United States
Securities and Exchange Commission
Washington, D.C. 20549
Form
Certified Shareholder Report of Registered Management Investment Companies
811-3947
(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: 2025-02-28
Date of Reporting Period:
| Item 1. | Reports to Stockholders |
| Item 2. | Code of Ethics |
(a) As of the end of the period covered by this report, the registrant has adopted a code of ethics (the “Section 406 Standards for Investment Companies - Ethical Standards for Principal Executive and Financial Officers”) that applies to the registrant’s Principal Executive Officer and Principal Financial Officer; the registrant’s Principal Financial Officer also serves as the Principal Accounting Officer.
(c) There was no amendment to the registrant’s code of ethics described in Item 2(a) above during the period covered by the report.
(d) There was no waiver granted, either actual or implicit, from a provision to the registrant’s code of ethics described in Item 2(a) above during the period covered by the report.
(e) Not Applicable
(f)(3) The registrant hereby undertakes to provide any person, without charge, upon request, a copy of the code of ethics. To request a copy of the code of ethics, contact the registrant at 1-800-341-7400, and ask for a copy of the Section 406 Standards for Investment Companies - Ethical Standards for Principal Executive and Financial Officers.
| Item 3. | Audit Committee Financial Expert |
The registrant’s Board has determined that each of the following members of the Board’s Audit Committee is an “audit committee financial expert,” and is “independent,” for purposes of this Item 3: John G. Carson, Thomas M. O’Neill and John S. Walsh.
| Item 4. | Principal Accountant Fees and Services |
(a) Audit Fees billed to the registrant for the two most recent fiscal years:
Fiscal year ended 2025 - $35,038
Fiscal year ended 2024 - $33,450
(b) Audit-Related Fees billed to the registrant for the two most recent fiscal years:
Fiscal year ended 2025 - $0
Fiscal year ended 2024 - $0
Amount requiring approval of the registrant’s Audit Committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, $1,683 and $0 respectively. Fiscal year ended 2025- Travel expenses for attendance at Board meeting.
(c) Tax Fees billed to the registrant for the two most recent fiscal years:
Fiscal year ended 2025 - $0
Fiscal year ended 2024 - $0
Amount requiring approval of the registrant’s Audit Committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, $0 and $0 respectively.
(d) All Other Fees billed to the registrant for the two most recent fiscal years:
Fiscal year ended 2025 - $0
Fiscal year ended 2024 - $0
Amount requiring approval of the registrant’s Audit Committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, $0 and $0 respectively.
(e)(1) Audit Committee Policies regarding Pre-approval of Services.
The Audit Committee is required to pre-approve audit and non-audit services performed by the independent auditor in order to assure that the provision of such services do not impair the auditor’s independence. The Audit Committee is required to pre-concur with independence conclusions made by the independent auditor regarding non-audit services to be provided by the independent auditor to the Funds, the Funds Board of Directors, or any entity that is controlled directly or indirectly by the Funds. Unless a type of service to be provided by the independent auditor has received general pre-approval, it will require specific pre-approval (and pre-concurrence for non-audit services) by the Audit Committee. Any proposed services exceeding pre-approved cost levels will require specific pre-approval by the Audit Committee.
Certain services have the general pre-approval of the Audit Committee. The term of the general pre-approval is 12 months from the date of pre-approval, unless the Audit Committee specifically provides for a different period. The Audit Committee will annually review the services that may be provided by the independent auditor without obtaining specific pre-approval from the Audit Committee and may grant general pre-approval for such services. The Audit Committee will revise the list of general pre-approved services from time to time, based on subsequent determinations. The Audit Committee will not delegate to management its responsibilities to pre-approve services performed by the independent auditor.
The Audit Committee has delegated pre-approval/pre-concurrence authority to its chairman (the “Chairman”) for services that do not exceed a specified dollar threshold. The Chairman or Chief Audit Executive will report any such pre-approval/pre-concurrence decisions to the Audit Committee at its next scheduled meeting. The Committee will designate another member with such pre-approval/pre-concurrence authority when the Chairman is unavailable.
AUDIT SERVICES
The annual audit services engagement terms and fees will be subject to the specific pre-approval of the Audit Committee. The Audit Committee will approve, if necessary, any changes in terms, conditions and fees resulting from changes in audit scope, registered investment company (RIC) structure or other matters.
In addition to the annual audit services engagement specifically approved by the Audit Committee, the Audit Committee may grant general pre-approval for other audit services, which are those services that only the independent auditor reasonably can provide. The Audit Committee has pre-approved certain audit services; with limited exception, all other audit services must be specifically pre-approved by the Audit Committee.
AUDIT-RELATED SERVICES
Audit-related services are assurance and related services that are reasonably related to the performance of the audit or review of the RIC’s financial statements or that are traditionally performed by the independent auditor. The Audit Committee believes that the provision of audit-related services does not impair the independence of the auditor, and has pre-approved certain audit-related services; all other audit-related services must be specifically pre-approved by the Audit Committee.
TAX SERVICES
The Audit Committee believes that the independent auditor can provide tax services to the RIC such as tax compliance, tax planning and tax advice without impairing the auditor’s independence. However, the Audit Committee will not permit the retention of the independent auditor in connection with a transaction initially recommended by the independent auditor, the purpose of which may be tax avoidance and the tax treatment of which may not be supported in the Internal Revenue Code and related regulations. The Audit Committee has pre-approved/pre-concurred certain tax services; with limited exception, all tax services involving large and complex transactions must be specifically pre-approved/pre-concurred by the Audit Committee.
ALL OTHER SERVICES
With respect to the provision of permissible services other than audit, review or attest services the pre-approval/pre-concurrence requirement is waived if:
(1) With respect to such services rendered to the Funds, the aggregate amount of all such services provided constitutes no more than five percent of the total amount of revenues paid by the audit client to its accountant during the fiscal year in which the services are provided; and,
(2) With respect to such services rendered to the Fund’s investment adviser ( the “Adviser”)and any entity controlling, controlled by to under common control with the Adviser such as affiliated non-U.S. and U.S. funds not under the Audit Committee’s purview and which do not fall within a category of service which has been determined by the Audit Committee not to have a direct impact on the operations or financial reporting of the RIC, the aggregate amount of all services provided constitutes no more than five percent of the total amount of revenues paid to the RIC’s auditor by the RIC, its Adviser and any entity controlling, controlled by, or under common control with the Adviser during the fiscal year in which the services are provided; and
(3) Such services were not recognized by the issuer or RIC at the time of the engagement to be non-audit services; and
(4) Such services are promptly brought to the attention of the Audit Committee and approved prior to the completion of the audit by the Audit Committee or by one or more members of the Audit Committee who are members of the Board of Directors to whom authority to grant such approvals has been delegated by the Audit Committee.
The Audit Committee may grant general pre-approval/pre-concurrence to those permissible non-audit services which qualify for pre-approval and which it believes are routine and recurring services, and would not impair the independence of the auditor.
The Securities and Exchange Commission’s (the “SEC”) rules and relevant guidance should be consulted to determine the precise definitions of these services and applicability of exceptions to certain of the prohibitions.
PRE-APPROVAL FEE LEVELS
Pre-approval fee levels for all services to be provided by the independent auditor will be established annually by the Audit Committee. Any proposed services exceeding these levels will require specific pre-approval by the Audit Committee.
PROCEDURES
Requests or applications to provide services that require specific approval/concurrence by the Audit Committee will be submitted to the Audit Committee by the Fund’s Principal Accounting Officer and/or the Chief Audit Executive of Federated Hermes, Inc., only after those individuals have determined that the request or application is consistent with the SEC’s rules on auditor independence.
(e)(2) Percentage of services identified in items 4(b) through 4(d) that were approved by the registrant’s Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X:
4(b)
Fiscal year ended 2025 – 0%
Fiscal year ended 2024 - 0%
Percentage of services provided to the registrant’s Adviser and any entity controlling, controlled by, or under common control with the Adviser that provides ongoing services to the registrant that were approved by the registrant’s Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X, 0% and 0% respectively.
4(c)
Fiscal year ended 2025 – 0%
Fiscal year ended 2024 – 0%
Percentage of services provided to the registrant’s Adviser and any entity controlling, controlled by, or under common control with the Adviser that provides ongoing services to the registrant that were approved by the registrant’s Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X, 0% and 0% respectively.
4(d)
Fiscal year ended 2025 – 0%
Fiscal year ended 2024 – 0%
Percentage of services provided to the registrant’s Adviser and any entity controlling, controlled by, or under common control with the Adviser that provides ongoing services to the registrant that were approved by the registrant’s Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X, 0% and 0% respectively.
(f) NA
(g) Non-Audit Fees billed to the registrant, the registrant’s Adviser, and certain entities controlling, controlled by or under common control with the Adviser:
Fiscal year ended 2025 - $126,051
Fiscal year ended 2024 - $248,548
(h) The registrant’s Audit Committee has considered that the provision of non-audit services that were rendered to the registrant’s Adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the Adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.
(i) Not Applicable
(j) Not Applicable
| Item 5. | Audit Committee of Listed Registrants |
Not Applicable
| Item 6. | Schedule of Investments |
(a) The registrant’s Schedule of Investments is included as part of the Financial Statements filed under Item 7 of this form.
(b) Not Applicable
| Item 7. | Financial Statements and Financial Highlights for Open-End Management Companies |
Annual Financial Statements
and Additional Information
and Additional Information
February 28, 2025
|
Share
Class | Ticker
|
Institutional | FSGVX
|
Service | FSGIX
|
|
|
Federated Hermes Short-Term Government Fund
A Portfolio of Federated Hermes Short-Term Government Trust
Not FDIC Insured ▪ May
Lose Value ▪ No Bank Guarantee
CONTENTS
Portfolio
of Investments
February 28, 2025
|
Principal
Amount
or
Shares |
|
|
Value
|
|
|
|
U.S.
TREASURIES—57.6% |
|
|
|
|
U.S.
Treasury Notes—57.6% |
|
|
$2,000,000
|
|
3.875%,
10/15/2027 |
$ 1,994,881
|
|
1,000,000
|
|
4.000%,
2/15/2026 |
998,372
|
|
3,000,000
|
|
4.125%,
6/15/2026 |
3,002,663
|
|
1,000,000
|
|
4.125%,
10/31/2026 |
1,001,635
|
|
2,000,000
|
|
4.125%,
2/15/2027 |
2,004,678
|
|
1,500,000
|
|
4.125%,
11/15/2027 |
1,505,389
|
|
1,500,000
|
|
4.375%,
8/15/2026 |
1,506,918
|
|
2,000,000
|
|
4.500%,
3/31/2026 |
2,007,811
|
|
2,000,000
|
|
4.500%,
4/15/2027 |
2,020,264
|
|
3,000,000
|
|
4.625%,
6/30/2026 |
3,021,869
|
|
3,400,000
|
|
4.625%,
9/15/2026 |
3,429,529
|
|
3,000,000
|
|
4.625%,
11/15/2026 |
3,029,036
|
|
2,000,000
|
|
4.875%,
4/30/2026 |
2,017,126
|
|
|
|
TOTAL
U.S. TREASURIES
(IDENTIFIED
COST $27,306,763) |
27,540,171
|
|
|
1
|
COLLATERALIZED
MORTGAGE OBLIGATIONS—26.9% |
|
|
|
|
Federal
Home Loan Mortgage Corporation—15.1% |
|
|
1,946,259
|
|
REMIC,
Series 4119, Class FC, 4.803% (30-DAY AVERAGE SOFR +0.464%), 10/15/2042 |
1,909,879
|
|
1,856,970
|
|
REMIC,
Series 4407, Class CF, 4.753% (30-DAY AVERAGE SOFR +0.414%), 6/15/2044 |
1,826,739
|
|
1,877,746
|
|
REMIC,
Series 4614, Class FG, 4.953% (30-DAY AVERAGE SOFR +0.614%), 9/15/2046 |
1,854,906
|
|
1,634,245
|
|
REMIC,
Series 5400, Class FA, 6.068% (30-DAY AVERAGE SOFR +0.000%), 4/25/2054 |
1,620,629
|
|
|
|
TOTAL
|
7,212,153
|
|
|
|
Federal
National Mortgage Association—7.8% |
|
|
2,175,246
|
|
REMIC,
Series 2020-27, Class FD, 4.916% (30-DAY AVERAGE SOFR +0.564%), 5/25/2050 |
2,129,118
|
|
1,643,813
|
|
REMIC,
Series 2024-15, Class FB, 6.121% (30-DAY AVERAGE SOFR +0.000%), 4/25/2054 |
1,629,709
|
|
|
|
TOTAL
|
3,758,827
|
|
|
|
Government
National Mortgage Association—4.0% |
|
|
1,909,261
|
|
REMIC,
Series 2023-111, Class FD, 5.345% (30-DAY AVERAGE SOFR +1.000%), 8/20/2053 |
1,909,816
|
|
|
|
TOTAL
COLLATERALIZED MORTGAGE OBLIGATIONS
(IDENTIFIED
COST $12,935,010) |
12,880,796
|
|
|
|
MORTGAGE-BACKED
SECURITIES—12.1% |
|
|
|
|
Federal
Home Loan Mortgage Corporation—4.9% |
|
|
2,361,815
|
|
4.500%,
10/1/2038 |
2,345,528
|
|
|
|
Federal
National Mortgage Association—7.2% |
|
|
1,888,874
|
|
4.000%,
1/1/2039 |
1,842,689
|
|
1,614,726
|
|
4.500%,
10/1/2037 |
1,605,105
|
|
|
|
TOTAL
|
3,447,794
|
|
|
|
TOTAL
MORTGAGE-BACKED SECURITIES
(IDENTIFIED
COST $5,783,590) |
5,793,322
|
|
|
|
INVESTMENT
COMPANY—2.7% |
|
|
1,281,704
|
|
Federated
Hermes Government Obligations Fund, Premier Shares, 4.26%2
(IDENTIFIED
COST $1,281,704) |
1,281,704
|
|
|
|
TOTAL
INVESTMENT IN SECURITIES—99.3%
(IDENTIFIED
COST $47,307,067)3
|
47,495,993
|
|
|
|
OTHER
ASSETS AND LIABILITIES - NET—0.7%4
|
337,456
|
|
|
|
NET
ASSETS—100% |
$47,833,449
|
Annual
Financial Statements and Additional Information
1
At February 28, 2025,
the Fund had the following outstanding futures contracts:
|
Description
|
Number
of
Contracts
|
Notional
Value
|
Expiration
Date
|
Value
and
Unrealized
Appreciation
|
|
Long
Futures: |
|
|
|
|
|
United
States Treasury Notes 2-Year Long Futures |
60
|
$12,418,125
|
June
2025 |
$49,093
|
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 February 28, 2025, were as follows:
|
|
Federated
Hermes
Government
Obligations
Fund,
Premier
Shares |
|
Value
as of 2/29/2024 |
$3,335,246
|
|
Purchases
at Cost |
$38,623,063
|
|
Proceeds
from Sales |
$(40,676,605)
|
|
Change
in Unrealized Appreciation/Depreciation |
$—
|
|
Net
Realized Gain/(Loss) |
$—
|
|
Value
as of 2/28/2025 |
$1,281,704
|
|
Shares
Held as of 2/28/2025 |
1,281,704
|
|
Dividend
Income |
$133,486
|
|
1
|
Floating/variable
note with current rate and current maturity or next reset date shown. |
|
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 February 28, 2025.
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 February 28, 2025, 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: |
|
|
|
|
|
U.S.
Treasuries |
$—
|
$27,540,171
|
$—
|
$27,540,171
|
|
Collateralized
Mortgage Obligations |
—
|
12,880,796
|
—
|
12,880,796
|
|
Mortgage-Backed
Securities |
—
|
5,793,322
|
—
|
5,793,322
|
|
Investment
Company |
1,281,704
|
—
|
—
|
1,281,704
|
|
TOTAL
SECURITIES |
$1,281,704
|
$46,214,289
|
$—
|
$47,495,993
|
|
Other
Financial Instruments:1
|
|
|
|
|
|
Assets
|
$49,093
|
$—
|
$—
|
$49,093
|
|
1
|
Other
financial instruments are futures contracts. |
|
The
following acronym(s) are used throughout this portfolio: |
| |
|
REMIC
|
—Real
Estate Mortgage Investment Conduit | |
|
SOFR
|
—Secured
Overnight Financing Rate | |
See Notes which are an integral part of
the Financial Statements
Annual
Financial Statements and Additional Information
2
Financial
Highlights–Institutional
Shares
(For a Share Outstanding Throughout Each
Period)
|
|
Year Ended February 28
or 29, | ||||
|
|
2025
|
2024
|
2023
|
2022
|
2021
|
|
Net Asset
Value, Beginning of Period |
$9.62
|
$9.63
|
$10.16
|
$10.40
|
$10.35
|
|
Income
From Investment Operations: |
|
|
|
|
|
|
Net
investment income (loss)1
|
0.43
|
0.38
|
0.25
|
0.05
|
0.08
|
|
Net
realized and unrealized gain (loss) |
0.04
|
(0.01)
|
(0.54)
|
(0.25)
|
0.06
|
|
Total
From Investment Operations |
0.47
|
0.37
|
(0.29)
|
(0.20)
|
0.14
|
|
Less Distributions:
|
|
|
|
|
|
|
Distributions
from net investment income |
(0.43)
|
(0.38)
|
(0.24)
|
(0.04)
|
(0.09)
|
|
Net
Asset Value, End of Period |
$9.66
|
$9.62
|
$9.63
|
$10.16
|
$10.40
|
|
Total
Return2
|
5.00%
|
3.96%
|
(2.88)%
|
(1.89)%
|
1.35%
|
|
Ratios
to Average Net Assets: |
|
|
|
|
|
|
Net
expenses3
|
0.36%
|
0.36%
|
0.41%
|
0.44%
|
0.42%
|
|
Net
investment income |
4.48%
|
4.00%
|
2.58%
|
0.47%
|
0.81%
|
|
Expense
waiver/reimbursement4
|
0.45%
|
0.31%
|
0.28%
|
0.30%
|
0.26%
|
|
Supplemental
Data: |
|
|
|
|
|
|
Net
assets, end of period (000 omitted) |
$45,465
|
$68,956
|
$93,119
|
$62,418
|
$79,451
|
|
Portfolio
turnover5
|
79%
|
61%
|
220%
|
133%
|
99%
|
|
1
|
Per
share numbers have been calculated using the average shares method. |
|
2
|
Based
on net asset value. |
|
3
|
Amount
does not reflect net expenses incurred by investment companies in which the Fund may invest. |
|
4
|
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. |
|
5
|
Securities
that mature are considered sales for purposes of this calculation. |
See Notes which are an integral part of
the Financial Statements
Annual
Financial Statements and Additional Information
3
Financial
Highlights–Service
Shares
(For a Share Outstanding Throughout Each
Period)
|
|
Year Ended February 28
or 29, | ||||
|
|
2025
|
2024
|
2023
|
2022
|
2021
|
|
Net Asset
Value, Beginning of Period |
$9.61
|
$9.62
|
$10.15
|
$10.39
|
$10.33
|
|
Income
From Investment Operations: |
|
|
|
|
|
|
Net
investment income (loss)1
|
0.41
|
0.36
|
0.21
|
0.01
|
0.04
|
|
Net
realized and unrealized gain (loss) |
0.05
|
(0.01)
|
(0.54)
|
(0.24)
|
0.06
|
|
Total
From Investment Operations |
0.46
|
0.35
|
(0.33)
|
(0.23)
|
0.10
|
|
Less Distributions:
|
|
|
|
|
|
|
Distributions
from net investment income |
(0.41)
|
(0.36)
|
(0.20)
|
(0.01)
|
(0.04)
|
|
Net
Asset Value, End of Period |
$9.66
|
$9.61
|
$9.62
|
$10.15
|
$10.39
|
|
Total
Return2
|
4.84%
|
3.70%
|
(3.23)%
|
(2.26)%
|
1.00%
|
|
Ratios
to Average Net Assets: |
|
|
|
|
|
|
Net
expenses3
|
0.61%
|
0.61%
|
0.78%
|
0.86%
|
0.86%
|
|
Net
investment income |
4.23%
|
3.75%
|
2.13%
|
0.05%
|
0.39%
|
|
Expense
waiver/reimbursement4
|
0.45%
|
0.31%
|
0.28%
|
0.30%
|
0.26%
|
|
Supplemental
Data: |
|
|
|
|
|
|
Net
assets, end of period (000 omitted) |
$2,369
|
$6,089
|
$7,145
|
$6,514
|
$6,183
|
|
Portfolio
turnover5
|
79%
|
61%
|
220%
|
133%
|
99%
|
|
1
|
Per
share numbers have been calculated using the average shares method. |
|
2
|
Based
on net asset value. |
|
3
|
Amount
does not reflect net expenses incurred by investment companies in which the Fund may invest. |
|
4
|
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. |
|
5
|
Securities
that mature are considered sales for purposes of this calculation. |
See Notes which are an integral part of
the Financial Statements
Annual
Financial Statements and Additional Information
4
Statement
of Assets and Liabilities
February 28, 2025
|
Assets:
|
|
|
Investment
in securities, at value including $1,281,704 of investments in affiliated holdings* (identified
cost $47,307,067, including $1,281,704
of
identified cost in affiliated holdings) |
$47,495,993
|
|
Due
from broker (Note 2)
|
72,000
|
|
Income
receivable |
375,526
|
|
Income
receivable from affiliated holdings |
4,867
|
|
Receivable
for shares sold |
4,077
|
|
Receivable
for variation margin on futures contracts |
19,671
|
|
Total
Assets |
47,972,134
|
|
Liabilities:
|
|
|
Payable
for shares redeemed |
61,689
|
|
Bank
overdraft |
1,314
|
|
Income
distribution payable |
13,437
|
|
Payable
to adviser (Note 5)
|
1,694
|
|
Payable
for administrative fee (Note 5)
|
101
|
|
Payable
for legal fees |
8,339
|
|
Payable
for custodian fees |
5,777
|
|
Payable
for portfolio accounting fees |
24,259
|
|
Payable
for other service fees (Notes 2 and 5)
|
830
|
|
Payable
for share registration costs |
17,273
|
|
Accrued
expenses (Note 5)
|
3,972
|
|
Total
Liabilities |
138,685
|
|
Net
assets for 4,951,127 shares outstanding |
$47,833,449
|
|
Net Assets
Consist of: |
|
|
Paid-in
capital |
$65,499,791
|
|
Total
distributable earnings (loss) |
(17,666,342)
|
|
Net
Assets |
$47,833,449
|
|
Net Asset
Value, Offering Price and Redemption Proceeds Per Share: |
|
|
Institutional
Shares: |
|
|
Net
asset value per share ($45,464,652 ÷ 4,705,840 shares outstanding), no par value, unlimited shares authorized |
$9.66
|
|
Service
Shares: |
|
|
Net
asset value per share ($2,368,797 ÷ 245,287 shares outstanding), no par value, unlimited shares authorized |
$9.66
|
|
*
|
See
information listed after the Fund’s Portfolio of Investments. |
See Notes which are an integral part of
the Financial Statements
Annual
Financial Statements and Additional Information
5
Statement
of Operations
Year Ended February
28, 2025
|
Investment
Income: |
|
|
Interest
|
$2,830,783
|
|
Dividends
received from affiliated holdings* |
133,486
|
|
TOTAL
INCOME |
2,964,269
|
|
Expenses:
|
|
|
Investment
adviser fee (Note 5)
|
183,573
|
|
Administrative
fee (Note 5)
|
47,850
|
|
Custodian
fees |
8,866
|
|
Transfer
agent fees |
46,738
|
|
Directors’/Trustees’
fees (Note 5)
|
5,925
|
|
Auditing
fees |
33,450
|
|
Legal
fees |
11,723
|
|
Portfolio
accounting fees |
68,909
|
|
Other
service fees (Notes 2 and 5)
|
15,247
|
|
Share
registration costs |
42,634
|
|
Printing
and postage |
21,538
|
|
Commitment
fee (Note 6) |
5,470
|
|
Miscellaneous
(Note 5)
|
22,739
|
|
TOTAL
EXPENSES |
514,662
|
|
Waiver
and Reimbursements: |
|
|
Waiver/reimbursement
of investment adviser fee (Note 5)
|
(183,573)
|
|
Reimbursement
of other operating expenses (Note 5) |
(92,557)
|
|
TOTAL
WAIVER AND REIMBURSEMENTS |
(276,130)
|
|
Net
expenses |
238,532
|
|
Net
investment income |
2,725,737
|
|
Realized
and Unrealized Gain (Loss) on Investments and Futures Contracts: |
|
|
Net
realized loss on investments |
(315,555)
|
|
Net
realized loss on futures contracts |
(78,417)
|
|
Net
change in unrealized depreciation of investments |
585,268
|
|
Net
change in unrealized appreciation of futures contracts |
43,339
|
|
Net
realized and unrealized gain (loss) on investments and futures contracts |
234,635
|
|
Change
in net assets resulting from operations |
$2,960,372
|
|
*
|
See
information listed after the Fund’s Portfolio of Investments. |
See Notes which are an integral part of
the Financial Statements
Annual
Financial Statements and Additional Information
6
Statement
of Changes in Net Assets
|
Year
Ended February 28 or 29 |
2025
|
2024
|
|
Increase
(Decrease) in Net Assets |
|
|
|
Operations:
|
|
|
|
Net
investment income |
$2,725,737
|
$3,529,192
|
|
Net
realized gain (loss) |
(393,972)
|
(1,220,076)
|
|
Net
change in unrealized appreciation/depreciation |
628,607
|
1,238,174
|
|
CHANGE
IN NET ASSETS RESULTING FROM OPERATIONS |
2,960,372
|
3,547,290
|
|
Distributions
to Shareholders: |
|
|
|
Institutional
Shares |
(2,474,714)
|
(3,283,022)
|
|
Service
Shares |
(261,117)
|
(243,343)
|
|
CHANGE
IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS |
(2,735,831)
|
(3,526,365)
|
|
Share Transactions:
|
|
|
|
Proceeds
from sale of shares |
7,325,223
|
8,932,408
|
|
Net
asset value of shares issued to shareholders in payment of distributions declared |
2,515,255
|
3,323,320
|
|
Cost
of shares redeemed |
(37,275,760)
|
(37,495,696)
|
|
CHANGE
IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS |
(27,435,282)
|
(25,239,968)
|
|
Change
in net assets |
(27,210,741)
|
(25,219,043)
|
|
Net Assets:
|
|
|
|
Beginning
of period |
75,044,190
|
100,263,233
|
|
End
of period |
$47,833,449
|
$75,044,190
|
See Notes which are an integral part of
the Financial Statements
Annual
Financial Statements and Additional Information
7
Notes to
Financial Statements
February 28, 2025
1. ORGANIZATION
Federated Hermes Short-Term Government Trust
(the “Trust”) is registered under the Investment Company Act of 1940, as amended (the
“Act”), as a diversified, open-end management investment company. The Trust consists of one portfolio, Federated Hermes Short-Term
Government Fund (the “Fund”). The Fund offers two classes of shares: Institutional Shares and Service Shares. All shares of
the Fund have equal rights with respect to voting, except on class-specific
matters. The investment objective of the Fund is to provide 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 Trustees have designated the Adviser as the Fund’s valuation designee to perform any fair value
determinations for securities and other assets held by the Fund.
The Adviser is subject to the Trustees’ oversight and certain reporting and
other requirements intended to provide the Trustees the information needed to oversee the Adviser’s fair value determinations.
The Adviser, acting through
its Valuation Committee, is responsible for determining the fair value of investments for which market quotations
are not readily available. The Valuation Committee is comprised of officers of the Adviser and certain of the Adviser’s affiliated
companies and determines fair value and oversees the calculation of the NAV. The Valuation Committee is also authorized to use
pricing services to provide fair value evaluations of the current value of certain investments for purposes of calculating the NAV. The
Valuation Committee employs various methods for reviewing third-party
pricing-service evaluations including periodic reviews of third-party
pricing services’ policies, procedures and valuation methods (including key inputs, methods, models and assumptions), transactional
back-testing, comparisons of evaluations of different pricing services, and review of price challenges by the Adviser based on
recent market activity. In the event that market quotations and price evaluations are not available for an investment, the Valuation Committee
determines the fair value of the investment in accordance with procedures adopted by the Adviser. The Trustees periodically review
the fair valuations made by the Valuation Committee. The Trustees have also approved the Adviser’s fair valuation and significant
events procedures as part of the Fund’s compliance program
and will review any changes made to the procedures.
Factors considered by
pricing services in evaluating an investment include the yields or prices of investments of comparable quality, coupon,
maturity, call rights and other potential prepayments, terms and type, reported transactions, indications as to values from dealers
and general market conditions. Some pricing services provide a single price evaluation reflecting the bid-side of the market for an
investment (a “bid” evaluation). Other pricing services offer both bid evaluations and price evaluations indicative of a price
between the prices bid and ask for the investment (a “mid”
evaluation). The Fund normally uses bid evaluations for any U.S. Treasury and Agency securities,
mortgage-backed securities and municipal securities. The Fund normally uses mid evaluations for any other types of fixed-income
securities and any OTC derivative contracts. In the event that market quotations and price evaluations are not available for an investment,
the fair value of the investment is determined in accordance with procedures adopted by the Adviser.
Annual
Financial Statements and Additional Information
8
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. 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.
Investment Income, Gains and Losses, Expenses and Distributions
Investment
transactions are accounted for on a trade-date basis. Realized gains and losses from investment transactions are recorded on an
identified-cost basis. Interest income and expenses are accrued daily. Dividend income and distributions to shareholders are recorded
on the ex-dividend date. Distributions of net investment income,
if any, are declared daily and paid monthly. In addition, distributions of capital
gains, if any, are declared and paid at least annually. Non-cash dividends included in dividend income, if any, are recorded at fair value.
Amortization/accretion of premium and discount is included in investment income. 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 and reimbursements
of $276,130 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 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 year ended February 28, 2025, other
service fees for the Fund were as follows:
|
|
Other
Service
Fees
Incurred |
|
Service
Shares |
$15,247
|
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 year
ended February 28, 2025, 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 February 28, 2025, 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 seek to increase income and return and 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 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.
Annual
Financial Statements and Additional Information
9
The
average notional value of long futures contracts held by the Fund throughout the period was $6,608,887. This is based on amounts
held as of each month-end throughout the fiscal period.
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 |
$49,093*
|
|
*
|
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 Year Ended February 28, 2025
|
Amount
of Realized Gain or (Loss) on Derivatives Recognized in Income | |
|
|
Futures
Contracts
|
|
Interest
rate contracts |
$(78,417)
|
|
Change
in Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income | |
|
|
Futures
Contracts
|
|
Interest
rate contracts |
$43,339
|
Other
The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the
amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ materially from
those estimated. The Fund applies investment company accounting
and reporting guidance.
3. SHARES
OF BENEFICIAL INTEREST
The following tables summarize share activity:
|
|
Year
Ended
2/28/2025
|
Year
Ended
2/29/2024
| ||
|
Institutional
Shares: |
Shares
|
Amount
|
Shares
|
Amount
|
|
Shares
sold |
458,560
|
$4,424,192
|
913,083
|
$8,820,187
|
|
Shares
issued to shareholders in payment of distributions declared |
234,182
|
2,254,177
|
319,761
|
3,080,120
|
|
Shares
redeemed |
(3,157,748)
|
(30,398,966)
|
(3,735,566)
|
(36,085,909)
|
|
NET
CHANGE RESULTING FROM INSTITUTIONAL SHARE TRANSACTIONS |
(2,465,006)
|
$(23,720,597)
|
(2,502,722)
|
$(24,185,602)
|
|
|
Year
Ended
2/28/2025
|
Year
Ended
2/29/2024
| ||
|
Service
Shares: |
Shares
|
Amount
|
Shares
|
Amount
|
|
Shares
sold |
300,091
|
$2,901,031
|
11,650
|
$112,221
|
|
Shares
issued to shareholders in payment of distributions declared |
27,123
|
261,078
|
25,272
|
243,200
|
|
Shares
redeemed |
(715,460)
|
(6,876,794)
|
(146,053)
|
(1,409,787)
|
|
NET
CHANGE RESULTING FROM SERVICE SHARE TRANSACTIONS |
(388,246)
|
$(3,714,685)
|
(109,131)
|
$(1,054,366)
|
|
NET
CHANGE RESULTING FROM TOTAL FUND SHARE TRANSACTIONS |
(2,853,252)
|
$(27,435,282)
|
(2,611,853)
|
$(25,239,968)
|
Annual
Financial Statements and Additional Information
10
4. FEDERAL
TAX INFORMATION
The tax character of distributions as reported
on the Statement of Changes in Net Assets for the years ended February 28, 2025 and February
29, 2024, was as follows:
|
|
2025
|
2024
|
|
Ordinary
income |
$2,735,831
|
$3,526,365
|
As of February 28, 2025, the components
of distributable earnings on a tax-basis were as follows:
|
Undistributed
ordinary income |
$74,273
|
|
Net
unrealized appreciation |
$188,926
|
|
Capital
loss carryforwards |
$(17,929,541)
|
|
TOTAL
|
$(17,666,342)
|
At February 28, 2025, the cost of investments
for federal tax purposes was $47,307,067. The net unrealized appreciation of investments for
federal tax purposes was $188,926. This consists of unrealized appreciation from investments for those securities having an excess of
value over cost of $265,874 and unrealized depreciation from investments
for those securities having an excess of cost over value of $76,948.
The amounts presented are inclusive of derivative contracts. The difference between book-basis and tax-basis net unrealized appreciation
is attributable to differing treatments for mark-to-market of futures contracts.
As of February 28, 2025,
the Fund had a capital loss carryforward of $17,929,541 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
|
|
$16,389,300
|
$1,540,241
|
$17,929,541
|
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 0.30% of the Fund’s average daily net assets.
Subject to the terms described in the Expense Limitation note, the Adviser may voluntarily choose to waive any portion of its fee and/or
reimburse certain operating expenses of the Fund for competitive reasons such as to maintain the Fund’s expense ratio, or as and
when appropriate, to maintain positive or zero net yields. For
the year ended February 28, 2025, the Adviser voluntarily waived $181,707 of
its fee and voluntarily reimbursed $92,557 of other operating expenses.
The Adviser has agreed
to reimburse the Fund for certain investment adviser fees as a result of transactions in other affiliated investment
companies. For the year ended February 28, 2025, the Adviser reimbursed $1,866.
Administrative Fee
Federated
Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and
services. For purposes of determining the appropriate rate breakpoint, “Investment Complex” is defined as all of the Federated
Hermes Funds subject to a fee under the Administrative Services
Agreement. The fee paid to FAS is based on the average daily net assets
of the Investment Complex as specified below:
|
Administrative
Fee |
Average
Daily Net Assets
of
the Investment Complex |
|
0.100%
|
on
assets up to $50 billion |
|
0.075%
|
on
assets over $50 billion |
Subject to the terms described in the Expense
Limitation note, FAS may voluntarily choose to waive any portion of its fee. For the year ended
February 28, 2025, the annualized fee paid to FAS was 0.078% of average daily net assets of the Fund.
In addition, FAS may charge certain out-of-pocket
expenses to the Fund.
Distribution Services Fee
The
Fund has adopted a Distribution Plan (the “Plan”) pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund
will compensate Federated Securities Corp. (FSC), the principal
distributor, from the daily net assets of the Fund’s Service Shares to finance activities
intended to result in the sale of these shares. The Plan provides that the Fund may incur distribution expenses of up to 0.25% of average
daily net assets, annually, to compensate FSC. Subject to the terms described in the Expense Limitation note, FSC may voluntarily
choose to waive any portion of its fee.
For the year ended February
28, 2025, the Fund’s Service Shares did not incur a distribution services fee; however, it may begin to incur
this fee upon approval of the Trustees.
Annual
Financial Statements and Additional Information
11
Other Service Fees
For
the year ended February 28, 2025, FSSC did not receive or reimburse any of the other service fees disclosed in Note 2.
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 Institutional Shares and Service
Shares (after the voluntary waivers and/or reimbursements) will not exceed 0.36% and 0.61% (the “Fee Limit”), respectively,
up to but not including the later of (the “Termination Date”):
(a) May 1, 2026, 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 agreement 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. LINE
OF CREDIT
The Fund participates with certain other
Federated Hermes Funds, on a several basis, in an up to $500,000,000 unsecured, 364-day, committed,
revolving line of credit (LOC) agreement dated June 18, 2024. 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 February 28, 2025, the Fund had
no outstanding loans. During the year ended February 28, 2025,
the Fund did not utilize the LOC.
7. 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 February 28, 2025, there were no outstanding loans. During
the year ended February 28, 2025, the program was not utilized.
8. OPERATING
SEGMENTS
In this reporting period, the Fund adopted
FASB Accounting Standards Update 2023-07, Segment Reporting (Topic 280) - Improvements to
Reportable Segment Disclosures. Adoption of the new standard impacted financial statement disclosures only and did not affect the Fund’s
financial position or the results of its operations. 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.
9. 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.
Annual
Financial Statements and Additional Information
12
10. FEDERAL
TAX INFORMATION (UNAUDITED)
For the year ended February 28, 2025, 100%
of total ordinary income distributions qualified as business interest income for purposes of 163(j)
of the Code and the regulations thereunder.
Annual
Financial Statements and Additional Information
13
Report of
Independent Registered Public Accounting Firm
TO THE SHAREHOLDERS AND THE BOARD OF TRUSTEES
OF FEDERATED HERMES SHORT-TERM GOVERNMENT TRUST:
Opinion on the Financial Statements
We have audited the accompanying
statement of assets and liabilities of Federated Hermes Short-Term Government Trust (the
“Trust”) (comprising Federated Hermes Short-Term Government Fund (the “Fund”)), including the portfolio of investments,
as of February 28, 2025, and the related statement of operations for the year then ended, the statement of changes
in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in
the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the
financial statements present fairly, in all material
respects, the financial position of the Fund comprising Federated Hermes Short-Term
Government Trust at February 28, 2025, the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period
then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are
the responsibility of the Trust’s management. Our responsibility is to express an opinion on the
Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audits in accordance
with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether
due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal
control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control
over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal
control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due
to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation
of securities owned as of February 28, 2025, by correspondence with the custodian, brokers, and others; when
replies were not received from brokers or others, we performed other auditing procedures. Our audits also included evaluating
the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation
of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor
of one or more Federated Hermes investment companies since 1979.
Boston, Massachusetts
April 24, 2025
April 24, 2025
Annual
Financial Statements and Additional Information
14
Shareholder
Meeting Results (unaudited)
At a Special Meeting held on
October 25, 2024, shareholders of the Federated Hermes Short-Term Government Trust (the
“Trust”) elected Trustees of the Trust. Shareholders of the Trust elected new individuals to serve as Trustees effective January
1, 2025, who will serve on the Board with current Trustees Messrs. J. Christopher Donahue, John B. Fisher, John G.
Carson, G. Thomas Hough, Thomas M. O’Neill, John S. Walsh and Ms. Madelyn A. Reilly. Under the Trust’s Director Service
Policy, Trustees Judge Maureen Lally-Green and Mr. P. Jerome Richey retired from the Board on December
31, 2024. The number of votes cast for, against or withheld, as well as the number of abstentions and broker non-votes
with respect to the election of each nominee for office, is included below.
|
Trustee:
|
Voting
For |
Withheld
Authority |
Abstained
|
Broker
Non-Voting |
|
J.
Christopher Donahue |
3,684,682.755
|
6,930.091
|
0
|
N/A
|
|
John
B. Fisher |
3,684,682.755
|
6,930.091
|
0
|
N/A
|
|
John
G. Carson |
3,684,682.755
|
6,930.091
|
0
|
N/A
|
|
G.
Thomas Hough |
3,684,682.755
|
6,930.091
|
0
|
N/A
|
|
Karen
L. Larrimer |
3,622,888.776
|
68,724.070
|
0
|
N/A
|
|
Max
F. Miller |
3,622,888.776
|
68,724.070
|
0
|
N/A
|
|
Frank
J. Nasta |
3,684,682.755
|
6,930.091
|
0
|
N/A
|
|
Thomas
M. O’Neill |
3,684,682.755
|
6,930.091
|
0
|
N/A
|
|
Madelyn
A. Reilly |
3,622,888.776
|
68,724.070
|
0
|
N/A
|
|
John
S. Walsh |
3,622,888.776
|
68,724.070
|
0
|
N/A
|
Annual
Financial Statements and Additional Information
15
Evaluation
and Approval of Advisory Contract–May
2024
Federated Hermes Short-Term
Government Fund (the “Fund”)
At its meetings in May 2024 (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 (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
all of the information and factors believed to be relevant and appropriate on whether 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 evaluation of the Fund’s management fee (the “CCO Fee Evaluation Report”).
The Board considered the CCO Fee Evaluation 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 extensive materials that comprise and accompany the CCO Fee Evaluation 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 and in
between regularly scheduled meetings on particular matters as the need arose.
The Board’s
consideration of the Contract included review of materials and information covering the following matters, among
others: (1) copies of the Contracts; (2) the nature, quality and extent of the advisory and other services provided to the
Fund by Federated Hermes; (3) Federated Hermes’ business and operations; (4) the Adviser’s investment philosophy, personnel
and processes; (5) the Fund’s investment objectives 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 they
deemed relevant to an adviser’s fiduciary duty with respect to its receipt of compensation from a fund, including: (1)
the nature and quality of the services provided by the adviser to the fund and its shareholders, including the performance
of the fund, its benchmark and comparable funds; (2) the adviser’s cost of providing the services and the profitability
to the adviser of providing advisory services to the fund; (3) the extent to which the adviser may realize “economies
of scale” as the fund grows larger and, if such economies of scale exist, whether they have been appropriately shared
with the fund and its shareholders or the family of funds; (4) any “fall-out” benefits that accrue to the adviser because
of its relationship with the fund, including research services received from brokers that execute fund trades and any
fees paid to affiliates of the adviser for services rendered to the fund; (5) comparative fees and expenses, including a comparison
of management fees paid to the adviser with those paid by similar funds managed by the same adviser or other advisers
as well as management fees charged to institutional and other advisory clients of the same adviser for what might be
viewed as like services; and (6) the extent of care, conscientiousness and independence with which the fund’s board members
perform their duties and their expertise, including whether they are fully informed about all facts the board deems
relevant to its consideration of the adviser’s services and fees. The Board considered that the Securities and Exchange
Commission (“SEC”) disclosure requirements regarding the basis for a fund board’s approval of the fund’s investment
advisory contract generally align with the factors listed above. The Board was guided by these factors in its evaluation
of the Contract to the extent it considered them to be appropriate and relevant, as discussed further below. The Board
considered and weighed these factors in light of its substantial accumulated experience in governing the Fund and working
with Federated Hermes on matters relating to the oversight of the other funds advised by Federated Hermes (each, a
“Federated Hermes Fund” and, collectively, the “Federated Hermes Funds”).
Annual
Financial Statements and Additional Information
16
In
addition, the Board considered the preferences and expectations of Fund shareholders and the potential disruptions of the
Fund’s operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate
or not renew the Contract. In particular, the Board recognized that many shareholders likely have invested in the Fund
based on the strength of Federated Hermes’ industry standing and reputation and with the expectation that Federated Hermes
will have a continuing role in providing advisory services to the Fund. Thus, the Board observed that there are a range
of investment options available to the Fund’s shareholders in the marketplace, and such shareholders, having had the opportunity
to consider other investment options, have effectively selected Federated Hermes by virtue of investing in the
Fund.
In determining
to approve the continuation of the Contract, the members of the Board reviewed and evaluated information
and factors they believed to be relevant and appropriate through the exercise of their reasonable business judgment.
While individual members of the Board may have weighed certain factors differently, the Board’s determination
to approve the continuation of the Contract was based on a comprehensive consideration of all information provided
to the Board throughout the year and specifically with respect to the continuation of the Contract. The Board recognized
that its evaluation process is evolutionary and that the factors considered and 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 Advisers, 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), 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 noted the benefits of the previous
significant acquisition of Hermes Fund Managers Limited by Federated Hermes, which has deepened Federated Hermes’
investment management expertise and capabilities and expanded its access to analytical resources related to environmental,
social and governance (“ESG”) factors and issuer engagement on ESG matters where appropriate. 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, 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.
Annual
Financial Statements and Additional Information
17
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 index, performance attribution
information and commentary on the effect of market conditions. The Board considered that, in its evaluation of investment
performance at meetings throughout the year, it focused particular attention on information indicating less favorable
performance of certain Federated Hermes Funds for specific time periods and discussed with Federated Hermes the
reasons for such performance as well as any specific actions Federated Hermes had taken, or had agreed 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. (the “Morningstar”), an independent fund ranking organization (the
“Performance Peer Group”). The Board noted the CCO’s view 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 considered the CCO’s
view that, in evaluating such comparisons, in some cases there may be differences in the funds’ objectives or investment
management techniques, or the costs to implement the funds, even within the same Performance Peer Group.
The Board
also considered comparative performance data from Lipper, Inc. that was included in reports provided to the Board
throughout the year. The Board noted that differences may exist between the Performance Peer Group and Lipper peers
and that the results of these performance comparisons may vary.
For the
periods ended December 31, 2023, the Fund’s performance fell below the Performance Peer Group median for the
one-year and five-year periods, and was above the Performance Peer Group median for the three-year period. The Board
discussed the Fund’s performance with the Adviser and recognized the efforts being taken by the Adviser in the context
of other factors considered relevant by the Board.
Based on
these considerations, the Board concluded that it had continued confidence in the Adviser’s overall capabilities
to manage the Fund.
Fund Expenses
The Board
considered the advisory fee and overall expense structure of the Fund and the comparative fee and expense information
that had been provided in connection with the May Meetings. In this regard, the Board was presented with, and
considered, information regarding the contractual advisory fee rates, net advisory fee rates, total expense ratios and each
element of the Fund’s total expense ratio (i.e., gross and net advisory fees, administrative fees, custody fees, portfolio accounting
fees and transfer agency fees) relative to an appropriate group of peer funds compiled by Federated Hermes from
the overall category of peer funds selected by Morningstar (the “Expense Peer Group”). The Board received a description
of the methodology used to select the Expense Peer Group from the overall Morningstar category. The Board also
reviewed comparative information regarding the fees and expenses of the broader group of funds in the overall Morningstar
category.
While mindful
that courts have cautioned against giving too much weight to comparative information concerning fees charged
to funds by other advisers, the use of comparisons between the Fund and its Expense Peer Group assisted the Board
in its evaluation of the Fund’s fees and expenses. The Board focused on comparisons with other registered funds more
heavily than non-registered fund products or services because such comparisons are believed to be more relevant.
Annual
Financial Statements and Additional Information
18
The Board
considered that other registered funds are the products most like the Fund, in that they are readily available to Fund
shareholders as alternative investment vehicles, and they are the type of investment vehicle, in fact, chosen and maintained
by the Fund’s shareholders. The Board noted that the range of such other registered funds’ fees and expenses, therefore,
appears to be a relevant indicator of what investors have found to be reasonable in the marketplace in which the Fund
competes.
The Board
reviewed the contractual advisory fee rate, net advisory fee rate and other expenses of the Fund and noted the position
of the Fund’s fee rates relative to its Expense Peer Group. In this regard, the Board noted that the contractual advisory
fee rate was below the median of the Expense Peer Group, and the Board was satisfied that the overall expense structure
of the Fund remained competitive.
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 conclusion that non-registered fund clients
are inherently different products due to the following differences, among others: (i) different types of targeted investors;
(ii) different applicable laws and regulations; (iii) different legal structures; (iv) different average account sizes and
portfolio management techniques made necessary by different cash flows and different associated costs; (v) 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; (vi) different SEC mandated risk management programs with
respect to fund liquidity and use of derivatives; (vii) different administrative responsibilities; (viii) different degrees of
risk associated with management; and (ix) a variety of different costs. 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
view 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 did not consider the fees for providing advisory services to other types of clients
to be determinative in judging the appropriateness of the Federated Hermes Funds’ advisory fees.
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 view that, while these cost allocation reports apply consistent allocation processes, the inherent difficulties
in allocating costs on a fund-by-fund basis continues to cause the CCO to question the precision of the process and
to conclude that such reports may be unreliable because a single change in an allocation estimate may 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 view 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 view 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 conclusion that, based on such profitability information, Federated
Hermes’ profit margins did not appear to be excessive. The Board also considered the CCO’s view that Federated
Hermes appeared financially sound, with the resources necessary to fulfill its obligations under its contracts with
the Federated Hermes Funds.
Annual
Financial Statements and Additional Information
19
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 and the CCO believe that this information is relevant to considering 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 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: (i) the CCO’s conclusion that his observations and the information accompanying the CCO Fee Evaluation
Report show that the management fee for the Fund is reasonable; and (ii) the CCO’s recommendation that the Board
approve the management fee. The Board noted that, under these circumstances, no changes were recommended to, and
no objection was raised to the continuation of, the Contract by the CCO. The CCO also recognized that the Board’s 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
and, in this regard, the CCO noted certain items, and management has committed to reviewing certain items, for future
reporting to the Board as the Board continues its ongoing oversight of the Federated Hermes Funds.
On the basis
of the information and factors summarized above, among other information and factors deemed relevant by the
Board, and the evaluation thereof, the Board, including the Independent Trustees, unanimously voted to approve the continuation
of the Contract. The Board based its determination to approve the Contract on the totality of the circumstances
and relevant factors and with a view of past and future long-term considerations. Not all of the factors and considerations
identified above were necessarily deemed to be relevant to the Fund, nor did the Board consider any one of them
to be determinative.
Annual
Financial Statements and Additional Information
20
Mutual funds are not
bank deposits or obligations, are not guaranteed by any bank and are not insured or guaranteed by the
U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency.
Investment in mutual funds involves investment risk, including the possible loss of principal.
This information is authorized
for distribution to prospective investors only when preceded or accompanied by the Fund’s Prospectus,
which contains facts concerning its objective and policies, management fees, expenses and other information.
Federated Hermes Short-Term Government
Fund
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us at
FederatedHermes.com/us
or call 1-800-341-7400.
or call 1-800-341-7400.
Federated Securities Corp., Distributor
CUSIP 31428M100
CUSIP 31428M209
CUSIP 31428M209
30215 (4/25)
©
2025 Federated Hermes, Inc.
| Item 8. | Changes in and Disagreements with Accountants for Open-End Management Investment Companies |
Federated Hermes Short-Term Government Fund: Not Applicable.
| Item 9. | Proxy Disclosures for Open-End Management Investment Companies. |
Federated Hermes Short-Term Government Fund: The Fund’s report on its most recent meeting of shareholders is filed under Item 7 of this form.
| Item 10. | Remuneration Paid to Directors, Officers, and Others of Open-End Management Investment Companies. |
Federated Hermes Short-Term Government Fund: The Fund’s disclosure of remuneration items is included as part of the Financial Statements filed under Item 7 of this form.
| Item 11. | Statement Regarding Basis for Approval of Investment Advisory Contract. |
Federated Hermes Short-Term Government Fund: The Fund’s Evaluation and Approval of Advisory Contract summary by fund appear in the Financial Statements filed under Item 7 of this form.
| Item 12. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies |
Not Applicable
| Item 13. | Portfolio Managers of Closed-End Management Investment Companies. |
Not Applicable
| Item 14. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
Not Applicable
| Item 15. | Submission of Matters to a Vote of Security Holders. |
No Changes to Report
| Item 16. | Controls and Procedures. |
(a) The registrant’s Principal Executive Officer and Principal Financial Officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Act) are effective in design and operation and are sufficient to form the basis of the certifications required by Rule 30a-(2) under the Act, based on their evaluation of these disclosure controls and procedures as of a date within 90 days of the filing date of this report on Form N-CSR.
(b) There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
| Item 17. | Disclosure of Securities Lending Activities for Closed-End Management Investment Companies. |
Not Applicable
| Item 18. | Recovery of Erroneously Awarded Compensation |
(a) Not Applicable
(b) Not Applicable
| Item 19. | Exhibits |
(a)(1) Not Applicable.
(a)(2) Not Applicable.
(a)(3) Certifications of Principal Executive Officer and Principal Financial Officer.
(a)(4) Not Applicable.
(a)(5) Not Applicable.
(b) Certifications pursuant to 18 U.S.C. Section 1350.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: Federated Hermes Short-Term Government Trust
By: /s/ Jeremy D. Boughton
Jeremy D. Boughton, Principal Financial Officer
Date: April 23, 2025
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: /s/ J. Christopher
Donahue
J. Christopher Donahue, Principal Executive Officer
Date: April 23, 2025
By: /s/ Jeremy D. Boughton
Jeremy D. Boughton, Principal Financial Officer
Date: April 23, 2025