments in these areas are extensive and are
Semi-Annual
Financial Statements and Additional Information
27
designed
to provide enhanced or expanded services to the Federated Hermes Funds and their shareholders. The Board considered
that the benefits of these investments are likely to be shared with the family of Federated Hermes Funds as a whole.
In addition, the Board considered that fee waivers and expense reimbursements are another means for potential economies
of scale to be shared with shareholders and can provide protection from an increase in expenses if a Federated Hermes
Fund’s assets decline. The Board considered that, in order for the Federated Hermes Funds to remain competitive in
the marketplace, Federated Hermes has frequently waived fees and/or reimbursed expenses for the Federated Hermes Funds
and has disclosed to shareholders and/or reported to the Board its intention to do so (or continue to do so) in the future.
The Board also considered that Federated Hermes has been active in managing expenses of the Federated Hermes Funds
in recent years, which has resulted in benefits being realized by shareholders.
The Board
also received and considered information on adviser-paid fees (commonly referred to as “revenue sharing” payments)
that was provided to the Board throughout the year and in connection with the May Meetings. The Board considered
that Federated Hermes believes that this information is relevant to consider whether Federated Hermes had an incentive
to either not apply breakpoints, or to apply breakpoints at higher levels, but should not be considered when evaluating
the reasonableness of advisory fees. The Board also noted the absence of any applicable regulatory or industry guidelines
on economies of scale, which is compounded by the lack of any uniform methodology or pattern with respect to structuring
fund advisory fees with breakpoints that serve to reduce the fees as a fund attains a certain size.
Other Benefits
The Board
considered information regarding the compensation and other ancillary (or “fall-out”) benefits that Federated Hermes
derived from its relationships with the Federated Hermes Funds. The Board considered that Federated Hermes may
derive a benefit to its reputation as an adviser to the Fund, which may help in attracting other clients and investment personnel.
The Board noted that, in addition to receiving advisory fees under the Federated Hermes Funds’ investment advisory
contracts, Federated Hermes’ affiliates also receive fees for providing other services to the Federated Hermes Funds
under separate service contracts, including for serving as the Federated Hermes Funds’ administrator and distributor.
In this regard, the Board considered that Federated Hermes’ affiliates provide distribution and shareholder services
to the Federated Hermes Funds, for which they may be compensated through distribution and servicing fees paid pursuant
to Rule 12b-1 plans or otherwise. The Board also received and considered information detailing the benefits, if any,
that Federated Hermes may derive from its receipt of research services from brokers who execute portfolio trades for the
Federated Hermes Funds.
Conclusions
The Board
considered the CCO’s presentation and statements and the information accompanying the CCO Management Fee
Report. The Board recognized that its evaluation of the Federated Hermes Funds’ advisory and sub-advisory arrangements
is a continuing and ongoing process that is informed by the information that the Board requests and receives from
management throughout the course of the year.
On the basis
of the information and factors summarized above, among other information and factors deemed relevant by the
Board, and the evaluation thereof, the Board, including the Independent Trustees, unanimously voted to approve the continuation
of the Contract. The Board based its determination to approve the Contract on the totality of the circumstances
and relevant factors and with a view of past and future long-term considerations. Not all of the factors and considerations
identified above were necessarily deemed to be relevant to the Fund, nor did the Board consider any one of them
to be determinative.
Semi-Annual
Financial Statements and Additional Information
28
Variable
investment options are not bank deposits or obligations, are not guaranteed by any bank and are not insured or guaranteed
by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government
agency. Investment in variable investment options involves investment risk, including the possible loss of
principal.
This information is authorized
for distribution to prospective investors only when preceded or accompanied by the Fund’s Prospectus,
which contains facts concerning its objective and policies, management fees, expenses and other information.
In an effort to reduce costs
and avoid duplicate mailings, the Fund(s) intend to deliver a single copy of certain documents
to each household in which more 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 of Additional
Information, and supplements to each, as well as Semi-Annual and 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 shareholder as having given consent (“implied consent”) if (i)
shareholders with the same last name, or believed to be members of the same family, reside at the same street address
or receive mail at the same post office box, (ii) the Fund gives notice of its intent to “household” at least sixty (60)
days before it begins “householding” and (iii) none of the shareholders in the household have notified the Fund(s)
or their agent of the desire to “opt out” of “householding.” Shareholders who have granted written consent, or
have been deemed to have granted implied consent, can
revoke that consent and opt out of “householding” at any time:
shareholders who purchased shares through an intermediary should contact their representative; other shareholders
may call the Fund at 1-800-341-7400, Option #4.
Federated Hermes Quality Bond Fund II
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us at
FederatedHermes.com/us
or call 1-800-341-7400.
or call 1-800-341-7400.
Federated Securities Corp., Distributor
CUSIP 313916884
CUSIP 313916785
CUSIP 313916785
G02590-01 (8/26)
©
2026 Federated Hermes, Inc.
Semi-Annual Financial Statements
and Additional Information
and Additional Information
June 30, 2026
Federated Hermes Fund for U.S. Government Securities II
A Portfolio of Federated Hermes Insurance Series
Not FDIC Insured ▪ May
Lose Value ▪ No Bank Guarantee
Portfolio
of Investments
June 30, 2026 (unaudited)
|
Principal
Amount
|
|
|
Value
|
|
|
|
MORTGAGE-BACKED
SECURITIES—62.5% |
|
|
|
|
Federal
Home Loan Mortgage Corporation—15.6% |
|
|
$3,377,982
|
|
2.000%,
1/1/2052 |
$ 2,726,030
|
|
1,436,411
|
|
2.000%,
1/1/2052 |
1,173,996
|
|
1,015,646
|
|
2.500%,
9/1/2050 |
862,562
|
|
976,263
|
|
2.500%,
1/1/2052 |
832,471
|
|
307,787
|
|
3.500%,
6/1/2052 |
283,219
|
|
1,098,677
|
|
3.500%,
7/1/2052 |
1,009,606
|
|
40,996
|
|
4.000%,
12/1/2047 |
38,881
|
|
481,588
|
|
4.000%,
9/1/2052 |
452,269
|
|
717,954
|
|
4.500%,
11/1/2037 |
714,364
|
|
101,839
|
|
5.000%,
1/1/2034 |
102,187
|
|
26,243
|
|
5.000%,
5/1/2034 |
26,328
|
|
25,667
|
|
5.000%,
4/1/2036 |
25,776
|
|
10,031
|
|
5.000%,
5/1/2036 |
10,074
|
|
5,639
|
|
5.000%,
6/1/2036 |
5,664
|
|
28,817
|
|
5.000%,
6/1/2040 |
28,939
|
|
172,646
|
|
5.500%,
5/1/2034 |
175,476
|
|
9,142
|
|
5.500%,
12/1/2035 |
9,310
|
|
43,765
|
|
5.500%,
2/1/2036 |
44,632
|
|
37,197
|
|
5.500%,
5/1/2036 |
37,902
|
|
2,535
|
|
5.500%,
5/1/2036 |
2,588
|
|
3,343
|
|
5.500%,
5/1/2036 |
3,410
|
|
2,426
|
|
5.500%,
6/1/2036 |
2,477
|
|
489
|
|
5.500%,
6/1/2036 |
499
|
|
28,427
|
|
5.500%,
11/1/2037 |
29,024
|
|
50,566
|
|
5.500%,
1/1/2038 |
51,638
|
|
180,130
|
|
5.500%,
5/1/2038 |
183,418
|
|
425,354
|
|
5.500%,
8/1/2055 |
427,146
|
|
865,910
|
|
5.500%,
12/1/2055 |
869,761
|
|
1,644
|
|
6.000%,
1/1/2032 |
1,681
|
|
5,339
|
|
6.000%,
2/1/2032 |
5,457
|
|
30,193
|
|
6.000%,
4/1/2036 |
31,092
|
|
4,254
|
|
6.000%,
5/1/2036 |
4,381
|
|
109,836
|
|
6.000%,
6/1/2037 |
113,773
|
|
4,776
|
|
6.000%,
7/1/2037 |
4,944
|
|
975
|
|
6.500%,
3/1/2029 |
1,009
|
|
762
|
|
6.500%,
6/1/2029 |
789
|
|
343
|
|
6.500%,
7/1/2029 |
355
|
|
95
|
|
6.500%,
9/1/2029 |
98
|
|
365
|
|
7.000%,
12/1/2029 |
385
|
|
92
|
|
7.000%,
6/1/2030 |
97
|
|
60
|
|
7.000%,
11/1/2030 |
63
|
|
104,341
|
|
7.000%,
4/1/2032 |
110,106
|
|
2,549
|
|
7.500%,
1/1/2031 |
2,649
|
|
522
|
|
8.500%,
5/1/2030 |
542
|
|
|
|
TOTAL
|
10,407,068
|
|
|
|
Federal
National Mortgage Association—28.1% |
|
|
1,784,061
|
|
2.000%,
7/1/2050 |
1,442,524
|
|
693,768
|
|
2.000%,
2/1/2052 |
561,388
|
Semi-Annual
Financial Statements and Additional Information
1
|
Principal
Amount
|
|
|
Value
|
|
|
|
MORTGAGE-BACKED
SECURITIES—continued
|
|
|
|
|
Federal
National Mortgage Association—continued |
|
|
$1,580,476
|
|
2.000%,
2/1/2052 |
$ 1,274,456
|
|
624,851
|
|
2.000%,
2/1/2052 |
506,988
|
|
297,592
|
|
2.500%,
9/1/2036 |
278,650
|
|
1,012,738
|
|
2.500%,
9/1/2050 |
856,611
|
|
478,457
|
|
2.500%,
10/1/2051 |
405,893
|
|
687,763
|
|
2.500%,
1/1/2052 |
582,165
|
|
554,739
|
|
2.500%,
2/1/2052 |
466,792
|
|
588,354
|
|
2.500%,
3/1/2052 |
495,078
|
|
24,715
|
|
3.000%,
2/1/2047 |
22,210
|
|
473,577
|
|
3.000%,
2/1/2048 |
416,409
|
|
676,862
|
|
3.000%,
5/1/2051 |
591,135
|
|
1,190,551
|
|
3.000%,
2/1/2052 |
1,045,717
|
|
879,980
|
|
3.000%,
6/1/2052 |
777,878
|
|
483,711
|
|
3.000%,
6/1/2052 |
422,689
|
|
556,919
|
|
3.000%,
6/1/2052 |
490,909
|
|
937,068
|
|
3.500%,
8/1/2037 |
896,457
|
|
956,125
|
|
3.500%,
9/1/2037 |
914,688
|
|
259,283
|
|
3.500%,
12/1/2047 |
239,802
|
|
662,998
|
|
3.500%,
1/1/2048 |
610,456
|
|
522,001
|
|
3.500%,
6/1/2052 |
478,214
|
|
100,567
|
|
4.500%,
10/1/2041 |
99,568
|
|
672,602
|
|
4.500%,
2/1/2053 |
651,003
|
|
78,078
|
|
5.000%,
7/1/2034 |
78,340
|
|
10,226
|
|
5.000%,
11/1/2035 |
10,269
|
|
1,781,291
|
|
5.000%,
6/1/2053 |
1,761,937
|
|
463,973
|
|
5.000%,
5/1/2055 |
456,736
|
|
708,487
|
|
5.000%,
8/1/2055 |
696,992
|
|
241,067
|
|
5.000%,
12/1/2055 |
237,006
|
|
48,145
|
|
5.500%,
9/1/2034 |
49,002
|
|
10,673
|
|
5.500%,
1/1/2036 |
10,886
|
|
23,462
|
|
5.500%,
4/1/2036 |
23,919
|
|
681,710
|
|
5.500%,
6/1/2053 |
688,204
|
|
376
|
|
6.000%,
7/1/2029 |
385
|
|
515
|
|
6.000%,
5/1/2031 |
526
|
|
4,010
|
|
6.000%,
5/1/2036 |
4,137
|
|
41,108
|
|
6.000%,
7/1/2036 |
42,388
|
|
1,224
|
|
6.000%,
7/1/2036 |
1,266
|
|
17,905
|
|
6.000%,
9/1/2037 |
18,531
|
|
16,437
|
|
6.000%,
11/1/2037 |
17,042
|
|
10,084
|
|
6.000%,
12/1/2037 |
10,366
|
|
710
|
|
6.500%,
6/1/2029 |
735
|
|
40
|
|
6.500%,
7/1/2029 |
41
|
|
69
|
|
6.500%,
7/1/2029 |
71
|
|
617
|
|
6.500%,
7/1/2029 |
638
|
|
64
|
|
6.500%,
7/1/2029 |
66
|
|
1,854
|
|
6.500%,
9/1/2030 |
1,918
|
|
8,620
|
|
6.500%,
6/1/2031 |
8,917
|
|
7,142
|
|
6.500%,
4/1/2032 |
7,387
|
|
373
|
|
7.000%,
10/1/2029 |
394
|
|
5,505
|
|
7.000%,
10/1/2029 |
5,809
|
|
2,179
|
|
7.000%,
11/1/2030 |
2,299
|
Semi-Annual
Financial Statements and Additional Information
2
|
Principal
Amount
|
|
|
Value
|
|
|
|
MORTGAGE-BACKED
SECURITIES—continued
|
|
|
|
|
Federal
National Mortgage Association—continued |
|
|
$ 50,741
|
|
7.000%,
4/1/2032 |
$ 53,544
|
|
141
|
|
7.500%,
8/1/2028 |
144
|
|
47
|
|
7.500%,
9/1/2028 |
47
|
|
1,647
|
|
7.500%,
2/1/2030 |
1,704
|
|
834
|
|
8.000%,
7/1/2030 |
865
|
|
|
|
TOTAL
|
18,720,191
|
|
|
|
Government
National Mortgage Association—18.8% |
|
|
1,482,221
|
|
2.000%,
6/20/2052 |
1,215,572
|
|
2,101,599
|
|
2.500%,
6/20/2051 |
1,796,594
|
|
922,061
|
|
3.000%,
7/20/2051 |
819,150
|
|
784,883
|
|
3.500%,
1/20/2048 |
715,014
|
|
386,186
|
|
3.500%,
5/20/2052 |
353,739
|
|
759,508
|
|
4.000%,
10/20/2052 |
715,364
|
|
783,972
|
|
4.000%,
12/20/2052 |
737,916
|
|
138,998
|
|
4.500%,
6/20/2039 |
136,956
|
|
114,312
|
|
4.500%,
10/15/2039 |
112,671
|
|
160,452
|
|
4.500%,
8/20/2040 |
157,969
|
|
734,163
|
|
4.500%,
10/20/2052 |
711,662
|
|
78,881
|
|
5.000%,
7/15/2034 |
79,354
|
|
689,446
|
|
5.000%,
9/20/2052 |
685,402
|
|
603,921
|
|
5.500%,
10/20/2052 |
614,003
|
|
964,204
|
|
5.500%,
9/20/2053 |
976,610
|
|
1,322,890
|
|
5.500%,
4/20/2055 |
1,332,883
|
|
2,545
|
|
6.000%,
4/15/2032 |
2,598
|
|
13,542
|
|
6.000%,
5/15/2032 |
13,920
|
|
48,925
|
|
6.000%,
5/15/2036 |
50,342
|
|
11,256
|
|
6.000%,
7/20/2036 |
11,585
|
|
11,390
|
|
6.000%,
5/20/2037 |
11,729
|
|
70,173
|
|
6.000%,
7/20/2038 |
72,366
|
|
579,921
|
|
6.000%,
10/20/2052 |
597,318
|
|
506,010
|
|
6.000%,
10/20/2053 |
521,032
|
|
99
|
|
6.500%,
6/15/2029 |
103
|
|
1,193
|
|
6.500%,
7/20/2031 |
1,237
|
|
1,054
|
|
6.500%,
8/20/2031 |
1,092
|
|
13,240
|
|
6.500%,
10/15/2031 |
13,724
|
|
12,898
|
|
6.500%,
12/15/2031 |
13,370
|
|
878
|
|
6.500%,
4/15/2032 |
911
|
|
7,096
|
|
6.500%,
5/15/2032 |
7,355
|
|
74,970
|
|
6.500%,
5/15/2032 |
77,713
|
|
162
|
|
7.500%,
10/15/2029 |
166
|
|
879
|
|
7.500%,
3/20/2030 |
902
|
|
477
|
|
8.000%,
4/15/2030 |
488
|
|
|
|
TOTAL
|
12,558,810
|
|
|
|
TOTAL
MORTGAGE-BACKED SECURITIES
(IDENTIFIED
COST $41,664,843) |
41,686,069
|
|
|
|
U.S.
TREASURIES—14.0% |
|
|
|
|
U.S.
Treasury Bonds—8.1% |
|
|
300,000
|
|
2.875%,
11/15/2046 |
219,110
|
|
1,200,000
|
|
3.375%,
11/15/2048 |
938,250
|
|
1,850,000
|
|
3.625%,
2/15/2044 |
1,567,008
|
|
300,000
|
|
4.000%,
11/15/2052 |
256,640
|
Semi-Annual
Financial Statements and Additional Information
3
|
Principal
Amount
|
|
|
Value
|
|
|
|
U.S.
TREASURIES—continued
|
|
|
|
|
U.S.
Treasury Bonds—continued |
|
|
$1,600,000
|
|
4.500%,
2/15/2036 |
$ 1,618,771
|
|
850,000
|
|
4.625%,
2/15/2055 |
807,633
|
|
|
|
TOTAL
|
5,407,412
|
|
|
|
U.S.
Treasury Notes—5.9% |
|
|
1,000,000
|
|
3.500%,
1/31/2028 |
989,698
|
|
1,750,000
|
|
3.750%,
4/15/2028 |
1,737,494
|
|
500,000
|
|
4.250%,
11/15/2034 |
495,078
|
|
700,000
|
|
4.625%,
2/15/2035 |
711,153
|
|
|
|
TOTAL
|
3,933,423
|
|
|
|
TOTAL
U.S. TREASURIES
(IDENTIFIED
COST $9,653,587) |
9,340,835
|
|
|
|
GOVERNMENT
AGENCIES—11.2% |
|
|
|
|
Federal
Home Loan Bank System—9.7% |
|
|
1,000,000
|
|
3.500%,
10/4/2027 |
991,938
|
|
2,000,000
|
|
4.000%,
10/9/2026 |
1,999,830
|
|
1,500,000
|
|
4.000%,
3/10/2027 |
1,500,177
|
|
2,000,000
|
|
4.125%,
9/14/2029 |
1,994,300
|
|
|
|
TOTAL
|
6,486,245
|
|
|
|
Government
Agency—1.5% |
|
|
1,000,000
|
|
Tennessee
Valley Authority Notes, 3.875%, 8/1/2030 |
987,610
|
|
|
|
TOTAL
GOVERNMENT AGENCIES
(IDENTIFIED
COST $7,508,583) |
7,473,855
|
|
|
|
COMMERCIAL
MORTGAGE-BACKED SECURITIES—4.9% |
|
|
|
|
Agency
Commercial Mortgage-Backed Securities—4.9% |
|
|
457,000
|
|
FHLMC
REMIC, Series K151, Class A2, 3.800%, 10/25/2032 |
436,608
|
|
828,907
|
|
FHLMC
REMIC, Series K512, Class A2, 5.000%, 11/25/2028 |
836,452
|
|
1,000,000
|
|
FHLMC
REMIC, Series K750, Class A2, 3.000%, 9/25/2029 |
960,287
|
|
1,000,000
|
|
FHLMC
REMIC, Series K754, Class A2, 4.940%, 11/25/2030 |
1,016,973
|
|
|
|
TOTAL
COMMERCIAL MORTGAGE-BACKED SECURITIES
(IDENTIFIED
COST $3,171,517) |
3,250,320
|
|
|
|
REPURCHASE
AGREEMENT—3.0% |
|
|
2,013,000
|
|
Interest
in $584,000,000 joint repurchase agreement 3.65%, dated 6/30/2026 under which Bank of America, N.A. will
repurchase
securities provided as collateral for $584,059,211 on 7/1/2026. The securities provided as collateral at the end of
the
period held with BNY Mellon as tri-party agent, were U.S. Government Agency securities with various maturities to
12/1/2047
and the market value of those underlying securities was $595,740,395.
(IDENTIFIED
COST $2,013,000) |
2,013,000
|
|
|
|
COLLATERALIZED
MORTGAGE OBLIGATIONS—2.8% |
|
|
|
|
Government
National Mortgage Association—0.4% |
|
|
307,937
|
|
REMIC,
Series 2015-47, Class AE, 2.900%, 11/16/2055 |
293,904
|
|
|
|
Non-Agency
Mortgage-Backed Securities—2.4% |
|
|
436,100
|
|
GS
Mortgage-Backed Securities Trust 2023-PJ1, Class A4, 3.500%, 2/25/2053 |
391,093
|
|
887,650
|
1
|
JP
Morgan Mortgage Trust 2021-1, Class A11, 4.262% (30-DAY AVERAGE SOFR +0.650%), 6/25/2051 |
836,753
|
|
358,253
|
|
JP
Morgan Mortgage Trust 2023-6, Class A2, 6.000%, 12/26/2053 |
361,724
|
|
|
|
TOTAL
|
1,589,570
|
|
|
|
TOTAL
COLLATERALIZED MORTGAGE OBLIGATIONS
(IDENTIFIED
COST $1,939,041) |
1,883,474
|
|
|
|
ASSET-BACKED
SECURITIES—1.0% |
|
|
|
|
Single
Family Rental Security—0.6% |
|
|
409,212
|
|
Progress
Residential Trust 2022-SFR4, Class B, 4.788%, 5/17/2041 |
405,667
|
|
|
|
Student
Loans—0.4% |
|
|
75,025
|
|
Navient
Student Loan Trust 2020-FA, Class A, 1.220%, 7/15/2069 |
70,912
|
Semi-Annual
Financial Statements and Additional Information
4
|
Principal
Amount
|
|
|
Value
|
|
|
|
ASSET-BACKED
SECURITIES—continued
|
|
|
|
|
Student
Loans—continued |
|
|
$ 161,754
|
|
Navient
Student Loan Trust 2020-GA, Class A, 1.170%, 9/16/2069 |
$ 151,379
|
|
|
|
TOTAL
|
222,291
|
|
|
|
TOTAL
ASSET-BACKED SECURITIES
(IDENTIFIED
COST $646,025) |
627,958
|
|
|
|
TOTAL
INVESTMENT IN SECURITIES—99.4%
(IDENTIFIED
COST $66,596,596)2
|
66,275,511
|
|
|
|
OTHER
ASSETS AND LIABILITIES - NET—0.6%3
|
377,434
|
|
|
|
NET
ASSETS—100% |
$66,652,945
|
At June 30, 2026, 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 |
13
|
$2,679,726
|
September
2026 |
$(3,367)
|
|
United
States Treasury Notes 5-Year Long Futures |
26
|
$2,783,219
|
September
2026 |
$1,665
|
|
United
States Treasury Notes 10-Year Long Futures |
25
|
$2,747,266
|
September
2026 |
$12,926
|
|
Short
Futures: |
|
|
|
|
|
United
States Treasury Notes 10-Year Ultra Short Futures |
6
|
$674,813
|
September
2026 |
$(4,896)
|
|
NET
UNREALIZED APPRECIATION ON FUTURES CONTRACTS |
$6,328
| |||
Net Unrealized Appreciation on Futures Contracts
is included in “Other Assets and Liabilities—Net.”
|
1
|
Floating/variable
note with current rate and current maturity or next reset date shown. |
|
2
|
Also
represents cost of investments for federal tax purposes. |
|
3
|
Assets,
other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
Note: The categories of investments are
shown as a percentage of net assets at June 30, 2026.
Various inputs are used in determining the
value of the Fund’s investments. These inputs are summarized in the three broad levels listed
below:
Level 1—quoted prices in active markets
for identical securities.
Level 2—other significant observable
inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk,
etc.). Also includes securities valued at amortized cost.
Level 3—significant unobservable inputs
(including the Fund’s own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing
securities are not an indication of the risk associated with investing in those securities.
Semi-Annual
Financial Statements and Additional Information
5
The following is a summary of the inputs used, as of June 30, 2026, 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: |
|
|
|
|
|
Mortgage-Backed
Securities |
$—
|
$41,686,069
|
$—
|
$41,686,069
|
|
U.S.
Treasuries |
—
|
9,340,835
|
—
|
9,340,835
|
|
Government
Agencies |
—
|
7,473,855
|
—
|
7,473,855
|
|
Commercial
Mortgage-Backed Securities |
—
|
3,250,320
|
—
|
3,250,320
|
|
Collateralized
Mortgage Obligations |
—
|
1,883,474
|
—
|
1,883,474
|
|
Asset-Backed
Securities |
—
|
627,958
|
—
|
627,958
|
|
Repurchase
Agreement |
—
|
2,013,000
|
—
|
2,013,000
|
|
TOTAL
SECURITIES |
$—
|
$66,275,511
|
$—
|
$66,275,511
|
|
Other
Financial Instruments:1
|
|
|
|
|
|
Assets
|
$14,591
|
$—
|
$—
|
$14,591
|
|
Liabilities
|
(8,263)
|
—
|
—
|
(8,263)
|
|
TOTAL
OTHER FINANCIAL INSTRUMENTS |
$6,328
|
$—
|
$—
|
$6,328
|
|
1
|
Other
financial instruments are futures contracts. |
|
The
following acronym(s) are used throughout this portfolio: |
| |
|
FHLMC
|
—Federal
Home Loan Mortgage Corporation | |
|
REMIC
|
—Real
Estate Mortgage Investment Conduit | |
|
SOFR
|
—Secured
Overnight Financing Rate | |
See Notes which are an integral part of
the Financial Statements
Semi-Annual
Financial Statements and Additional Information
6
Financial
Highlights
(For a Share Outstanding Throughout Each
Period)
|
|
Six
Months
Ended
(unaudited)
6/30/2026
|
Year Ended December 31,
| ||||
|
|
2025
|
2024
|
2023
|
2022
|
2021
| |
|
Net Asset
Value, Beginning of Period |
$9.31
|
$9.07
|
$9.35
|
$9.20
|
$10.71
|
$11.16
|
|
Income
From Investment Operations: |
|
|
|
|
|
|
|
Net
investment income (loss)1
|
0.17
|
0.33
|
0.33
|
0.30
|
0.21
|
0.15
|
|
Net
realized and unrealized gain (loss) |
(0.13)
|
0.27
|
(0.28)
|
0.08
|
(1.54)
|
(0.38)
|
|
TOTAL
FROM INVESTMENT OPERATIONS |
0.04
|
0.60
|
0.05
|
0.38
|
(1.33)
|
(0.23)
|
|
Less Distributions:
|
|
|
|
|
|
|
|
Distributions
from net investment income |
(0.35)
|
(0.36)
|
(0.33)
|
(0.23)
|
(0.18)
|
(0.22)
|
|
Net
Asset Value, End of Period |
$9.00
|
$9.31
|
$9.07
|
$9.35
|
$9.20
|
$10.71
|
|
Total
Return2
|
0.49%
|
6.80%
|
0.58%
|
4.19%
|
(12.55)%
|
(2.04)%
|
|
Ratios
to Average Net Assets: |
|
|
|
|
|
|
|
Net
expenses3
|
0.78%4
|
0.78%
|
0.80%
|
0.78%
|
0.78%
|
0.78%
|
|
Net
investment income |
3.72%4
|
3.67%
|
3.64%
|
3.29%
|
2.12%
|
1.34%
|
|
Expense
waiver/reimbursement5
|
0.21%4
|
0.24%
|
0.17%
|
0.14%
|
0.13%
|
0.09%
|
|
Supplemental
Data: |
|
|
|
|
|
|
|
Net
assets, end of period (000 omitted) |
$66,653
|
$69,612
|
$70,744
|
$84,042
|
$91,840
|
$114,594
|
|
Portfolio
turnover6
|
0%
|
57%
|
22%
|
74%
|
122%
|
166%
|
|
Portfolio
turnover (excluding purchases and sales from dollar-roll transactions)6
|
0%
|
25%
|
13%
|
65%
|
96%
|
31%
|
|
1
|
Per
share numbers have been calculated using the average shares method. |
|
2
|
Based
on net asset value. Total returns do not reflect any additional fees or expenses that may be imposed by separate accounts of insurance
companies or in
connection
with any variable annuity or variable life insurance contract. Total returns for periods of less than one year are not annualized.
|
|
3
|
Amount
does not reflect net expenses incurred by investment companies in which the Fund may invest. |
|
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. Amount does not reflect expense
waiver/
reimbursement
recorded by investment companies in which the Fund may invest. |
|
6
|
Securities
that mature are considered sales for purposes of this calculation. |
See Notes which are an integral part of
the Financial Statements
Semi-Annual
Financial Statements and Additional Information
7
Statement
of Assets and Liabilities
June 30, 2026 (unaudited)
|
Assets:
|
|
|
Investment
in securities, at value (identified
cost $66,596,596) |
$66,275,511
|
|
Cash
|
558
|
|
Due
from broker (Note 2)
|
85,030
|
|
Income
receivable |
355,289
|
|
Receivable
for shares sold |
68,096
|
|
Total
Assets |
66,784,484
|
|
Liabilities:
|
|
|
Payable
for shares redeemed |
59,367
|
|
Payable
for variation margin on futures contracts |
11,473
|
|
Payable
for investment adviser fee (Note 5)
|
669
|
|
Payable
for administrative fee (Note 5)
|
141
|
|
Payable
for custodian fees |
6,685
|
|
Payable
for insurance premiums |
1,686
|
|
Payable
for legal fees |
6,575
|
|
Payable
for transfer agent fees |
970
|
|
Payable
for commitment fees |
2,530
|
|
Payable
for portfolio accounting fees |
36,711
|
|
Accrued
expenses (Note 5)
|
4,732
|
|
Total
Liabilities |
131,539
|
|
Net
assets for 7,402,642 shares outstanding |
$66,652,945
|
|
Net Assets
Consist of: |
|
|
Paid-in
capital |
$79,504,364
|
|
Total
distributable earnings (loss) |
(12,851,419)
|
|
Net
Assets |
$66,652,945
|
|
Net Asset
Value, Offering Price and Redemption Proceeds Per Share: |
|
|
$66,652,945
÷ 7,402,642 shares outstanding, no par value, unlimited shares authorized |
$9.00
|
See Notes which are an integral part of
the Financial Statements
Semi-Annual
Financial Statements and Additional Information
8
Statement
of Operations
Six Months Ended June
30, 2026 (unaudited)
|
Investment
Income: |
|
|
Interest
|
$1,530,256
|
|
Expenses:
|
|
|
Investment
adviser fee (Note 5)
|
203,777
|
|
Administrative
fee (Note 5)
|
27,899
|
|
Custodian
fees |
8,181
|
|
Transfer
agent fees |
4,262
|
|
Directors’/Trustees’
fees (Note 5)
|
833
|
|
Auditing
fees |
14,490
|
|
Legal
fees |
5,505
|
|
Portfolio
accounting fees |
54,824
|
|
Printing
and postage |
8,892
|
|
Miscellaneous
(Note 5)
|
10,879
|
|
TOTAL
EXPENSES |
339,542
|
|
Waiver
of investment adviser fee (Note 5) |
(72,968)
|
|
Net
expenses |
266,574
|
|
Net
investment income |
1,263,682
|
|
Realized
and Unrealized Gain (Loss) on Investments and Futures Contracts: |
|
|
Net
realized loss on futures contracts |
(125,052)
|
|
Net
change in unrealized appreciation of investments |
(804,311)
|
|
Net
change in unrealized depreciation of futures contracts |
18,066
|
|
Net
realized and unrealized gain (loss) on investments and futures contracts |
(911,297)
|
|
Change
in net assets resulting from operations |
$352,385
|
See Notes which are an integral part of
the Financial Statements
Semi-Annual
Financial Statements and Additional Information
9
Statement
of Changes in Net Assets
|
|
Six
Months
Ended
(unaudited)
6/30/2026
|
Year
Ended
12/31/2025
|
|
Increase
(Decrease) in Net Assets |
|
|
|
Operations:
|
|
|
|
Net
investment income |
$1,263,682
|
$2,582,207
|
|
Net
realized gain (loss) |
(125,052)
|
(782,671)
|
|
Net
change in unrealized appreciation/depreciation |
(786,245)
|
2,849,801
|
|
CHANGE
IN NET ASSETS RESULTING FROM OPERATIONS |
352,385
|
4,649,337
|
|
Distributions
to Shareholders |
(2,598,938)
|
(2,802,697)
|
|
Share Transactions:
|
|
|
|
Proceeds
from sale of shares |
2,998,479
|
7,628,717
|
|
Net
asset value of shares issued to shareholders in payment of distributions declared |
2,598,938
|
2,802,697
|
|
Cost
of shares redeemed |
(6,309,553)
|
(13,410,343)
|
|
CHANGE
IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS |
(712,136)
|
(2,978,929)
|
|
Change
in net assets |
(2,958,689)
|
(1,132,289)
|
|
Net Assets:
|
|
|
|
Beginning
of period |
69,611,634
|
70,743,923
|
|
End
of period |
$66,652,945
|
$69,611,634
|
See Notes which are an integral part of
the Financial Statements
Semi-Annual
Financial Statements and Additional Information
10
Notes to
Financial Statements
June 30, 2026 (unaudited)
1. ORGANIZATION
Federated Hermes Insurance Series (the “Trust”)
is registered under the Investment Company Act of 1940, as amended (the “Act”), as an
open-end management investment company. The Trust consists of six portfolios. The financial statements included herein are only those
of Federated Hermes Fund for U.S. Government Securities II (the “Fund”), a diversified portfolio. The financial statements
of the other portfolios are presented separately. The assets of
each portfolio are segregated and a shareholder’s interest is limited to the portfolio
in which shares are held. Each portfolio pays its own expenses. Fund shares are available exclusively as a funding vehicle for life insurance
companies writing variable life insurance policies and variable annuity contracts. The investment objective of the Fund is to provide
current income.
2. SIGNIFICANT
ACCOUNTING POLICIES
The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of its financial statements.
These policies are in conformity with U.S. generally accepted accounting principles (GAAP).
Investment Valuation
In
calculating its net asset value (NAV), the Fund generally values investments as follows:
■
Fixed-income
securities are fair valued using price evaluations provided by a pricing service approved by Federated Investment Management
Company (the “Adviser”).
■
Shares
of other mutual funds or non-exchange-traded investment companies are valued based upon their reported NAVs, or NAV per share
practical expedient, as applicable.
■
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.
■
For
securities that are fair valued in accordance with procedures established by and under the general supervision of the Adviser, certain
factors may be considered, such as: the last traded or purchase price of the security, information obtained by contacting the issuer
or dealers, analysis of the issuer’s financial statements or other available documents, fundamental analytical data, the nature
and duration of restrictions on disposition, the movement of the
market in which the security is normally traded, public trading in similar securities
or derivative contracts of the issuer or comparable issuers, movement of a relevant index, or other factors including but not limited
to industry changes and relevant government actions.
If any price, quotation, price evaluation
or other pricing source is not readily available when the NAV is calculated, if the Fund cannot obtain
price evaluations from a pricing service or from more than one dealer for an investment within a reasonable period of time as set forth
in the Adviser’s valuation policies and procedures for the Fund, or if information furnished by a pricing service, in the opinion
of the Adviser’s valuation committee (“Valuation Committee”),
is deemed not representative of the fair value of such security, the Fund uses the
fair value of the investment determined in accordance with the procedures described below. There can be no assurance that the Fund
could obtain the fair value assigned to an investment if it sold the investment at approximately the time at which the Fund determines
its NAV per share, and the actual value obtained could be materially different.
Fair Valuation Procedures
Pursuant
to Rule 2a-5 under the Act, the Fund’s Board of Trustees (the “Trustees”) has designated the Adviser as the Fund’s
valuation designee to perform any fair value determinations for
securities and other assets held by the Fund. The Adviser is subject to the Trustees’
oversight and certain reporting and other requirements intended to provide the Trustees the information needed to oversee the
Adviser’s fair value determinations.
The Adviser, acting through
its Valuation Committee, is responsible for determining the fair value of investments for which market quotations
are not readily available. The Valuation Committee is comprised of officers of the Adviser and certain of the Adviser’s affiliated
companies and determines fair value and oversees the calculation of the NAV. The Valuation Committee is also authorized to use
pricing services to provide fair value evaluations of the current value of certain investments for purposes of calculating the NAV. The
Valuation Committee employs various methods for reviewing third-party
pricing-service evaluations including periodic reviews of third-party
pricing services’ policies, procedures and valuation methods (including key inputs, methods, models and assumptions), transactional
back-testing, comparisons of evaluations of different pricing services, and review of price challenges by the Adviser based on
recent market activity. In the event that market quotations and price evaluations are not available for an investment, the Valuation Committee
determines the fair value of the investment in accordance with procedures adopted by the Adviser. The Trustees periodically review
the fair valuations made by the Valuation Committee. The Trustees have also approved the Adviser’s fair valuation and significant
events procedures as part of the Fund’s compliance program
and will review any changes made to the procedures.
Factors considered by
pricing services in evaluating an investment include the yields or prices of investments of comparable quality, coupon,
maturity, call rights and other potential prepayments, terms and type, reported transactions, indications as to values from dealers
and general market conditions. Some pricing services provide a single price evaluation reflecting the bid-side of the market for an
investment (a “bid” evaluation). Other pricing services offer both bid evaluations and price evaluations indicative of a price
between the prices bid and ask for the investment (a “mid”
evaluation). The Fund normally uses bid evaluations for any U.S. Treasury and Agency securities,
mortgage-backed securities and municipal securities. The Fund normally uses mid evaluations for any other types of fixed-income
securities and any OTC derivative contracts. In the event that market quotations and price evaluations are not available for an investment,
the fair value of the investment is determined in accordance with procedures adopted by the Adviser.
Semi-Annual
Financial Statements and Additional Information
11
Repurchase Agreements
The
Fund may invest in repurchase agreements for short-term liquidity purposes. It is the policy of the Fund to require the other party to
a repurchase agreement to transfer to the Fund’s custodian
or sub-custodian eligible securities or cash with a market value (after transaction
costs) at least equal to the repurchase price to be paid under the repurchase agreement. The eligible securities are transferred
to accounts with the custodian or sub-custodian in which the Fund holds a “securities entitlement” and exercises “control”
as those terms are defined in the Uniform Commercial Code. Certain
repurchase agreements may be structured as loans secured by a security
interest or lien on the eligible securities. The Fund has established procedures for monitoring the market value of the transferred securities
and requiring the transfer of additional eligible securities if necessary to equal at least the repurchase price. These procedures also
allow the other party to require securities to be transferred from the account to the extent that their market value exceeds the repurchase
price or in exchange for other eligible securities of equivalent market value.
The insolvency of the
other party or other failure to repurchase the securities may delay the disposition of the underlying securities or cause
the Fund to receive less than the full repurchase price. Under the terms of the repurchase agreement, any amounts received by the Fund
in excess of the repurchase price and related transaction costs must be remitted to the other party.
The Fund may enter into
repurchase agreements in which eligible securities are transferred into joint trading accounts maintained by the
custodian or sub-custodian for investment companies and other clients advised by the Fund’s Adviser and its affiliates. The Fund
will participate on a pro rata basis with the other investment
companies and clients in its share of the securities transferred under such repurchase
agreements and in its share of proceeds from any repurchase or other disposition of such securities.
Repurchase agreements
are subject to Master Netting Agreements (MNA) which are agreements between the Fund and its counterparties
that provide for the net settlement of all transactions and collateral with the Fund, through a single payment, in the event of
default or termination. Amounts presented on the Portfolio of Investments and Statement of Assets and Liabilities are not net settlement
amounts but gross. As indicated above, the cash or securities to be repurchased, as shown on the Portfolio of Investments, exceeds
the repurchase price to be paid under the agreement reducing the net settlement amount to zero.
Investment Income, Gains and Losses, Expenses and Distributions
Investment
transactions are accounted for on a trade-date basis. Realized gains and losses from investment transactions are recorded on an
identified-cost basis. Interest income and expenses are accrued daily. Dividend income and distributions to shareholders are recorded
on the ex-dividend date. Distributions of net investment income
and capital gains, if any, are declared and paid at least annually. Non-cash
dividends included in dividend income, if any, are recorded at fair value. Amortization/accretion of premium and discount is included
in investment income. Gains and losses realized on principal payment of mortgage-backed securities (paydown gains and losses)
are classified as part of investment income. The detail of the total fund expense waiver of $72,968 is disclosed in Note 5.
Federal Taxes
It
is the Fund’s policy to comply with the Subchapter M provision of the Internal Revenue Code of 1986 (the “Code”) and
to distribute to shareholders each year substantially all of its
income. Accordingly, no provision for federal income tax is necessary. As of and during the six
months ended June 30, 2026, the Fund did not have a liability for any uncertain tax positions. The Fund recognizes interest and penalties,
if any, related to tax liabilities as income tax expense in the Statement of Operations. As of June 30, 2026, tax years 2022
through 2025 remain subject to examination by the Fund’s major tax jurisdictions, which include the United States of America and
the Commonwealth of Massachusetts.
When-Issued and Delayed-Delivery Transactions
The
Fund may engage in when-issued or delayed-delivery transactions. The Fund records when-issued securities on the trade date and maintains
security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased
on a when-issued or delayed-delivery basis are marked to market daily and begin earning interest on the settlement date. Losses
may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the
contract.
The Fund may transact
in To Be Announced Securities (TBAs). As with other delayed-delivery transactions, a seller agrees to issue TBAs
at a future date. However, the seller does not specify the particular securities to be delivered. Instead, the Fund agrees to accept any
security that meets specified terms such as issuer, interest rate and terms of underlying mortgages. The Fund records TBAs on the trade
date utilizing information associated with the specified terms of the transaction as opposed to the specific mortgages. TBAs are marked
to market daily and begin earning interest on the settlement date. Losses may occur due to the fact that the actual underlying mortgages
received may be less favorable than those anticipated by the Fund.
Dollar-Roll Transactions
The
Fund may engage in dollar-roll transactions in which the Fund sells mortgage-backed securities with a commitment to buy similar (same
type, coupon and maturity), but not identical mortgage-backed securities on a future date. Both securities involved are TBA mortgage-backed
securities. The Fund treats dollar-roll transactions as purchases and sales. Dollar-rolls are subject to interest rate risks and
credit risks.
Futures Contracts
The
Fund purchases and sells financial futures contracts to manage duration and yield curve risks. Upon entering into a financial futures
contract with a broker, the Fund is required to deposit with a
broker, either U.S. government securities or a specified amount of cash, which
is shown as due from broker in the Statement of Assets and Liabilities. Futures contracts are valued daily and unrealized gains or losses
are recorded in a “variation margin” account. The Fund receives from or pays to the broker a specified amount of cash based
Semi-Annual
Financial Statements and Additional Information
12
upon changes in the
variation margin account. When a contract is closed, the Fund recognizes a realized gain or loss. Futures contracts have
market risks, including the risk that the change in the value of the contract may not correlate with the changes in the value of the underlying
securities. There is minimal counterparty risk to the Fund since futures contracts are exchange traded and the exchange’s clearinghouse,
as counterparty to all exchange-traded futures contracts, guarantees the futures contracts against default.
Futures contracts outstanding at period
end are listed after the Fund’s Portfolio of Investments.
The average notional
value of long and short futures contracts held by the Fund throughout the period was $6,973,369 and $553,268, respectively.
This is based on amounts held as of each month-end throughout the six-month period.
Securities Lending
The
Fund participates in a securities lending program providing for the lending of government securities to qualified brokers. The term of
the loans within the program is one year or less. The Fund receives cash collateral for securities loaned, which generally is invested
in an affiliated money market fund. Collateral is maintained at
a minimum level of 100% of the market value of investments loaned, plus interest,
if applicable. In accordance with the Fund’s securities lending agreement, the market value of securities on loan is determined
each day at the close of business and any additional collateral
required to cover the value of securities on loan is delivered to the Fund on
the next business day. Earnings on collateral are allocated between the borrower of the security, the securities lending agent, as a fee
for its services under the program and the Fund, according to
agreed-upon rates. The Fund will not have the right to vote on securities while
they are on loan. However, the Fund will attempt to terminate a loan in an effort to reacquire the securities in time to vote on matters
that are deemed to be material by the Adviser. There can be no assurance that the Fund will have sufficient notice of such matters
to be able to terminate the loan in time to vote thereon.
As of June 30, 2026, the Fund had no outstanding
securities on loan.
Restricted Securities
The
Fund may purchase securities which are considered restricted. Restricted securities are securities that either: (a) cannot be offered
for public sale without first being registered, or being able
to take advantage of an exemption from registration, under the Securities Act of
1933; or (b) are subject to contractual restrictions on public sales. In some cases, when a security cannot be offered for public sale
without first being registered, the issuer of the restricted security
has agreed to register such securities for resale, at the issuer’s expense, either
upon demand by the Fund or in connection with another registered offering of the securities. Many such restricted securities may be
resold in the secondary market in transactions exempt from registration. Restricted securities may be determined to be liquid under criteria
established by the Trustees. The Fund will not incur any registration costs upon such resales. The Fund’s restricted securities,
like other securities, are priced in accordance with procedures
established by and under the general supervision of the Adviser.
Additional Disclosure Related to Derivative Instruments
|
Fair
Value of Derivative Instruments | ||
|
|
Liabilities
| |
|
|
Statement
of
Assets
and
Liabilities
Location
|
Fair
Value
|
|
Derivatives
not accounted for as hedging
instruments
under ASC Topic 815 |
|
|
|
Interest
rate contracts |
Payable
for variation margin
on
futures contracts |
$(6,328)*
|
|
*
|
Includes
cumulative net appreciation of futures contracts as reported in the footnotes to the Portfolio of Investments. Only the current day’s
variation margin is
reported
within the Statement of Assets and Liabilities. |
The Effect of Derivative Instruments on the Statement
of Operations for the Six Months Ended June 30, 2026
|
Amount
of Realized Gain or (Loss) on Derivatives Recognized in Income | |
|
|
Futures
Contracts
|
|
Interest
rate contracts |
$(125,052)
|
|
Change
in Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income | |
|
|
Futures
Contracts
|
|
Interest
rate contracts |
$18,066
|
Other
The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the
amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ materially from
those estimated. The Fund applies investment company accounting
and reporting guidance.
Semi-Annual
Financial Statements and Additional Information
13
3. SHARES
OF BENEFICIAL INTEREST
The following table summarizes share activity:
|
|
Six
Months Ended
6/30/2026
|
Year
Ended
12/31/2025
|
|
Shares
sold |
327,534
|
837,910
|
|
Shares
issued to shareholders in payment of distributions declared |
291,361
|
312,801
|
|
Shares
redeemed |
(691,205)
|
(1,476,634)
|
|
NET
CHANGE RESULTING FROM FUND SHARE TRANSACTIONS |
(72,310)
|
(325,923)
|
4. FEDERAL
TAX INFORMATION
At June 30, 2026, the cost of investments
for federal tax purposes was $66,596,596. The net unrealized depreciation of investments for federal
tax purposes was $314,757. This consists of unrealized appreciation from investments for those securities having an excess of value
over cost of $636,202 and unrealized depreciation from investments for those securities having an excess of cost over value of $950,959.
The amounts presented are inclusive of derivative contracts.
As of December 31, 2025,
the Fund had a capital loss carryforward of $13,686,223 which will reduce the Fund’s taxable income arising from
future net realized gains on investments, if any, to the extent permitted by the Code, thereby reducing the amount of distributions to
shareholders which would otherwise be necessary to relieve the Fund of any liability for federal income tax. Pursuant to the Code, these
net capital losses retain their character as either short-term or long-term and do not expire.
The following schedule summarizes the Fund’s
capital loss carryforwards:
|
Short-Term
|
Long-Term
|
Total
|
|
$5,134,891
|
$8,551,332
|
$13,686,223
|
At December 31, 2025, for federal income
tax purposes, the Fund had $452 in straddle loss deferrals.
5. INVESTMENT
ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
The
advisory agreement between the Fund and the Adviser provides for an annual fee equal to 0.60% of the Fund’s average daily net assets.
Subject to the terms described in the Expense Limitation note, the Adviser may voluntarily choose to waive any portion of its fee and/or
reimburse certain operating expenses of the Fund for competitive reasons such as to maintain the Fund’s expense ratio, or as and
when appropriate, to maintain positive or zero net yields. For
the six months ended June 30, 2026, the Adviser voluntarily waived $72,968
of its fee.
Administrative Fee
Federated
Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and
services. For purposes of determining the appropriate rate breakpoint, “Investment Complex” is defined as all of the Federated
Hermes Funds subject to a fee under the Administrative Services
Agreement. The fee paid to FAS is based on the average daily net assets
of the Investment Complex as specified below:
|
Administrative
Fee |
Average
Daily Net Assets
of
the Investment Complex |
|
0.100%
|
on
assets up to $50 billion |
|
0.075%
|
on
assets over $50 billion |
Subject to the terms described in the Expense
Limitation note, FAS may voluntarily choose to waive any portion of its fee. For the six months
ended June 30, 2026, the annualized fee paid to FAS was 0.082% of average daily net assets of the Fund.
In addition, FAS may charge certain out-of-pocket
expenses to the Fund.
Expense Limitation
The
Adviser and certain of its affiliates (which may include FAS) on their own initiative have agreed to waive certain amounts of their respective
fees and/or reimburse expenses. Total annual fund operating expenses (as shown in the financial highlights, excluding interest expense,
extraordinary expenses and proxy-related expenses, if any) paid by the Fund (after the voluntary waivers and/or reimbursements)
will not exceed 0.78% (the “Fee Limit”) up to but not including the later of (the “Termination Date”): (a) May
1, 2027; or (b) the date of the Fund’s next effective Prospectus.
While the Adviser and its applicable affiliates currently do not anticipate terminating or
increasing these arrangements prior to the Termination Date, these arrangements may only be terminated or the Fee Limit increased prior
to the Termination Date with the approval of the Trustees.
Semi-Annual
Financial Statements and Additional Information
14
Directors’/Trustees’
and Miscellaneous Fees
Certain
Officers and Trustees of the Fund are Officers and Directors or Trustees of certain of the above companies. To efficiently facilitate
payment, Independent Directors’/Trustees’ fees and
certain expenses related to conducting meetings of the Directors/Trustees and other
miscellaneous expenses are paid by an affiliate of the Adviser which in due course are reimbursed by the Fund. These expenses related
to conducting meetings of the Directors/Trustees and other miscellaneous expenses may be included in Accrued and Miscellaneous
Expenses on the Statement of Assets and Liabilities and Statement of Operations, respectively.
6. INVESTMENT
TRANSACTIONS
Purchases and sales of investments, excluding
long-term U.S. government securities and short-term obligations, for the six months ended
June 30, 2026, were as follows:
|
Purchases
|
$—
|
|
Sales
|
$157,581
|
7. LINE
OF CREDIT
The Fund participates with certain other
Federated Hermes Funds, on a several basis, in an up to $400,000,000 unsecured, 364-day, committed,
revolving line of credit (LOC) agreement dated June 16, 2026. The LOC was made available to temporarily finance the repurchase
or redemption of shares of the Fund, failed trades, payment of dividends, settlement of trades and for other short-term, temporary
or emergency general business purposes. The Fund cannot borrow under the LOC if an inter-fund loan is outstanding. The Fund’s
ability to borrow under the LOC also is subject to the limitations of the Act and various conditions precedent that must be satisfied
before the Fund can borrow. Loans under the LOC are charged interest at a fluctuating rate per annum equal to (a) the highest, on
any day, of (i) the federal funds effective rate, (ii) the published secured overnight financing rate plus an assigned percentage, and
(iii) 0.0%, plus (b) a margin. Any fund eligible to borrow under
the LOC pays its pro rata share of a commitment fee based on the amount of
the lenders’ commitment that has not been utilized, quarterly in arrears and at maturity. As of June 30, 2026, the Fund had no outstanding
loans. During the six months ended June 30, 2026, the Fund did not utilize the LOC.
8. INTERFUND
LENDING
Pursuant to an Exemptive Order issued by
the Securities and Exchange Commission, the Fund, along with other funds advised by subsidiaries
of Federated Hermes, Inc., may participate in an interfund lending program. This program provides an alternative credit facility
allowing the Fund to borrow from other participating affiliated funds. As of June 30, 2026, there were no outstanding loans. During
the six months ended June 30, 2026, the program was not utilized.
9. Operating
Segments
An operating segment is defined as a component
of a public entity that engages in business activities from which it may recognize revenues
and incur expenses, has operating results that are regularly reviewed by the public entity’s chief operating decision maker (CODM)
to make decisions about resources to be allocated to the segment and assess its performance, and has discrete financial information
available. A management committee of the Adviser acts as the CODM. The Fund represents a single operating segment, as the
CODM monitors the operating results of the Fund as a whole and the strategic asset allocation is determined based on the investment
objective of the Fund and executed by the Fund’s portfolio management team. The financial information in the form of the Fund’s
portfolio composition, total returns, expense ratios and changes in net assets (i.e., changes in net assets resulting from operations,
subscriptions and redemptions) which is reviewed by the CODM to assess the Fund’s performance in comparison to the Fund’s
benchmarks and to make resource allocation decisions for the Fund’s single segment is consistent with the information presented
in these financial statements. Segment assets are reflected on
the accompanying Statement of Assets and Liabilities as “total assets” and significant
segment expenses are listed on the accompanying Statement of Operations.
10. INDEMNIFICATIONS
Under the Fund’s organizational documents,
its Officers and Directors/Trustees are indemnified against certain liabilities arising out of the
performance of their duties to the Fund (other than liabilities arising out of their willful misfeasance, bad faith, gross negligence
or reckless disregard of their duties to the Fund). In addition,
in the normal course of business, the Fund provides certain indemnifications under
arrangements with third parties. Typically, obligations to indemnify a third party arise in the context of an arrangement entered into
by the Fund under which the Fund agrees to indemnify such third party for certain liabilities arising out of actions taken pursuant to
the arrangement, provided the third party’s actions are
not deemed to have breached an agreed-upon standard of care (such as willful misfeasance,
bad faith, gross negligence or reckless disregard of their duties under the contract). The Fund’s maximum exposure under these
arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet arisen. The Fund
does not anticipate any material claims or losses pursuant to these arrangements at this time, and accordingly, expects the risk of loss
to be remote.
Semi-Annual
Financial Statements and Additional Information
15
Evaluation
and Approval of Advisory Contract–May
2026
Federated Hermes Fund for U.S.
Government Securities II (the “Fund”)
At its meetings in May 2026 (the
“May Meetings”), the Fund’s Board of Trustees (the “Board”), including those Trustees who
are not “interested persons” of the Fund, as defined in the Investment Company Act of 1940, as amended (the
“Independent Trustees”), reviewed and unanimously approved the continuation of the investment advisory contract between
the Fund and Federated Investment Management Company (the “Adviser”) (the “Contract”) for an additional one-year
term. The Board’s determination to approve the continuation of the Contract reflects the exercise of its business judgment
after considering such information deemed necessary to evaluate the terms of the Contract and to approve the continuation
of the existing arrangement. The information, factors and conclusions that formed the basis for the Board’s approval
are summarized below.
Information Received
and Review Process
At the request
of the Independent Trustees, the Fund’s Chief Compliance Officer (the “CCO”) furnished to the Board in advance
of its May Meetings an independent written report regarding data related to the Fund’s management fee (the
“CCO Management Fee Report”). The Board considered the CCO Management Fee Report, along with other information,
in evaluating the reasonableness of the Fund’s management fee and in determining to approve the continuation
of the Contract.
In addition
to the CCO Management Fee Report, the Board considered information specifically prepared in connection with
the approval of the continuation of the Contract that was presented at the May Meetings. In this regard, in the months preceding
the May Meetings, the Board requested and reviewed written responses and supporting materials prepared by the
Adviser and its affiliates (collectively, “Federated Hermes”) in response to requests posed to Federated Hermes by independent
legal counsel on behalf of the Independent Trustees encompassing a wide variety of topics, including those summarized
below. The Board also considered such additional matters as the Independent Trustees deemed reasonably necessary
to evaluate the Contract, which included detailed information about the Fund and Federated Hermes furnished to the
Board at its meetings throughout the year.
The Board’s
consideration of the Contract included review of materials and information covering the following matters, among
others: (1) a copy of the Contract; (2) the nature, quality and extent of the advisory and other services provided to the
Fund by Federated Hermes; (3) Federated Hermes’ business and operations; (4) the Adviser’s investment philosophy, personnel
and processes; (5) the Fund’s investment objective and strategies; (6) the Fund’s short-term and long-term performance
- in absolute terms (both on a gross basis and net of expenses) and relative to an appropriate group of peer funds
and its benchmark; (7) the Fund’s fees and expenses, including the advisory fee and the overall expense structure of the
Fund - in absolute terms and relative to an appropriate group of peer funds, with due regard for contractual or voluntary
expense limitations (if any); (8) the financial condition of Federated Hermes; (9) the Adviser’s profitability with respect
to managing the Fund; (10) distribution and sales activity for the Fund; and (11) the use and allocation of brokerage
commissions derived from trading the Fund’s portfolio securities (if any).
The Board
also considered judicial decisions concerning allegedly excessive investment advisory fees charged to other registered
funds in evaluating the Contract. Using these judicial decisions as a guide, the Board considered several factors it
deemed relevant to an adviser’s fiduciary duty with respect to its receipt of compensation from a fund, including: (1) the nature
and quality of the services provided by the adviser to the fund and its shareholders, including the performance of the
fund, its benchmark and comparable funds; (2) the adviser’s cost of providing the services and the profitability to the adviser
of providing advisory services to the fund; (3) the extent to which the adviser may realize “economies of scale” as the
fund grows larger and, if such economies of scale exist, whether they have been appropriately shared with the fund and its
shareholders or the family of funds; (4) any “fall-out” benefits that accrue to the adviser because of its relationship with
the fund, including research services received from
brokers that execute fund trades and any fees paid to affiliates of the adviser
for services rendered to the fund; (5) comparative fees and expenses, including a comparison of management fees paid
to the adviser with those paid by similar funds managed by the same adviser or other advisers as well as management fees
charged to institutional and other advisory clients of the same adviser for what might be viewed as like services; and (6)
the extent of care, conscientiousness and independence with which the fund’s board members perform their duties and their
expertise, including whether they are fully informed about all facts the board deems relevant to its consideration of the
adviser’s services and fees. The Board considered that the Securities and Exchange Commission (“SEC”) disclosure requirements
regarding the basis for a fund board’s approval of the fund’s investment advisory contract generally align with
the factors listed above. The Board was guided by these factors in its evaluation of the Contract to the extent it considered
them to be appropriate and relevant, as discussed further below. The Board considered and weighed these factors
in light of its substantial accumulated experience in governing the Fund and working with Federated Hermes on matters
relating to the oversight of the other funds advised by Federated Hermes (each, a “Federated Hermes Fund” and, collectively,
the “Federated Hermes Funds”).
Semi-Annual
Financial Statements and Additional Information
16
In
addition, the Board considered the preferences and expectations of Fund shareholders and the potential disruptions of the
Fund’s operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate
or not renew the Contract. In particular, the Board recognized that many shareholders likely have invested in the Fund
based on the strength of Federated Hermes’ industry standing and reputation and with the expectation that Federated Hermes
will have a continuing role in providing advisory services to the Fund. Thus, the Board observed that there are a range
of investment options available to the Fund’s shareholders in the marketplace, and such shareholders, having had the opportunity
to consider other investment options, have effectively selected Federated Hermes by virtue of investing in the
Fund.
In determining
to approve the continuation of the Contract, the members of the Board reviewed and evaluated information
and factors they believed to be relevant and appropriate through the exercise of their reasonable business judgment.
While individual members of the Board may have weighed certain factors differently, the Board’s determination
to approve the continuation of the Contract was based on a comprehensive consideration of all information provided
to the Board throughout the year. The Board recognized that its evaluation process is evolutionary and that the factors
considered and the emphasis placed on relevant factors may change in recognition of changing circumstances in the
registered fund marketplace. The Independent Trustees were assisted throughout the evaluation process by independent legal
counsel. In connection with their deliberations at the May Meetings, the Independent Trustees met separately in executive
session with their independent legal counsel and without management present to review the relevant materials and
consider their responsibilities under applicable laws. In addition, senior management representatives of Federated Hermes
also met with the Independent Trustees and their independent legal counsel to discuss the materials and presentations
furnished to the Board at the May Meetings. The Board considered the approval of the Contract for the Fund as
part of its consideration of agreements for funds across the family of Federated Hermes Funds, but its approvals were made
on a fund-by-fund basis.
Nature, Extent and
Quality of Services
The Board
considered the nature, extent and quality of the services provided to the Fund by the Adviser and the resources
of Federated Hermes dedicated to the Fund. In this regard, the Board evaluated, among other things, the terms of the
Contract and the full range of services provided to the Fund by Federated Hermes. The Board considered the Adviser’s personnel,
investment philosophy and process, investment research capabilities and resources, trade operations capabilities,
experience and performance track record. The Board reviewed the qualifications, backgrounds and responsibilities
of the portfolio management team primarily responsible for the day-to-day management of the Fund and evaluated
Federated Hermes’ ability and experience in attracting and retaining qualified personnel to service the Fund. The Board
considered the trading operations by the Adviser, including the execution of portfolio transactions and the selection of
brokers for those transactions. The Board also considered the Adviser’s ability to deliver competitive investment performance
for the Fund when compared to the Fund’s Performance Peer Group (as defined below).
In addition,
the Board considered the financial resources and overall reputation of Federated Hermes and its willingness to
consider and make investments in personnel, infrastructure, technology, cybersecurity, business continuity planning and operational
enhancements that are designed to benefit the Federated Hermes Funds. The Board considered Federated Hermes’
oversight of the securities lending program for the Federated Hermes Funds that engage in securities lending and noted
the income earned by the Federated Hermes Funds that participate in such program. In addition, the Board considered
the quality of Federated Hermes’ communications with the Board and responsiveness to Board inquiries and requests
made from time to time with respect to the Federated Hermes Funds. The Board also considered that Federated Hermes
is responsible for providing the Federated Hermes Funds’ officers.
The Board
received and evaluated information regarding Federated Hermes’ regulatory and compliance environment. The
Board considered Federated Hermes’ compliance program and compliance history and reports from the CCO about Federated
Hermes’ compliance with applicable laws and regulations, including responses to regulatory developments and any
compliance or other issues raised by regulatory agencies. The Board also noted Federated Hermes’ support of the Federated
Hermes Funds’ compliance control structure and the compliance-related resources devoted by Federated Hermes
in support of the Fund’s obligations pursuant to Rule 38a-1 under the Investment Company Act of 1940, as amended,
including Federated Hermes’ commitment to respond to rulemaking and other regulatory initiatives of the SEC. The
Board considered Federated Hermes’ approach to internal audits and risk management with respect to the Federated Hermes
Funds and its day-to-day oversight of the Federated Hermes Funds’ compliance with their investment objectives and
policies as well as with applicable laws and regulations, noting that regulatory and other developments had over time led,
and continue to lead, to an increase in the scope of Federated Hermes’ oversight in this regard. In addition, the Board noted
Federated Hermes’ commitment to maintaining high quality systems and expending substantial resources to prepare for
and respond to ongoing changes due to the market, regulatory and control environments in which the Fund and its service
providers operate.
Semi-Annual
Financial Statements and Additional Information
17
The
Board considered Federated Hermes’ efforts to provide shareholders in the Federated Hermes Funds with a comprehensive
array of funds with different investment objectives, policies and strategies. The Board considered the expenses
that Federated Hermes had incurred, as well as the entrepreneurial and other risks assumed by Federated Hermes, in
sponsoring and providing on-going services to new funds to expand these opportunities for shareholders. The Board noted
the benefits to shareholders of being part of the family of Federated Hermes Funds, which include the general right to
exchange investments between the same class of shares without the incurrence of additional sales charges.
Based on
these considerations, the Board concluded that it was satisfied with the nature, extent and quality of the services
provided by the Adviser to the Fund.
Fund Investment Performance
The Board
considered the investment performance of the Fund. In evaluating the Fund’s investment performance, the Board
considered performance results in light of the Fund’s investment objective, strategies and risks. The Board considered
detailed investment reports on, and the Adviser’s analysis of, the Fund’s performance over different time periods
that were provided to the Board throughout the year and in connection with the May Meetings. These reports included,
among other items, information on the Fund’s gross and net returns, the Fund’s investment performance compared
to one or more relevant categories or groups of peer funds and the Fund’s benchmark, performance attribution information
and commentary on the effect of market conditions. The Board noted that it evaluated investment performance at
meetings throughout the year and received reports from Federated Hermes regarding the performance of certain Federated
Hermes Funds as well as Federated Hermes’ explanations for less favorable performance and any specific actions
Federated Hermes had taken, or had determined to take, to seek to enhance Fund investment performance and the results
of those actions.
The Board
also reviewed comparative information regarding the performance of other registered funds in the category of
peer funds selected by Morningstar, Inc. (“Morningstar”), an independent fund ranking organization (the “Performance
Peer Group”). The Board noted the CCO’s
statement that comparisons to fund peer groups may be helpful, though not conclusive,
in evaluating the performance of the Adviser in managing the Fund.
The Board
also considered comparative performance data from Lipper, Inc. that was included in reports provided to the Board
throughout the year.
The Board
considered that the Fund’s performance fell below the median of the Performance Peer Group for the one-year,
three-year and five-year periods ended December 31, 2025. The Board discussed the Fund’s performance with the Adviser
and recognized the efforts being taken by the Adviser in the context of other factors considered relevant by the
Board.
Based on
these considerations, the Board concluded that it had continued confidence in the Adviser’s overall capabilities
to manage the Fund.
Fund Expenses
The Board
considered the advisory fee and overall expense structure of the Fund and the comparative fee and expense information
that had been provided in connection with the May Meetings. In this regard, the Board was presented with, and
considered, information regarding the contractual advisory fee rates, total expense ratios and each element of the Fund’s
total expense ratio (i.e., gross and net advisory fees, administrative fees, custody fees, portfolio accounting fees and transfer
agency fees) relative to an appropriate group of peer funds compiled by Federated Hermes from the overall category
of peer funds selected by Morningstar (the “Expense Peer Group”). The Board received a description of the methodology
used to select the Expense Peer Group from the overall Morningstar category. The Board also reviewed comparative
information regarding the fees and expenses of the broader group of funds in the overall Morningstar
category.
While mindful
that courts have cautioned against giving too much weight to comparative information concerning fees charged
to funds by other advisers, the use of comparisons between the Fund and its Expense Peer Group assisted the Board
in its evaluation of the Fund’s fees and expenses. The Board focused on comparisons with other registered funds more
heavily than non-registered fund products or services because such comparisons are believed to be more relevant. The
Board considered that other registered funds are the products most like the Fund, in that they are readily available to Fund
shareholders as alternative investment vehicles, and they are the type of investment vehicle, in fact, chosen and maintained
by the Fund’s shareholders. The Board noted that the range of such other registered funds’ fees and expenses, therefore,
appears to be a relevant indicator of what investors have found to be reasonable in the marketplace in which the Fund
competes.
Semi-Annual
Financial Statements and Additional Information
18
The
Board reviewed the contractual advisory fee rate, net advisory fee rate and other expenses of the Fund and noted the position
of the Fund’s contractual advisory fee rate and other expenses relative to its Expense Peer Group. In this regard, the
Board noted that the contractual advisory fee rate was above the median of the Expense Peer Group, but the Board noted
the applicable waivers and reimbursements, and that the overall expense structure of the Fund remained competitive in
the context of other factors considered by the Board.
The Board
also received and considered information about the nature and extent of services offered and fees charged by Federated
Hermes to other types of clients with investment strategies similar to those of the Federated Hermes Funds, including
non-registered fund clients (such as institutional separate accounts) and third-party unaffiliated registered funds for
which the Adviser or its affiliates serve as sub-adviser. The Board noted the CCO’s statement that non-registered fund clients
are inherently different products due to the following differences, among others: (i) types of targeted investors; (ii)
applicable laws and regulations; (iii) legal structures; (iv) average account sizes; (v) portfolio management techniques made
necessary by different cash flows and different associated costs; (vi) the time spent by portfolio managers and their teams
(among other personnel across various departments, including legal, compliance and risk management) in reviewing securities
pricing; (vii) SEC mandated risk management programs with respect to fund liquidity and use of derivatives; (viii)
questions on regulatory reporting; (ix) a variety of different administrative responsibilities; and (x) degrees of risk associated
with management. The Board also considered information regarding the differences in the nature of the services required
for Federated Hermes to manage its proprietary registered fund business versus managing a discrete pool of assets as
a sub-adviser to another institution’s registered fund, noting the CCO’s statement that Federated Hermes generally performs
significant additional services and assumes substantially greater risks in managing the Fund and other Federated Hermes
Funds than in its role as sub-adviser to an unaffiliated third-party registered fund. The Board noted that the CCO emphasized
that differences in fees for providing advisory services to other types of clients may not be appropriate when judging
the appropriateness of the Federated Hermes Funds’ advisory fees because of the different services provided.
In the case
of the Fund, the Board noted that Federated Hermes does not manage any other types of clients that are comparable
to the Fund.
Based on
these considerations, the Board concluded that the fees and total operating expenses of the Fund, in conjunction
with other matters considered, are reasonable in light of the services provided.
Profitability
The Board
received and considered profitability information furnished by Federated Hermes. Such profitability information
included revenues reported on a fund-by-fund basis and estimates of the allocation of expenses made on a fund-by-fund
basis, using allocation methodologies specified by the CCO and described to the Board. The Board considered
the CCO’s statement that, while the cost allocation report applies consistent allocation processes for purposes of
general comparison of funds, the inherent difficulties in arbitrarily allocating costs lack precision and may cause the report
to be unreliable because a single change in an allocation estimate can dramatically alter the resulting estimate of cost
and/or profitability of a Federated Hermes Fund and may produce unintended consequences. In addition, the Board considered
the CCO’s statement that the allocation methodologies used by Federated Hermes in estimating profitability for purposes
of reporting to the Board in connection with the continuation of the Contract are consistent with the methodologies
previously reviewed by an independent consultant. The Board noted that the independent consultant had previously
conducted a review of the allocation methodologies and reported to the Board that, although there is no single best
method to allocate expenses, the methodologies used by Federated Hermes are reasonable. The Board considered the CCO’s
statement that the estimated profitability to the Adviser from its relationship with the Fund was not unreasonable in relation
to the services provided.
The Board
also reviewed information compiled by Federated Hermes comparing its profitability information to other publicly-held
fund management companies, including information regarding profitability trends over time. The Board recognized
that profitability comparisons among fund management companies are difficult because of the variation in the type
of comparative information that is publicly available, and the profitability of any fund management company is affected
by numerous factors. The Board considered the CCO’s statement that, based on such profitability information, Federated
Hermes’ profit margins did not appear to be excessive and that Federated Hermes appeared financially sound, with
the resources available to fulfill its contractual obligations.
Economies of Scale
The Board
received and considered information about the notion of possible realization of “economies of scale” as a fund
grows larger, the difficulties of isolating and quantifying economies of scale at an individual fund level, and the extent
to which potential scale benefits are shared with shareholders. In this regard, the Board considered that Federated Hermes
has made significant and long-term investments in areas that support all of the Federated Hermes Funds, such as: portfolio
management, investment research and trading operations; shareholder services; compliance; business continuity, cybersecurity
and information security programs; internal audit and risk management functions; and technology, systems capabilities
and use of data. The Board noted that Federated Hermes’ investments in these areas are extensive and are
Semi-Annual
Financial Statements and Additional Information
19
designed
to provide enhanced or expanded services to the Federated Hermes Funds and their shareholders. The Board considered
that the benefits of these investments are likely to be shared with the family of Federated Hermes Funds as a whole.
In addition, the Board considered that fee waivers and expense reimbursements are another means for potential economies
of scale to be shared with shareholders and can provide protection from an increase in expenses if a Federated Hermes
Fund’s assets decline. The Board considered that, in order for the Federated Hermes Funds to remain competitive in
the marketplace, Federated Hermes has frequently waived fees and/or reimbursed expenses for the Federated Hermes Funds
and has disclosed to shareholders and/or reported to the Board its intention to do so (or continue to do so) in the future.
The Board also considered that Federated Hermes has been active in managing expenses of the Federated Hermes Funds
in recent years, which has resulted in benefits being realized by shareholders.
The Board
also received and considered information on adviser-paid fees (commonly referred to as “revenue sharing” payments)
that was provided to the Board throughout the year and in connection with the May Meetings. The Board considered
that Federated Hermes believes that this information is relevant to consider whether Federated Hermes had an incentive
to either not apply breakpoints, or to apply breakpoints at higher levels, but should not be considered when evaluating
the reasonableness of advisory fees. The Board also noted the absence of any applicable regulatory or industry guidelines
on economies of scale, which is compounded by the lack of any uniform methodology or pattern with respect to structuring
fund advisory fees with breakpoints that serve to reduce the fees as a fund attains a certain size.
Other Benefits
The Board
considered information regarding the compensation and other ancillary (or “fall-out”) benefits that Federated Hermes
derived from its relationships with the Federated Hermes Funds. The Board considered that Federated Hermes may
derive a benefit to its reputation as an adviser to the Fund, which may help in attracting other clients and investment personnel.
The Board noted that, in addition to receiving advisory fees under the Federated Hermes Funds’ investment advisory
contracts, Federated Hermes’ affiliates also receive fees for providing other services to the Federated Hermes Funds
under separate service contracts, including for serving as the Federated Hermes Funds’ administrator and distributor.
In this regard, the Board considered that Federated Hermes’ affiliates provide distribution and shareholder services
to the Federated Hermes Funds, for which they may be compensated through distribution and servicing fees paid pursuant
to Rule 12b-1 plans or otherwise. The Board also received and considered information detailing the benefits, if any,
that Federated Hermes may derive from its receipt of research services from brokers who execute portfolio trades for the
Federated Hermes Funds.
Conclusions
The Board
considered the CCO’s presentation and statements and the information accompanying the CCO Management Fee
Report. The Board recognized that its evaluation of the Federated Hermes Funds’ advisory and sub-advisory arrangements
is a continuing and ongoing process that is informed by the information that the Board requests and receives from
management throughout the course of the year.
On the basis
of the information and factors summarized above, among other information and factors deemed relevant by the
Board, and the evaluation thereof, the Board, including the Independent Trustees, unanimously voted to approve the continuation
of the Contract. The Board based its determination to approve the Contract on the totality of the circumstances
and relevant factors and with a view of past and future long-term considerations. Not all of the factors and considerations
identified above were necessarily deemed to be relevant to the Fund, nor did the Board consider any one of them
to be determinative.
Semi-Annual
Financial Statements and Additional Information
20
Variable
investment options are not bank deposits or obligations, are not guaranteed by any bank and are not insured or guaranteed
by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government
agency. Investment in variable investment options involves investment risk, including the possible loss of
principal.
This information is authorized
for distribution to prospective investors only when preceded or accompanied by the Fund’s Prospectus,
which contains facts concerning its objective and policies, management fees, expenses and other information.
In an effort to reduce costs
and avoid duplicate mailings, the Fund(s) intend to deliver a single copy of certain documents
to each household in which more 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 of Additional
Information, and supplements to each, as well as Semi-Annual and 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 shareholder as having given consent (“implied consent”) if (i)
shareholders with the same last name, or believed to be members of the same family, reside at the same street address
or receive mail at the same post office box, (ii) the Fund gives notice of its intent to “household” at least sixty (60)
days before it begins “householding” and (iii) none of the shareholders in the household have notified the Fund(s)
or their agent of the desire to “opt out” of “householding.” Shareholders who have granted written consent, or
have been deemed to have granted implied consent, can
revoke that consent and opt out of “householding” at any time:
shareholders who purchased shares through an intermediary should contact their representative; other shareholders
may call the Fund at 1-800-341-7400, Option #4.
Federated Hermes Fund for U.S. Government
Securities II
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us at
FederatedHermes.com/us
or call 1-800-341-7400.
or call 1-800-341-7400.
Federated Securities Corp., Distributor
CUSIP 313916207
G00433-01 (8/26)
©
2026 Federated Hermes, Inc.
| Item 8. | Changes in and Disagreements with Accountants for Open-End Management Investment Companies |
Federated Hermes Government Money Fund II: Not Applicable.
Federated Hermes High Income Bond Fund II: Not Applicable.
Federated Hermes Kaufmann Fund II: Not Applicable.
Federated Hermes Managed Volatility Fund II: Not Applicable.
Federated Hermes Quality Bond Fund II: Not Applicable.
Federated Hermes Fund for U.S. Government Securities II: Not Applicable.
| Item 9. | Proxy Disclosures for Open-End Management Investment Companies. |
Federated Hermes Government Money Fund II: Not Applicable.
Federated Hermes High Income Bond Fund II: Not Applicable.
Federated Hermes Kaufmann Fund II: Not Applicable.
Federated Hermes Managed Volatility Fund II: Not Applicable.
Federated Hermes Quality Bond Fund II: Not Applicable.
Federated Hermes Fund for U.S. Government Securities II: Not Applicable.
| Item 10. | Remuneration Paid to Directors, Officers, and Others of Open-End Management Investment Companies. |
Federated Hermes Government Money Fund II: The Fund’s disclosure of remuneration items is included as part of the Financial Statements filed under Item 7 of this form.
Federated Hermes High Income Bond Fund II: The Fund’s disclosure of remuneration items is included as part of the Financial Statements filed under Item 7 of this form.
Federated Hermes Kaufmann Fund II: The Fund’s disclosure of remuneration items is included as part of the Financial Statements filed under Item 7 of this form.
Federated Hermes Managed Volatility Fund II: The Fund’s disclosure of remuneration items is included as part of the Financial Statements filed under Item 7 of this form.
Federated Hermes Quality Bond Fund II: The Fund’s disclosure of remuneration items is included as part of the Financial Statements filed under Item 7 of this form.
Federated Hermes Fund for U.S. Government Securities II: The Fund’s disclosure of remuneration items is included as part of the Financial Statements filed under Item 7 of this form.
| Item 11. | Statement Regarding Basis for Approval of Investment Advisory Contract. |
Federated Hermes Government Money Fund II: The Fund’s Evaluation and Approval of Advisory Contract summary by fund appear in the Financial Statements filed under Item 7 of this form.
Federated Hermes High Income Bond Fund II: The Fund’s Evaluation and Approval of Advisory Contract summary by fund appear in the Financial Statements filed under Item 7 of this form.
Federated Hermes Kaufmann Fund II: The Fund’s Evaluation and Approval of Advisory Contract summary by fund appear in the Financial Statements filed under Item 7 of this form.
Federated Hermes Managed Volatility Fund II: The Fund’s Evaluation and Approval of Advisory Contract summary by fund appear in the Financial Statements filed under Item 7 of this form.
Federated Hermes Quality Bond Fund II: The Fund’s Evaluation and Approval of Advisory Contract summary by fund appear in the Financial Statements filed under Item 7 of this form.
Federated Hermes Fund for U.S. Government Securities II: The Fund’s Evaluation and Approval of Advisory Contract summary by fund appear in the Financial Statements filed under Item 7 of this form.
| Item 12. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies |
Not Applicable
| Item 13. | Portfolio Managers of Closed-End Management Investment Companies. |
Not Applicable
| Item 14. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
Not Applicable
| Item 15. | Submission of Matters to a Vote of Security Holders. |
No Changes to Report
| Item 16. | Controls and Procedures. |
(a) The registrant’s Principal Executive Officer and Principal Financial Officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Act) are effective in design and operation and are sufficient to form the basis of the certifications required by Rule 30a-(2) under the Act, based on their evaluation of these disclosure controls and procedures as of a date within 90 days of this report on Form N-CSR.
(b) There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
| Item 17. | Disclosure of Securities Lending Activities for Closed-End Management Investment Companies. |
Not Applicable
| Item 18. | Recovery of Erroneously Awarded Compensation |
(a) Not Applicable
(b) Not Applicable
| Item 19. | Exhibits |
(a)(1) Not Applicable.
(a)(2) Not Applicable.
(a)(3) Certifications of Principal Executive Officer and Principal Financial Officer.
(a)(4) Not Applicable.
(a)(5) Not Applicable.
(b) Certifications pursuant to 18 U.S.C. Section 1350.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: Federated Hermes Insurance Series
By: /s/ Jeremy D. Boughton
Jeremy D. Boughton, Principal Financial Officer
Date: August 14, 2026
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: /s/ Paul A. Uhlman
Paul A. Uhlman, President - Principal Executive Officer
Date: August 14, 2026
By: /s/ Jeremy D. Boughton
Jeremy D. Boughton, Principal Financial Officer
Date: August 14, 2026