John Hancock Funds II
Statement
of Additional Information
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Alternative
Asset Allocation Fund |
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Capital
Appreciation Fund |
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Capital
Appreciation Value Fund |
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Disciplined
Value Emerging Markets Equity Fund (formerly
Emerging
Markets Fund) |
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Emerging
Markets Debt Fund |
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Floating
Rate Income Fund |
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Fundamental
Global Franchise Fund |
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International
Small Company Fund |
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International
Strategic Equity Allocation Fund |
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Multi-Asset
High Income Fund |
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Lifestyle
Blend Aggressive Portfolio |
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Lifestyle
Blend Balanced Portfolio |
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Lifestyle
Blend Conservative Portfolio |
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Lifestyle
Blend Growth Portfolio |
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Lifestyle
Blend Moderate Portfolio |
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2065
Lifetime Blend Portfolio |
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2060
Lifetime Blend Portfolio |
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2055
Lifetime Blend Portfolio |
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2050
Lifetime Blend Portfolio |
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2045
Lifetime Blend Portfolio |
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2040
Lifetime Blend Portfolio |
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2035
Lifetime Blend Portfolio |
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2030
Lifetime Blend Portfolio |
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2025
Lifetime Blend Portfolio |
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2020
Lifetime Blend Portfolio |
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Manulife,
Manulife Investment Management, Stylized M Design, and Manulife Investment
Management & Stylized M Design are trademarks of The Manufacturers Life
Insurance
Company and are used by its affiliates under license.
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2015
Lifetime Blend Portfolio |
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2010
Lifetime Blend Portfolio |
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Multimanager
2065 Lifetime Portfolio |
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Multimanager
2060 Lifetime Portfolio |
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Multimanager
2055 Lifetime Portfolio |
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Multimanager
2050 Lifetime Portfolio |
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Multimanager
2045 Lifetime Portfolio |
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Multimanager
2040 Lifetime Portfolio |
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Multimanager
2035 Lifetime Portfolio |
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Multimanager
2030 Lifetime Portfolio |
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Multimanager
2025 Lifetime Portfolio |
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Multimanager
2020 Lifetime Portfolio |
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Multimanager
2015 Lifetime Portfolio |
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Multimanager
2010 Lifetime Portfolio |
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Opportunistic
Fixed Income Fund |
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Real
Estate Securities Fund |
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Science
& Technology Fund |
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Small
Cap Dynamic Growth Fund |
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Strategic
Income Opportunities Fund |
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U.S.
Sector Rotation Fund |
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This Statement
of Additional Information (“SAI”) provides information about each fund listed
above (each a “fund” and collectively, the “funds”). Each fund is a
series of the Trust indicated above. The information in this SAI is in addition
to the information that is contained in each fund’s prospectus dated
January 1,
2025, as amended
and supplemented from time to time (collectively, the “Prospectus”). The
funds may offer other share classes that are described in
separate prospectuses and SAIs.
This SAI is
not a prospectus. It should be read in conjunction with the Prospectus. This SAI
incorporates by reference the financial statements of each fund for the
period ended August 31, 2024, as well as
the related opinion of the fund’s independent registered public accounting firm,
as included in the fund’s most
recent Form
N-CSR
filing. The
financial statements of each fund for the fiscal period ended August 31,
2024 are available
through the following
link(s):
Form N-CSR
filed October 23, 2024 for:
Form N-CSR
filed October 23, 2024 for:
Form N-CSR
filed November 1, 2024 for:
Alternative
Asset Allocation Fund
Blue Chip
Growth Fund
Real Estate
Securities Fund
Small
Cap Dynamic
Growth Fund
Form N-CSR
filed November
1, 2024
for:
Form N-CSR
filed November
7, 2024
for:
Form N-CSR
filed November 7, 2024
for:
A copy of a
Prospectus,
Form N-CSR,
other information such as fund financial statements that the fund files on Form
N-CSR, or an
annual report
to shareholders
(each an “Annual
Report”) can be
obtained free of charge by contacting:
John Hancock
Signature Services, Inc.
P.O. Box
219909
Kansas City,
MO 64121-9909
800-225-5291
jhinvestments.com
Glossary
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the
Securities Act of 1933, as amended |
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the
Investment Company Act of 1940, as amended |
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the
Investment Advisers Act of 1940, as amended |
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John
Hancock Investment Management LLC, 200 Berkeley Street, Boston,
Massachusetts 02116 |
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an
investment advisory agreement or investment management contract between
the Trust and the Advisor |
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Manulife
Investment Management (North America) Limited and Manulife Investment
Management (US) LLC, as
applicable |
“affiliated
underlying funds” |
underlying
funds that are advised by John Hancock’s investment advisor or its
affiliates |
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business
development companies |
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Board
of Trustees of the Trust |
“Brown
Brothers Harriman” |
Brown
Brothers Harriman & Co. |
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Certificates
of Accrual on Treasury Securities |
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Collateralized
Bond Obligations |
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Contingent
Deferred Sales Charge |
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the
Commodity Exchange Act, as amended |
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China
interbank bond market |
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Collateralized
Loan Obligations |
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Collateralized
Mortgage Obligations |
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the
Internal Revenue Code of 1986, as amended |
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Consumer
Price Index for Urban Consumers |
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Commodity
Futures Trading Commission |
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Citibank,
N.A., 388 Greenwich Street, New York, NY 10013 |
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John
Hancock Investment Management Distributors LLC, 200 Berkeley Street,
Boston, Massachusetts 02116 |
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Economic
and Monetary Union |
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Federal
National Mortgage Association |
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Foreign
Account Tax Compliance Act |
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Federal
Housing Finance Agency |
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Federal
Intermediate Credit Banks |
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Federal
Home Loan Mortgage Corporation |
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The
John Hancock funds within this SAI as noted on the front cover and as the
context may require |
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funds
that seek to achieve their investment objectives by investing in
underlying funds, as permitted by
Section
12(d) of the 1940 Act and the rules thereunder |
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Government
National Mortgage Association |
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Hong
Kong Securities Clearing Company |
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Individual
Retirement Account |
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John
Hancock Collateral
Trust |
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John
Hancock Distributors, LLC |
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John
Hancock Life Insurance Company of New York |
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John
Hancock Life Insurance Company (U.S.A.) |
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London
Interbank Offered Rate |
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Monthly
Automatic Accumulation Program |
“Manulife
Financial” or “MFC” |
Manulife
Financial, a publicly traded company based in Toronto,
Canada |
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Manulife
Investment Management (North America) Limited |
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Manulife
Investment Management (US) LLC |
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Markets
in Financial Instruments Directive |
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Moody’s
Investors Service, Inc |
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Nationally
Recognized Statistical Rating Organization |
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Planned
Amortization Class |
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Personal
Financial Services |
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People's
Republic of China |
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Real
Estate Investment Trusts |
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Regulated
Investment Company |
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John
Hancock Retirement Plan Services |
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Salary
Reduction Simplified Employee Pension Plan |
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Securities
and Exchange Commission |
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Simplified
Employee Pension |
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Savings
Incentive Match Plan for Employees |
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Student
Loan Marketing Association |
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Special
Purpose Acquisition Companies |
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State
Street Bank and Trust Company, One Congress Street, Suite 1, Boston, MA
02114 |
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Any
subadvisors employed by John Hancock within this SAI as noted in Appendix
B and as the context may
require |
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Target
Amortization Class |
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Treasury
Receipts, Treasury Investors Growth Receipts |
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John
Hancock Bond Trust
John
Hancock California Tax-Free Income Fund
John
Hancock Capital Series
John
Hancock Current Interest
John
Hancock Exchange-Traded Fund Trust
John
Hancock Funds II
John
Hancock Funds III
John
Hancock Investment Trust
John
Hancock Investment Trust II
John
Hancock Municipal Securities Trust
John
Hancock Sovereign Bond Fund
John
Hancock Strategic Series
John
Hancock Variable Insurance Trust |
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“unaffiliated
underlying funds” |
underlying
funds that are advised by an entity other than John Hancock’s investment
advisor or its
affiliates |
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funds
in which the funds of funds invest |
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Organization
of the TRUST
The Trust is
organized as a Massachusetts business trust under the laws of The Commonwealth
of Massachusetts and is an open-end management investment
company registered under the 1940 Act. Each of Blue Chip Growth Fund, Emerging
Markets Debt Fund, Fundamental Global Franchise Fund, Real Estate
Securities Fund and
Science
&
Technology Fund is a
non-diversified series of the Trust and each other fund is a diversified series
of the Trust, as those terms
are used in the 1940 Act, and as interpreted or modified by regulatory authority
having jurisdiction, from time to time. The funds of funds may
invest in affiliated and unaffiliated underlying funds. The following table sets
forth the date the Trust was organized:
The Advisor is
a Delaware limited liability company whose principal offices are located at 200
Berkeley Street, Boston, Massachusetts 02116. The Advisor is
registered as an investment advisor under the Advisers Act. The Advisor is an
indirect principally owned subsidiary of JHLICO U.S.A. JHLICO U.S.A. and its
subsidiaries today offer a broad range of financial products, including life
insurance, annuities, 401(k) plans, long-term care insurance, college
savings, and other forms of business insurance. Additional information about
John Hancock may be found on the Internet at johnhancock.com. The ultimate
controlling parent of the Advisor is MFC, a publicly traded company based in
Toronto, Canada. MFC is the holding company of The Manufacturers
Life Insurance Company and its subsidiaries, collectively known as Manulife
Financial.
The Advisor
has retained for each fund a subadvisor that is responsible for providing
investment advice to the fund subject to the review of the Board and the
overall supervision of the Advisor.
Manulife
Financial is a leading international financial services group with principal
operations in Asia, Canada, and the United States. Operating primarily as
John Hancock in the United States and Manulife elsewhere, it provides financial
protection products and advice, insurance, as well as wealth and
asset management services through its extensive network of solutions for
individuals, groups, and institutions. Its global headquarters are in
Toronto,
Canada, and it trades as ‘MFC’ on the Toronto Stock Exchange, NYSE, and the
Philippine Stock Exchange, and under '945' in Hong Kong. Manulife
Financial can be found on the Internet at manulife.com.
The following
table sets forth each fund's inception date:
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Commencement
of Operations |
Alternative
Asset Allocation Fund |
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Capital
Appreciation Fund |
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Capital
Appreciation Value Fund |
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Disciplined
Value Emerging Markets Equity Fund |
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Emerging
Markets Debt Fund |
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Floating
Rate Income Fund |
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Fundamental
Global Franchise Fund |
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International
Small Company Fund |
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International
Strategic Equity Allocation Fund |
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Multi-Asset
High Income Fund |
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Lifestyle
Blend Aggressive Portfolio |
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Lifestyle
Blend Balanced Portfolio |
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Lifestyle
Blend Conservative Portfolio |
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Lifestyle
Blend Growth Portfolio |
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Lifestyle
Blend Moderate Portfolio |
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2065
Lifetime Blend Portfolio |
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2060
Lifetime Blend Portfolio |
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2055
Lifetime Blend Portfolio |
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2050
Lifetime Blend Portfolio |
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Commencement
of Operations |
2045
Lifetime Blend Portfolio |
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2040
Lifetime Blend Portfolio |
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2035
Lifetime Blend Portfolio |
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2030
Lifetime Blend Portfolio |
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2025
Lifetime Blend Portfolio |
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2020
Lifetime Blend Portfolio |
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2015
Lifetime Blend Portfolio |
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2010
Lifetime Blend Portfolio |
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Multimanager
2065 Lifetime Portfolio |
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Multimanager
2060 Lifetime Portfolio |
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Multimanager
2055 Lifetime Portfolio |
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Multimanager
2050 Lifetime Portfolio |
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Multimanager
2045 Lifetime Portfolio |
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Multimanager
2040 Lifetime Portfolio |
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Multimanager
2035 Lifetime Portfolio |
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Multimanager
2030 Lifetime Portfolio |
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Multimanager
2025 Lifetime Portfolio |
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Multimanager
2020 Lifetime Portfolio |
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Multimanager
2015 Lifetime Portfolio |
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Multimanager
2010 Lifetime Portfolio |
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Opportunistic
Fixed Income Fund |
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Real
Estate Securities Fund |
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Science
& Technology Fund |
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Small
Cap Dynamic Growth Fund |
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Strategic
Income Opportunities Fund |
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U.S.
Sector Rotation Fund |
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If a fund or
share class has been in operation for a period that is shorter than the
three-year fiscal period covered in this SAI, information is provided for
the period the
fund or share class, as applicable, was in operation.
Additional
Investment Policies and Other Instruments
The principal
strategies and risks of investing in each fund are described in the applicable
Prospectus. Unless otherwise stated in the applicable Prospectus or
this SAI, the investment objective and policies of each
fund may be
changed without shareholder approval. Each fund may invest in the instruments
below, and such instruments and investment policies apply to each fund, but only
if and to the extent that such policies are consistent with and permitted
by a fund's investment objective and policies. Each fund may also have indirect exposure to the instruments described below through derivative contracts, if applicable.
By owning shares of the underlying
funds, each fund of funds indirectly invests in the securities and instruments
held by the underlying funds and bears the same risks of such underlying
funds.
The
securitization techniques used to develop mortgage securities also are being
applied to a broad range of other assets. Through the use of trusts and
special
purpose corporations, automobile and credit card receivables are being
securitized in pass-through structures similar to mortgage pass-through
structures or in a pay-through structure similar to the CMO
structure.
Generally, the
issuers of asset-backed bonds, notes or pass-through certificates are special
purpose entities and do not have any significant assets other than the
receivables securing such obligations. In general, the collateral supporting
asset-backed securities is of a shorter maturity than that of mortgage
loans. As a result, investment in these securities should be subject to less
volatility than mortgage securities. Instruments backed by pools of receivables
are similar to mortgage-backed securities in that they are subject to
unscheduled prepayments of principal prior to maturity. When the obligations
are prepaid, a fund must reinvest the prepaid amounts in securities with the
prevailing interest rates at the time. Therefore, a fund’s ability to
maintain an
investment including high-yielding asset-backed securities will be affected
adversely to the extent that prepayments of principal must be
reinvested in
securities that have lower yields than the prepaid obligations. Moreover,
prepayments of securities purchased at a premium could result in a realized
loss. Unless otherwise stated in its Prospectus, a fund will only invest in
asset-backed securities rated, at the time of purchase, “AA” or better
by S&P or
Fitch or “Aa” or better by Moody’s.
As with
mortgage securities, asset-backed securities are often backed by a pool of
assets representing the obligation of a number of different parties and use
similar credit enhancement techniques. For a description of the types of credit
enhancement that may accompany asset-backed securities, see “Types of
Credit Support” below. When a fund invests in asset-backed securities, it will
not limit its investments in asset-backed securities to those with credit
enhancements. Although asset-backed securities are not generally traded on a
national securities exchange, such securities are widely traded by brokers and
dealers, and will not be considered illiquid securities for the purposes of the
investment restriction on illiquid securities under the sub-section
“Illiquid Securities” in this section below.
Types
of Credit Support.
To lessen the
impact of an obligor’s failure to make payments on underlying assets, mortgage
securities and asset-backed securities may
contain elements of credit support. Such credit support falls into two
categories:
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liquidity
protection; and
Liquidity
protection refers to the provision of advances, generally by the entity
administering the pool of assets, to ensure that the pass-through of
payments due
on the underlying pool of assets occurs in a timely fashion. Default protection
provides protection against losses resulting from ultimate default and
enhances the likelihood of ultimate payment of the obligations on at least a
portion of the assets in the pool. This protection may be provided through
guarantees, insurance policies or letters of credit obtained by the issuer or
sponsor from third parties, through various means of structuring the
transaction or
through a combination of such approaches. A fund will not pay any additional
fees for such credit support, although the existence of credit support
may increase the price of a security.
Some examples
of credit support include:
●
“senior-subordinated
securities” (multiple class securities with one or more classes subordinate to
other classes as to the payment of principal thereof and
interest thereon, with the result that defaults on the underlying assets are
borne first by the holders of the subordinated class);
●
creation of
“reserve funds” (where cash or investments, sometimes funded from a portion of
the payments on the underlying assets, are held in reserve
against future losses); and
●
“over-collateralization”
(where the scheduled payments on, or the principal amount of, the underlying
assets exceed those required to make payment on the
securities and pay any servicing or other fees).
The ratings of
mortgage-backed securities and asset-backed securities for which third-party
credit enhancement provides liquidity protection or default protection are
generally dependent upon the continued creditworthiness of the provider of the
credit enhancement. The ratings of these securities could be
reduced in the event of deterioration in the creditworthiness of the credit
enhancement provider even in cases where the delinquency and loss experienced on
the underlying pool of assets is better than expected.
The degree of
credit support provided for each issue is generally based on historical
information concerning the level of credit risk associated with the underlying
assets. Delinquency or loss greater than anticipated could adversely affect the
return on an investment in mortgage securities or asset-backed
securities.
Collateralized
Debt Obligations.
CBOs, CLOs,
other collateralized debt obligations, and other similarly structured securities
(collectively, “CDOs”) are types of
asset-backed securities. A CBO is a trust that is often backed by a diversified
pool of high risk, below investment grade fixed-income securities.
The collateral can be from many different types of fixed-income securities such
as high yield debt, residential privately issued mortgage-related
securities, commercial privately issued mortgage-related securities, trust
preferred securities and emerging market debt. A CLO is a trust
typically collateralized by a pool of loans, which may include, among others,
domestic and foreign senior secured loans, senior unsecured loans, and
subordinate corporate loans, including loans that may be rated below investment
grade or equivalent unrated loans. Other CDOs are trusts backed by other types
of assets representing obligations of various parties. CDOs may charge
management fees and administrative expenses.
In a CDO
structure, the cash flows from the trust are split into two or more portions,
called tranches, varying in risk and yield. The riskiest portion is the
“equity”
tranche which bears the bulk of defaults from the bonds or loans in the trust
and serves to protect the other, more senior tranches from default in all but the
most severe circumstances. Since it is partially protected from defaults, a
senior tranche from a CDO trust typically has a higher rating and lower yield
than its underlying securities, and can be rated investment grade. Despite the
protection from the equity tranche, CDO tranches can experience
substantial losses due to actual defaults, increased sensitivity to defaults due
to collateral default and disappearance of protecting tranches,
market anticipation of defaults, as well as aversion to CDO securities as a
class. In the case of all CDO tranches, the market prices of and yields on
tranches with longer terms to maturity tend to be more volatile than those of
tranches with shorter terms to maturity due to the greater volatility and
uncertainty of cash flows.
Unless
otherwise prohibited, a fund may borrow money in an amount that does not exceed
33% of its total assets. Borrowing by a fund involves leverage,
which may exaggerate any increase or decrease in a fund’s investment performance
and in that respect may be considered a speculative practice. The
interest that a fund must pay on any borrowed money, additional fees to maintain
a line of credit or any minimum average balances
required to be
maintained are additional costs that will reduce or eliminate any potential
investment income and may offset any capital gains. Unless the
appreciation and income, if any, on the asset acquired with borrowed funds
exceed the cost of borrowing, the use of leverage will diminish the investment
performance of a fund.
Brady Bonds
are debt securities issued under the framework of the “Brady Plan,” an
initiative announced by former U.S. Treasury Secretary Nicholas F. Brady in 1989
as a mechanism for debtor nations to restructure their outstanding external
commercial bank indebtedness. The Brady Plan framework, as it has
developed, involves the exchange of external commercial bank debt for newly
issued bonds (“Brady Bonds”). Brady Bonds also may be issued in respect of new
money being advanced by existing lenders in connection with the debt
restructuring. Brady Bonds issued to date generally have maturities
between 15 and 30 years from the date of issuance and have traded at a deep
discount from their face value. In addition to Brady Bonds, investments in
emerging market governmental obligations issued as a result of debt
restructuring agreements outside of the scope of the Brady Plan are
available.
Agreements
implemented under the Brady Plan to date are designed to achieve debt and
debt-service reduction through specific options negotiated by a debtor
nation with its creditors. As a result, the financial packages offered by each
country differ. The types of options have included:
●
the exchange
of outstanding commercial bank debt for bonds issued at 100% of face value that
carry a below-market stated rate of interest (generally
known as par bonds);
●
bonds issued
at a discount from face value (generally known as discount bonds);
●
bonds bearing
an interest rate which increases over time; and
●
bonds issued
in exchange for the advancement of new money by existing lenders.
Regardless of
the stated face amount and interest rate of the various types of Brady Bonds,
when investing in Brady Bonds, a fund will purchase Brady Bonds in
secondary markets in which the price and yield to the investor reflect market
conditions at the time of purchase.
Certain
sovereign bonds are entitled to “value recovery payments” in certain
circumstances, which in effect constitute supplemental interest payments
but generally
are not collateralized. Certain Brady Bonds have been collateralized as to
principal due at maturity (typically 15 to 30 years from the date of issuance)
by U.S. Treasury zero coupon bonds with a maturity equal to the final maturity
of such Brady Bonds, although the collateral is not available to investors
until the final maturity of the Brady Bonds. Collateral purchases are financed
by the International Monetary Fund (the “IMF”), the World Bank and the debtor
nations’ reserves. In addition, interest payments on certain types of Brady
Bonds may be collateralized by cash or high-grade securities in amounts
that typically represent between 12 and 18 months of interest accruals on these
instruments, with the balance of the interest accruals being
uncollateralized.
A fund may
purchase Brady Bonds with no or limited collateralization, and must rely for
payment of interest and (except in the case of principal collateralized
Brady Bonds) principal primarily on the willingness and ability of the foreign
government to make payment in accordance with the terms of the Brady
Bonds.
Brady Bonds
issued to date are purchased and sold in secondary markets through U.S.
securities dealers and other financial institutions and are generally
maintained through European transactional securities depositories. A substantial
portion of the Brady Bonds and other sovereign debt securities in
which a fund invests are likely to be acquired at a discount.
Canadian
and Provincial Government and Crown Agency Obligations
Canadian
Government Obligations.
Canadian
government obligations are debt securities issued or guaranteed as to principal
or interest by the government of
Canada pursuant to authority granted by the Parliament of Canada and approved by
the Governor in Council, where necessary. These securities
include treasury bills, notes, bonds, debentures and marketable government of
Canada loans.
Canadian
Crown Obligations.
Canadian Crown
agency obligations are debt securities issued or guaranteed by a Crown
corporation, company or agency (“Crown
Agencies”) pursuant to authority granted by the Parliament of Canada and
approved by the Governor in Council, where necessary. Certain Crown
Agencies are by statute agents of Her Majesty in right of Canada, and their
obligations, when properly authorized, constitute direct obligations of
the government of Canada. These obligations include, but are not limited to,
those issued or guaranteed by the:
●
Export
Development Corporation;
●
Farm Credit
Corporation;
●
Federal
Business Development Bank; and
●
Canada Post
Corporation.
In addition,
certain Crown Agencies that are not, by law, agents of Her Majesty may issue
obligations that, by statute, the Governor in Council may authorize the
Minister of Finance to guarantee on behalf of the government of Canada. Other
Crown Agencies that are not, by law, agents of Her Majesty may issue or
guarantee obligations not entitled to be guaranteed by the government of Canada.
No assurance can be given that the government of Canada will
support the obligations of Crown Agencies that are not agents of Her Majesty,
which it has not guaranteed, since it is not obligated to do so by
law.
Provincial
Government Obligations.
Provincial
Government obligations are debt securities issued or guaranteed as to principal
or interest by the government of
any province of Canada pursuant to authority granted by the provincial
Legislature and approved by the Lieutenant Governor in Council of such
province, where necessary. These securities include treasury bills, notes, bonds
and debentures.
Provincial
Crown Agency Obligations.
Provincial
Crown Agency obligations are debt securities issued or guaranteed by a
provincial Crown corporation,
company or agency (“Provincial Crown Agencies”) pursuant to authority granted by
the provincial Legislature and approved by the Lieutenant
Governor in Council of such province, where necessary. Certain Provincial Crown
Agencies are by statute agents of Her Majesty in right of a particular
province of Canada, and their obligations, when properly authorized, constitute
direct obligations of such province. Other Provincial Crown Agencies that
are not, by law, agents of Her Majesty in right of a particular province of
Canada may issue obligations that, by statute, the Lieutenant Governor in
Council of such province may guarantee, or may authorize the Treasurer thereof
to guarantee, on behalf of the government of such province. Finally, other
Provincial Crown Agencies that are not, by law, agencies of Her Majesty may
issue or guarantee obligations not entitled to be guaranteed by a
provincial government. No assurance can be given that the government of any
province of Canada will support the obligations of Provincial Crown Agencies that
are not agents of Her Majesty and that it has not guaranteed, as it is not
obligated to do so by law. Provincial Crown Agency obligations described
above include, but are not limited to, those issued or guaranteed by
a:
●
provincial
railway corporation;
●
provincial
hydroelectric or power commission or authority;
●
provincial
municipal financing corporation or agency; and
●
provincial
telephone commission or authority.
Certificates
of Deposit, Time Deposits, and Bankers’ Acceptances
Certificates
of Deposit.
Certificates
of deposit are certificates issued against funds deposited in a bank or a
savings and loan. They are issued for a definite
period of time and earn a specified rate of return.
Time
Deposits.
Time deposits
are non-negotiable deposits maintained in banking institutions for specified
periods of time at stated interest rates.
Bankers’
Acceptances.
Bankers’
acceptances are short-term credit instruments evidencing the obligation of a
bank to pay a draft which has been drawn on it by
a customer. These instruments reflect the obligations both of the bank and of
the drawer to pay the face amount of the instrument upon maturity. They
are primarily used to finance the import, export, transfer or storage of goods.
They are “accepted” when a bank guarantees their payment at
maturity.
These
obligations are not insured by the Federal Deposit Insurance
Corporation.
Commercial
Paper and Short-Term Notes
Commercial
paper consists of unsecured promissory notes issued by corporations. Issues of
commercial paper and short-term notes will normally have maturities of
less than nine months and fixed rates of return, although such instruments may
have maturities of up to one year.
Variable
Amount Master Demand Notes.
Commercial
paper obligations may include variable amount master demand notes. Variable
amount master demand
notes are obligations that permit the investment of fluctuating amounts at
varying rates of interest pursuant to direct arrangements between a
fund, as lender, and the borrower. These notes permit daily changes in the
amounts borrowed. The investing (i.e., “lending”) fund has the right
to increase
the amount under the note at any time up to the full amount provided by the note
agreement, or to decrease the amount, and the borrower may prepay up
to the full amount of the note without penalty. Because variable amount master
demand notes are direct lending arrangements between the lender and
borrower, it is not generally contemplated that such instruments will be traded.
There is no secondary market for these notes, although they are
redeemable (and thus immediately repayable by the borrower) at face value, plus
accrued interest, at any time.
Except in the
case of Opportunistic Fixed Income Fund, an affiliated underlying fund, a
subadvisor will only invest in variable amount master demand notes issued
by companies that, at the date of investment, have an outstanding debt issue
rated “Aaa” or “Aa” by Moody’s or “AAA” or “AA” by S&P or Fitch, and
that the subadvisor has determined present minimal risk of loss. A subadvisor
will look generally at the financial strength of the issuing company as
“backing” for the note and not to any security interest or supplemental source,
such as a bank letter of credit. A variable amount master demand note
will be valued on each day a NAV is determined. The NAV generally will be equal
to the face value of the note plus accrued interest unless the financial
position of the issuer is such that its ability to repay the note when due is in
question.
Conversion
of Debt Securities
In the event
debt securities held by a fund are converted to or exchanged for equity
securities, the fund may continue to hold such equity securities, but
only if and to
the extent consistent with and permitted by its investment objective and
policies.
Convertible
securities may include corporate notes or preferred securities. Investments in
convertible securities are not subject to the rating criteria with respect
to non-convertible debt obligations. As with all debt securities, the market
value of convertible securities tends to decline as interest rates increase and,
conversely, to increase as interest rates decline. The market value of
convertible securities can also be heavily dependent upon the changing value
of the equity securities into which such securities are convertible, depending
on whether the market price of the underlying security exceeds the
conversion price. Convertible securities generally rank senior to common stocks
in an issuer’s capital structure and consequently entail
less risk than
the issuer’s common stock. However, the extent to which such risk is reduced
depends upon the degree to which the convertible security sells above
its value as a fixed-income security.
Corporate
obligations are bonds and notes issued by corporations to finance long-term
credit needs.
Securities of
foreign issuers may include American Depositary Receipts, European Depositary
Receipts, Global Depositary Receipts, International Depositary
Receipts, and Non-Voting Depositary Receipts (“ADRs,” “EDRs,” “GDRs,” “IDRs,”
and “NVDRs,” respectively, and collectively, “Depositary Receipts”).
Depositary Receipts are certificates typically issued by a bank or trust company
that give their holders the right to receive securities issued by a foreign
or domestic corporation.
ADRs are U.S.
dollar-denominated securities backed by foreign securities deposited in a U.S.
securities depository. ADRs are created for trading in the U.S. markets.
The value of an ADR will fluctuate with the value of the underlying security and
will reflect any changes in exchange rates. An investment in ADRs involves
risks associated with investing in foreign securities. Issuers of unsponsored
ADRs are not contractually obligated to disclose material information in
the United States, and, therefore, there may not be a correlation between that
information and the market value of an unsponsored ADR.
EDRs, GDRs,
IDRs, and NVDRs are receipts evidencing an arrangement with a foreign bank or
exchange affiliate similar to that for ADRs and are designed for
use in foreign securities markets. EDRs, GDRs, IDRs, and NVDRs are not
necessarily quoted in the same currency as the underlying security.
NVDRs do not have voting rights.
ETNs are
senior, unsecured, unsubordinated debt securities the returns of which are
linked to the performance of a particular market benchmark or strategy,
minus applicable fees. ETNs are traded on an exchange (e.g., the NYSE) during
normal trading hours; however, investors also can hold ETNs until they
mature. At maturity, the issuer pays to the investor a cash amount equal to the
principal amount, subject to the day’s market benchmark or strategy
factor. ETNs do not make periodic coupon payments or provide principal
protection. ETNs are subject to credit risk, including the credit risk of
the issuer,
and the value of the ETN may drop due to a downgrade in the issuer’s credit
rating, despite the underlying market benchmark or strategy remaining
unchanged. The value of an ETN also may be influenced by time to maturity, level
of supply and demand for the ETN, volatility and lack of liquidity in
underlying assets, changes in the applicable interest rates, changes in the
issuer’s credit rating, and economic, legal, political, or geographic
events that
affect the referenced underlying asset. When a fund invests in ETNs, it will
bear its proportionate share of any fees and expenses borne by the ETN. A
decision by a fund to sell ETN holdings may be limited by the availability of a
secondary market. In addition, although an ETN may be listed on an exchange,
the issuer may not be required to maintain the listing, and there can be no
assurance that a secondary market will exist for an ETN.
ETNs also are
subject to tax risk. No assurance can be given that the IRS will accept, or a
court will uphold, how a fund characterizes and treats ETNs for tax
purposes.
An ETN that is
tied to a specific market benchmark or strategy may not be able to replicate and
maintain exactly the composition and relative weighting of securities,
commodities or other components in the applicable market benchmark or strategy.
Some ETNs that use leverage can, at times, be relatively
illiquid, and thus they may be difficult to purchase or sell at a fair price.
Leveraged ETNs are subject to the same risk as other instruments that
use leverage
in any form. The market value of ETNs may differ from their market benchmark or
strategy. This difference in price may be due to the fact that the
supply and demand in the market for ETNs at any point in time is not always
identical to the supply and demand in the market for the securities,
commodities or
other components underlying the market benchmark or strategy that the ETN seeks
to track. As a result, there may be times when an ETN trades at
a premium or discount to its market benchmark or strategy.
Investment
grade bonds are rated at the time of purchase in the four highest rating
categories by a NRSRO, such as those rated “Aaa,” “Aa,” “A” and “Baa”
by Moody’s, or
“AAA,” “AA,” “A” and “BBB” by S&P or Fitch. Obligations rated in the lowest
of the top four rating categories (such as “Baa” by Moody’s or “BBB” by
S&P or Fitch) may have speculative characteristics and changes in economic
conditions or other circumstances are more likely to lead to a weakened
capacity to make principal and interest payments, including a greater
possibility of default or bankruptcy of the issuer, than is the case with
higher grade
bonds. Subsequent to its purchase by a fund, an issue of securities may cease to
be rated or its rating may be reduced below the minimum required for
purchase by a fund. In addition, it is possible that Moody’s, S&P, Fitch and
other NRSROs might not timely change their ratings of a particular
issue to reflect subsequent events. None of these events will require the sale
of the securities by a fund, although a subadvisor will consider these events
in determining whether it should continue to hold the securities.
In general,
the ratings of Moody’s, S&P, and Fitch represent the opinions of these
agencies as to the quality of the securities that they rate. It should be
emphasized
however, that ratings are relative and subjective and are not absolute standards
of quality. These ratings will be used by a fund as initial criteria for
the selection of portfolio securities. Among the factors that will be considered
are the long-term ability of the issuer to pay principal and interest and
general economic trends. Appendix A contains further information concerning the
ratings of Moody’s, S&P, and Fitch and their significance.
Foreign
Government Securities
Foreign
government securities include securities issued or guaranteed by foreign
governments (including political subdivisions) or their authorities,
agencies, or
instrumentalities or by supra-national agencies. Different kinds of foreign
government securities have different kinds of government support. For
example, some foreign government securities are supported by the full faith and
credit of a foreign national government or political subdivision
and some are not. Foreign government securities of some countries may involve
varying degrees of credit risk as a result of financial or political
instability in those countries and the possible inability of a fund to enforce
its rights against the foreign government issuer. As with other fixed
income
securities, sovereign issuers may be unable or unwilling to make timely
principal or interest payments. Supra-national agencies are agencies
whose member
nations make capital contributions to support the agencies’
activities.
High
Yield (High Risk) Domestic Corporate Debt Securities
High yield
corporate debt securities (also known as “junk bonds”) include bonds,
debentures, notes, bank loans, credit-linked notes and commercial paper. Most of
these debt securities will bear interest at fixed rates, except bank loans,
which usually have floating rates. Bonds also may have variable rates of
interest, and debt securities may involve equity features, such as equity
warrants or convertible outright and participation features (i.e., interest
or other
payments, often in addition to a fixed rate of return, that are based on the
borrower’s attainment of specified levels of revenues, sales or profits
and thus
enable the holder of the security to share in the potential success of the
venture). Today, much high yield debt is used for general corporate purposes, such
as financing capital needs or consolidating and paying down bank lines of
credit.
The secondary
market for high yield U.S. corporate debt securities is concentrated in
relatively few market makers and is dominated by institutional investors,
including funds, insurance companies and other financial institutions.
Accordingly, the secondary market for such securities is not as liquid
as, and is
more volatile than, the secondary market for higher-rated securities. In
addition, market trading volume for high yield U.S. corporate debt securities is
generally lower and the secondary market for such securities could shrink or
disappear suddenly and without warning as a result of adverse market or
economic conditions, independent of any specific adverse changes in the
condition of a particular issuer. The lack of sufficient market liquidity may
cause a fund to incur losses because it will be required to effect sales at a
disadvantageous time and then only at a substantial drop in price. These
factors may have an adverse effect on the market price and a fund’s ability to
dispose of particular portfolio investments. A less liquid secondary
market also may make it more difficult for a fund to obtain precise valuations
of the high yield securities in its portfolio.
A fund is not
obligated to dispose of securities whose issuers subsequently are in default or
that are downgraded below the rating requirements that the fund imposes
at the time of purchase.
Hybrid
instruments (a type of potentially high-risk derivative) combine the elements of
futures contracts or options with those of debt, preferred equity or a
depository instrument.
Characteristics
of Hybrid Instruments.
Generally, a
hybrid instrument is a debt security, preferred stock, depository share, trust
certificate, certificate of
deposit or other evidence of indebtedness on which a portion of or all interest
payments, and/or the principal or stated amount payable at maturity,
redemption or retirement, is determined by reference to the
following:
●
prices,
changes in prices, or differences between prices of securities, currencies,
intangibles, goods, articles or commodities (collectively, “underlying
assets”); or
●
an objective
index, economic factor or other measure, such as interest rates, currency
exchange rates, commodity indices, and securities indices (collectively,
“benchmarks”).
Hybrid
instruments may take a variety of forms, including, but not limited
to:
●
debt
instruments with interest or principal payments or redemption terms determined
by reference to the value of a currency or commodity or securities
index at a future point in time;
●
preferred
stock with dividend rates determined by reference to the value of a currency;
or
●
convertible
securities with the conversion terms related to a particular
commodity.
Uses
of Hybrid Instruments.
Hybrid
instruments provide an efficient means of creating exposure to a particular
market, or segment of a market, with the objective
of enhancing total return. For example, a fund may wish to take advantage of
expected declines in interest rates in several European countries, but
avoid the transaction costs associated with buying and currency-hedging the
foreign bond positions.
One approach
is to purchase a U.S. dollar-denominated hybrid instrument whose redemption
price is linked to the average three-year interest rate in a designated
group of countries. The redemption price formula would provide for payoffs of
greater than par if the average interest rate was lower than a specified
level, and payoffs of less than par if rates were above the specified level.
Furthermore, the investing fund could limit the downside risk of the
security by
establishing a minimum redemption price so that the principal paid at maturity
could not be below a predetermined minimum level if interest rates were to
rise significantly.
The purpose of
this type of arrangement, known as a structured security with an embedded put
option, is to give a fund the desired European bond exposure while
avoiding currency risk, limiting downside market risk, and lowering transactions
costs. Of course, there is no guarantee that such a strategy will
be successful and the value of a fund may decline if, for example, interest
rates do not move as anticipated or credit problems develop with the issuer of
the hybrid instrument.
Structured
Notes.
Structured
notes include investments in an entity, such as a trust, organized and operated
solely for the purpose of restructuring the investment
characteristics of various securities. This type of restructuring involves the
deposit or purchase of specified instruments and the issuance of
one or more classes of securities backed by, or representing interests, in the
underlying instruments. The cash flow on the underlying instruments
may be apportioned among the newly issued structured notes to create securities
with different investment characteristics, such as varying maturities,
payment priorities or interest rate provisions. The extent of the income paid by
the structured notes is dependent on the cash flow of the underlying
instruments.
A fund may not
invest more than 15% of its net assets in securities that cannot be sold or
disposed of in seven calendar days or less without the sale or disposition
significantly changing the market value of the investment (“illiquid
securities”). Investment in illiquid securities involves the risk that,
because of the
lack of consistent market demand for such securities, a fund may be forced to
sell them at a discount from the last offer price. To the extent that an
investment is deemed to be an illiquid investment or a less liquid investment, a
fund can expect to be exposed to greater liquidity risk.
Illiquid
securities may include, but are not limited to: (a) securities (except for
Section 4(a)(2) Commercial Paper, discussed below) that are not eligible
for resale
pursuant to Rule 144A under the 1933 Act; (b) repurchase agreements maturing in
more than seven days (except for those that can be terminated
after a notice period of seven days or less); (c) IOs and POs of
non-governmental issuers; (d) time deposits maturing in more than seven
days; (e)
federal fund loans maturing in more than seven days; (f) bank loan participation
interests; (g) foreign government loan participations; (h) municipal
leases and participations therein; and (i) any other securities or other
investments for which a liquid secondary market does not exist.
The Trust has
implemented a written liquidity risk management program (the “LRM Program”) and
related procedures to manage the liquidity risk of a fund in
accordance with Rule 22e-4 under the 1940 Act (“Rule 22e-4”). Rule 22e-4 defines
“liquidity risk” as the risk that a fund could not meet requests to redeem
shares issued by the fund without significant dilution of the remaining
investors’ interests in the fund. The Board has designated the Advisor
to serve as
the administrator of the LRM Program and the related procedures. As a part of
the LRM Program, the Advisor is responsible to identify illiquid
investments and categorize the relative liquidity of a fund’s investments in
accordance with Rule 22e-4. Under the LRM Program, the Advisor assesses,
manages, and periodically reviews a fund’s liquidity risk, and is responsible to
make periodic reports to the Board and the SEC regarding the liquidity of a
fund’s investments, and to notify the Board and the SEC of certain liquidity
events specified in Rule 22e-4. The liquidity of a fund’s portfolio investments is
determined based on relevant market, trading and investment-specific
considerations under the LRM Program.
Commercial
paper issued in reliance on Section 4(a)(2) of the 1933 Act (“Section 4(a)(2)
Commercial Paper”) is restricted as to its disposition under federal
securities law, and generally is sold to institutional investors, such as the
funds, who agree that they are purchasing the paper for investment purposes and
not with a view to public distribution. Any resale by the purchaser must be made
in an exempt transaction. Section 4(a)(2) Commercial Paper normally
is resold to other institutional investors, like the funds, through or with the
assistance of the issuer or investment dealers who make a market in
Section 4(a)(2) Commercial Paper, thus providing liquidity.
If the Advisor
determines, pursuant to the LRM Program and related procedures, that specific
Section 4(a)(2) Commercial Paper or securities that are restricted as
to resale but for which a ready market is available pursuant to an exemption
provided by Rule 144A under the 1933 Act or other exemptions
from the registration requirements of the 1933 Act are liquid, they will not be
subject to a fund’s limitation on investments in illiquid securities.
Investing in Section 4(a)(2) Commercial Paper could have the effect of
increasing the level of illiquidity in a fund if qualified institutional
buyers become
for a time uninterested in purchasing these restricted
securities.
Indexed
securities are instruments whose prices are indexed to the prices of other
securities, securities indices, currencies, or other financial indicators.
Indexed securities typically, but not always, are debt securities or deposits
whose value at maturity or coupon rate is determined by reference to a
specific instrument or statistic.
Currency-indexed
securities typically are short-term to intermediate-term debt securities whose
maturity values or interest rates are determined by reference to
the values of one or more specified foreign currencies, and may offer higher
yields than U.S. dollar-denominated securities. Currency-indexed
securities may be positively or negatively indexed; that is, their maturity
value may increase when the specified currency value increases,
resulting in a security that performs similarly to a foreign denominated
instrument, or their maturity value may decline when foreign currencies
increase, resulting in a security whose price characteristics are similar to a
put on the underlying currency. Currency-indexed securities also may have
prices that depend on the values of a number of different foreign currencies
relative to each other.
The
performance of indexed securities depends to a great extent on the performance
of the security, currency, or other instrument to which they are indexed, and
also may be influenced by interest rate changes in the United States and abroad.
Indexed securities may be more volatile than the underlying
instruments. Indexed securities also are subject to the credit risks associated
with the issuer of the security, and their values may decline substantially
if the issuer’s creditworthiness deteriorates. Issuers of indexed securities
have included banks, corporations, and certain U.S. government agencies. An
indexed security may be leveraged to the extent that the magnitude of any change
in the interest rate or principal payable on an indexed security is a
multiple of the change in the reference price.
Index-Related
Securities (“Equity Equivalents”)
A fund may
invest in certain types of securities that enable investors to purchase or sell
shares in a basket of securities that seeks to track the performance of
an underlying index or a portion of an index. Such Equity Equivalents include,
among others DIAMONDS (interests in a basket of securities
that seeks to track the performance of the Dow Jones Industrial Average), SPDRs
or S&P Depositary Receipts (an ETF that tracks
the S&P 500 Index). Such
securities are similar to index mutual funds, but they are traded on various
stock exchanges or secondary markets. The value of these securities is
dependent upon the performance of the underlying index on which they are based.
Thus, these securities are subject to the same risks as their
underlying indices as well as the securities that make up those indices. For
example, if the securities comprising an index that an index-related
security seeks
to track perform poorly, the index-related security will lose value.
Equity
Equivalents may be used for several purposes, including to simulate full
investment in the underlying index while retaining a cash balance for
portfolio
management purposes, to facilitate trading, to reduce transaction costs or to
seek higher investment returns where an Equity Equivalent is priced more
attractively than securities in the underlying index. Because the expense
associated with an investment in Equity Equivalents may be substantially
lower than the expense of small investments directly in the securities
comprising the indices they seek to track, investments in Equity Equivalents
may provide a cost-effective means of diversifying a fund’s assets across a
broad range of securities.
To the extent
a fund invests in securities of other investment companies, including Equity
Equivalents, fund shareholders would indirectly pay a portion of the
operating costs of such companies in addition to the expenses of its own
operations. These costs include management, brokerage, shareholder servicing and
other operational expenses. Indirectly, if a fund invests in Equity Equivalents,
shareholders may pay higher operational costs than if they owned the
underlying investment companies directly. Additionally, a fund’s investments in
such investment companies are subject to limitations under the 1940 Act
and market availability.
The prices of
Equity Equivalents are derived and based upon the securities held by the
particular investment company. Accordingly, the level of risk involved in
the purchase or sale of an Equity Equivalent is similar to the risk involved in
the purchase or sale of traditional common stock, with the exception that
the pricing mechanism for such instruments is based on a basket of stocks. The
market prices of Equity Equivalents are expected to fluctuate in
accordance with both changes in the NAVs of their underlying indices and the
supply and demand for the instruments on the exchanges on which they are
traded. Substantial market or other disruptions affecting Equity Equivalents
could adversely affect the liquidity and value of the shares of a
fund.
Inflation-indexed
bonds are debt instruments whose principal and/or interest value are adjusted
periodically according to a rate of inflation (usually a CPI). Two
structures are most common. The U.S. Treasury and some other issuers use a
structure that accrues inflation into the principal value of the bond. Most
other issuers pay out the inflation accruals as part of a semiannual
coupon.
U.S. Treasury
Inflation Protected Securities (“TIPS”) currently are issued with maturities of
five, ten, or thirty years, although it is possible that securities with other
maturities will be issued in the future. The principal amount of TIPS adjusts
for inflation, although the inflation-adjusted principal is not paid
until
maturity. Semiannual coupon payments are determined as a fixed percentage of the
inflation-adjusted principal at the time the payment is made.
If the rate
measuring inflation falls, the principal value of inflation-indexed bonds will
be adjusted downward, and consequently the interest payable on these
securities (calculated with respect to a smaller principal amount) will be
reduced. At maturity, TIPS are redeemed at the greater of their inflation-adjusted
principal or at the par amount at original issue. If an inflation-indexed bond
does not provide a guarantee of principal at maturity, the adjusted
principal value of the bond repaid at maturity may be less than the original
principal.
The value of
inflation-indexed bonds is expected to change in response to changes in real
interest rates. Real interest rates in turn are tied to the relationship
between nominal interest rates and the rate of inflation. For example, if
inflation were to rise at a faster rate than nominal interest rates, real
interest rates
would likely decline, leading to an increase in value of inflation-indexed
bonds. In contrast, if nominal interest rates increase at a faster rate than
inflation, real interest rates would likely rise, leading to a decrease in value
of inflation-indexed bonds.
While these
securities, if held to maturity, are expected to be protected from long-term
inflationary trends, short-term increases in inflation may lead to a decline in
value. If nominal interest rates rise due to reasons other than inflation (for
example, due to an expansion of non-inflationary economic activity),
investors in these securities may not be protected to the extent that the
increase in rates is not reflected in the bond’s inflation measure.
The inflation
adjustment of TIPS is tied to the CPI-U, which is calculated monthly by the U.S.
Bureau of Labor Statistics. The CPI-U is a measurement of price changes
in the cost of living, made up of components such as housing, food,
transportation, and energy. There can be no assurance that the CPI-U
will
accurately measure the real rate of inflation in the prices of goods and
services.
Pursuant to an
exemptive order issued by the SEC, a fund may lend money to, and borrow money
from, other funds advised by the Advisor or any other investment
advisor under common control with the Advisor, subject to the fundamental
restrictions on borrowing and lending applicable to the fund. Each fund is
authorized to participate fully in this program.
A fund will
borrow through the program only when the costs are equal to or lower than the
cost of bank loans, and a fund will lend through the program only when the
returns are higher than those available from an investment in overnight
repurchase agreements. Interfund loans and borrowings normally extend
overnight, but can have a maximum duration of seven days. Loans may be called on
one day’s notice. A fund may have to borrow from a bank at a
higher
interest rate if an interfund loan is called or not renewed. Any delay in
repayment to a lending fund or from a borrowing fund could result in a lost
investment
opportunity or additional borrowing costs.
Investment
in Other Investment Companies
A fund may
invest in other investment companies (including closed-end investment companies,
unit investment trusts, open-end investment companies, investment
companies exempted from registration under the 1940 Act pursuant to the rules
thereunder and other pooled vehicles) to the extent permitted by
federal securities laws, including Section 12 of the 1940 Act, and the rules,
regulations and interpretations thereunder. A fund may invest in other
investment companies beyond the statutory limits set forth in Section 12 of the
1940 Act (“statutory limits”) to the extent permitted by an exemptive rule
adopted by the SEC or pursuant to an exemptive order obtained from the
SEC.
Investing in
other investment companies involves substantially the same risks as investing
directly in the underlying instruments, but the total return on such
investments at the investment company-level may be reduced by the operating
expenses and fees of such other investment companies, including advisory fees.
Certain types of investment companies, such as closed-end investment companies,
issue a fixed number of shares that trade on a stock exchange or
may involve the payment of substantial premiums above the value of such
investment companies’ portfolio securities when traded OTC or at discounts to
their NAVs. Others are continuously offered at NAV, but also may be traded in
the secondary market.
Blue Chip
Growth Fund, Capital Appreciation Value Fund, Health Sciences Fund, and Equity
Income Fund also may invest in shares of certain internal T. Rowe Price
funds (collectively, the “T. Rowe Funds”), consistent with each such fund’s
investment objective and policies. In order to prevent these funds from paying
duplicate management fees, the value of shares of the T. Rowe Funds held in a T.
Rowe Price-subadvised fund’s portfolio will be excluded from the
fund’s total assets in calculating the subadvisory fees payable to T. Rowe
Price.
Investments
in Creditors’ Claims
Creditors’
claims in bankruptcy (“Creditors’ Claims”) are rights to payment from a debtor
under the U.S. bankruptcy laws. Creditors’ Claims may be secured or
unsecured. A secured claim generally receives priority in payment over unsecured
claims.
Sellers of
Creditors’ Claims can either be: (i) creditors that have extended unsecured
credit to the debtor company (most commonly trade suppliers of materials or
services); or (ii) secured creditors (most commonly financial institutions) that
have obtained collateral to secure an advance of credit to the debtor.
Selling a Creditors’ Claim offers the creditor an opportunity to turn a claim
that otherwise might not be satisfied for many years into liquid assets.
A Creditors’
Claim may be purchased directly from a creditor although most are purchased
through brokers. A Creditors’ Claim can be sold as a single claim or as
part of a package of claims from several different bankruptcy filings.
Purchasers of Creditors’ Claims may take an active role in the reorganization
process of the bankrupt company and, in certain situations in which a Creditors’
Claim is not paid in full, the claim may be converted into stock of the
reorganized debtor.
Although
Creditors’ Claims can be sold to other investors, the market for Creditors’
Claims is not liquid and, as a result, a purchaser of a Creditors’ Claim
may be unable
to sell the claim or may have to sell it at a drastically reduced price. There
is no guarantee that any payment will be received from a Creditors’
Claim, especially in the case of unsecured claims.
A fund may
lend its securities so long as such loans do not represent more than
33 1∕3% of its total
assets. As collateral for the loaned securities, the borrower gives
the lending portfolio collateral equal to at least 100% of the value of the
loaned securities. The collateral will consist of cash (including U.S. dollars
and foreign currency), cash equivalents or securities issued or guaranteed by
the U.S. government or its agencies or instrumentalities. The borrower must
also agree to increase the collateral if the value of the loaned securities
increases. If the market value of the loaned securities declines, the borrower
may request that some collateral be returned.
During the
existence of the loan, a fund will receive from the borrower amounts equivalent
to any dividends, interest or other distributions on the loaned securities, as
well as interest on such amounts. If the fund receives a payment in lieu of
dividends (a “substitute payment”) with respect to securities on loan pursuant
to a securities lending transaction, such income will not be eligible for the
dividends-received deduction (the “DRD”) for corporate shareholders
or for treatment as qualified dividend income for individual shareholders. The
DRD and qualified dividend income are discussed more fully in this SAI
under “Additional Information Concerning Taxes.”
Because Class
1 shares of the funds are held directly by insurance companies affiliated with
the Advisor, such insurance companies, rather than individuals
who select the funds as investment options under variable insurance contracts,
would receive the benefit of any DRD. As a result, a decision by the Advisor
or an affiliated subadvisor for a particular fund to refrain from securities
lending could benefit the affiliated insurance companies (which would receive
the DRD) to the detriment of contract holders who have selected that fund (as
they would not receive the benefit of securities lending income,
including substitute payments). However, the Advisor and the affiliated
subadvisors have a fiduciary duty to independently assess whether engaging in
securities lending is in the best interests of a fund, which should act to limit
this conflict of interest.
As with other
extensions of credit, there are risks that collateral could be inadequate in the
event of the borrower failing financially, which could result in actual
financial loss, and risks that recovery of loaned securities could be delayed,
which could result in interference with portfolio management decisions or
exercise of ownership rights. The collateral is managed by an affiliate of the
Advisor, which may incentivize the Advisor to lend fund
securities to
benefit this affiliate. The Advisor maintains robust oversight of securities
lending activity and seeks to ensure that all lending activity undertaken by
a fund is in the fund's best interests. A fund will be responsible for the risks
associated with the investment of cash collateral, including the risk that
the fund may lose money on the investment or may fail to earn sufficient income
to meet its obligations to the borrower. In addition, a fund may lose its
right to vote its shares of the loaned securities at a shareholder meeting if
the subadvisor does not recall or does not timely recall the loaned
securities, or if the borrower fails to return the recalled securities in
advance of the record date for the meeting.
The Trust, on
behalf of its funds,
may
enter into an
agency agreement for securities lending transactions (“Securities Lending
Agreement”) with one or
more of
the
following: Brown
Brothers Harriman; National
Financial Services LLC;
Goldman Sachs
Bank USA;
and State
Street Bank
(each, a
“Securities Lending
Agent”). Pursuant to each Securities Lending Agreement, the Securities
Lending
Agent acts as
securities lending agent for a
fund and
administers
the fund’s
securities lending program. During the fiscal year, each Securities Lending
Agent performed various services for the applicable
funds,
including the following: (i) lending portfolio securities, previously identified
by the fund as available for loan, and held by the fund’s custodian (“Custodian”)
on behalf of the fund, to borrowers identified by the fund in the Securities
Lending Agreement; (ii) instructing the Custodian to receive and deliver
securities, as applicable, to effect such loans; (iii) locating borrowers; (iv)
monitoring daily the market value of loaned securities; (v) ensuring
daily movement
of collateral associated with loan transactions; (vi) marking to market loaned
securities and non-cash collateral; (vii) monitoring dividend
activity with respect to loaned securities; (viii) negotiating loan terms with
the borrowers; (ix) recordkeeping and account servicing related to securities
lending activities; and (x) arranging for the return of loaned securities at the
termination of the loan. Under each Securities Lending Agreement,
the Securities
Lending Agent
generally will
bear the risk that a borrower may default on its obligation to return loaned
securities.
Securities
lending involves counterparty risk, including the risk that the loaned
securities may not be returned or returned in a timely manner and/or a
loss of rights
in the collateral if the borrower or the lending agent defaults or fails
financially. This risk is increased when the fund’s loans are concentrated
with a single or limited number of borrowers. There are no limits on the number
of borrowers to which the fund may lend securities and the fund may lend
securities to only one or a small group of borrowers. In addition, under each
Securities Lending Agreement, loans may be made to affiliates of
the Securities
Lending Agent
as
identified in
the applicable Securities Lending Agreement.
Cash
collateral may be invested by a fund in JHCT, a privately offered 1940 Act
registered institutional money market fund. Investment of cash collateral
offers the opportunity for a fund to profit from income earned by this
collateral pool, but also the risk of loss, should the value of the fund’s
shares in the
collateral pool decrease below the NAV at which such shares were
purchased.
For each fund
that engaged in securities lending activities during the fiscal period ended
August 31, 2024, the
following tables detail the amounts of income and
fees/compensation related to such activities during the period. Any fund not
listed below did not engage in securities lending activities during the
fiscal period ended August 31, 2024.
|
|
Alternative
Asset
Allocation
Fund |
|
Capital
Appreciation
Fund |
Capital
Appreciation
Value
Fund |
Gross
Income from securities lending activities ($) |
|
|
|
|
Fees
and/or compensation for securities lending activities and related
service: |
|
|
|
|
Fees
paid to securities lending agent from a revenue split
($) |
|
|
|
|
Fees
paid for any cash collateral management service (including fees deducted
from
a pooled cash collateral reinvestment vehicle) that are not included in
the
revenue
split ($) |
|
|
|
|
Administrative
fees not included in revenue split ($) |
|
|
|
|
Indemnification
fee not included in revenue split ($) |
|
|
|
|
Rebate
(paid to borrower) ($) |
|
|
|
|
Other
fees not included in revenue split (specify) ($) |
|
|
|
|
Aggregate
fees/compensation for securities lending activities
($) |
|
|
|
|
Net
Income from securities lending activities ($) |
|
|
|
|
|
|
|
Disciplined
Value
Emerging
Markets
Equity
Fund |
Emerging
Markets
Debt
Fund |
|
Gross
Income from securities lending activities ($) |
|
|
|
|
Fees
and/or compensation for securities lending activities and related
service: |
|
|
|
|
Fees
paid to securities lending agent from a revenue split
($) |
|
|
|
|
|
|
|
Disciplined
Value
Emerging
Markets
Equity
Fund |
Emerging
Markets
Debt
Fund |
|
Fees
paid for any cash collateral management service (including fees deducted
from
a pooled cash collateral reinvestment vehicle) that are not included in
the
revenue
split ($) |
|
|
|
|
Administrative
fees not included in revenue split ($) |
|
|
|
|
Indemnification
fee not included in revenue split ($) |
|
|
|
|
Rebate
(paid to borrower) ($) |
|
|
|
|
Other
fees not included in revenue split (specify) ($) |
|
|
|
|
Aggregate
fees/compensation for securities lending activities
($) |
|
|
|
|
Net
Income from securities lending activities ($) |
|
|
|
|
|
|
Floating
Rate
Income
Fund |
|
International
Small
Company
Fund |
International
Strategic
Equity
Allocation
Fund |
Gross
Income from securities lending activities ($) |
|
|
|
|
Fees
and/or compensation for securities lending activities and related
service: |
|
|
|
|
Fees
paid to securities lending agent from a revenue split
($) |
|
|
|
|
Fees
paid for any cash collateral management service (including fees deducted
from
a pooled cash collateral reinvestment vehicle) that are not included in
the
revenue
split ($) |
|
|
|
|
Administrative
fees not included in revenue split ($) |
|
|
|
|
Indemnification
fee not included in revenue split ($) |
|
|
|
|
Rebate
(paid to borrower) ($) |
|
|
|
|
Other
fees not included in revenue split (specify) ($) |
|
|
|
|
Aggregate
fees/compensation for securities lending activities
($) |
|
|
|
|
Net
Income from securities lending activities ($) |
|
|
|
|
|
|
Lifestyle
Blend
Aggressive
Portfolio |
Lifestyle
Blend
Balanced
Portfolio |
Lifestyle
Blend
Conservative
Portfolio |
Lifestyle
Blend
Growth
Portfolio |
Gross
Income from securities lending activities ($) |
|
|
|
|
Fees
and/or compensation for securities lending activities and related
service: |
|
|
|
|
Fees
paid to securities lending agent from a revenue split
($) |
|
|
|
|
Fees
paid for any cash collateral management service (including fees deducted
from
a pooled cash collateral reinvestment vehicle) that are not included in
the
revenue
split ($) |
|
|
|
|
Administrative
fees not included in revenue split ($) |
|
|
|
|
Indemnification
fee not included in revenue split ($) |
|
|
|
|
Rebate
(paid to borrower) ($) |
|
|
|
|
Other
fees not included in revenue split (specify) ($) |
|
|
|
|
Aggregate
fees/compensation for securities lending activities
($) |
|
|
|
|
Net
Income from securities lending activities ($) |
|
|
|
|
|
|
Lifestyle
Blend
Moderate
Portfolio |
|
Multi-Asset
High
Income
Fund |
Opportunistic
Fixed
Income
Fund |
Gross
Income from securities lending activities ($) |
|
|
|
|
Fees
and/or compensation for securities lending activities and related
service: |
|
|
|
|
Fees
paid to securities lending agent from a revenue split
($) |
|
|
|
|
Fees
paid for any cash collateral management service (including fees deducted
from
a pooled cash collateral reinvestment vehicle) that are not included in
the
revenue
split ($) |
|
|
|
|
Administrative
fees not included in revenue split ($) |
|
|
|
|
Indemnification
fee not included in revenue split ($) |
|
|
|
|
Rebate
(paid to borrower) ($) |
|
|
|
|
Other
fees not included in revenue split (specify) ($) |
|
|
|
|
Aggregate
fees/compensation for securities lending activities
($) |
|
|
|
|
Net
Income from securities lending activities ($) |
|
|
|
|
|
|
Real
Estate
Securities
Fund |
Strategic
Income
Opportunities
Fund |
2010
Lifetime
Blend
Portfolio |
2015
Lifetime
Blend
Portfolio |
Gross
Income from securities lending activities ($) |
|
|
|
|
Fees
and/or compensation for securities lending activities and related
service: |
|
|
|
|
Fees
paid to securities lending agent from a revenue split
($) |
|
|
|
|
Fees
paid for any cash collateral management service (including fees deducted
from
a
pooled cash collateral reinvestment vehicle) that are not included in the
revenue
split
($) |
|
|
|
|
Administrative
fees not included in revenue split ($) |
|
|
|
|
Indemnification
fee not included in revenue split ($) |
|
|
|
|
Rebate
(paid to borrower) ($) |
|
|
|
|
Other
fees not included in revenue split (specify) ($) |
|
|
|
|
Aggregate
fees/compensation for securities lending activities
($) |
|
|
|
|
Net
Income from securities lending activities ($) |
|
|
|
|
|
|
2020
Lifetime
Blend
Portfolio |
2025
Lifetime
Blend
Portfolio |
2030
Lifetime
Blend
Portfolio |
2035
Lifetime
Blend
Portfolio |
Gross
Income from securities lending activities ($) |
|
|
|
|
Fees
and/or compensation for securities lending activities and related
service: |
|
|
|
|
Fees
paid to securities lending agent from a revenue split
($) |
|
|
|
|
Fees
paid for any cash collateral management service (including fees deducted
from a
pooled
cash collateral reinvestment vehicle) that are not included in the revenue
split ($) |
|
|
|
|
Administrative
fees not included in revenue split ($) |
|
|
|
|
Indemnification
fee not included in revenue split ($) |
|
|
|
|
Rebate
(paid to borrower) ($) |
|
|
|
|
Other
fees not included in revenue split (specify) ($) |
|
|
|
|
Aggregate
fees/compensation for securities lending activities
($) |
|
|
|
|
Net
Income from securities lending activities ($) |
|
|
|
|
|
|
2040
Lifetime
Blend
Portfolio |
2045
Lifetime
Blend
Portfolio |
2050
Lifetime
Blend
Portfolio |
2055
Lifetime
Blend
Portfolio |
Gross
Income from securities lending activities ($) |
|
|
|
|
Fees
and/or compensation for securities lending activities and related
service: |
|
|
|
|
Fees
paid to securities lending agent from a revenue split
($) |
|
|
|
|
Fees
paid for any cash collateral management service (including fees deducted
from a
pooled
cash collateral reinvestment vehicle) that are not included in the revenue
split ($) |
|
|
|
|
Administrative
fees not included in revenue split ($) |
|
|
|
|
Indemnification
fee not included in revenue split ($) |
|
|
|
|
Rebate
(paid to borrower) ($) |
|
|
|
|
Other
fees not included in revenue split (specify) ($) |
|
|
|
|
Aggregate
fees/compensation for securities lending activities
($) |
|
|
|
|
Net
Income from securities lending activities ($) |
|
|
|
|
|
|
2060
Lifetime
Blend
Portfolio |
2065
Lifetime
Blend
Portfolio |
Science
&
Technology
Fund |
|
Gross
Income from securities lending activities ($) |
|
|
|
|
Fees
and/or compensation for securities lending activities and related
service: |
|
|
|
|
Fees
paid to securities lending agent from a revenue split
($) |
|
|
|
|
Fees
paid for any cash collateral management service (including fees deducted
from a
pooled
cash collateral reinvestment vehicle) that are not included in the revenue
split ($) |
|
|
|
|
Administrative
fees not included in revenue split ($) |
|
|
|
|
Indemnification
fee not included in revenue split ($) |
|
|
|
|
Rebate
(paid to borrower) ($) |
|
|
|
|
Other
fees not included in revenue split (specify) ($) |
|
|
|
|
Aggregate
fees/compensation for securities lending activities
($) |
|
|
|
|
Net
Income from securities lending activities ($) |
|
|
|
|
|
|
U.S.
Sector
Rotation
Fund |
Gross
Income from securities lending activities ($) |
|
Fees
and/or compensation for securities lending activities and related
service: |
|
Fees
paid to securities lending agent from a revenue split
($) |
|
Fees
paid for any cash collateral management service (including fees deducted
from a pooled cash collateral reinvestment vehicle)
that
are not included in the revenue split ($) |
|
Administrative
fees not included in revenue split ($) |
|
Indemnification
fee not included in revenue split ($) |
|
Rebate
(paid to borrower) ($) |
|
Other
fees not included in revenue split (specify) ($) |
|
Aggregate
fees/compensation for securities lending activities
($) |
|
Net
Income from securities lending activities ($) |
|
Loan
Participations and Assignments; Term Loans
Loan
participations are loans or other direct debt instruments that are interests in
amounts owned by a corporate, governmental or other borrower to another party.
They may represent amounts owed to lenders or lending syndicates to suppliers of
goods or services, or to other parties. A fund will have the right to
receive payments of principal, interest and any fees to which it is entitled
only from the lender selling the participation and only upon receipt
by the lender
of the payments from the borrower. In connection with purchasing participations,
a fund generally will have no right to enforce compliance
by the
borrower with the term of the loan agreement relating to loan, nor any rights of
set-off against the borrower, and a fund may not directly benefit from any
collateral supporting the loan in which it has purchased the participation. As a
result, the fund will assume the credit risk of both the borrower and the lender
that is selling the participation. In the event of the insolvency of the lender
selling a participation, a fund may be treated as a general creditor of
the lender and may not benefit from any set-off between the lender and the
borrower.
When a fund
purchases assignments from lenders it will acquire direct rights against the
borrower on the loan. However, because assignments are arranged
through private negotiations between potential assignees and potential
assignors, the rights and obligation acquired by a fund as the purchaser of
an assignment may differ from, and be more limited than, those held by the
assigning lender. Investments in loan participations and assignments
present the possibility that a fund could be held liable as a co-lender under
emerging legal theories of lender liability. In addition, if the loan
is foreclosed,
a fund could be part owner of any collateral and could bear the costs and
liabilities of owning and disposing of the collateral. It is anticipated
that such securities could be sold only to a limited number of institutional
investors. In addition, some loan participations and assignments may not be
rated by major rating agencies and may not be protected by the securities
laws.
A term loan is
typically a loan in a fixed amount that borrowers repay in a scheduled series of
repayments or a lump-sum payment at maturity. A delayed draw loan is a
special feature in a term loan that permits the borrower to withdraw
predetermined portions of the total amount borrowed at certain times. If a
fund enters into a commitment with a borrower regarding a delayed draw term loan
or bridge loan, the fund will be obligated on one or more dates in the
future to lend the borrower monies (up to an aggregate stated amount) if called
upon to do so by the borrower. Once repaid, a term loan cannot be
drawn upon again.
Investments in
loans and loan participations will subject a fund to liquidity risk. Loans and
loan participations may be transferable among financial institutions,
but may not have the liquidity of conventional debt securities and are often
subject to restrictions on resale, thereby making them potentially
illiquid. For example, the purchase or sale of loans requires, in many cases,
the consent of either a third party (such as the lead or agent bank for the loan)
or of the borrower, and although such consent is, in practice, infrequently
withheld, the consent requirement can delay a purchase or hinder a fund’s
ability to dispose of its investments in loans in a timely fashion. In addition,
in some cases, negotiations involved in disposing of indebtedness may require
weeks to complete. Consequently, some indebtedness may be difficult or
impossible to dispose of readily at what a subadvisor believes to be a fair
price.
Corporate
loans that a fund may acquire or in which a fund may purchase a loan
participation are made generally to finance internal growth, mergers,
acquisitions,
stock repurchases, leveraged buy-outs, leverage recapitalizations and other
corporate activities. The highly leveraged capital structure of the borrowers
in certain of these transactions may make such loans especially vulnerable to
adverse changes in economic or market conditions and greater credit
risk than other investments.
Certain of the
loan participations or assignments acquired by a fund may involve unfunded
commitments of the lenders or revolving credit facilities under which a
borrower may from time to time borrow and repay amounts up to the maximum amount
of the facility. In such cases, a fund would have an obligation to
advance its portion of such additional borrowings upon the terms specified in
the loan documentation. Such an obligation may have the effect of
requiring a fund to increase its investment in a company at a time when it might
not be desirable to do so (including at a time when the company’s
financial condition makes it unlikely that such amounts will be
repaid).
The borrower
of a loan in which a fund holds an interest (including through a loan
participation) may, either at its own election or pursuant to the terms
of the loan
documentation, prepay amounts of the loan from time to time. The degree to which
borrowers prepay loans, whether as a contractual requirement or
at their election, may be affected by general business conditions, the financial
condition of the borrower and competitive conditions among lenders,
among other things. As such, prepayments cannot be predicted with accuracy. Upon
a prepayment, either in part or in full, the actual outstanding
debt on which a fund derives interest income will be reduced. The effect of
prepayments on a fund’s performance may be mitigated by the receipt of
prepayment fees, and the fund’s ability to reinvest prepayments in other loans
that have similar or identical yields. However, there is no assurance that
a fund will be able to reinvest the proceeds of any loan prepayment at the same
interest rate or on the same terms as those of the prepaid
loan.
A fund may
invest in loans that pay interest at fixed rates and loans that pay interest at
rates that float or reset periodically at a margin above a generally
recognized
base lending rate, such as the Prime Rate (the interest rate that banks charge
their most creditworthy customers)
or another
generally recognized
base lending rate. Most floating rate loans are senior in rank in the event of
bankruptcy to most other securities of the borrower such as common stock
or public bonds. In addition, floating rate loans also are normally secured by
specific collateral or assets of the borrower so that the holders of the
loans will have a priority claim on those assets in the event of default or
bankruptcy of the issuer. While the seniority in rank and the security
interest are helpful in reducing credit risk, such risk is not eliminated.
Securities with floating interest rates can be less sensitive to interest rate
changes, but
may decline in value if their interest rates do not rise as much as interest
rates in general, or if interest rates decline. While, because of this
interest rate
reset feature, loans with resetting interest rates provide a considerable degree
of protection against rising interest rates, there is still potential for
interest rates on such loans to lag changes in interest rates in general for
some period of time. In addition, changes in interest rates will affect the
amount of interest income paid to a fund as the floating rate instruments adjust
to the new levels of interest rates. In a rising base rate environment,
income generation generally will increase. Conversely, during periods when the
base rate is declining, the income generating ability of the loan
instruments will be adversely affected.
Investments in
many loans have additional risks that result from the use of agents and other
interposed financial institutions. Many loans are structured and
administered by a financial institution (e.g., a commercial bank) that acts as
the agent of the lending syndicate. The agent typically administers and
enforces the
loan on behalf of the other lenders in the lending syndicate. In addition, an
institution, typically but not always the agent, holds the collateral, if
any, on behalf of the lenders. A financial institution’s employment as an agent
might be terminated in the event that it fails to observe a requisite
standard of care or becomes insolvent. A successor agent would generally be
appointed to replace the terminated agent, and assets held by the agent
under the loan agreement would likely remain available to holders of such
indebtedness. However, if assets held by the agent for the benefit of
a
fund were determined to be subject to the claims of the agent’s general
creditors, the fund might incur certain costs and delays in realizing payment on
a
loan or loan participation and could suffer a loss of principal and/or interest.
In situations involving other interposed financial institutions (e.g., an
insurance
company or government agency) similar risks may arise.
Loans
and Other Direct Debt Instruments
Direct debt
instruments are interests in amounts owed by a corporate, governmental, or other
borrower to lenders or lending syndicates (loans and loan participations),
to suppliers of goods or services (trade claims or other receivables), or to
other parties. Direct debt instruments involve a risk of loss in case of
default or insolvency of the borrower and may offer less legal protection to the
purchaser in the event of fraud or misrepresentation, or there may be a
requirement that a fund supply additional cash to a borrower on demand. U.S.
federal securities laws afford certain protections against fraud and
misrepresentation in connection with the offering or sale of a security, as well
as against manipulation of trading markets for securities. It is unclear
whether these
protections are available to investments in loans and other forms of direct
indebtedness under certain circumstances, in which case such risks may be
increased.
A fund may be
in possession of material non-public information about a borrower as a result of
owning a floating rate instrument issued by such borrower.
Because of prohibitions on trading in securities of issuers while in possession
of such information, a fund might be unable to enter into a transaction in
a publicly traded security issued by that borrower when it would otherwise be
advantageous to do so.
Market
Capitalization Weighted Approach
A fund’s
structure may involve market capitalization weighting in determining individual
security weights and, where applicable, country or region weights.
Market capitalization weighting means each security is generally purchased based
on the issuer’s relative market capitalization. Market capitalization
weighting may be adjusted by a subadvisor, for a variety of reasons. A fund may
deviate from market capitalization weighting to limit or fix the exposure
to a particular country or issuer to a maximum portion of the assets of the
fund. Additionally, a subadvisor may consider such factors as free float,
price
momentum,
short-run
reversals, trading
strategies, size, relative price, liquidity, profitability, investment
characteristics and other factors
determined to be appropriate by a subadvisor given market conditions. In
assessing relative price, a subadvisor may consider additional factors
such as price
to cash flow or price to earnings ratios. In assessing profitability, a
subadvisor may consider different ratios, such as that of earnings or
profits from
operations relative to book value or assets. The criteria a subadvisor uses for
assessing relative price and profitability are subject to change from time to
time. A subadvisor may exclude the eligible security of a company that meets
applicable market capitalization criterion if it determines, in its judgment,
that the purchase of such security is inappropriate in light of other
conditions. These adjustments will result in a deviation from traditional
market
capitalization weighting. A further deviation may occur due to holdings in
securities received in connection with corporate actions. A subadvisor
may consider a
small capitalization company’s investment characteristics as
compared to other
eligible companies when making investment decisions and may
exclude a small capitalization company with high
asset growth. In assessing
a company’s investment characteristics, a subadvisor may consider
ratios such as recent changes in assets divided by total assets. A fund will
generally not exclude more than 5%
of the eligible small capitalization
company universe within each
eligible
country based on such investment characteristics. The criteria
a subadvisor uses for assessing a company’s
investment characteristics is subject to change from time to time.
Adjustment for
free float modifies market capitalization weighting to exclude the share capital
of a company that is not freely available for trading in the public equity
markets. For example, the following types of shares may be excluded: (i) those
held by strategic investors (such as governments, controlling
shareholders and management); (ii) treasury shares; or (iii) shares subject to
foreign ownership restrictions.
Furthermore, a
subadvisor may reduce the relative amount of any security held in order to
retain sufficient portfolio liquidity. A portion, but generally not in excess of
20% of a fund’s assets, may be invested in interest-bearing obligations, such as
money market instruments, thereby causing further deviation from
market capitalization weighting. A further deviation may occur due to holdings
in securities received in connection with corporate actions.
Block
purchases of eligible securities may be made at opportune prices, even though
such purchases exceed the number of shares that, at the time of purchase,
would be purchased under a market capitalization weighted approach. Generally,
changes in the composition and relative ranking (in terms of market
capitalization) of the stocks that are eligible for purchase take place with
every trade when the securities markets are open for trading due, primarily, to
price changes of such securities. On at least a semiannual basis, a subadvisor
will identify companies whose stock is eligible for investment by the fund.
Additional investments generally will not be made in securities that have
changed in value sufficiently to be excluded from a subadvisor’s then-current
market capitalization requirement for eligible portfolio securities. This may
result in further deviation from market capitalization weighting. Such deviation
could be substantial if a significant amount of holdings of a fund change in
value sufficiently to be excluded from the requirement for eligible
securities but not by a sufficient amount to warrant their sale.
Country
weights may be based on the total market capitalization of companies within each
country. The country weights may take into consideration the free float of
companies within a country or whether these companies are eligible to be
purchased for the particular strategy. In addition, to maintain a satisfactory
level of diversification, a subadvisor may limit or fix the exposure to a
particular country or region to a maximum proportion of the assets of
that vehicle.
Country weights may also vary due to general day-to-day trading patterns and
price movements. The weighting of countries may vary from their
weighting in published international indices.
Money market
instruments (and other securities as noted under each fund description) may be
purchased for temporary defensive purposes or for short-term
investment purposes. General overnight cash held in a fund's portfolio may also
be invested in JHCT, a privately offered 1940 Act registered institutional
money market fund subadvised by Manulife IM (US), an affiliate of the Advisor,
that is part of the same group of investment companies as the fund and
that is offered exclusively to funds in the same group of investment
companies.
Under a
mortgage dollar roll, a fund sells mortgage-backed securities for delivery in
the future (generally within 30 days) and simultaneously contracts to repurchase
substantially similar securities (of the same type, coupon and maturity) on a
specified future date. During the roll period, a fund forgoes principal and
interest paid on the mortgage-backed securities. A fund is compensated by the
difference between the current sale price and the lower forward price
for the future purchase (often referred to as the “drop”), as well as by the
interest earned on the cash proceeds of the initial sale. A fund also may be
compensated by receipt of a commitment fee. Dollar roll transactions involve the
risk that the market value of the securities sold by a fund may decline
below the repurchase price of those securities. A mortgage dollar roll may be
considered a form of leveraging, and may, therefore, increase fluctuations
in a fund’s NAV per share. Please see “Government Regulation of Derivatives”
section for additional information. For financial reporting and tax purposes,
the funds treat mortgage dollar rolls as two separate transactions; one
involving the purchase of a security and a separate transaction involving a
sale.
Prepayment
of Mortgages.
Mortgage
securities differ from conventional bonds in that principal is paid over the
life of the securities rather than at maturity. As a
result, when a fund invests in mortgage securities, it receives monthly
scheduled payments of principal and interest, and may receive unscheduled
principal payments representing prepayments on the underlying mortgages. When a
fund reinvests the payments and any unscheduled prepayments of
principal it receives, it may receive a rate of interest that is higher or lower
than the rate on the existing mortgage securities. For this reason,
mortgage securities may be less effective than other types of debt securities as
a means of locking in long term interest rates.
In addition,
because the underlying mortgage loans and assets may be prepaid at any time, if
a fund purchases mortgage securities at a premium, a prepayment
rate that is faster than expected will reduce yield to maturity, while a
prepayment rate that is slower than expected will increase yield to maturity.
Conversely, if a fund purchases these securities at a discount, faster than
expected prepayments will increase yield to maturity, while slower than expected
payments will reduce yield to maturity.
Adjustable
Rate Mortgage Securities.
Adjustable
rate mortgage securities are similar to the fixed rate mortgage securities
discussed above, except that,
unlike fixed rate mortgage securities, adjustable rate mortgage securities are
collateralized by or represent interests in mortgage loans with variable
rates of interest. These variable rates of interest reset periodically to align
themselves with market rates. Most adjustable rate mortgage securities
provide for an initial mortgage rate that is in effect for a fixed period,
typically ranging from three to twelve months. Thereafter, the mortgage
interest rate
will reset periodically in accordance with movements in a specified published
interest rate index. The amount of interest due to an adjustable
rate mortgage holder is determined in accordance with movements in a specified
published interest rate index by adding a pre-determined increment or
“margin” to the specified interest rate index. Many adjustable rate mortgage
securities reset their interest rates based on changes in:
●
one-year,
three-year and five-year constant maturity Treasury Bill rates;
●
three-month or
six-month Treasury Bill rates;
●
11th District
Federal Home Loan Bank Cost of Funds;
●
National
Median Cost of Funds; or
●
one-month,
three-month, six-month or one-year LIBOR or SOFR
and other
market rates.
During periods
of increasing rates, a fund will not benefit from such increase to the extent
that interest rates rise to the point where they cause the current coupon
of adjustable rate mortgages held as investments to exceed any maximum allowable
annual or lifetime reset limits or “cap rates” for a particular
mortgage. In this event, the value of the mortgage securities held by a fund
would likely decrease. During periods of declining interest rates, income to a
fund derived from adjustable rate mortgages that remain in a mortgage pool may
decrease in contrast to the income on fixed rate mortgages,
which will remain constant. Adjustable rate mortgages also have less potential
for appreciation in value as interest rates decline than do fixed rate
investments. Also, a fund’s NAV could vary to the extent that current yields on
adjustable rate mortgage securities held as investments are different than
market yields during interim periods between coupon reset dates.
Privately
Issued Mortgage Securities.
Privately
issued mortgage securities provide for the monthly principal and interest
payments made by individual
borrowers to pass through to investors on a corporate basis, and in privately
issued CMOs, as further
described below. Privately issued mortgage
securities are issued by private originators of, or investors in, mortgage
loans, including:
●
savings and
loan associations; and
●
special
purpose subsidiaries of the foregoing.
Since
privately issued mortgage certificates are not guaranteed by an entity having
the credit status of GNMA or Freddie Mac, such securities generally are structured
with one or more types of credit enhancement. For a description of the types of
credit enhancements that may accompany privately issued
mortgage securities, see “Types of Credit Support” below. To the extent that a
fund invests in mortgage securities, it will not limit its investments
in mortgage
securities to those with credit enhancements.
Collateralized
Mortgage Obligations.
CMOs generally
are bonds or certificates issued in multiple classes that are collateralized by
or represent an interest in
mortgages. CMOs may be issued by single-purpose, stand-alone finance
subsidiaries or trusts of financial institutions, government agencies,
investment
banks or other similar institutions. Each class of CMOs, often referred to as a
“tranche,” may be issued with a specific fixed coupon rate (which may be
zero) or a floating coupon rate. Each class of CMOs also has a stated maturity
or final distribution date. Principal prepayments on the underlying
mortgages may cause the CMOs to be retired substantially earlier than their
stated maturities or final distribution dates. Interest is paid or accrued on
CMOs on a monthly, quarterly or semiannual basis.
The principal
of and interest on the underlying mortgages may be allocated among the several
classes of a series of a CMO in many ways. The general goal sought to
be achieved in allocating cash flows on the underlying mortgages to the various
classes of a series of CMOs is to create tranches on which the
expected cash flows have a higher degree of predictability than the underlying
mortgages. In creating such tranches, other tranches may be subordinated
to the interests of these tranches and receive payments only after the
obligations of the more senior tranches have been satisfied. As a general
matter, the more predictable the cash flow is on a CMO tranche, the lower the
anticipated yield will be on that tranche at the time of issuance. As
part of the
process of creating more predictable cash flows on most of the tranches in a
series of CMOs, one or more tranches generally must be created that absorb
most of the volatility in the cash flows on the underlying mortgages. The yields
on these tranches are relatively higher than on tranches with more
predictable cash flows. Because of the uncertainty of the cash flows on these
tranches, and the sensitivity of these transactions to changes in prepayment
rates on the underlying mortgages, the market prices of and yields on these
tranches tend to be highly volatile. The market prices of and yields on
tranches with longer terms to maturity also tend to be more volatile than
tranches with shorter terms to maturity due to these same factors. To
the extent the
mortgages underlying a series of a CMO are so-called “subprime mortgages”
(mortgages granted to borrowers whose credit history is not sufficient to
obtain a conventional mortgage), the risk of default is higher, which increases
the risk that one or more tranches of a CMO will not receive its predicted cash
flows.
CMOs purchased
by a fund may be:
1
collateralized
by pools of mortgages in which each mortgage is guaranteed as to payment of
principal and interest by an agency or instrumentality of the U.S.
government;
2
collateralized
by pools of mortgages in which payment of principal and interest is guaranteed
by the issuer and the guarantee is collateralized by U.S.
government securities; or
3
securities for
which the proceeds of the issuance are invested in mortgage securities and
payment of the principal and interest is supported by the credit of an
agency or instrumentality of the U.S. government.
Separate
Trading of Registered Interest and Principal of Securities.
Separately
traded interest components of securities may be issued or guaranteed by
the U.S. Treasury. The interest components of selected securities are traded
independently under the Separate Trading of Registered Interest and
Principal of Securities program. Under the Separate Trading of Registered
Interest and Principal of Securities program, the interest components are
individually numbered and separately issued by the U.S. Treasury at the request
of depository financial institutions, which then trade the component
parts independently.
Stripped
Mortgage Securities.
Stripped
mortgage securities are derivative multi-class mortgage securities. Stripped
mortgage securities may be issued by
agencies or instrumentalities of the U.S. government, or by private issuers,
including savings and loan associations, mortgage banks, commercial
banks, investment banks and special purpose subsidiaries of the foregoing.
Stripped mortgage securities have greater volatility than other types of
mortgage securities in which a fund invests. Although stripped mortgage
securities are purchased and sold by institutional investors through
several
investment banking firms acting as brokers or dealers, the market for such
securities has not yet been fully developed. Accordingly, stripped mortgage
securities may be illiquid and, together with any other illiquid investments,
will not exceed a fund’s limitation on investments in illiquid securities.
Stripped
mortgage securities are usually structured with two classes that receive
different proportions of the interest and principal distributions on a
pool of
mortgage assets. A common type of stripped mortgage security will have one class
receiving some of the interest and most of the principal from the mortgage
assets, while the other class will receive most of the interest and the
remainder of the principal. In the most extreme case, one class will
receive all of
the interest (the interest only or “IO” class), while the other class will
receive all of the principal (the principal only or “PO” class). The yield
to maturity on
an IO class is extremely sensitive to changes in prevailing interest rates and
the rate of principal payments (including prepayments) on the related
underlying mortgage assets. A rapid rate of principal payments may have a
material adverse effect on an investing fund’s yield to maturity. If
the underlying
mortgage assets experience greater than anticipated prepayments of principal,
the fund may fail to fully recoup its initial investment in these
securities even if the securities are rated highly.
As interest
rates rise and fall, the value of IOs tends to move in the same direction as
interest rates. The value of the other mortgage securities described
in the
Prospectus and this SAI, like other debt instruments, will tend to move in the
opposite direction to interest rates. Accordingly, investing in IOs, in
conjunction
with the other mortgage securities described in the Prospectus and this SAI, is
expected to contribute to the relative stability of a fund’s NAV.
In addition to
the stripped mortgage securities described above, the affiliated underlying
fund, High Yield Fund, may invest in similar securities such as Super
Principal Only (“SPO”) and Levered Interest Only (“LIO”) are more volatile than
POs and IOs. Risks associated with instruments such as SPOs are similar in
nature to those risks related to investments in POs. Risks associated with LIOs
and IOettes (a.k.a. “high coupon bonds”) are similar in nature to those
associated with IOs. Other similar instruments may develop in the
future.
Under the
Code, POs may generate taxable income from the current accrual of OID, without a
corresponding distribution of cash to a fund.
Inverse
Floaters.
Inverse
floaters may be issued by agencies or instrumentalities of the U.S. government,
or by private issuers, including savings and loan
associations, mortgage banks, commercial banks, investment banks and special
purpose subsidiaries of the foregoing. Inverse floaters have greater
volatility than other types of mortgage securities in which a fund invests (with
the exception of stripped mortgage securities and there is a risk that the
market value will vary from the amortized cost). Although inverse floaters are
purchased and sold by institutional investors through several investment
banking firms acting as brokers or dealers, the market for such securities has
not yet been fully developed. Accordingly, inverse floaters may be illiquid.
Any illiquid inverse floaters, together with any other illiquid investments,
will not exceed a fund’s limitation on investments in illiquid securities.
Inverse
floaters are derivative mortgage securities that are structured as a class of
security that receives distributions on a pool of mortgage assets. Yields on
inverse floaters move in the opposite direction of short-term interest rates and
at an accelerated rate.
Types
of Credit Support.
Mortgage
securities are often backed by a pool of assets representing the obligations of
a number of different parties. To lessen the
impact of an obligor’s failure to make payments on underlying assets, mortgage
securities may contain elements of credit support. A discussion of
credit support is included in “Asset-Backed Securities.”
The two
principal classifications of municipal obligations are general obligations and
revenue obligations. General obligations are secured by the issuer’s
pledge of its full faith, credit and taxing power for the payment of principal
and interest. Revenue obligations are payable only from the revenues
derived from a
particular facility or class of facilities or in some cases from the proceeds of
a special excise or other tax. For example, industrial development
and pollution control bonds are in most cases revenue obligations since payment
of principal and interest is dependent solely on the ability of the
user of the facilities financed or the guarantor to meet its financial
obligations, and in certain cases, the pledge of real and personal property as
security for payment.
Issuers of
municipal obligations are subject to the provisions of bankruptcy, insolvency
and other laws affecting the rights and remedies of creditors, such as the
Federal Bankruptcy Act, and laws, if any, that may be enacted by Congress or
state legislatures extending the time for payment of principal or interest or
both, or imposing other constraints upon enforcement of such obligations. There
also is the possibility that as a result of litigation or other conditions,
the power or ability of any one or more issuers to pay when due the principal of
and interest on their municipal obligations may be affected.
Municipal
Bonds.
Municipal
bonds are issued to obtain funding for various public purposes, including the
construction of a wide range of public facilities
such as airports, highways, bridges, schools, hospitals, housing, mass
transportation, streets and water and sewer works. Other public purposes for
which municipal bonds may be issued include refunding outstanding obligations,
obtaining funds for general operating expenses and obtaining
funds to lend to other public institutions and facilities. In addition, certain
types of industrial development bonds are issued by or on behalf of public
authorities to obtain funds for many types of local, privately operated
facilities. Such debt instruments are considered municipal obligations if the
interest paid
on them is exempt from federal income tax. The payment of principal and interest
by issuers of certain obligations purchased may be guaranteed by
a letter of credit, note repurchase agreement, insurance or other credit
facility agreement offered by a bank or other financial institution.
Such
guarantees and the creditworthiness of guarantors will be considered by a
subadvisor in determining whether a municipal obligation meets investment
quality requirements. No assurance can be given that a municipality or guarantor
will be able to satisfy the payment of principal or interest on a municipal
obligation.
The yields or
returns of municipal bonds depend on a variety of factors, including general
market conditions, effective marginal tax rates, the financial condition of
the issuer, general conditions of the municipal bond market, the size of a
particular offering, the maturity of the obligation, and the rating (if
any) of the
issue. The ratings of S&P, Moody’s and Fitch represent their opinions as to
the quality of various municipal bonds that they undertake to rate. It should be
emphasized, however, that ratings are not absolute standards of quality. For
example, depending on market conditions, municipal bonds with the same
maturity and stated interest rate, but with different ratings, may nevertheless
have the same yield. See Appendix A for a description of ratings. Many
issuers of securities choose not to have their obligations rated. Although
unrated securities eligible for purchase must be determined to be comparable
in quality to securities having certain specified ratings, the market for
unrated securities may not be as broad as for rated securities since many
investors rely on rating organizations for credit appraisal. Yield disparities
may occur for reasons not directly related to the investment quality of
particular issues or the general movement of interest rates, due to such factors
as changes in the overall demand or supply of various types of municipal
bonds.
The effects of
a widespread health crisis such as a global pandemic could affect the ability of
states and their political subdivisions to make payments on debt
obligations when due and could adversely impact the value of their bonds, which
could negatively impact the performance of the fund.
Municipal
Bonds Issued by the Commonwealth of Puerto Rico.
Municipal
obligations issued by the Commonwealth of Puerto Rico and its agencies, or
other U.S.
territories, generally are tax-exempt.
Adverse
economic, market, political, or other conditions within Puerto Rico may
negatively affect the value of a fund’s holdings in municipal obligations
issued by the
Commonwealth of Puerto Rico and its agencies.
Puerto Rico
has faced and continues to face significant fiscal challenges, including
persistent government budget deficits, underfunded public pension benefit
obligations, underfunded government retirement systems, sizable debt service
obligations and a high unemployment rate. In recent years, several rating
organizations have downgraded a number of securities issued in Puerto Rico to
below investment-grade or placed them on “negative watch.” Puerto
Rico has previously missed payments on its general obligation debt. As a result
of Puerto Rico's fiscal challenges, it entered into a process
analogous to a bankruptcy proceeding in U.S. courts. Recently, Puerto Rico
received court approval to be released from bankruptcy through a large
restructuring of its U.S. municipal debt. The restructuring was recommended by
an oversight board, an unelected body that shares power with elected
officials, that is federally mandated to oversee Puerto Rico's finances.
Pursuant to federal law, the oversight board will remain intact and can
only disband
after Puerto Rico experiences four consecutive years of balanced budgets. Any
future defaults, or actions by the oversight board, among other factors,
could have a negative impact on the marketability, liquidity, or value of
certain investments held by a fund and could reduce a fund’s performance.
Municipal
Notes.
Municipal
notes are short-term obligations of municipalities, generally with a maturity
ranging from six months to three years. The principal
types of such notes include tax, bond and revenue anticipation notes, project
notes and construction loan notes.
Tax-Anticipation
Notes. Tax
anticipation notes are issued to finance working capital needs of
municipalities. Generally, they are issued in anticipation of various tax
revenues, such as income, sales, use and business taxes, and are specifically
payable from these particular future tax revenues.
Bond
Anticipation Notes. Bond
anticipation notes are issued to provide interim financing until long-term bond
financing can be arranged. In most cases, the long-term
bonds then provide the funds for the repayment of the notes.
Revenue
Anticipation Notes. Revenue
anticipation notes are issued in expectation of receipt of specific types of
revenue, other than taxes, such as federal
revenues available under Federal Revenue Sharing Programs.
Project
Notes. Project notes
are backed by an agreement between a local issuing agency and the Federal
Department of Housing and Urban Development
(“HUD”) and carry a U.S. government guarantee. These notes provide financing for
a wide range of financial assistance programs for housing,
redevelopment and related needs (such as low-income housing programs and urban
renewal programs). Although they are the primary obligations of
the local public housing agencies or local urban renewal agencies, the HUD
agreement provides for the additional security of the full faith and credit of
the U.S. government. Payment by the United States pursuant to its full faith and
credit obligation does not impair the tax-exempt character of the income
from project notes.
Construction
Loan Notes. Construction
loan notes are sold to provide construction financing. Permanent financing, the
proceeds of which are applied to the payment of
construction loan notes, is sometimes provided by a commitment by GNMA to
purchase the loan, accompanied by a commitment by the Federal
Housing Administration to insure mortgage advances thereunder. In other
instances, permanent financing is provided by the commitments of banks to
purchase the loan.
Municipal
Commercial Paper.
Municipal
commercial paper is a short-term obligation of a municipality, generally issued
at a discount with a maturity of
less than one year. Such paper is likely to be issued to meet seasonal working
capital needs of a municipality or interim construction financing.
Municipal commercial paper is backed in many cases by letters of credit, lending
agreements, note repurchase agreements or other credit facility
agreements offered by banks and other institutions.
High
Yield (High Risk) Municipal Debt Obligations.
Municipal
bonds rated “BBB” or “BB” by S&P or Fitch, or “Baa” or “Ba” by Moody’s, or
lower (and their unrated
equivalents) are considered to have some speculative characteristics and, to
varying degrees, can pose special risks generally involving the ability of
the issuer to make payment of principal and interest to a greater extent than
higher rated securities.
A subadvisor
may be authorized to purchase lower-rated municipal bonds when, based upon
price, yield and its assessment of quality, investment in these bonds is
determined to be consistent with a fund’s investment objectives. The subadvisor
will evaluate and monitor the quality of all investments, including
lower-rated bonds, and will dispose of these bonds as determined to be necessary
to assure that the fund’s portfolio is constituted in a manner consistent
with these objectives. To the extent that a fund’s investments in lower-rated
municipal bonds emphasize obligations believed to be consistent with the goal
of preserving capital, these obligations may not provide yields as high as those
of other obligations having these ratings, and the differential
in yields between these bonds and obligations with higher quality ratings may
not be as significant as might otherwise be generally available. The Prospectus
for certain funds includes additional information regarding a fund’s ability to
invest in lower-rated debt obligations under “Principal investment
strategies.”
Preferred
Stocks
Preferred
stock generally has a preference to dividends and, upon liquidation, over an
issuer’s common stock but ranks junior to debt securities in an issuer’s
capital structure. Preferred stock generally pays dividends in cash (or
additional shares of preferred stock) at a defined rate but, unlike interest
payments on
debt securities, preferred stock dividends are payable only if declared by the
issuer’s board of directors. Dividends on preferred stock may be cumulative,
meaning that, in the event the issuer fails to make one or more dividend
payments on the preferred stock, no dividends may be paid on the issuer’s
common stock until all unpaid preferred stock dividends have been paid.
Preferred stock also may be subject to optional or mandatory redemption
provisions.
Repurchase
Agreements, Reverse Repurchase Agreements, and Sale-Buybacks
Repurchase
agreements are arrangements involving the purchase of an obligation and the
simultaneous agreement to resell the same obligation on demand or at a
specified future date and at an agreed-upon price. A repurchase agreement can be
viewed as a loan made by a fund to the seller of the obligation
with such obligation serving as collateral for the seller’s agreement to repay
the amount borrowed with interest. Repurchase agreements provide the
opportunity to earn a return on cash that is only temporarily available.
Repurchase agreements may be entered with banks, brokers, or dealers.
However, a repurchase agreement will only be entered with a broker or dealer if
the broker or dealer agrees to deposit additional collateral should the
value of the obligation purchased decrease below the resale price.
Generally,
repurchase agreements are of a short duration, often less than one week but on
occasion for longer periods. Securities subject to repurchase agreements
will be valued every business day and additional collateral will be requested if
necessary so that the value of the collateral is at least equal to the value
of the repurchase obligation, including the interest accrued
thereon.
A subadvisor
shall engage in a repurchase agreement transaction only with those banks or
broker dealers who meet the subadvisor’s quantitative and qualitative
criteria regarding creditworthiness, asset size and collateralization
requirements. The Advisor also may engage in repurchase agreement transactions
on behalf of the funds. The counterparties to a repurchase agreement transaction
are limited to a:
●
Federal
Reserve System member bank;
●
primary
government securities dealer reporting to the Federal Reserve Bank of New York’s
Market Reports Division; or
●
broker dealer
that reports U.S. government securities positions to the Federal Reserve
Board.
A fund also
may participate in repurchase agreement transactions utilizing the settlement
services of clearing firms that meet the subadvisors' creditworthiness
requirements.
The Advisor
and the subadvisors will continuously monitor repurchase agreement transactions
to ensure that the collateral held with respect to a repurchase
agreement equals or exceeds the amount of the obligation.
The risk of a
repurchase agreement transaction is limited to the ability of the seller to pay
the agreed-upon sum on the delivery date. In the event of bankruptcy or
other default by the seller, the instrument purchased may decline in value,
interest payable on the instrument may be lost and there may be possible
difficulties and delays in obtaining collateral and delays and expense in
liquidating the instrument. If an issuer of a repurchase agreement fails to
repurchase the underlying obligation, the loss, if any, would be the difference
between the repurchase price and the underlying obligation’s market value.
A fund also might incur certain costs in liquidating the underlying obligation.
Moreover, if bankruptcy or other insolvency proceedings are commenced with
respect to the seller, realization upon the underlying obligation might be
delayed or limited.
Under a
reverse repurchase agreement, a fund sells a debt security and agrees to
repurchase it at an agreed-upon time and at an agreed-upon price. The fund
retains record ownership of the security and the right to receive interest and
principal payments thereon. At an agreed-upon future date, the fund
repurchases the security by remitting the proceeds previously received, plus
interest. The difference between the amount the fund receives for the
security and
the amount it pays on repurchase is payment of interest. In certain types of
agreements, there is no agreed-upon repurchase date and interest
payments are calculated daily, often based on the prevailing overnight
repurchase rate. A reverse repurchase agreement may be considered a form of
leveraging and may, therefore, increase fluctuations in a fund’s NAV per
share.
A fund may
effect simultaneous purchase and sale transactions that are known as
“sale-buybacks.” A sale-buyback is similar to a reverse repurchase agreement,
except that in a sale-buyback, the counterparty that purchases the security is
entitled to receive any principal or interest payments made on the underlying
security pending settlement of the fund's repurchase of the underlying
security.
Subject to the
requirements noted under “Government Regulation of Derivatives”, a fund will
either treat reverse repurchase agreements and similar financings,
including sale-buybacks, as derivatives subject to the Derivatives Rule
limitations or not as derivatives and treat reverse repurchase agreements and
similar financings transactions as senior securities equivalent to bank
borrowings subject to asset coverage requirements of Section 18 of
the 1940 Act. A fund will ensure that its repurchase agreement transactions are
“fully collateralized” by maintaining in a custodial account cash,
Treasury bills, other U.S. government securities, or certain other liquid assets
having an aggregate value at least equal to the amount of such
commitment to repurchase including accrued interest, until payment is
made.
Foreign
Repurchase Agreements.
Foreign
repurchase agreements involve an agreement to purchase a foreign security and to
sell that security back to the
original seller at an agreed-upon price in either U.S. dollars or foreign
currency. Unlike typical U.S. repurchase agreements, foreign repurchase
agreements may not be fully collateralized at all times. The value of a security
purchased may be more or less than the price at which the counterparty
has agreed to repurchase the security. In the event of default by the
counterparty, a fund may suffer a loss if the value of the security
purchased is
less than the agreed-upon repurchase price, or if it is unable to successfully
assert a claim to the collateral under foreign laws. As a result, foreign
repurchase agreements may involve higher credit risks than repurchase agreements
in U.S. markets, as well as risks associated with currency fluctuations.
In addition, as with other emerging market investments, repurchase agreements
with counterparties located in emerging markets, or relating to
emerging markets, may involve issuers or counterparties with lower credit
ratings than typical U.S. repurchase agreements.
A fund may
invest in “restricted securities,” which generally are securities that may be
resold to the public only pursuant to an effective registration statement
under the 1933 Act or an exemption from registration. Regulation S under the
1933 Act is an exemption from registration that permits, under certain
circumstances, the resale of restricted securities in offshore transactions,
subject to certain conditions, and Rule 144A under the 1933 Act is an
exemption that permits the resale of certain restricted securities to qualified
institutional buyers.
Since its
adoption by the SEC in 1990, Rule 144A has facilitated trading of restricted
securities among qualified institutional investors. To the extent restricted
securities held by a fund qualify under Rule 144A and an institutional market
develops for those securities, the fund expects that it will be able to
dispose of the securities without registering the resale of such securities
under the 1933 Act. However, to the extent that a robust market for such 144A
securities does not develop, or a market develops but experiences periods of
illiquidity, investments in Rule 144A securities could increase the level of a
fund's illiquidity. A fund might have to register restricted securities in order
to dispose of them, resulting in additional expense and delay. Adverse market
conditions could impede such a public offering of securities.
There is a
large institutional market for certain securities that are not registered under
the 1933 Act, which may include markets for repurchase agreements,
commercial paper, foreign securities, municipal securities, loans and corporate
bonds and notes. Institutional investors depend on an efficient
institutional market in which the unregistered security can be readily resold or
on an issuer's ability to honor a demand for repayment. The fact that there are
contractual or legal restrictions on resale to the general public or to certain
institutions may not be indicative of the liquidity of such investments.
A fund may
engage in short sales and short sales “against the box.” In a short sale against
the box, a fund borrows securities from a broker-dealer and sells the
borrowed securities, and at all times during the transaction, a fund either owns
or has the right to acquire the same securities at no extra cost. If the price
of the security has declined at the time a fund is required to deliver the
security, a fund will benefit from the difference in the price. If the price
of a security
has increased, the funds will be required to pay the difference.
In addition, a
fund may sell a security it does not own in anticipation of a decline in the
market value of that security (a “short sale”). To complete such a transaction, a
fund must borrow the security to make delivery to the buyer. The fund is then
obligated to replace the security borrowed by purchasing it at market
price at the time of replacement. The price at such time may be more or less
than the price at which the security was sold by the fund. Until the
security is
replaced, the fund is required to pay the lender any dividends or interest which
accrues during the period of the loan. To borrow the security, the fund also
may be required to pay a premium, which would increase the cost of the security
sold. The proceeds of the short sale are typically retained by the broker
to meet margin requirements until the short position is closed out. Please see
“Government Regulation of Derivatives” section for additional
information.
A fund will
incur a loss as a result of the short sale if the price of the security
increases between the date of the short sale and the date on which the fund
replaced the
borrowed security and theoretically the fund's loss could be unlimited. A fund
will generally realize a gain if the security declines in price between those
dates. This result is the opposite of what one would expect from a cash purchase
of a long position in a security. The amount of any gain will be
decreased, and the amount of any loss increased, by the amount of any premium,
dividends or interest the fund may be required to pay in connection
with a short sale. Short selling may amplify changes in a fund's NAV. Short
selling also may produce higher than normal portfolio turnover, which may
result in increased transaction costs to a fund.
Short-term
trading means the purchase and subsequent sale of a security after it has been
held for a relatively brief period of time. If and to the extent consistent
with and permitted by its investment objective and policies, a fund may engage
in short-term trading in response to stock market conditions, changes in
interest rates or other economic trends and developments, or to take advantage
of yield disparities between various fixed-income securities in order to
realize capital gains or improve income. Short-term trading may have the effect
of increasing portfolio turnover rate. A high rate of portfolio turnover (100%
or greater) involves correspondingly greater brokerage transaction expenses and
may make it more difficult for a fund to qualify as a RIC for
federal income tax purposes (for additional information about qualification as a
RIC under the Code, see “Additional Information Concerning Taxes” in this
SAI). See specific fund details in the “Portfolio Turnover” section of this
SAI.
Sovereign
Debt Obligations
Sovereign debt
obligations are issued or guaranteed by foreign governments or their agencies.
Sovereign debt may be in the form of conventional securities or
other types of debt instruments such as loan or loan participations. Typically,
sovereign debt of developing countries may involve a high degree of risk
and may be in default or present the risk of default, however, sovereign debt of
developed countries also may involve a high degree of risk and may be in
default or present the risk of default. Governments rely on taxes and other
revenue sources to pay interest and principal on their debt obligations,
and governmental entities responsible for repayment of the debt may be unable or
unwilling to repay principal and pay interest when due and may
require renegotiation or rescheduling of debt payments. The payment of principal
and interest on these obligations may be adversely affected
by a variety
of factors, including economic results, changes in interest and exchange rates,
changes in debt ratings, a limited tax base or limited revenue sources,
natural disasters, or other economic or credit problems. In addition, prospects
for repayment and payment of interest may depend on political as well as
economic factors. Defaults in sovereign debt obligations, or the perceived risk
of default, also may impair the market for other securities and debt
instruments, including securities issued by banks and other entities holding
such sovereign debt, and negatively impact the funds.
U.S.
Government and Government Agency Obligations
U.S.
Government Obligations.
U.S.
government obligations are debt securities issued or guaranteed as to principal
or interest by the U.S. Treasury. These
securities include treasury bills, notes and bonds.
GNMA
Obligations.
GNMA
obligations are mortgage-backed securities guaranteed by the GNMA, which
guarantee is supported by the full faith and credit of the
U.S. government.
U.S.
Agency Obligations.
U.S.
government agency obligations are debt securities issued or guaranteed as to
principal or interest by an agency or instrumentality
of the U.S. government pursuant to authority granted by Congress. U.S.
government agency obligations include, but are not limited to:
U.S.
Instrumentality Obligations.
U.S.
instrumentality obligations include, but are not limited to, those issued by the
Export-Import Bank and Farmers Home
Administration.
Some
obligations issued or guaranteed by U.S. government agencies or
instrumentalities are supported by the right of the issuer to borrow from the
U.S. Treasury
or the Federal Reserve Banks, such as those issued by FICBs. Others, such as
those issued by Fannie Mae, FHLBs and Freddie Mac, are supported by
discretionary authority of the U.S. government to purchase certain obligations
of the agency or instrumentality. In addition, other obligations,
such as those issued by the SLMA, are supported only by the credit of the agency
or instrumentality. There also are separately traded interest
components of securities issued or guaranteed by the U.S. Treasury.
No assurance
can be given that the U.S. government will provide financial support for the
obligations of such U.S. government-sponsored agencies or instrumentalities
in the future, since it is not obligated to do so by law. In this SAI, “U.S.
government securities” refers not only to securities issued or guaranteed as
to principal or interest by the U.S. Treasury but also to securities that are
backed only by their own credit and not the full faith and credit of the U.S.
government.
It is possible
that the availability and the marketability (liquidity) of the securities
discussed in this section could be adversely affected by actions of the
U.S.
government to tighten the availability of its credit. In 2008, FHFA, an agency
of the U.S. government, placed Fannie Mae and Freddie Mac into conservatorship,
a statutory process with the objective of returning the entities to normal
business operations. The FHFA will act as the conservator to operate Fannie
Mae and Freddie Mac until they are stabilized. It is unclear what effect this
conservatorship will have on the securities issued or guaranteed by
Fannie Mae or Freddie Mac.
Variable
and Floating Rate Obligations
Investments in
floating or variable rate securities normally will involve industrial
development or revenue bonds, which provide that the rate of interest is
set as a
specific percentage of a designated base rate, such as rates of Treasury Bonds
or Bills or the prime rate at a major commercial bank. In addition, a
bondholder can demand payment of the obligations on behalf of the investing fund
on short notice at par plus accrued interest, which amount may be
more or less than the amount the bondholder paid for them. The maturity of
floating or variable rate obligations (including participation interests
therein) is deemed to be the longer of: (i) the notice period required before a
fund is entitled to receive payment of the obligation upon demand; or
(ii) the period remaining until the obligation’s next interest rate adjustment.
If not redeemed by the investor through the demand feature, the obligations
mature on a specified date, which may range up to thirty years from the date of
issuance.
Warrants may
trade independently of the underlying securities. Warrants are rights to
purchase securities at specific prices and are valid for a specific period of
time. Warrant prices do not necessarily move parallel to the prices of the
underlying securities, and warrant holders receive no dividends and have no voting
rights or rights with respect to the assets of an issuer. The price of a warrant
may be more volatile than the price of its underlying security, and a warrant
may offer greater potential for capital appreciation as well as capital loss.
Warrants cease to have value if not exercised prior to the expiration
date. These factors can make warrants more speculative than other types of
investments.
When-Issued/Delayed
Delivery/Forward Commitment Securities
A fund may
purchase or sell securities on a “when-issued,” “delayed-delivery” or “forward
commitment” basis. When-issued, delayed-delivery or forward-commitment
transactions involve a commitment to purchase or sell securities at a
predetermined price or yield in which payment and delivery take place
after the customary settlement for such securities (which is typically one month
or more after trade date). When purchasing securities in one of these types
of transactions, payment for the securities is not required until the delivery
date, however, the purchaser assumes the rights and risks of
ownership,
including the risks of price and yield fluctuations and the risk that the
security will not be delivered. When a fund has sold securities pursuant
to one of
these transactions, it will not participate in further gains or losses with
respect to that security. At the time of delivery, the value of when-issued,
delayed-delivery or forward commitment securities may be more or less than the
transaction price, and the yields then available in the market may be
higher or lower than those obtained in the transaction.
Under normal
circumstances, when a fund purchases securities on a when-issued or forward
commitment basis, it will take delivery of the securities, but a fund
may, if deemed advisable, sell the securities before the settlement date.
Forward contracts may settle in cash between the counterparty and the fund or by
physical settlement of the underlying securities, and a fund may renegotiate or
roll over a forward commitment transaction. In general, a fund does not
pay for the securities, or start earning interest on them, or deliver or take
possession of securities until the obligations are scheduled to be settled. In
such transactions, no cash changes hands on the trade date, however, if the
transaction is collateralized, the exchange of margin may take place between
the fund and the counterparty according to an agreed-upon schedule. A fund does,
however, record the transaction and reflect the value each day of
the securities in determining its NAV.
When-issued or
forward settling securities transactions physically settling within 35-days are
deemed not to involve a senior security. When-issued or forward
settling securities transactions that do not physically settle within 35-days
are required to be treated as derivatives transactions in compliance
with the
Derivatives Rule as outlined in the “Government Regulation of Derivatives”
section.
Inverse
floating rate securities include, but are not limited to, an inverse floating
rate class of a government agency-issued yield curve note. A yield curve
note is a
fixed-income security that bears interest at a floating rate that is reset
periodically based on an interest rate benchmark. The interest rate resets on a
yield curve note in the opposite direction from the interest rate
benchmark.
Zero
Coupon Securities, Deferred Interest Bonds and Pay-In-Kind
Bonds
Zero coupon
securities, deferred interest bonds and pay-in-kind bonds involve special risk
considerations. Zero coupon securities and deferred interest bonds are debt
securities that pay no cash income but are sold at substantial discounts from
their value at maturity. While zero coupon bonds do not require the
periodic payment of interest, deferred interest bonds provide for a period of
delay before the regular payment of interest begins. When a zero coupon
security or a deferred interest bond is held to maturity, its entire return,
which consists of the amortization of discount, comes from the difference
between its purchase price and its maturity value. This difference is known at
the time of purchase, so that investors holding these securities until maturity
know at the time of their investment what the return on their investment will
be. Pay-in-kind bonds are bonds that pay all or a portion of their interest
in the form of debt or equity securities.
Zero coupon
securities, deferred interest bonds and pay-in-kind bonds are subject to greater
price fluctuations in response to changes in interest rates than ordinary
interest-paying debt securities with similar maturities. The value of zero
coupon securities and deferred interest bonds usually appreciates
during periods of declining interest rates and usually depreciates during
periods of rising interest rates.
Issuers
of Zero Coupon Securities and Pay-In-Kind Bonds.
Zero coupon
securities and pay-in-kind bonds may be issued by a wide variety of corporate and
governmental issuers. Although zero coupon securities and pay-in-kind bonds are
generally not traded on a national securities exchange,
these securities are widely traded by brokers and dealers and, to the extent
they are widely traded, will not be considered illiquid for the purposes of
the investment restriction under “Illiquid Securities.”
Tax
Considerations.
Current
federal income tax law requires the holder of a zero coupon security or certain
pay-in-kind bonds to accrue income with respect
to these securities prior to the receipt of cash payments. To maintain its
qualification as a RIC under the Code and avoid liability for federal income
and excise taxes, a fund may be required to distribute income accrued with
respect to these securities and may have to dispose of portfolio
securities under disadvantageous circumstances in order to generate cash to
satisfy these distribution requirements.
The risks of
investing in certain types of securities are described below. Risks are only
applicable to a fund if and to the extent that corresponding investments,
or indirect exposures to such investments through derivative contracts, are
consistent with and permitted by the fund’s investment objectives and
policies. The value of an individual security or a particular type of security
can be more volatile than the market as a whole and can perform
differently than the value of the market as a whole. By owning shares of the
underlying funds, each fund of funds indirectly invests in the securities and
instruments held by the underlying funds and bears the same risks of such
underlying funds.
A fund may be
subject to delays in making investments when significant purchases or
redemptions of fund shares cause the fund to have an unusually large cash
position. When the fund has a higher than normal cash position, it may incur
“cash drag,” which is the opportunity cost of holding a significant cash position.
This significant cash position might cause the fund to miss investment
opportunities it otherwise would have benefited from if fully invested, or
might cause the fund to pay more for investments in a rising market, potentially
reducing fund performance.
Collateralized
Debt Obligations
The risks of
an investment in a CDO depend largely on the quality of the collateral
securities and the class of the instrument in which a fund invests. Normally, CDOs
are privately offered and sold, and thus, are not registered under the
securities laws. As a result, investments in CDOs may be
characterized
by a fund as illiquid, however an active dealer market may exist for CDOs
allowing them to qualify for treatment as liquid under Rule 144A transactions.
In addition to the normal risks associated with fixed-income securities
discussed elsewhere in this SAI and the Prospectus (e.g., interest rate risk and
default risk), CDOs carry risks including, but are not limited to the
possibility that: (i) distributions from collateral securities will not be
adequate to
make interest or other payments; (ii) the quality of the collateral may decline
in value or default; (iii) a fund may invest in CDO classes that are
subordinate to other classes of the CDO; and (iv) the complex structure of the
CDO may not be fully understood at the time of investment and may produce
disputes with the issuer or unexpected investment results.
Equity
securities include common, preferred and convertible preferred stocks and
securities the values of which are tied to the price of stocks, such as
rights,
warrants and convertible debt securities. Common and preferred stocks represent
equity ownership in a company. Stock markets are volatile. The price of
equity securities will fluctuate and can decline and reduce the value of a
fund’s investment in equities. The price of equity securities fluctuates
based on changes in a company’s financial condition and overall market and
economic conditions. The value of equity securities purchased by a fund
could decline if the financial condition of the issuers of these securities
declines or if overall market and economic conditions deteriorate. Even
funds that
invest in high quality or “blue chip” equity securities or securities of
established companies with large market capitalizations (which generally
have strong
financial characteristics) can be negatively impacted by poor overall market and
economic conditions. Companies with large market capitalizations
also may have less growth potential than smaller companies and may be able to
react less quickly to change in the marketplace.
Certain
subadvisors may integrate research on environmental, social and governance
(“ESG”) factors into a fund’s investment process. Such subadvisors
may consider ESG factors that it deems relevant or additive, along with other
material factors and analysis, when managing a fund. ESG factors may
include, but are not limited to, matters regarding board diversity, climate
change policies, and supply chain and human rights policies. Incorporating
ESG criteria and making investment decisions based on certain ESG
characteristics, as determined by a subadvisor, carries the risk that a
fund may
perform differently, including underperforming, funds that do not utilize ESG
criteria, or funds that utilize different ESG criteria. Integration of
ESG factors
into a fund’s investment process may result in a subadvisor making different
investment decisions for a fund than for a fund with a similar investment
universe and/or investment style that does not incorporate such considerations
in its investment strategy or processes, and a fund's investment
performance may be affected. Integration of ESG factors into a fund’s investment
process does not preclude a fund from including companies with
low ESG characteristics or excluding companies with high ESG characteristics in
a fund's investments.
The ESG
characteristics utilized in a fund’s investment process may change over time,
and different ESG characteristics may be relevant to different investments.
Successful integration of ESG factors will depend on a subadvisor’s skill in
researching, identifying, and applying these factors, as well as on the
availability of relevant data. The method of evaluating ESG factors and
subsequent impact on portfolio composition, performance, proxy voting
decisions and
other factors, is subject to the interpretation of a subadvisor in accordance
with the fund’s investment objective and strategies. ESG factors may be
evaluated differently by different subadvisors, and may not carry the same
meaning to all investors and subadvisors. The regulatory landscape with
respect to ESG investing in the United States is evolving and any future rules
or regulations may require a fund to change its investment process with
respect to ESG integration.
Countries in
Europe may be significantly affected by fiscal and monetary controls implemented
by the EU and EMU, which require member countries to comply with
restrictions on inflation rates, deficits, interest rates, debt levels and
fiscal and monetary controls. Decreasing imports or exports, changes
in
governmental or other regulations on trade, changes in the exchange rate or
dissolution of the Euro, the default or threat of default by one or more EU
member
countries on its sovereign debt, and/or an economic recession in one or more EU
member countries may have a significant adverse effect on other European
economies and major trading partners outside Europe.
In recent
years, the European financial markets have experienced volatility and adverse
trends due to concerns about economic downturns, rising government
debt levels and the possible default of government debt in several European
countries. The European Central Bank and IMF have previously bailed-out
several European countries. There is no guarantee that these institutions will
continue to provide financial support, and markets may react adversely to
any reduction in financial support. A default or debt restructuring by any
European country can adversely impact holders of that country’s debt and
sellers of credit default swaps linked to that country’s creditworthiness, which
may be located in countries other than those listed above, and can affect
exposures to other EU countries and their financial companies as
well.
Uncertainties
surrounding the sovereign debt of a number of EU countries and the viability of
the EU have disrupted and may in the future disrupt markets in the
United States and around the world. If one or more countries leave the EU or the
EU dissolves, the global securities markets likely will be significantly
disrupted. On January 31, 2020, the UK left the EU, commonly referred to as
“Brexit,” the UK ceased to be a member of the EU, and the UK and EU entered
into a Trade and Cooperation Agreement. While the full impact of Brexit is
unknown, Brexit has already resulted in volatility in European and global
markets. There remains significant market uncertainty regarding Brexit’s
ramifications, and the range and potential implications of possible political,
regulatory, economic, and market outcomes are difficult to predict. It is also
possible that various countries within the UK, such as Scotland or Northern
Ireland, could seek to separate and remain a part of the EU. Other secessionist
movements including countries seeking to abandon the Euro or withdraw from
the EU may cause volatility and uncertainty in the EU.
The UK has one
of the largest economies in Europe and is a major trading partner with the EU
countries and the United States. Brexit might negatively affect The
City of London’s economy, which is heavily dominated by financial services, as
banks might be forced to move staff and comply with two separate sets
of rules or lose business to banks in Continental Europe.
Investing in
the securities of Eastern European issuers is highly speculative and involves
risks not usually associated with investing in the more developed
markets of Western Europe. Securities markets of Eastern European countries
typically are less efficient and have lower trading volume, lower
liquidity, and higher volatility than more developed markets. Eastern European
economies also may be particularly susceptible to disruption in the international
credit market due to their reliance on bank related inflows of
capital.
To the extent
that a fund invests in European securities, it may be exposed to these risks
through its direct investments in such securities, including sovereign
debt, or indirectly through investments in money market funds and financial
institutions with significant investments in such securities. In addition,
Russia’s increasing international assertiveness could negatively impact EU and
Eastern European economic activity. Please see “Market Events” for
additional information regarding risks related to sanctions imposed on
Russia.
Fixed-income
securities are generally subject to two principal types of risk: (1)
interest-rate risk; and (2) credit quality risk. Fixed-income securities are
also subject
to liquidity risk.
Interest
Rate Risk.
Fixed-income
securities are affected by changes in interest rates. When interest rates
decline, the market value of the fixed-income
securities generally can be expected to rise. Conversely, when interest rates
rise, the market value of fixed-income securities generally can be expected to
decline.
The longer a
fixed-income security’s duration, the more sensitive it will be to changes in
interest rates. Similarly, a fund with a longer average portfolio duration will
be more sensitive to changes in interest rates than a fund with a shorter
average portfolio duration. Duration is a measure used to determine the
sensitivity of a security’s price to changes in interest rates that incorporates
a security’s yield, coupon, final maturity, and call features, among other
characteristics. All other things remaining equal, for each one percentage point
increase in interest rates, the value of a portfolio of fixed-income
investments would generally be expected to decline by one percent for every year
of the portfolio’s average duration above zero. For example, the
price of a bond fund with an average duration of eight years would be expected
to fall approximately 8% if interest rates rose by one percentage
point. The maturity of a security, another commonly used measure of price
sensitivity, measures only the time until final payment is due, whereas
duration takes into account the pattern of all payments of interest and
principal on a security over time, including how these payments are affected by
prepayments and by changes in interest rates, as well as the time until an
interest rate is reset (in the case of variable-rate securities).
In response to
certain economic conditions, including
periods of high inflation, governmental authorities and regulators may respond
with significant fiscal and
monetary policy changes such as raising interest rates. The fund may
be subject to heightened interest rate risk when the Federal Reserve
Board
(Fed) raises
interest
rates.
Recent and
potential future changes in government monetary policy may affect interest
rates. It is
difficult to accurately
predict the timing,
frequency or magnitude of potential
interest rate
increases
or decreases
by the Fed and the
evaluation of macro-economic
and other conditions that
could cause a
change in approach in the future. If the Fed and
other central banks increase the federal funds rate and
equivalent rates, such
increases generally will cause market interest rates to rise, and could cause
the value of a fund’s investments, and the fund’s NAV, to
decline, potentially suddenly and significantly. As a result, the fund may
experience high redemptions and, as a result, increased portfolio turnover,
which could increase the costs that the fund incurs and may negatively impact
the fund’s performance.
In
certain market
conditions, governmental
authorities and regulators may
considerably
lower interest
rates, which, in some cases could result in negative
interest rates. These actions, including their reversal or potential
ineffectiveness, could further increase volatility in securities and other
financial
markets and reduce market liquidity. To the extent the fund has a bank deposit
or holds a debt instrument with a negative interest rate to maturity, the
fund would generate a negative return on that investment. Similarly, negative
rates on investments by money market funds and similar cash
management products could lead to losses on investments, including on
investments of the fund’s uninvested cash.
Credit
Quality Risk.
Fixed-income
securities are subject to the risk that the issuer of the security will not
repay all or a portion of the principal borrowed and
will not make all interest payments. If the credit quality of a fixed-income
security deteriorates after a fund has purchased the security, the market value
of the security may decrease and lead to a decrease in the value of the fund’s
investments. Funds that may invest in lower rated fixed-income
securities are riskier than funds that may invest in higher rated fixed-income
securities.
Liquidity
Risk.
Liquidity risk
may result from the lack of an active market, the reduced number of traditional
market participants, or the reduced capacity of
traditional market participants to make a market in fixed-income securities. The
capacity of traditional dealers to engage in fixed-income trading has
not kept pace with the bond market’s growth. As a result, dealer inventories of
corporate bonds, which indicate the ability to “make markets,” i.e., buy or
sell a security at the quoted bid and ask price, respectively, are at or near
historic lows relative to market size. Because market makers provide
stability to fixed-income markets, the significant reduction in dealer
inventories could lead to decreased liquidity and increased volatility, which
may become
exacerbated during periods of economic or political stress. In addition,
liquidity risk may be magnified in a rising interest rate environment
in which
investor redemptions from fixed-income funds may be higher than normal; the
selling of fixed-income securities to satisfy shareholder redemptions
may result in an increased supply of such securities during periods of reduced
investor demand due to a lack of buyers, thereby impairing the fund’s
ability to sell such securities. The secondary market for certain tax-exempt
securities tends to be less well-developed or liquid than many other
securities markets, which may adversely affect a fund’s ability to sell such
securities at attractive prices.
Floating
Rate Loans Risk
Floating rate
loans are generally rated below investment-grade, or if unrated, determined by
the manager to be of comparable quality. They are generally considered
speculative because they present a greater risk of loss, including default, than
higher quality debt instruments. Such investments may, under certain
circumstances, be particularly susceptible to liquidity and valuation risks.
Although certain floating rate loans are collateralized, there is no guarantee
that the value of the collateral will be sufficient or available to satisfy the
borrower’s obligation. In times of unusual or adverse market, economic or
political conditions, floating rate loans may experience higher than normal
default rates. In the event of a serious credit event the value of the fund's
investments in floating rate loans are more likely to decline. The secondary
market for floating rate loans is limited and, therefore, the fund’s
ability to
sell or realize the full value of its investment in these loans to reinvest sale
proceeds or to meet redemption obligations may be impaired. In addition,
floating rate loans generally are subject to extended settlement periods that
may be longer than seven days. As a result, the fund may be adversely
affected by selling other investments at an unfavorable time and/or under
unfavorable conditions to meet redemption requests or pursue other
investment opportunities. In addition, certain floating rate loans may be
“covenant-lite” loans that may contain fewer or less restrictive covenants
on the
borrower or may contain other borrower-friendly characteristics. The fund may
experience relatively greater difficulty or delays in enforcing its rights on its
holdings of certain covenant-lite loans and debt securities than its holdings of
loans or securities with the usual covenants.
In certain
circumstances, floating rate loans may not be deemed to be securities. As a
result, the fund may not have the protection of the anti-fraud provisions of
the federal securities laws. In such cases, the fund generally must rely on the
contractual provisions in the loan agreement and common-law
fraud protections under applicable state law.
Currency
Fluctuations.
Investments in
foreign securities may cause a fund to lose money when converting investments
from foreign currencies into U.S. dollars.
A fund may attempt to lock in an exchange rate by purchasing a foreign currency
exchange contract prior to the settlement of an investment in
a foreign security. However, the fund may not always be successful in doing so,
and it could still lose money.
Political
and Economic Conditions.
Investments in
foreign securities subject a fund to the political or economic conditions of the
foreign country. These
conditions could cause a fund’s investments to lose value if these conditions
deteriorate for any reason. This risk increases in the case of emerging
market countries which are more likely to be politically unstable. Political
instability could cause the value of any investment in the securities
of an issuer
based in a foreign country to decrease or could prevent or delay a fund from
selling its investment and taking the money out of the country.
Removal
of Proceeds of Investments from a Foreign Country.
Foreign
countries, especially emerging market countries, often have currency
controls or
restrictions that may prevent or delay a fund from taking money out of the
country or may impose additional taxes on money removed from the country.
Therefore, a fund could lose money if it is not permitted to remove capital from
the country or if there is a delay in taking the assets out of the country,
since the value of the assets could decline during this period, or the exchange
rate to convert the assets into U.S. dollars could worsen.
Nationalization
of Assets.
Investments in
foreign securities subject a fund to the risk that the company issuing the
security may be nationalized. If the company is
nationalized, the value of the company’s securities could decrease in value or
even become worthless.
Settlement
of Sales.
Foreign
countries, especially emerging market countries, also may have problems
associated with settlement of sales. Such problems could
cause a fund to suffer a loss if a security to be sold declines in value while
settlement of the sale is delayed.
Investor
Protection Standards.
Foreign
countries, especially emerging market countries, may have less stringent
investor protection and disclosure standards than
the U.S. Therefore, when making a decision to purchase a security for a fund, a
subadvisor may not be aware of problems associated with the
company issuing the security and may not enjoy the same legal rights as those
provided in the U.S.
Securities
of Emerging Market Issuers or Countries.
The risks
described above apply to an even greater extent to investments in emerging
markets. The
securities markets of emerging countries are generally smaller, less developed,
less liquid, and more volatile than the securities markets of the United
States and developed foreign countries. In addition, the securities markets of
emerging countries may be subject to a lower level of monitoring and
regulation. Government enforcement of existing securities regulations also has
been extremely limited, and any such enforcement may be arbitrary
and the results difficult to predict with any degree of certainty. Many emerging
countries have experienced substantial, and in some periods extremely
high, rates of inflation for many years. Inflation and rapid fluctuations in
inflation rates have had and may continue to have very negative effects on the
economies and securities markets of some emerging countries. Economies in
emerging markets generally are heavily dependent upon international
trade and, accordingly, have been and may continue to be affected adversely by
trade barriers, exchange controls, managed adjustments in relative
currency values, and other protectionist measures imposed or negotiated by the
countries with which they trade. Economies in emerging markets also
have been and may continue to be adversely affected by economic conditions in
the countries with which they trade. The economies of countries with
emerging markets also may be predominantly based on only a few industries or
dependent on revenues from particular commodities. In many cases,
governments of emerging market countries continue to exercise significant
control over their economies, and government actions relative to the
economy, as well as economic developments generally, may affect the capacity of
issuers of debt instruments to make payments on their debt obligations,
regardless of their financial condition.
Restrictions
on Investments.
There may be
unexpected restrictions on investments in companies located in certain foreign
countries. For example, on November
12, 2020, the President of the United States signed an Executive Order
prohibiting U.S. persons from purchasing or investing in publicly-traded
securities of companies identified by the U.S. government as “Communist Chinese
military companies,” or in instruments that are derivative of,
or are designed to provide investment exposure to, such securities. In addition,
to the extent that a fund holds such a security, one or more fund
intermediaries may decline to process customer orders with respect to such fund
unless and until certain representations are made by the fund or
the prohibited
holdings are divested. As a result of forced sales of a security, or inability
to participate in an investment the manager otherwise believes is attractive,
a fund may incur losses.
Gaming-Tribal
Authority Investments
The value of a
fund’s investments in securities issued by gaming companies, including gaming
facilities operated by Indian (Native American) tribal authorities,
is subject to legislative or regulatory changes, adverse market conditions,
and/or increased competition affecting the gaming sector. Securities of
gaming companies may be considered speculative, and generally exhibit greater
volatility than the overall market. The market value of gaming company
securities may fluctuate widely due to unpredictable earnings, due in part to
changing consumer tastes and intense competition, strong
reaction to technological developments, and the threat of increased government
regulation.
Securities
issued by Indian tribal authorities are subject to particular risks. Indian
tribes enjoy sovereign immunity, which is the legal privilege by which
the United
States federal, state, and tribal governments cannot be sued without their
consent. In order to sue an Indian tribe (or an agency or instrumentality
thereof), the tribe must have effectively waived its sovereign immunity with
respect to the matter in dispute. Certain Indian tribal authorities
have agreed to waive their sovereign immunity in connection with their
outstanding debt obligations. Generally, waivers of sovereign immunity have
been held to be enforceable against Indian tribes. Nevertheless, if a waiver of
sovereign immunity is held to be ineffective, claimants, including
investors in Indian tribal authority securities (such as a fund), could be
precluded from judicially enforcing their rights and remedies.
Further, in
most commercial disputes with Indian tribes, it may be difficult or impossible
to obtain federal court jurisdiction. A commercial dispute may not present a
federal question, and an Indian tribe may not be considered a citizen of any
state for purposes of establishing diversity jurisdiction. The U.S. Supreme
Court has held that jurisdiction in a tribal court must be exhausted before any
dispute can be heard in an appropriate federal court. In cases where
the jurisdiction of the tribal forum is disputed, the tribal court first must
rule as to the limits of its own jurisdiction. Such jurisdictional issues, as
well as the general view that Indian tribes are not considered to be subject to
ordinary bankruptcy proceedings, may be disadvantageous to holders of
obligations issued by Indian tribal authorities, including a
fund.
Greater
China Region Risk
Investments in
the Greater China region are subject to special risks, such as less developed or
less efficient trading markets, restrictions on monetary repatriation
and possible seizure, nationalization or expropriation of assets. Taiwan’s
history of political contention with China has resulted in ongoing tensions
between the two countries and, at times, threats of military conflict.
Investments in Taiwan could be adversely affected by its political and
economic
relationship with China. In addition, the willingness of the government of the
PRC to support the Mainland China and Hong Kong economies and markets is
uncertain, and changes in government policy could significantly affect the
markets in both Hong Kong and China. For example, a government may
restrict investment in companies or industries considered important to national
interests, or intervene in the financial markets, such as by imposing
trading restrictions, or banning or curtailing short selling. The PRC also
maintains strict currency controls and imposes repatriation restrictions
in order to achieve economic, trade and political objectives and regularly
intervenes in the currency market. The imposition of currency controls and
repatriation restrictions may negatively impact the performance and liquidity of
a fund as capital may become trapped in the PRC. Chinese yuan currency
exchange rates can be very volatile and can change quickly and unpredictably. A
small number of companies and industries may generally
represent a relatively large portion of the Greater China market. Consequently,
a fund may experience greater price volatility and significantly lower
liquidity than a portfolio invested solely in equity securities of U.S. issuers.
These companies and industries also may be subject to greater sensitivity to
adverse political, economic or regulatory developments generally affecting the
market (see “Risk Factors – Foreign Securities”).
To the extent
a fund invests in securities of Chinese issuers, it may be subject to certain
risks associated with variable interest entities (“VIEs”). VIEs are widely used by
China-based companies where China restricts or prohibits foreign ownership in
certain sectors, including telecommunications, technology,
media, and education. In a typical VIE structure, a shell company is set up in
an offshore jurisdiction and enters into contractual arrangements
with a China-based operating company. The VIE lists on a U.S. exchange and
investors then purchase the stock issued by the VIE. The VIE structure is
designed to provide investors with economic exposure to the Chinese company that
replicates equity ownership, without providing actual equity
ownership.
VIE structures
do not offer the same level of investor protections as direct ownership and
investors may experience losses if VIE structures are altered, contractual
disputes emerge, or the legal status of the VIE structure is prohibited under
Chinese law. Additionally, significant portions of the Chinese securities
markets may also become rapidly illiquid, as Chinese issuers have the ability to
suspend the trading of their equity securities, and have shown a willingness
to exercise that option in response to market volatility and other
events.
The legal
status of the VIE structure remains uncertain under Chinese law. There is risk
that the Chinese government may cease to tolerate such VIE structures at
any time or impose new restrictions on the structure, in each case either
generally or with respect to specific issuers. If new laws, rules or
regulations
relating to VIE structures are adopted, investors, including a fund, could
suffer substantial, detrimental, and possibly permanent losses with little or no
recourse available.
In addition,
VIEs may be delisted if they do not meet U.S. accounting standards and auditor
oversight requirements. Delisting would significantly decrease the
liquidity and value of the securities of these companies, decrease the ability
of a fund to invest in such securities and may increase the expenses of a
fund if it is required to seek alternative markets in which to invest in such
securities.
High
Yield (High Risk) Securities
General.
A fund may
invest in high yield (high risk) securities, consistent with its investment
objectives and policies. High yield (high risk) securities (also known as
“junk bonds”) are those rated below investment grade and comparable unrated
securities. These securities offer yields that fluctuate over time, but
generally are superior to the yields offered by higher-rated securities.
However, securities rated below investment grade also have greater risks than
higher-rated securities as described below.
Interest
Rate Risk.
To the extent
that a fund invests in fixed-income securities, the NAV of the fund’s shares can
be expected to change as general levels of
interest rates fluctuate. However, the market values of securities rated below
investment grade (and comparable unrated securities) tend to react less to
fluctuations in interest rate levels than do those of higher-rated securities.
Except to the extent that values are affected independently by other factors
(such as developments relating to a specific issuer) when interest rates
decline, the value of a fixed-income fund generally rise. Conversely,
when interest
rates rise, the value of a fixed-income fund will decline.
Liquidity.
The secondary
markets for high yield corporate and sovereign debt securities are not as liquid
as the secondary markets for investment grade
securities. The secondary markets for high yield debt securities are
concentrated in relatively few market makers and participants are mostly
institutional
investors. In addition, the trading volume for high yield debt securities is
generally lower than for investment grade securities. Furthermore, the secondary
markets could contract under adverse market or economic conditions independent
of any specific adverse changes in the condition of a particular
issuer.
These factors
may have an adverse effect on the ability of funds investing in high yield
securities to dispose of particular portfolio investments. These factors also
may limit funds that invest in high yield securities from obtaining accurate
market quotations to value securities and calculate NAV. If a fund investing in
high yield debt securities is not able to obtain precise or accurate market
quotations for a particular security, it will be more difficult for the
subadvisor to
value the fund’s investments.
Less liquid
secondary markets also may affect a fund’s ability to sell securities at their
fair value. Each fund may invest in illiquid securities, subject to certain
restrictions (see “Additional Investment Policies and Other Instruments”). These
securities may be more difficult to value and to sell at fair value.
If the
secondary markets for high yield debt securities are affected by adverse
economic conditions, the proportion of a fund’s assets invested in illiquid
securities may
increase.
Below-Investment
Grade Corporate Debt Securities.
While the
market values of securities rated below investment grade (and comparable unrated
securities)
tend to react less to fluctuations in interest rate levels than do those of
higher-rated securities, the market values of below-investment grade
corporate debt
securities tend to be more sensitive to individual corporate developments and
changes in economic conditions than higher-rated securities.
In addition,
these securities generally present a higher degree of credit risk. Issuers of
these securities are often highly leveraged and may not have more
traditional methods of financing available to them. Therefore, their ability to
service their debt obligations during an economic downturn or during
sustained
periods of rising interest rates may be impaired. The risk of loss due to
default by such issuers is significantly greater than with investment
grade
securities because such securities generally are unsecured and frequently are
subordinated to the prior payment of senior indebtedness.
Below-Investment
Grade Foreign Sovereign Debt Securities.
Investing in
below-investment grade foreign sovereign debt securities will expose a
fund to the
consequences of political, social or economic changes in the developing and
emerging market countries that issue the securities. The ability and
willingness of sovereign obligors in these countries to pay principal and
interest on such debt when due may depend on general economic and political
conditions within the relevant country. Developing and emerging market countries
have historically experienced (and may continue to experience)
high inflation and interest rates, exchange rate trade difficulties, extreme
poverty and unemployment. Many of these countries also are characterized
by political uncertainty or instability.
The ability of
a foreign sovereign obligor to make timely payments on its external debt
obligations also will be strongly influenced by:
●
the obligor’s
balance of payments, including export performance;
●
the obligor’s
access to international credits and investments;
●
fluctuations
in interest rates; and
●
the extent of
the obligor’s foreign reserves.
Defaulted
Securities.
The risk of
loss due to default may be considerably greater with lower-quality securities
because they are generally unsecured and are often
subordinated to other debt of the issuer. The purchase of defaulted debt
securities involves risks such as the possibility of complete loss of
the investment
where the issuer does not restructure to enable it to resume principal and
interest payments. If the issuer of a security in a fund’s portfolio
defaults, the fund may have unrealized losses on the security, which may lower
the fund’s NAV. Defaulted securities tend to lose much of their value before
they default. Thus, a fund’s NAV may be adversely affected before an issuer
defaults. In addition, a fund may incur additional expenses if it must try to
recover principal or interest payments on a defaulted security.
Defaulted debt
securities may be illiquid and, as such, will be part of the percentage limits
on investments in illiquid securities discussed under “Illiquid Securities.”
Obligor’s
Balance of Payments.
A country
whose exports are concentrated in a few commodities or whose economy depends on
certain strategic imports could
be vulnerable to fluctuations in international prices of these commodities or
imports. To the extent that a country receives payment for its exports in
currencies other than dollars, its ability to make debt payments denominated in
dollars could be adversely affected.
Obligor’s
Access to International Credits and Investments.
If a foreign
sovereign obligor cannot generate sufficient earnings from foreign trade to
service its
external debt, it may need to depend on continuing loans and aid from foreign
governments, commercial banks, and multilateral organizations,
and inflows of foreign investment. The commitment on the part of these entities
to make such disbursements may be conditioned on the government’s
implementation of economic reforms and/or economic performance and the timely
service of its obligations. Failure in any of these efforts may result in
the cancellation of these third parties’ lending commitments, thereby further
impairing the obligor’s ability or willingness to service its debts on
time.
Obligor’s
Fluctuations in Interest Rates.
The cost of
servicing external debt is generally adversely affected by rising international
interest rates since many
external debt obligations bear interest at rates that are adjusted based upon
international interest rates.
Obligor’s
Foreign Reserves.
The ability to
service external debt also will depend on the level of the relevant government’s
international currency reserves and
its access to foreign exchange. Currency devaluations may affect the ability of
a sovereign obligor to obtain sufficient foreign exchange to service its
external debt.
The
Consequences of a Default.
As a result of
the previously listed factors, a governmental obligor may default on its
obligations. If a default occurs, a fund holding
foreign sovereign debt securities may have limited legal recourse against the
issuer and/or guarantor. Remedies must, in some cases, be pursued in the
courts of the defaulting party itself, and the ability of the holder of the
foreign sovereign debt securities to obtain recourse may be subject to the
political climate in the relevant country. In addition, no assurance can be
given that the holders of commercial bank debt will not contest payments to
the holders of other foreign sovereign debt obligations in the event of default
under their commercial bank loan agreements.
Sovereign
obligors in developing and emerging countries are among the world’s largest
debtors to commercial banks, other governments, international financial
organizations and other financial institutions. These obligors have in the past
experienced substantial difficulties in servicing their external debt
obligations. This difficulty has led to defaults on certain obligations and the
restructuring of certain indebtedness. Restructuring arrangements have included,
among other things:
●
reducing and
rescheduling interest and principal payments by negotiating new or amended
credit agreements or converting outstanding principal and unpaid
interest to Brady Bonds; and
●
obtaining new
credit to finance interest payments.
Holders of
certain foreign sovereign debt securities may be requested to participate in the
restructuring of such obligations and to extend further loans to their
issuers. There can be no assurance that the Brady Bonds and other foreign
sovereign debt securities in which a fund may invest will not be subject to
similar restructuring arrangements or to requests for new credit that may
adversely affect the fund’s holdings. Furthermore, certain participants
in the secondary market for such debt may be directly involved in negotiating
the terms of these arrangements and may therefore have access to
information not available to other market participants.
Securities
in the Lowest Rating Categories.
Certain debt
securities in which a fund may invest may have (or be considered comparable to
securities having) the
lowest ratings for non-subordinated debt instruments (e.g., securities rated
“Caa” or lower by Moody’s, “CCC” or lower by S&P or Fitch). These
securities are considered to have the following characteristics:
●
extremely poor
prospects of ever attaining any real investment standing;
●
current
identifiable vulnerability to default;
●
unlikely to
have the capacity to pay interest and repay principal when due in the event of
adverse business, financial or economic conditions;
●
are
speculative with respect to the issuer’s capacity to pay interest and repay
principal in accordance with the terms of the obligations; and/or
●
are in default
or not current in the payment of interest or principal.
Accordingly,
it is possible that these types of characteristics could, in certain instances,
reduce the value of securities held by a fund with a commensurate
effect on the value of the fund’s shares.
Hong
Kong Stock Connect Program and Bond Connect Program Risk
A fund may
invest in eligible renminbi-denominated class A shares of equity securities that
are listed and traded on certain Chinese stock exchanges (“China
A-Shares”) through the Hong Kong
Stock
Connect Program
(“Stock Connect”), a mutual
market access program designed to, among others, enable foreign
investment in the PRC; and in renminbi-denominated bonds issued in the PRC by
Chinese credit, government and quasi-governmental issuers (“RMB
Bonds”), which are available on the CIBM to eligible foreign investors through,
among others, the “Mutual Bond Market Access between Mainland China
and Hong Kong” (“Bond Connect”) program.
Trading in
China A-Shares through Stock Connect and bonds through Bond Connect is subject
to certain restrictions and risks. A fund’s investment in China A-Shares
may only be traded through Stock Connect and is not otherwise transferable. The
list of securities eligible to be traded on either program may
change from time to time. Securities listed on either program may lose purchase
eligibility, which could adversely affect a fund's performance.
While Stock
Connect is not subject to individual investment quotas, daily and aggregate
investment quotas apply to all Stock Connect participants, which may
restrict or preclude a fund’s ability to invest in China A-Shares. For example,
these quota limitations require that buy orders for China A-Shares be
rejected once the remaining balance of the relevant quota drops to zero or the
daily quota is exceeded (although a fund will be permitted to sell China
A-Shares regardless of the quota balance). These limitations may restrict a fund
from investing in China A-Shares on a timely basis, which could affect a
fund’s ability to effectively pursue its investment strategy. Investment quotas
are also subject to change. Bond Connect is not subject to investment
quotas.
Chinese
regulations prohibit over-selling of China A-Shares. If a fund intends to sell
China A-shares it holds, it must transfer those securities to the accounts of a
fund’s participant broker before the market opens. As a result, a fund may not
be able to dispose of its holdings of China A-Shares in a timely
manner.
Stock Connect
also is generally available only on business days when both the exchange on
which China A-Shares are offered and the Stock Exchange of Hong Kong are
open and when banks in both markets are open on the corresponding settlement
days. Therefore, an investment in China A-Shares through Stock
Connect may subject a fund to a risk of price fluctuations on days where Chinese
stock markets are open, but Stock Connect is not operating.
Similarly, Bond Connect is only available on days when markets in both China and
Hong Kong are open, which may limit a fund’s ability to trade when it
would be otherwise attractive to do so.
Stock Connect
launched in November 2014 and Bond Connect launched in July 2017. Therefore,
trading through Stock Connect and Bond Connect is subject to
trading, clearance, and settlement procedures that may continue to develop as
the programs mature, which could pose risks to a fund. Bond Connect is
relatively new and its effects on the CIBM are uncertain. In addition, the
trading, settlement and information technology systems required for non-Chinese
investors in Bond Connect are relatively new. In the event of systems
malfunctions or extreme market conditions, trading via Bond Connect could be
disrupted. In addition, the rules governing the operation of Stock Connect and
Bond Connect may be subject to further interpretation and guidance.
There can be no assurance as to the programs’ continued existence or whether
future developments regarding the programs may restrict or adversely
affect a fund’s investments or returns. Additionally, the withholding tax
treatment of dividends, interest, and capital gains payable to overseas
investors may
be subject to change. Furthermore, there is currently no specific formal
guidance by the PRC tax authorities on the treatment of income tax and other
tax categories payable in respect of trading in CIBM by eligible foreign
institutional investors via Bond Connect. Any changes in PRC tax law, future
clarifications thereof, and/or subsequent retroactive enforcement by the PRC tax
authorities of any tax may result in a material loss to a fund.
Stock Connect
and Bond Connect regulations provide that investors, such as a fund, enjoy the
rights and benefits of equities purchased through Stock Connect and
bonds purchased through Bond Connect. However, the nominee structure under Stock
Connect requires that China A-Shares be held through the
HKSCC as nominee on behalf of investors. For investments via Bond Connect, the
relevant filings, registration with People’s Bank of China, and account
opening have to be carried out via an onshore settlement agent, offshore custody
agent, registration agent, or other third parties (as the case may be).
As such, a fund is subject to the risks of default or errors on the part of such
third parties.
While a fund’s
ownership of China A-Shares will be reflected on the books of the custodian’s
records, a fund will only have beneficial rights in such A-Shares. The
precise nature and rights of a fund as the beneficial owner of the equities
through the HKSCC as nominee is not well defined under the law of the PRC.
Although the China Securities Regulatory Commission has issued guidance
indicating that participants in Stock Connect will be able to exercise
rights of beneficial owners in the PRC, the exact nature and methods of
enforcement of the rights and interests of a fund under PRC law is uncertain. In
particular, the courts may consider that the nominee or custodian as registered
holder of China A-Shares, has full ownership over the securities
rather than a fund as the underlying beneficial owner. The HKSCC, as nominee
holder, does not guarantee the title to China A-Shares held through it and
is under no obligation to enforce title or other rights associated with
ownership on behalf of beneficial owners. Consequently, title to these
securities, or the rights associated with them, such as participation in
corporate actions or shareholder meetings, cannot be assured.
While certain
aspects of the Stock Connect trading process are subject to Hong Kong law, PRC
rules applicable to share ownership will apply. In addition,
transactions using Stock Connect are not subject to the Hong Kong investor
compensation fund, which means that a fund will be unable to make monetary
claims on the investor compensation fund that it might otherwise be entitled to
with respect to investments in Hong Kong securities. Other risks
associated with investments in PRC securities apply fully to China A-Shares
purchased through Stock Connect.
Similarly, in
China, the Hong Kong Monetary Authority Central Money Markets Unit holds Bond
Connect securities on behalf of ultimate investors (such as a fund) in
accounts maintained with a China-based custodian (either the China Central
Depository & Clearing Co. or the Shanghai Clearing House). This
recordkeeping system subjects a fund to various risks, including the risk that a
fund may have a limited ability to enforce rights as a bondholder and
the risks of
settlement delays and counterparty default of the Hong Kong sub-custodian. In
addition, enforcing the ownership rights of a beneficial holder of Bond
Connect securities is untested and courts in China have limited experience in
applying the concept of beneficial ownership.
China A-Shares
traded via Stock Connect and bonds trading through Bond Connect are subject to
various risks associated with the legal and technical framework of
Stock Connect and Bond Connect, respectively. In the event that the relevant
systems fail to function properly, trading through Stock Connect or
Bond Connect could be disrupted. In the event of high trade volume or unexpected
market conditions, Stock Connect and Bond Connect may be available
only on a limited basis, if at all. Both the PRC and Hong Kong regulators are
permitted, independently of each other, to suspend Stock Connect in
response to certain market conditions. Similarly, in the event that the relevant
Mainland Chinese authorities suspend account opening or trading on the
CIBM via Bond Connect, a fund’s ability to invest in Chinese bonds will be
adversely affected and limited. In such event, a fund’s ability to achieve its
investment objective will be negatively affected and, after exhausting other
trading alternatives, a fund may suffer substantial losses as a result.
Hybrid
Instruments
The risks of
investing in hybrid instruments are a combination of the risks of investing in
securities, options, futures, swaps, and currencies. Therefore, an investment
in a hybrid instrument may include significant risks not associated with a
similar investment in a traditional debt instrument with a fixed principal
amount, is denominated in U.S. dollars, or that bears interest either at a fixed
rate or a floating rate determined by reference to a common, nationally
published benchmark. The risks of a particular hybrid instrument will depend
upon the terms of the instrument, but may include, without limitation,
the possibility of significant changes in the benchmarks or the prices of
underlying assets to which the instrument is linked. These risks generally
depend upon factors unrelated to the operations or credit quality of the issuer
of the hybrid instrument and that may not be readily foreseen by the purchaser.
Such factors include economic and political events, the supply and demand for
the underlying assets, and interest rate movements. In recent years,
various benchmarks and prices for underlying assets have been highly volatile,
and such volatility may be expected in the future. See “Hedging and
Other Strategic Transactions” for a description of certain risks associated with
investments in futures, options, and forward contracts. The principal
risks of investing in hybrid instruments are as follows:
Volatility.
Hybrid
instruments are potentially more volatile and carry greater market risks than
traditional debt instruments. Depending on the structure of
the particular hybrid instrument, changes in a benchmark may be magnified by the
terms of the hybrid instrument and have an even more dramatic
and substantial effect upon the value of the hybrid instrument. Also, the prices
of the hybrid instrument and the benchmark or underlying
asset may not move in the same direction or at the same time.
Leverage
Risk.
Hybrid
instruments may bear interest or pay preferred dividends at below market (or
even relatively nominal) rates. Alternatively, hybrid
instruments may bear interest at above market rates, but bear an increased risk
of principal loss (or gain). For example, an increased risk of principal loss
(or gain) may result if “leverage” is used to structure a hybrid instrument.
Leverage risk occurs when the hybrid instrument is structured so
that a change in a benchmark or underlying asset is multiplied to produce a
greater value change in the hybrid instrument, thereby magnifying the
risk of loss, as well as the potential for gain.
Liquidity
Risk.
Hybrid
instruments also may carry liquidity risk since the instruments are often
“customized” to meet the needs of a particular investor.
Therefore, the number of investors that would be willing and able to buy such
instruments in the secondary market may be smaller than for more
traditional debt securities. In addition, because the purchase and sale of
hybrid instruments could take place in an OTC market without the guarantee of a
central clearing organization or in a transaction between a fund and the issuer
of the hybrid instrument, the creditworthiness of the counterparty
or issuer of the hybrid instrument would be an additional risk factor, which the
fund would have to consider and monitor.
Lack
of U.S. Regulation.
Hybrid
instruments may not be subject to regulation of the CFTC, which generally
regulates the trading of swaps and commodity
futures by U.S. persons, the SEC, which regulates the offer and sale of
securities by and to U.S. persons, or any other governmental regulatory
authority.
Credit
and Counterparty Risk.
The issuer or
guarantor of a hybrid instrument may be unable or unwilling to make timely
principal, interest or settlement
payments, or otherwise honor its obligations. Funds that invest in hybrid
instruments are subject to varying degrees of risk that the issuers of the
securities will have their credit rating downgraded or will default, potentially
reducing a fund’s share price and income level.
The various
risks discussed above with respect to hybrid instruments particularly the market
risk of such instruments, may cause significant fluctuations
in the NAV of a fund that invests in such instruments.
Industry
or Sector Investing
When a fund
invests a substantial portion of its assets in a particular industry or sector
of the economy, the fund’s investments are not as varied as the investments of
most funds and are far less varied than the broad securities markets. As a
result, the fund’s performance tends to be more volatile than other funds,
and the values of the fund’s investments tend to go up and down more rapidly. In
addition, to the extent that a fund invests significantly in a particular
industry or sector, it is particularly susceptible to the impact of market,
economic, regulatory and other factors affecting that industry or sector. The
principal risks of investing in certain sectors are described below.
Communication.
Companies in
the communication sector are subject to the additional risks of rapid
obsolescence due to technological advancement or
development, lack of standardization or compatibility with existing
technologies, an unfavorable regulatory environment, and a dependency on
patent and copyright protection. The prices of the securities of companies in
the communication sector may fluctuate widely due to both federal
and state regulations governing rates of return and services that may be
offered, fierce competition for market share, and competitive challenges in
the U.S. from foreign competitors engaged in strategic joint ventures with U.S.
companies, and in foreign markets from both U.S. and foreign
competitors. In addition, recent industry consolidation trends may lead to
increased regulation of communication companies in their primary markets.
Consumer
Discretionary.
The consumer
discretionary sector may be affected by fluctuations in supply and demand and
may also be adversely affected by
changes in consumer spending as a result of world events, political and economic
conditions, commodity price volatility, changes in exchange
rates, imposition of import controls, increased competition, depletion of
resources and labor relations.
Consumer
Staples.
Companies in
the consumer staples sector may be affected by general economic conditions,
commodity production and pricing,
consumer confidence and spending, consumer preferences, interest rates, product
cycles, marketing, competition, and government regulation.
Other risks include changes in global economic, environmental and political
events, and the depletion of resources. Companies in the consumer
staples sector may also be negatively impacted by government regulations
affecting their products. For example, government regulations may affect the
permissibility of using various food additives and production methods of
companies that make food products, which could affect
company
profitability. Tobacco companies, in particular, may be adversely affected by
new laws, regulations and litigation. Companies in the consumer
staples sector may also be subject to risks relating to the supply of, demand
for, and prices of raw materials. The prices of raw materials fluctuate in
response to a number of factors, including, changes in exchange rates, import
and export controls, changes in international agricultural and trading
policies, and seasonal and weather conditions, among others. In addition, the
success of food, beverage, household and personal product
companies, in particular, may be strongly affected by unpredictable factors,
such as, demographics, consumer spending, and product trends.
Energy.
Companies in
the energy sector may be affected by energy prices, supply and demand
fluctuations including in energy fuels, energy conservation,
liabilities arising from government or civil actions, environmental and other
government regulations, and geopolitical events including political
instability and war. The market value of companies in the local energy sector is
heavily impacted by the levels and stability of global energy prices, energy
conservation efforts, the success of exploration projects, exchange rates,
interest rates, economic conditions, tax and other government
regulations, increased competition and technological advances, as well as other
factors. Companies in this sector may be subject to extensive
government regulation and contractual fixed pricing, which may increase the cost
of doing business and limit these companies’ profits. A large part of
the returns of these companies depends on few customers, including governmental
entities and utilities. As a result, governmental budget
constraints may have a significant negative effect on the stock prices of energy
sector companies. Energy companies may also operate in, or engage in,
transactions involving countries with less developed regulatory regimes or a
history of expropriation, nationalization or other adverse policies. As a
result, securities of companies in the energy field are subject to quick price
and supply fluctuations caused by events relating to international
politics. Other risks include liability from accidents resulting in injury or
loss of life or property, pollution or other environmental problems,
equipment malfunctions or mishandling of materials and a risk of loss from
terrorism, political strife and natural disasters. Energy companies can
also be heavily affected by the supply of, and demand for, their specific
product or service and for energy products in general, and government
subsidization. Energy companies may have high levels of debt and may be more
likely to restructure their businesses if there are downturns in
energy markets or the economy as a whole.
Global oil
prices declined significantly at the beginning of 2020 and have experienced
significant price volatility, including a period where an oil-price
futures contract fell into negative territory for the first time in history, as
demand for oil slowed and oil storage facilities had reached their storage
capacities. The impact on such commodities markets from varying levels of demand
may continue to be volatile for an extended period of time.
Financial
Services.
To the extent
that a fund invests principally in securities of financial services companies,
it is particularly vulnerable to events affecting that
industry. Financial services companies may include, but are not limited to,
commercial and industrial banks, savings and loan associations
and their holding companies, consumer and industrial finance companies,
diversified financial services companies, investment banking,
securities brokerage and investment advisory companies, leasing companies and
insurance companies. The types of companies that compose the
financial services sector may change over time. These companies are all subject
to extensive regulation, rapid business changes, volatile
performance dependent upon the availability and cost of capital, prevailing
interest rates and significant competition. General economic conditions
significantly affect these companies. Credit and other losses resulting from the
financial difficulty of borrowers or other third parties have a potentially
adverse effect on companies in this sector. Investment banking, securities
brokerage and investment advisory companies are particularly
subject to government regulation and the risks inherent in securities trading
and underwriting activities. In addition, all financial services companies face
shrinking profit margins due to new competitors, the cost of new technology, and
the pressure to compete globally.
Banking. Commercial
banks (including “money center” regional and community banks), savings and loan
associations and holding companies of the foregoing are
especially subject to adverse effects of volatile interest rates, concentrations
of loans in particular industries (such as real estate or energy) and
significant competition. The profitability of these businesses is to a
significant degree dependent upon the availability and cost of capital
funds.
Economic conditions in the real estate market may have a particularly strong
effect on certain banks and savings associations. Commercial banks and
savings associations are subject to extensive federal and, in many instances,
state regulation. Neither such extensive regulation nor the federal
insurance of deposits ensures the solvency or profitability of companies in this
industry, and there is no assurance against losses in securities
issued by such companies. Late in the
first quarter of 2023, a number of U.S. domestic
banks and foreign banks experienced financial difficulties
and, in some cases, failures. Given the interconnectedness of the banking
system, bank regulators took actions, including the Federal Reserve, which
invoked the systemic risk exception, temporarily transferred all deposits-both
insured and uninsured-and substantially all the assets of two failed
banks into respective bridge banks and guaranteed depositors' full access to
their funds. Despite such response, there can be no certainty that
the actions taken by banking regulators to limit the effect of those
difficulties and failures on other banks or other financial institutions
or on the
U.S. or foreign
economies generally will be effective. It is possible that more banks or other
financial institutions will experience financial difficulties
or fail, or other adverse developments may occur, which may affect adversely
other U.S. or foreign
financial institutions and economies.
Insurance. Insurance
companies are particularly subject to government regulation and rate setting,
potential anti-trust and tax law changes, and industry-wide
pricing and competition cycles. Property and casualty insurance companies also
may be affected by weather and other catastrophes. Life and
health insurance companies may be affected by mortality and morbidity rates,
including the effects of epidemics. Individual insurance companies may
be exposed to reserve inadequacies, problems in investment portfolios (for
example, due to real estate or “junk” bond holdings) and failures of
reinsurance carriers.
Health
Sciences.
Companies in
this sector are subject to the additional risks of increased competition within
the health care industry, changes in legislation or
government regulations, reductions in government funding, product liability or
other litigation and the obsolescence of popular
products. The
prices of the securities of health sciences companies may fluctuate widely due
to government regulation and approval of their products and
services, which may have a significant effect on their price and availability.
In addition, the types of products or services produced or provided by
these companies may quickly become obsolete. Moreover, liability for products
that are later alleged to be harmful or unsafe may be substantial
and may have a significant impact on a company’s market value or share
price.
Industrials.
Companies in
the industrials sector may be affected by general economic conditions, commodity
production and pricing, supply and demand
fluctuations, environmental and other government regulations, geopolitical
events, interest rates, insurance costs, technological developments,
liabilities arising from governmental or civil actions, labor relations, import
controls and government spending. The value of securities
issued by companies in the industrials sector may also be adversely affected by
supply and demand related to their specific products or services and
industrials sector products in general, as well as liability for environmental
damage and product liability claims and government regulations.
For example, the products of manufacturing companies may face obsolescence due
to rapid technological developments and frequent new product
introduction. Certain companies within this sector, particularly aerospace and
defense companies, may be heavily affected by government
spending policies because companies involved in this industry rely, to a
significant extent, on government demand for their products and services,
and, therefore, the financial condition of, and investor interest in, these
companies are significantly influenced by governmental defense
spending policies, which are typically under pressure from efforts to control
the U.S. (and other) government budgets. In addition, securities of industrials
companies in transportation may be cyclical and have occasional sharp price
movements which may result from economic changes, fuel prices,
labor relations and insurance costs, and transportation companies in certain
countries may also be subject to significant government regulation and
oversight, which may adversely affect their businesses.
Internet-Related
Investments.
The value of
companies engaged in Internet-related activities, which is a developing
industry, is particularly vulnerable to:
(a) rapidly changing technology; (b) extensive government regulation; and (c)
relatively high risk of obsolescence caused by scientific and
technological advances. In addition, companies engaged in Internet-related
activities are difficult to value and many have high share prices relative to
their earnings which they may not be able to maintain over the long-term.
Moreover, many Internet companies are not yet profitable and will need
additional financing to continue their operations. There is no guarantee that
such financing will be available when needed. Since many Internet
companies are start-up companies, the risks associated with investing in small
companies are heightened for these companies. A fund that invests a
significant portion of its assets in Internet-related companies should be
considered extremely risky even as compared to other funds that invest
primarily in small company securities.
Materials.
Companies in
the materials sector may be affected by general economic conditions, commodity
production and prices, consumer preferences,
interest rates, exchange rates, product cycles, marketing, competition, resource
depletion, and environmental, import/export and other
government regulations. Other risks may include liabilities for environmental
damage and general civil liabilities, and mandated expenditures for safety and
pollution control. The materials sector may also be affected by economic cycles,
technological progress, and labor relations. At times, worldwide
production of industrial materials has been greater than demand as a result of
over-building or economic downturns, leading to poor investment
returns or losses. These risks are heightened for companies in the materials
sector located in foreign markets.
Natural
Resources.
A fund’s
investments in natural resources companies are especially affected by variations
in the commodities markets (which may be due to
market events, regulatory developments or other factors that such fund cannot
control) and such companies may lack the resources and the broad
business lines to weather hard times. Natural resources companies can be
significantly affected by events relating to domestic or international
political and economic developments, energy conservation efforts, the success of
exploration projects, reduced availability of transporting,
processing, storing or delivering natural resources, extreme weather or other
natural disasters, and threats of attack by terrorists on energy assets.
Additionally, natural resource companies are subject to substantial government
regulation, including environmental regulation and liability for
environmental damage, and changes in the regulatory environment for energy
companies may adversely impact their profitability. At times, the
performance of these investments may lag the performance of other sectors or the
market as a whole.
Investments in
certain commodity-linked instruments, such as crude oil and crude oil products,
can be susceptible to negative prices due to a surplus in
production caused by global events, including restrictions or reductions in
global travel. Exposure to such commodity-linked instruments may adversely
affect an issuer’s returns or the performance of the fund.
Global oil
prices are susceptible to and have experienced significant volatility, including
a period where an oil-price futures contract fell into negative territory for
the first time in history in early 2020 as demand for oil slowed and oil storage
facilities reached their storage capacities. The impact on the natural
resources sector from varying levels of demand may continue to be volatile for
an extended period of time.
Technology.
Technology
companies rely heavily on technological advances and face intense competition,
both domestically and internationally, which may have
an adverse effect on profit margins. Shortening of product cycle and
manufacturing capacity increases may subject technology companies to
aggressive pricing. Technology companies may have limited product lines,
markets, financial resources or personnel. The products of technology
companies may face product obsolescence due to rapid technological developments
and frequent new product introduction, unpredictable
changes in growth rates and competition for the services of qualified personnel.
Technology companies may not successfully introduce new
products, develop and maintain a loyal customer base or achieve general market
acceptance for their products.
Stocks of
technology companies, especially those of smaller, less-seasoned companies, tend
to be more volatile than the overall market. Companies in the
technology sector are also heavily dependent on patent and intellectual property
rights, the loss or impairment of which may adversely affect the
profitability of these companies. Technology companies engaged in manufacturing,
such as semiconductor companies, often operate
internationally
which could expose them to risks associated with instability and changes in
economic and political conditions, foreign currency fluctuations,
changes in foreign regulations, competition from subsidized foreign competitors
with lower production costs and other risks inherent to international
business.
Utilities.
Companies in
the utilities sector may be affected by general economic conditions, supply and
demand, financing and operating costs, rate caps,
interest rates, liabilities arising from governmental or civil actions, consumer
confidence and spending, competition, technological progress,
energy prices, resource conservation and depletion, man-made or natural
disasters, geopolitical events, and environmental and other government
regulations. The value of securities issued by companies in the utilities sector
may be negatively impacted by variations in exchange rates,
domestic and international competition, energy conservation and governmental
limitations on rates charged to customers. Although rate changes of a
regulated utility usually vary in approximate correlation with financing costs,
due to political and regulatory factors rate changes usually happen
only after a delay after the changes in financing costs. Deregulation may
subject utility companies to increased competition and can negatively
affect their profitability as it permits utility companies to diversify outside
of their original geographic regions and customary lines of business,
causing them to engage in more uncertain ventures. Deregulation can also
eliminate restrictions on the profits of certain utility companies, but
can simultaneously expose these companies to an increased risk of loss. Although
opportunities may permit certain utility companies to
earn more than their traditional regulated rates of return, companies in the
utilities industry may have difficulty obtaining an adequate return on
invested capital, raising capital, or financing large construction projects
during periods of inflation or unsettled capital markets. Utility companies may
also be subject to increased costs because of the effects of man-made or natural
disasters. Current and future regulations or legislation
can make it more difficult for utility companies to operate profitably.
Government regulators monitor and control utility revenues and costs, and
thus may restrict utility profits. There is no assurance that regulatory
authorities will grant rate increases in the future, or that those increases will
be adequate to permit the payment of dividends on stocks issued by a utility
company. Because utility companies are faced with the same
obstacles, issues and regulatory burdens, their securities may react similarly
and more in unison to these or other market conditions.
Initial
Public Offerings (“IPOs”)
IPOs may have
a magnified impact on the performance of a fund with a small asset base. The
impact of IPOs on a fund’s performance likely will decrease as the fund’s
asset size increases, which could reduce the fund’s returns. IPOs may not be
consistently available to a fund for investment, particularly as the fund’s
asset base grows. IPO shares frequently are volatile in price due to the absence
of a prior public market, the small number of shares available for trading
and limited information about the issuer. Therefore, a fund may hold IPO shares
for a very short period of time. This may increase the turnover of a
fund and may lead to increased expenses for a fund, such as commissions and
transaction costs. In addition, IPO shares can experience an immediate
drop in value if the demand for the securities does not continue to support the
offering price.
The funds may
invest in shares of other investment companies, including both open- and
closed-end investment companies (including single country funds, ETFs,
and BDCs). When making such an investment, a fund will be indirectly exposed to
all the risks of such investment companies. In general, the investing
funds will bear a pro rata portion of the other investment company’s fees and
expenses, which will reduce the total return in the investing funds. Certain
types of investment companies, such as closed-end investment companies, issue a
fixed number of shares that trade on a stock exchange and
may involve the payment of substantial premiums above the value of such
investment companies’ portfolio securities when traded OTC or at discounts
to their NAVs. Others are continuously offered at NAV, but also may be traded in
the secondary market.
In addition,
the funds may invest in private investment funds, vehicles, or structures. A
fund also may invest in debt-equity conversion funds, which are funds
established to exchange foreign bank debt of countries whose principal
repayments are in arrears into a portfolio of listed and unlisted equities,
subject to
certain repatriation restrictions.
Exchange-Traded
Funds.
A fund may
invest in ETFs, which are a type of security bought and sold on a securities
exchange. A fund could purchase shares of an ETF to
gain exposure to a portion of the U.S. or a foreign market. The risks of owning
shares of an ETF include the risks of directly owning the underlying
securities and other instruments the ETF holds. A lack of liquidity in an ETF
(e.g., absence of an active trading market) could result in the ETF being more
volatile than its underlying securities. The existence of extreme market
volatility or potential lack of an active trading market for an ETF’s
shares could
result in the ETF’s shares trading at a significant premium or discount to its
NAV. An ETF has its own fees and expenses, which are indirectly borne by the
fund. A fund may also incur brokerage and other related costs when it purchases
and sells ETFs. Also, in the case of passively-managed ETFs, there is
a risk that an ETF may fail to closely track the index or market segment that it
is designed to track due to delays in the ETF’s implementation
of changes to the composition of the index or other factors.
Business
Development Companies.
A BDC is a
less-common type of closed-end investment company that more closely resembles an
operating company than a
typical investment company. BDCs typically invest in and lend to small- and
medium-sized private and certain public companies that may not have
access to public equity markets to raise capital. BDCs invest in such diverse
industries as health care, chemical and manufacturing, technology and
service companies. BDCs generally invest in less mature private companies, which
involve greater risk than well-established, publicly traded
companies. BDCs are unique in that at least 70% of their investments must be
made in private and certain public U.S. businesses, and BDCs are required to
make available significant managerial assistance to their portfolio companies.
Generally, little public information exists for private and thinly traded
companies, and there is a risk that investors may not be able to make a fully
informed investment decision. With investments in debt instruments issued by such
portfolio companies, there is a risk that the issuer may default on its payments
or declare bankruptcy.
Investment
Grade Fixed-Income Securities in the Lowest Rating Category
Investment
grade fixed-income securities in the lowest rating category (i.e., rated “Baa”
by Moody’s and “BBB” by S&P or Fitch, and comparable unrated securities)
involve a higher degree of risk than fixed-income securities in the higher
rating categories. While such securities are considered investment grade quality
and are deemed to have adequate capacity for payment of principal and interest,
such securities lack outstanding investment characteristics
and have speculative characteristics as well. For example, changes in economic
conditions or other circumstances are more likely to lead to a
weakened capacity to make principal and interest payments than is the case with
higher grade securities.
LIBOR
Discontinuation Risk
Certain debt
securities, derivatives and other financial instruments have traditionally
utilized LIBOR as the reference or benchmark rate for interest rate calculations.
However, following allegations of manipulation and concerns regarding liquidity,
the U.K. Financial Conduct Authority (“UK FCA”) announced that
LIBOR would be discontinued on June 30, 2023. The UK FCA elected to require the
ICE Benchmark Administration Limited, the administrator
of LIBOR, to continue publishing a subset of LIBOR settings
on a “synthetic” basis
until
September 30,
2024.
Although the
transition process away from LIBOR has become increasingly well-defined in
advance of the discontinuation dates, the impact on certain debt
securities, derivatives and other financial instruments remains uncertain.
Market participants have adopted alternative rates such as Secured Overnight
Financing Rate (“SOFR”) or otherwise amended financial instruments referencing
LIBOR to include fallback provisions and other measures that
contemplated the discontinuation of LIBOR or other similar market disruption
events, but neither the effect of the transition process nor the viability
of such
measures is known. To facilitate the transition of legacy derivatives contracts
referencing LIBOR, the International Swaps and Derivatives Association,
Inc. launched a protocol to incorporate fallback provisions. However, there are
obstacles to converting certain longer term securities and transactions
to a new benchmark or benchmarks and the effectiveness of one alternative
reference rate versus multiple alternative reference rates in new or
existing financial instruments and products has not been determined. Certain
replacement
rates to LIBOR, such as SOFR, which is a broad measure of
secured overnight U.S. Treasury repo rates, are materially different from LIBOR,
necessitating changes in
the applicable spread for financial instruments
transitioning away from LIBOR to accommodate
the differences.
The
utilization of an alternative reference rate, or the transition process to an
alternative reference rate, may adversely affect the fund’s
performance.
Alteration of
the terms of a debt instrument or a modification of the terms of other types of
contracts to replace LIBOR or another interbank offered rate (“IBOR”) with
a new reference rate could result in a taxable exchange and the realization of
income and gain/loss for U.S. federal income tax purposes. The IRS has
issued final regulations regarding the tax consequences of the transition from
IBOR to a new reference rate in debt instruments and non-debt
contracts. Under the final regulations, alteration or modification of the terms
of a debt instrument to replace an operative rate that uses a discontinued
IBOR with a qualified rate (as defined in the final regulations) including true
up payments equalizing the fair market value of contracts before and
after such IBOR transition, to add a qualified rate as a fallback rate to a
contract whose operative rate uses a discontinued IBOR or to replace
a
fallback rate that uses a discontinued IBOR with a qualified rate would not be
taxable. The IRS may provide additional guidance, with potential retroactive
effect.
Lower
Rated Fixed-Income Securities
Lower rated
fixed-income securities are defined as securities rated below-investment grade
(e.g., rated “Ba” and below by Moody’s, or “BB” and below by S&P or
Fitch). The principal risks of investing in these securities are as
follows:
Risk
to Principal and Income.
Investing in
lower rated fixed-income securities is considered speculative. While these
securities generally provide greater income
potential than investments in higher rated securities, there is a greater risk
that principal and interest payments will not be made. Issuers of
these securities may even go into default or become bankrupt.
Price
Volatility.
The price of
lower rated fixed-income securities may be more volatile than securities in the
higher rating categories. This volatility may increase
during periods of economic uncertainty or change. The price of these securities
is affected more than higher rated fixed-income securities by the market’s
perception of their credit quality especially during times of adverse publicity.
In the past, economic downturns or an increase in interest rates have, at
times, caused more defaults by issuers of these securities and may do so in the
future. Economic downturns and increases in interest rates have an
even greater effect on highly leveraged issuers of these securities.
Liquidity.
The market for
lower rated fixed-income securities may have more limited trading than the
market for investment grade fixed-income securities.
Therefore, it may be more difficult to sell these securities and these
securities may have to be sold at prices below their market value in order
to meet
redemption requests or to respond to changes in market conditions.
Dependence
on Subadvisor’s Own Credit Analysis.
While a
subadvisor to a fund may rely on ratings by established credit rating agencies,
it also will
supplement such ratings with its own independent review of the credit quality of
the issuer. Therefore, the assessment of the credit risk of lower rated
fixed-income securities is more dependent on a subadvisor’s evaluation than the
assessment of the credit risk of higher rated securities.
Additional
Risks Regarding Lower Rated Corporate Fixed-Income Securities.
Lower rated
corporate debt securities (and comparable unrated securities)
tend to be more sensitive to individual corporate developments and changes in
economic conditions than higher-rated corporate fixed-income
securities.
Issuers of
lower rated corporate debt securities also may be highly leveraged, increasing
the risk that principal and income will not be repaid.
Additional
Risks Regarding Lower Rated Foreign Government Fixed-Income
Securities.
Lower rated
foreign government fixed-income securities are
subject to the risks of investing in emerging market countries described under
“Risk Factors—Foreign Securities.” In addition, the ability and
willingness of a foreign government to make payments on debt when due may be
affected by the prevailing economic and political conditions within the country.
Emerging market countries may experience high inflation, interest rates and
unemployment as well as exchange rate fluctuations that adversely
affect trade and political uncertainty or instability. These factors increase
the risk that a foreign government will not make payments when due.
Events in
certain sectors historically have resulted, and may in the future result, in an
unusually high degree of volatility in the financial markets, both domestic and
foreign. These events have included, but are not limited to: bankruptcies,
corporate restructurings, and other similar events; bank
failures; governmental
efforts to limit short selling and high frequency trading; measures to address
U.S. federal and state budget deficits; social, political, and
economic instability in Europe; economic stimulus by the Japanese central bank;
dramatic changes in energy prices and currency exchange
rates; and China’s economic slowdown. Interconnected global economies and
financial markets increase the possibility that conditions in one country or
region might adversely impact issuers in a different country or region. Both
domestic and foreign equity markets have experienced increased volatility and
turmoil, with issuers that have exposure to the real estate, mortgage, and
credit markets particularly affected. Financial institutions could suffer losses
as interest rates rise or economic conditions deteriorate.
In addition,
relatively high market volatility and reduced liquidity in credit and
fixed-income markets may adversely affect many issuers worldwide. Actions taken
by the Fed or foreign central banks to stimulate or stabilize economic growth,
such as interventions in currency markets, could cause high volatility in
the equity and fixed-income markets. Reduced liquidity may result in less money
being available to purchase raw materials, goods, and services from
emerging markets, which may, in turn, bring down the prices of these economic
staples. It may also result in emerging-market issuers having more
difficulty obtaining financing, which may, in turn, cause a decline in their
securities prices.
In response to
certain economic conditions, including
periods of high inflation, governmental
authorities and regulators may respond with significant fiscal and
monetary policy changes such as raising interest rates. The fund
may
be subject to
heightened interest rate risk when the Fed raises interest rates. Recent
and potential future changes in government monetary policy may affect interest
rates. It is
difficult to accurately predict the timing,
frequency or
magnitude of potential
interest rate increases,
or decreases
by the Fed and the
evaluation of macro-economic and other conditions that
could cause a
change in approach in the future. If the Fed and
other central banks increase the federal funds rate and equivalent
rates, such
increases generally will
cause market interest rates to rise and could cause the value of a fund’s
investments, and the fund’s NAV, to decline, potentially suddenly and
significantly. As a result, the fund may experience high redemptions and, as a
result, increased portfolio turnover, which could increase the costs
that the fund
incurs and may negatively impact the fund’s performance.
In addition,
as the Fed increases the target Fed funds rate, any such rate increases, among
other factors, could cause markets to experience continuing high
volatility. A significant increase in interest rates may cause a decline in the
market for equity securities. These events and the possible resulting
market
volatility may have an adverse effect on a fund.
Political
turmoil within the United States and abroad may also impact a fund. Although the
U.S. government has honored its credit obligations, it remains
possible that the United States could default on its obligations. While it is
impossible to predict the consequences of such an unprecedented event, it is
likely that a default by the United States would be highly disruptive to the
U.S. and global securities markets and could significantly impair the
value of a
fund’s investments. Similarly, political events within the United States at
times have resulted, and may in the future result, in a shutdown of government
services, which could negatively affect the U.S. economy, decrease the value of
many fund investments, and increase uncertainty in or impair the
operation of the U.S. or other securities markets. In recent years, the U.S.
renegotiated many of its global trade relationships and imposed or threatened to
impose significant import tariffs. These actions could lead to price volatility
and overall declines in U.S. and global investment markets.
Uncertainties
surrounding the sovereign debt of a number of EU countries and the viability of
the EU have disrupted and may in the future disrupt markets in the
United States and around the world. If one or more countries leave the EU or the
EU dissolves, the global securities markets likely will be significantly
disrupted. On January 31, 2020, the UK left the EU, commonly referred to as
“Brexit,” the UK ceased to be a member of the EU, and the UK and EU entered
into a Trade and Cooperation Agreement. While the full impact of Brexit is
unknown, Brexit has already resulted in volatility in European and global
markets. There remains significant market uncertainty regarding Brexit’s
ramifications, and the range and potential implications of possible political,
regulatory, economic, and market outcomes are difficult to predict.
A widespread
health crisis such as a global pandemic could cause substantial market
volatility, exchange trading suspensions and closures, which may lead to less
liquidity in certain instruments, industries, sectors or the markets generally,
and may ultimately affect fund performance. For example, the coronavirus
(COVID-19) pandemic has resulted and may continue to result in significant
disruptions to global business activity and market volatility due to disruptions
in market access, resource availability, facilities operations, imposition of
tariffs, export controls and supply chain disruption, among others. While
many countries have lifted some or all restrictions related to the coronavirus
(COVID-19) and the United States ended the public health emergency and
national emergency declarations relating to the coronavirus (COVID-19) pandemic
on May 11, 2023, the continued impact of coronavirus
(COVID-19) and related variants is uncertain. The impact of a health crisis and
other epidemics and pandemics that may arise in the future, could affect
the global economy in ways that cannot necessarily be foreseen at the present
time. A health crisis may exacerbate other pre-existing political,
social and economic risks. Any such impact could adversely affect the fund’s
performance, resulting in losses to your investment.
Political and
military events, including in Ukraine, North Korea, Russia, Venezuela, Iran,
Syria, and other areas of the Middle East, and nationalist unrest in Europe and
South America, also may cause market disruptions.
As a result of
continued political tensions and armed conflicts, including the Russian invasion
of Ukraine commencing in February of 2022, the extent and ultimate
result of which are unknown at this time, the United States and the EU, along
with the regulatory bodies of a number of countries, have imposed
economic sanctions on certain Russian corporate entities and individuals, and
certain sectors of Russia’s economy, which may result in, among other things,
the continued devaluation of Russian currency, a downgrade in the country’s
credit rating, and/or a decline in the value and liquidity of Russian
securities, property or interests. These sanctions could also result in the
immediate freeze of Russian securities and/or funds invested in prohibited
assets, impairing the ability of a fund to buy, sell, receive or deliver those
securities and/or assets. These sanctions or the threat of additional
sanctions
could also result in Russia taking counter measures or retaliatory actions,
which may further impair the value and liquidity of Russian securities.
The United States and other nations or international organizations may also
impose additional economic sanctions or take other actions that may adversely
affect Russia-exposed issuers and companies in various sectors of the Russian
economy. Any or all of these potential results could lead Russia's
economy into a recession. Economic sanctions and other actions against Russian
institutions, companies, and individuals resulting from the ongoing
conflict may also have a substantial negative impact on other economies and
securities markets both regionally and globally, as well as on companies with
operations in the conflict region, the extent to which is unknown at this time.
The United States and the EU have also imposed similar sanctions on
Belarus for its support of Russia’s invasion of Ukraine. Additional sanctions
may be imposed on Belarus and other countries that support Russia. Any
such sanctions could present substantially similar risks as those resulting from
the sanctions imposed on Russia, including substantial negative
impacts on the regional and global economies and securities markets.
In addition,
there is a risk that the prices of goods and services in the United States and
many foreign economies may decline over time, known as deflation.
Deflation may have an adverse effect on stock prices and creditworthiness and
may make defaults on debt more likely. If a country’s economy slips into a
deflationary pattern, it could last for a prolonged period and may be difficult
to reverse. Further, there is a risk that the present value of assets or
income from investments will be less in the future, known as inflation.
Inflation rates may change frequently and drastically as a result of
various
factors, including unexpected shifts in the domestic or global economy, and a
fund’s investments may be affected, which may reduce a fund's performance.
Further, inflation may lead to the rise in interest rates, which may negatively
affect the value of debt instruments held by the fund, resulting in a
negative impact on a fund's performance. Generally, securities issued in
emerging markets are subject to a greater risk of inflationary or deflationary
forces, and more developed markets are better able to use monetary policy to
normalize markets.
Master
Limited Partnership (MLP) Risk
Investing in
MLPs involves certain risks related to investing in the underlying assets of
MLPs and risks associated with pooled investment vehicles. MLPs holding
credit-related investments are subject to interest-rate risk and the risk of
default on payment obligations by debt securities. In addition, investments in
the debt and securities of MLPs involve certain other risks, including risks
related to limited control and limited rights to vote on matters affecting
MLPs, risks related to potential conflicts of interest between an MLP and the
MLP’s general partner, cash flow risks, dilution risks and risks related to the
general partner’s right to require unit-holders to sell their common units at an
undesirable time or price. A fund’s investments in MLPs may be subject to
legal and other restrictions on resale or may be less liquid than publicly
traded securities. Certain MLP securities may trade in lower volumes due to
their smaller capitalizations, and may be subject to more abrupt or erratic
price movements and may lack sufficient market liquidity to enable the
fund to effect sales at an advantageous time or without a substantial drop in
price. If a fund is one of the largest investors in an MLP, it may be
more difficult
for the fund to buy and sell significant amounts of such investments without an
unfavorable impact on prevailing market prices. Larger purchases or
sales of MLP investments by a fund in a short period of time may cause abnormal
movements in the market price of these investments. As a result,
these investments may be difficult to dispose of at an advantageous price when a
fund desires to do so. During periods of interest rate volatility, these
investments may not provide attractive returns, which may adversely impact the
overall performance of a fund.
MLPs in which
a fund may invest operate oil, natural gas, petroleum, or other facilities
within the energy sector. As a result, a fund will be susceptible to
adverse
economic, environmental, or regulatory occurrences impacting the energy sector.
MLPs and other companies operating in the energy sector are subject to
specific risks, including, among others, fluctuations in commodity prices;
reduced consumer demand for commodities such as oil, natural gas,
or petroleum products; reduced availability of natural gas or other commodities
for transporting, processing, storing, or delivering; slowdowns in
new construction; extreme weather or other natural disasters; and threats of
attack by terrorists on energy assets. Additionally, changes in the
regulatory environment for energy companies may adversely impact their
profitability. Over time, depletion of natural gas reserves and other
energy
reserves may also affect the profitability of energy companies.
Global oil
prices declined significantly at the beginning of 2020 and have experienced
significant price volatility, including a period where an oil-price futures
contract fell into negative territory for the first time in history, as demand
for oil slowed and oil storage facilities reached their storage capacities.
Varying levels of demand and production and continued oil price volatility may
continue to adversely impact MLPs and energy infrastructure companies.
To the extent
a distribution received by a fund from an MLP is treated as a return of capital,
the fund’s adjusted tax basis in the interests of the MLP may be reduced,
which will result in an increase in an amount of income or gain (or decrease in
the amount of loss) that will be recognized by the fund for tax purposes upon
the sale of any such interests or upon subsequent distributions in respect of
such interests. After a fund’s tax basis in an MLP has been reduced to
zero, subsequent distributions from the MLP will be treated as ordinary income.
Changes in the tax character of MLP distributions, as well as late or
corrected tax reporting by MLPs, may result in a fund issuing corrected 1099s to
its shareholders.
Mortgage-Backed
and Asset-Backed Securities
Mortgage-Backed
Securities.
Mortgage-backed
securities represent participating interests in pools of residential mortgage
loans that are guaranteed by
the U.S. government, its agencies or instrumentalities. However, the guarantee
of these types of securities relates to the principal and interest
payments and not the market value of such securities. In addition, the guarantee
only relates to the mortgage-backed securities held by a fund and not the
purchase of shares of the fund.
Mortgage-backed
securities are issued by lenders such as mortgage bankers, commercial banks, and
savings and loan associations. Such securities differ from
conventional debt securities, which provide for the periodic payment of interest
in fixed amounts (usually semiannually) with principal payments at
maturity or on specified dates. Mortgage-backed securities provide periodic
payments that are, in effect, a “pass-through” of the interest and principal
payments (including any prepayments) made by the individual borrowers on the
pooled mortgage loans. A mortgage-backed security will mature when
all the mortgages in the pool mature or are prepaid. Therefore, mortgage-backed
securities do not have a fixed maturity, and their expected
maturities may vary when interest rates rise or fall.
When interest
rates fall, homeowners are more likely to prepay their mortgage loans. An
increased rate of prepayments on a fund’s mortgage-backed securities
will result in an unforeseen loss of interest income to the fund as the fund may
be required to reinvest assets at a lower interest rate. Because prepayments
increase when interest rates fall, the prices of mortgage-backed securities do
not increase as much as other fixed-income securities when interest rates
fall.
When interest
rates rise, homeowners are less likely to prepay their mortgage loans. A
decreased rate of prepayments lengthens the expected maturity of a
mortgage-backed security. Therefore, the prices of mortgage-backed securities
may decrease more than prices of other fixed-income securities when interest
rates rise.
The yield of
mortgage-backed securities is based on the average life of the underlying pool
of mortgage loans. The actual life of any particular pool may be shortened
by unscheduled or early payments of principal and interest. Principal
prepayments may result from the sale of the underlying property or the
refinancing or foreclosure of underlying mortgages. The occurrence of
prepayments is affected by a wide range of economic, demographic and
social factors
and, accordingly, it is not possible to accurately predict the average life of a
particular pool. The actual prepayment experience of a pool of mortgage loans
may cause the yield realized by a fund to differ from the yield calculated on
the basis of the average life of the pool. In addition, if a fund purchases
mortgage-backed securities at a premium, the premium may be lost in the event of
early prepayment, which may result in a loss to the fund.
Prepayments
tend to increase during periods of falling interest rates and decline during
periods of rising interest rates. Monthly interest payments received by a
fund have a compounding effect, which will increase the yield to shareholders as
compared to debt obligations that pay interest semiannually.
Because of the reinvestment of prepayments of principal at current rates,
mortgage-backed securities may be less effective than Treasury bonds of
similar maturity at maintaining yields during periods of declining interest
rates. Also, although the value of debt securities may increase as interest rates
decline, the value of these pass-through type of securities may not increase as
much due to their prepayment feature.
Collateralized
Mortgage Obligations.
CMOs are
mortgage-backed securities issued in separate classes with different stated
maturities. As the mortgage pool
experiences prepayments, the pool pays off investors in classes with shorter
maturities first. By investing in CMOs, a fund may manage the prepayment
risk of mortgage-backed securities. However, prepayments may cause the actual
maturity of a CMO to be substantially shorter than its stated
maturity.
Asset-Backed
Securities.
Asset-backed
securities include interests in pools of debt securities, commercial or consumer
loans, or other receivables. The value of
these securities depends on many factors, including changes in interest rates,
the availability of information concerning the pool and its structure, the
credit quality of the underlying assets, the market’s perception of the servicer
of the pool, and any credit enhancement provided. In addition,
asset-backed securities have prepayment risks similar to mortgage-backed
securities.
Multinational
Companies Risk
To the extent
that a fund invests in the securities of companies with foreign business
operations, it may be riskier than funds that focus on companies with primarily
U.S. operations. Multinational companies may face certain political and economic
risks, such as foreign controls over currency exchange; restrictions
on monetary repatriation; possible seizure, nationalization or expropriation of
assets; and political, economic or social instability. These risks are
greater for companies with significant operations in developing
countries.
Natural
Disasters, Adverse Weather Conditions, and Climate Change
Certain areas
of the world may be exposed to adverse weather conditions, such as major natural
disasters and other extreme weather events, including hurricanes,
earthquakes, typhoons, floods, tidal waves, tsunamis, volcanic eruptions,
wildfires, droughts, windstorms, coastal storm surges, heat waves, and
rising sea levels, among others. Some countries and regions may not have the
infrastructure or resources to respond to natural disasters, making them
more economically sensitive to environmental events. Such disasters, and the
resulting damage, could have a severe and negative impact on a fund’s
investment portfolio and, in the longer term, could impair the ability of
issuers in which a fund invests to conduct their businesses in the manner
normally conducted. Adverse weather conditions also may have a particularly
significant negative effect on issuers in the agricultural sector and on
insurance companies that insure against the impact of natural
disasters.
Climate
change, which is the result of a change in global or regional climate patterns,
may increase the frequency and intensity of such adverse weather conditions,
resulting in increased economic impact, and may pose long-term risks to a fund’s
investments. The future impact of climate change is
difficult to
predict but may include changes in demand for certain goods and services, supply
chain disruption, changes in production costs, increased legislation,
regulation, international accords and compliance-related costs, changes in
property and security values, availability of natural resources and
displacement of peoples.
Legal,
technological, political and scientific developments regarding climate change
may create new opportunities or risks for issuers in which a fund invests. These
developments may create demand for new products or services, including, but not
limited to, increased demand for goods that result in lower
emissions, increased demand for generation and transmission of energy from
alternative energy sources and increased competition to develop innovative new
products and technologies. These developments may also decrease demand for
existing products or services, including, but not limited to, decreased
demand for goods that produce significant greenhouse gas emissions and decreased
demand for services related to carbon based energy
sources, such as drilling services or equipment maintenance
services.
Certain
countries have recently experienced negative interest rates on deposits and debt
instruments have traded at negative yields. A negative interest rate policy is
an unconventional central bank monetary policy tool where nominal target
interest rates are set with a negative value (i.e., below zero percent)
intended to help create self-sustaining growth in the local economy. Negative
interest rates may become more prevalent among non-U.S.
issuers, and potentially within the U.S. For example, if a bank charges negative
interest, instead of receiving interest on deposits, a depositor must pay the
bank fees to keep money with the bank.
These market
conditions may increase a fund’s exposures to interest rate risk. To the extent
a fund has a bank deposit or holds a debt instrument with a negative
interest rate to maturity, the fund would generate a negative return on that
investment. While negative yields can be expected to reduce demand for
fixed-income investments trading at a negative interest rate, investors may be
willing to continue to purchase such investments for a number of
reasons including, but not limited to, price insensitivity, arbitrage
opportunities across fixed-income markets or rules-based investment strategies. If
negative interest rates become more prevalent in the market, it is expected that
investors will seek to reallocate assets to other income-producing
assets such as investment grade and high-yield debt instruments, or equity
investments that pay a dividend. This increased demand for higher
yielding assets may cause the price of such instruments to rise while triggering
a corresponding decrease in yield and the value of debt instruments
over time.
A fund that is
non-diversified is not limited as to the percentage of its assets that may be
invested in any one issuer, or as to the percentage of the outstanding
voting securities of such issuer that may be owned, except by the fund’s own
investment restrictions. In contrast, a diversified fund, as to at least 75% of
the value of its total assets, generally may not, except with respect to
government securities and securities of other investment companies, invest more
than five percent of its total assets in the securities, or own more than ten
percent of the outstanding voting securities, of any one issuer. In determining
the issuer of a municipal security, each state, each political subdivision,
agency, and instrumentality of each state and each multi-state agency of
which such state is a member is considered a separate issuer. In the event that
securities are backed only by assets and revenues of a particular
instrumentality, facility or subdivision, such entity is considered the
issuer.
A fund that is
non-diversified may invest a high percentage of its assets in the securities of
a small number of issuers, may invest more of its assets in the securities of
a single issuer, and may be affected more than a diversified fund by a change in
the financial condition of any of these issuers or by the financial
markets’ assessment of any of these issuers.
Operational
and Cybersecurity Risk
With the
increased use of technologies, such as mobile devices and “cloud”-based service
offerings and the dependence on the internet and computer systems to
perform necessary business functions, a fund's service providers are susceptible
to operational and information or cybersecurity risks that could result
in losses to the fund and its shareholders. Cybersecurity breaches are either
intentional or unintentional events that allow an unauthorized party to gain
access to fund assets, customer data, or proprietary information, or cause a
fund or fund service provider to suffer data corruption or lose operational
functionality. Intentional cybersecurity incidents include: unauthorized access
to systems, networks, or devices (such as through “hacking” activity or
“phishing”); infection from computer viruses or other malicious software code;
and attacks that shut down, disable, slow, or otherwise disrupt operations,
business processes, or website access or functionality. Cyberattacks can also be
carried out in a manner that does not require gaining unauthorized
access, such as causing denial-of-service attacks on the service providers'
systems or websites rendering them unavailable to intended users or via
“ransomware” that renders the systems inoperable until appropriate actions are
taken. In addition, unintentional incidents can occur, such as the
inadvertent release of confidential information.
A
cybersecurity breach could result in the loss or theft of customer data or
funds, loss or theft of proprietary information or corporate data, physical
damage to a
computer or network system, or costs associated with system repairs, any of
which could have a substantial impact on a fund. For example, in a denial of
service, fund shareholders could lose access to their electronic accounts
indefinitely, and employees of the Advisor, each subadvisor, or the funds’
other service providers may not be able to access electronic systems to perform
critical duties for the funds, such as trading, NAV calculation, shareholder
accounting, or fulfillment of fund share purchases and redemptions.
Cybersecurity incidents could cause a fund, the Advisor, each subadvisor, or
other service provider to incur regulatory penalties, reputational damage,
compliance costs associated with corrective measures, litigation
costs, or financial loss. They may also result in violations of applicable
privacy and other laws. In addition, such incidents could affect issuers
in which a
fund invests, thereby causing the fund’s investments to lose value.
Cyber-events
have the potential to affect materially the funds and the advisor’s
relationships with accounts, shareholders, clients, customers, employees,
products, and service providers. The funds have established risk management
systems reasonably designed to seek to reduce the risks associated
with cyber-events. There is no guarantee that the funds will be able to prevent
or mitigate the impact of any or all cyber-events.
The funds are
exposed to operational risk arising from a number of factors, including, but not
limited to, human error, processing and communication errors, errors
of the funds’ service providers, counterparties, or other third parties, failed
or inadequate processes, and technology or system failures.
The Advisor,
each subadvisor, and their affiliates have established risk management systems
that seek to reduce cybersecurity and operational risks, and business
continuity plans in the event of a cybersecurity breach or operational failure.
However, there are inherent limitations in such plans, including that
certain risks have not been identified, and there is no guarantee that such
efforts will succeed, especially since none of the Advisor, each subadvisor, or
their affiliates controls the cybersecurity or operations systems of the funds’
third-party service providers (including the funds’ custodian), or
those of the issuers of securities in which the funds invest.
In addition,
other disruptive events, including (but not limited to) natural disasters and
public health crises, may adversely affect the fund’s ability to conduct
business, in particular if the fund’s employees or the employees of its service
providers are unable or unwilling to perform their responsibilities as a result of
any such event. Even if the fund’s employees and the employees of its service
providers are able to work remotely, those remote work arrangements
could result in the fund’s business operations being less efficient than under
normal circumstances, could lead to delays in its processing of
transactions, and could increase the risk of cyber-events.
Preferred
and Convertible Securities Risk
Preferred
stock generally has a preference as to dividends and liquidation over an
issuer’s common stock but ranks junior to debt securities in an issuer’s
capital structure. Unlike interest payments on debt securities, preferred stock
dividends are payable only if declared by the issuer’s board of directors.
Also, preferred stock may be subject to optional or mandatory redemption
provisions. The market values of convertible securities tend to fall
as interest
rates rise and rise as interest rates fall. The value of convertible preferred
stock can depend heavily upon the value of the security into which such
convertible preferred stock is converted, depending on whether the market price
of the underlying security exceeds the conversion price.
Privately
Held and Newly Public Companies
Investments in
the stocks of privately held companies and newly public companies involve
greater risks than investments in stocks of companies that have traded
publicly on an exchange for extended time periods. Investments in such companies
are less liquid and may be difficult to value. There may be
significantly less information available about these companies’ business models,
quality of management, earnings growth potential, and other criteria used
to evaluate their investment prospects. The extent (if at all) to which
securities of privately held companies or newly public companies may
be sold
without negatively impacting its market value may be impaired by reduced market
activity or participation, legal restrictions, or other economic and market
impediments. Funds that invest in securities of privately held companies tend to
have a greater exposure to liquidity risk than funds that do not invest in
securities of privately held companies.
Rebalancing
Risks Involving Funds of Funds
The funds of
funds seek to achieve their investment objectives by investing in, among other
things, other John Hancock funds, as permitted by Section 12 of
the 1940 Act (affiliated underlying funds). In addition, a fund that is not a
fund of funds may serve as an affiliated underlying fund for one or more funds
of funds. The funds of funds will reallocate or rebalance assets among the
affiliated underlying funds (collectively, “Rebalancings”) on a daily basis.
The following discussion provides information on the risks related to
Rebalancings, which risks are applicable to the affiliated underlying
funds
undergoing Rebalancings, as well as to those funds of funds that hold affiliated
underlying funds undergoing Rebalancings.
From time to
time, one or more of the affiliated underlying funds may experience relatively
large redemptions or investments due to Rebalancings, as effected by
the funds of funds' Affiliated Subadvisor. Shareholders should note that
Rebalancings may adversely affect the affiliated underlying funds. The affiliated
underlying funds subject to redemptions by a fund of funds may find it necessary
to sell securities, and the affiliated underlying funds that receive
additional cash from a fund of funds will find it necessary to invest the cash.
The impact of Rebalancings is likely to be greater when a fund of funds owns,
redeems, or invests in, a substantial portion of an affiliated underlying fund.
Rebalancings could adversely affect the performance of one or more
affiliated underlying funds and, therefore, the performance of one or more funds
of funds.
Possible
adverse effects of Rebalancings on the affiliated underlying funds
include:
1
The affiliated
underlying funds could be required to sell securities or to invest cash, at
times when they may not otherwise desire to do so.
2
Rebalancings
may increase brokerage and/or other transaction costs of the affiliated
underlying funds.
3
When a fund of
funds owns a substantial portion of an affiliated underlying fund, a large
redemption by the fund of funds could cause that affiliated underlying
fund’s expenses to increase and could result in its portfolio becoming too small
to be economically viable.
4
Rebalancings
could accelerate the realization of taxable capital gains in affiliated
underlying funds subject to large redemptions if sales of securities
results in capital gains.
The Advisor,
which serves as the investment advisor to both the funds of funds and the
affiliated underlying funds, has delegated the day-to-day portfolio management of
the funds of funds and many of the affiliated underlying funds to the Affiliated
Subadvisors, affiliates of the Advisor. The Advisor monitors both
the funds and the affiliated underlying funds. The Affiliated Subadvisors manage
the assets of both the funds and many of the affiliated underlying
funds (the “Affiliated Subadvised Funds”). The Affiliated Subadvisors may
allocate up to all of a funds of funds' assets to Affiliated Subadvised
Funds and
accordingly have an incentive to allocate more fund of funds assets to such
Affiliated Subadvised Funds. The Advisor and the Affiliated Subadvisors
monitor the impact of Rebalancings on the affiliated underlying funds and
attempt to minimize any adverse effect of the Rebalancings on the underlying
funds, consistent with pursuing the investment objective of the relevant
affiliated underlying funds. Moreover, an Affiliated Subadvisor has a duty to
allocate assets to an Affiliated Subadvised Fund only when such Subadvisor
believes it is in the best interests of fund of funds shareholders.
Minimizing any adverse effect of the Rebalancings on the underlying funds may
impact the redemption schedule in connection with a Rebalancing.
As part of its oversight of the funds and the subadvisors, the Advisor will
monitor to ensure that allocations are conducted in accordance with these
principles. This conflict of interest is also considered by the Independent
Trustees when approving or replacing affiliated subadvisors and in periodically
reviewing allocations to Affiliated Subadvised Funds.
As discussed
above, the funds of funds periodically reallocate their investments among
underlying investments. In an effort to be fully invested at all times and also
to avoid temporary periods of under-investment, an affiliated underlying fund
may buy securities and other instruments in anticipation of or with
knowledge of future purchases of affiliated underlying fund shares resulting
from a reallocation of assets by the funds of funds to the affiliated
underlying
fund. Until such purchases of affiliated underlying fund shares by a fund of
funds settle (normally between one and three days), the affiliated underlying
fund may have investment exposure in excess of its net assets. Shareholders who
transact with the affiliated underlying fund during the period
beginning when the affiliated underlying fund first starts buying securities in
anticipation of a purchase order from a fund until such purchase order settles
may incur more loss or realize more gain than they otherwise might have in the
absence of the excess investment exposure. The funds of funds may
purchase and redeem shares of underlying funds each business day through the use
of an algorithm that operates pursuant to standing instructions
to allocate purchase and redemption orders among underlying funds. Each day,
pursuant to the algorithm, a fund of funds will purchase or redeem shares
of an underlying fund at the NAV for the underlying fund calculated that day.
This algorithm is used solely for rebalancing a fund of funds’ investments in
an effort to maintain previously determined allocation
percentages.
Throughout the
past decade, the United States, the EU, and other nations have imposed a series
of economic sanctions on the Russian Federation. In addition to
imposing new import and export controls on Russia and blocking financial
transactions with certain Russian elites, oligarchs, and political and national
security leaders, the United States, the EU, and other nations have imposed
sanctions on companies in certain sectors of the Russian economy,
including the financial services, energy, metals and mining, engineering,
technology, and defense and defense-related materials sectors. These
sanctions could impair a fund’s ability to continue to price, buy, sell,
receive, or deliver securities of certain Russian issuers. For example, a fund
may be
prohibited from investing in securities issued by companies subject to such
sanctions. A fund could determine at any time that certain of the most affected
securities have little or no value.
The extent and
duration of Russia’s military actions and the global response to such actions
are impossible to predict. More Russian companies could be sanctioned
in the future, and the threat of additional sanctions could itself result in
further declines in the value and liquidity of certain securities. Widespread
divestment of interests in Russia or certain Russian businesses could result in
additional declines in the value of Russian securities. Additionally,
market disruptions could have a substantial negative impact on other economics
and securities markets both regionally and globally, as well as global
supply chains and inflation.
The Russian
government may respond to these sanctions and others by freezing Russian assets
held by a fund, thereby prohibiting the fund from selling or otherwise
transacting in these investments. In such circumstances, a fund might be forced
to liquidate non-restricted assets in order to satisfy shareholder
redemptions. Such liquidation of fund assets might also result in a fund
receiving substantially lower prices for its portfolio
securities.
Securities
Linked to the Real Estate Market
Investing in
securities of companies in the real estate industry subjects a fund to the risks
associated with the direct ownership of real estate. These risks include,
but are not limited to:
●
declines in
the value of real estate;
●
risks related
to general and local economic conditions;
●
possible lack
of availability of mortgage portfolios;
●
extended
vacancies of properties;
●
increases in
property taxes and operating expenses;
●
losses due to
costs resulting from the clean-up of environmental problems;
●
liability to
third parties for damages resulting from environmental problems;
●
casualty or
condemnation losses;
●
changes in
neighborhood values and the appeal of properties to tenants; and
●
changes in
interest rates.
Therefore, if
a fund invests a substantial amount of its assets in securities of companies in
the real estate industry, the value of the fund’s shares may change at
different rates compared to the value of shares of a fund with investments in a
mix of different industries.
Securities of
companies in the real estate industry have been and may continue to be
negatively affected by widespread health crises such as a global pandemic.
Potential impacts on the real estate market may include lower occupancy rates,
decreased lease payments, defaults and foreclosures, among other
consequences. These impacts could adversely affect corporate borrowers and
mortgage lenders, the value of mortgage-backed securities, the bonds of
municipalities that depend on tax revenues and tourist dollars generated by such
properties, and insurers of the property and/or of corporate,
municipal or mortgage-backed securities. It is not known how long such impacts,
or any future impacts of other significant events, will last.
Securities of
companies in the real estate industry include REITs, including equity REITs and
mortgage REITs. Equity REITs may be affected by changes in the value
of the underlying property owned by the trusts, while mortgage REITs may be
affected by the quality of any credit extended. Further, equity and mortgage
REITs are dependent upon management skills and generally may not be diversified.
Equity and mortgage REITs also are subject to heavy cash flow
dependency, defaults by borrowers or lessees, and self-liquidations. In
addition, equity, mortgage, and hybrid REITs could possibly fail to qualify for
tax free pass-through of income under the Code, or to maintain their exemptions
from registration under the 1940 Act. The above factors also may
adversely affect a borrower’s or a lessee’s ability to meet its obligations to a
REIT. In the event of a default by a borrower or lessee, a REIT may experience
delays in enforcing its rights as a mortgagee or lessor and may incur
substantial costs associated with protecting its investments.
In addition,
even the larger REITs in the industry tend to be small to medium-sized companies
in relation to the equity markets as a whole. See “Small and Medium
Size and Unseasoned Companies” for a discussion of the risks associated with
investments in these companies.
Small
and Medium Size and Unseasoned Companies
Survival
of Small or Unseasoned Companies.
Companies that
are small or unseasoned (i.e., less than three years of operating history) are
more likely than
larger or established companies to fail or not to accomplish their goals. As a
result, the value of their securities could decline significantly. These
companies are less likely to survive since they are often dependent upon a small
number of products and may have limited financial resources and a small
management group.
Changes
in Earnings and Business Prospects.
Small or
unseasoned companies often have a greater degree of change in earnings and
business prospects than
larger or established companies, resulting in more volatility in the price of
their securities.
Liquidity.
The securities
of small or unseasoned companies may have limited marketability. This factor
could cause the value of a fund’s investments to decrease if it
needs to sell such securities when there are few interested buyers.
Impact
of Buying or Selling Shares.
Small or
unseasoned companies usually have fewer outstanding shares than larger or
established companies. Therefore, it
may be more difficult to buy or sell large amounts of these shares without
unfavorably impacting the price of the security.
Publicly
Available Information.
There may be
less publicly available information about small or unseasoned companies.
Therefore, when making a decision to
purchase a security for a fund, a subadvisor may not be aware of problems
associated with the company issuing the security.
Medium
Size Companies.
Investments in
the securities of medium sized companies present risks similar to those
associated with small or unseasoned
companies although to a lesser degree due to the larger size of the
companies.
Special
Purpose Acquisition Companies
A fund may
invest in stock, warrants, and other securities of SPACs or similar special
purpose entities that pool funds to seek potential acquisition opportunities.
SPACs are collective investment structures that allow public stock market
investors to invest in private equity type transactions (“PIPE”). Until an
acquisition is completed, a SPAC generally invests its assets in US government
securities, money market securities and cash. A fund may enter into a
contingent commitment with a SPAC to purchase PIPE shares if and when the SPAC
completes its merger or acquisition.
Because SPACs
and similar entities do not have an operating history or ongoing business other
than seeking acquisitions, the value of their securities is particularly
dependent on the ability of the SPAC's management to identify and complete a
profitable acquisition. Some SPACs may pursue acquisitions only within
certain industries or regions, which may increase the volatility of their
prices. An investment in a SPAC is subject to a variety of risks, including that
(i) a significant portion of the monies raised by the SPAC for the purpose of
identifying and effecting an acquisition or merger may be expended
during the search for a target transaction; (ii) an attractive acquisition or
merger target may not be identified at all and the SPAC will be required to
return any remaining monies to shareholders; (iii) any proposed merger or
acquisition may be unable to obtain the requisite approval, if any, of
shareholders; (iv) an acquisition or merger once effected may prove unsuccessful
and an investment in the SPAC may lose value; (v) the warrants or other rights
with respect to the SPAC held by a fund may expire worthless or may be
repurchased or retired by the SPAC at an unfavorable price; (vi) a fund may be
delayed in receiving any redemption or liquidation proceeds from a SPAC to which
it is entitled; (vii) an investment in a SPAC may be diluted by additional
later offerings of interests in the SPAC or by other investors exercising
existing rights to purchase shares of the SPAC; (viii) no or only a thinly traded
market for shares of or interests in a SPAC may develop, leaving a fund unable
to sell its interest in a SPAC or to sell its interest only at a price below
what the fund believes is the SPAC interest's intrinsic value; and (ix) the
values of investments in SPACs may be highly volatile and may depreciate
significantly over time.
Purchased PIPE
shares will be restricted from trading until the registration statement for the
shares is declared effective. Upon registration, the shares can be freely
sold; however, in certain circumstances, the issuer may have the right to
temporarily suspend trading of the shares in the first year after the merger.
The securities issued by a SPAC, which are typically traded either in the
OTC market or on
an exchange, may be considered illiquid, more difficult to
value, and/or be subject to restrictions on resale.
Stripped
securities are the separate income or principal components of a debt security.
The risks associated with stripped securities are similar to those of other
debt securities, although stripped securities may be more volatile, and the
value of certain types of stripped securities may move in the same direction
as interest rates. U.S. Treasury securities that have been stripped by a Federal
Reserve Bank are obligations issued by the U.S. Treasury.
U.S.
Government Securities
U.S.
government securities include securities issued or guaranteed by the U.S.
government or by an agency or instrumentality of the U.S. government.
Not all U.S.
government securities are backed by the full faith and credit of the United
States. Some are supported only by the credit of the issuing agency or
instrumentality, which depends entirely on its own resources to repay the debt.
U.S. government securities that are backed by the full faith and credit of
the United States include U.S. Treasuries and mortgage-backed securities
guaranteed by GNMA. Securities that are only supported by the credit of the
issuing agency or instrumentality include those issued by Fannie Mae, the FHLBs
and Freddie Mac.
Regulation
of Commodity Interests
The CFTC has
adopted regulations that subject registered investment companies and/or their
investment advisors to regulation by the CFTC if the registered
investment company invests more than a prescribed level of its NAV in commodity
futures, options on commodities or commodity futures, swaps, or
other financial instruments regulated under the CEA (“commodity interests”), or
if the registered investment company markets itself as providing
investment exposure to such commodity interests. The Advisor is registered as a
CPO under the CEA and is a National Futures Association member firm;
however, the Advisor acts in the capacity of a registered CPO only with respect
to Opportunistic Fixed Income Fund.
Although the
Advisor is a registered CPO and is a National Futures Association member firm,
the Advisor has claimed an exemption from CPO registration
pursuant to CFTC Rule 4.5 with respect to all of the funds other than
Opportunistic Fixed Income Fund (collectively, the “Exempt Funds”). To
remain
eligible for this exemption, each of the Exempt Funds must comply with certain
limitations, including limits on trading in commodity interests, and
restrictions on the manner in which an Exempt Fund markets its commodity
interests trading activities. These limitations may restrict an Exempt
Fund’s ability
to pursue its investment strategy, increase the costs of implementing its
strategy, increase its expenses and/or adversely affect its total return.
Under CFTC
rules, certain mandated disclosure, reporting and recordkeeping obligations will
apply to the Advisor with respect to Opportunistic Fixed Income Fund,
but not the Exempt Funds. The Advisor is subject to dual regulation by the SEC
and the CFTC with respect to the services it provides to Opportunistic
Fixed Income Fund. As a result of “harmonization” rule amendments adopted by the
CFTC in 2013, the Advisor expects to comply with substantially
all CFTC regulations applicable to the operation of Opportunistic Fixed Income
Fund through “substituted compliance” with SEC regulations,
as provided in the “harmonization” amendments. Any changes to the CFTC’s
substituted compliance regime may restrict the ability of Opportunistic
Fixed Income Fund to pursue its investment strategy, increase the costs of
implementing its strategy, increase its expenses and/or may adversely
affect its total return.
Please see
“Government Regulation of Derivatives” for more information regarding
governmental regulations of derivatives and similar
transactions.
Hedging
and Other Strategic Transactions
Hedging refers
to protecting against possible changes in the market value of securities or
other assets that a fund already owns or plans to buy or protecting
unrealized gains in the fund. These strategies also may be used to gain exposure
to a particular market. The hedging and other strategic transactions
that may be used by a fund, but only if and to the extent that such transactions
are consistent with its investment objective and policies, are described
below:
●
exchange-listed
and OTC put and call options on securities, equity indices, volatility indices,
financial futures contracts, currencies, fixed-income indices and
other financial instruments;
●
financial
futures contracts (including stock index futures);
●
interest rate
transactions;*
●
currency
transactions;**
●
warrants and
rights (including non-standard warrants and participatory risks);
●
swaps
(including interest rate, index, dividend, inflation, variance, equity, and
volatility swaps, credit default swaps, swap options and currency swaps);
and
●
structured
notes, including hybrid or “index” securities.
*
A fund’s
interest rate transactions may take the form of swaps, caps, floors and
collars.
**
A fund’s
currency transactions may take the form of currency forward contracts, currency
futures contracts, currency swaps and options on currencies or currency
futures
contracts.
Hedging and
other strategic transactions may be used for the following purposes:
●
to attempt to
protect against possible changes in the market value of securities held or to be
purchased by a fund resulting from securities markets or currency
exchange rate fluctuations;
●
to protect a
fund’s unrealized gains in the value of its securities;
●
to facilitate
the sale of a fund’s securities for investment purposes;
●
to manage the
effective maturity or duration of a fund’s securities;
●
to establish a
position in the derivatives markets as a method of gaining exposure to a
particular geographic region, market, industry, issuer, or security;
or
●
to increase
exposure to a foreign currency or to shift exposure to foreign currency
fluctuations from one country to another.
To the extent
that a fund uses hedging or another strategic transaction to gain, shift or
manage exposure to a particular geographic region, market, industry,
issuer, security, currency, or other asset, the fund will be exposed to the
risks of investing in that asset as well as the risks inherent in the
specific
hedging or other strategic transaction used to gain such exposure.
For purposes
of determining compliance with a fund’s investment policies, strategies and
restrictions, the fund will generally consider the market value of derivative
instruments, unless the nature of the derivative instrument warrants the use of
the instrument’s notional value to more accurately reflect the economic
exposure represented by the derivative position.
Because of the
uncertainties under federal tax laws as to whether income from commodity-linked
derivative instruments and certain other instruments would
constitute “qualifying income” to a RIC, no fund is permitted to invest in such
instruments unless a subadvisor obtains prior written approval from the Trust's
CCO. The CCO, as a member of the Advisor’s Complex Securities Committee,
evaluates with the committee the appropriateness of the investment.
General
Characteristics of Options
Put options
and call options typically have similar structural characteristics and
operational mechanics regardless of the underlying instrument on which they are
purchased or sold. Many hedging and other strategic transactions involving
options are subject to the requirements outlined in the “Government
Regulation of Derivatives” section.
Put
Options.
A put option
gives the purchaser of the option, upon payment of a premium, the right to sell
(and the writer the obligation to buy) the underlying
security, commodity, index, currency or other instrument at the exercise price.
A fund’s purchase of a put option on a security, for example, might be
designed to protect its holdings in the underlying instrument (or, in some
cases, a similar instrument) against a substantial decline in the market value
of such instrument by giving a fund the right to sell the instrument at the
option exercise price.
If, and to the
extent authorized to do so, a fund may, for various purposes, purchase and sell
put options on securities (whether or not it holds the securities in
its portfolio) and on securities indices, currencies and futures
contracts.
Risk
of Selling Put Options.
In selling put
options, a fund faces the risk that it may be required to buy the underlying
security at a disadvantageous price above
the market price.
Call
Options.
A call option,
upon payment of a premium, gives the purchaser of the option the right to buy
(and the seller the obligation to sell) the underlying
instrument at the exercise price. A fund’s purchase of a call option on an
underlying instrument might be intended to protect a fund against an increase in
the price of the underlying instrument that it intends to purchase in the future
by fixing the price at which it may purchase the instrument. An “American”
style put or call option may be exercised at any time during the option period,
whereas a “European” style put or call option may be exercised only
upon expiration or during a fixed period prior to expiration. If and to the
extent authorized to do so, a fund may purchase and sell call options on
securities (whether or not it holds the securities).
Partial
Hedge or Income to a Fund.
If a fund
sells a call option, the premium that it receives may serve as a partial hedge,
to the extent of the option premium,
against a decrease in the value of the underlying securities or instruments held
by a fund or will increase a fund’s income. Similarly, the sale of put options
also can provide fund gains.
Covering
of Options.
All call
options sold by a fund are subject to the requirements outlined in the
“Government Regulation of Derivatives” section.
Risk
of Selling Call Options.
Even though a
fund will receive the option premium to help protect it against loss, a call
option sold by a fund will expose it during the
term of the option to possible loss of the opportunity to sell the underlying
security or instrument with a gain.
Exchange-listed
Options.
Exchange-listed
options are issued by a regulated intermediary such as the Options Clearing
Corporation (the “OCC”), which
guarantees the performance of the obligations of the parties to the options. The
discussion below uses the OCC as an example, but also is applicable to
other similar financial intermediaries.
OCC-issued and
exchange-listed options, with certain exceptions, generally settle by physical
delivery of the underlying security or currency, although in the future,
cash settlement may become available. Index options and Eurodollar instruments
(which are described below under “Eurodollar
Instruments”)
are cash settled for the net amount, if any, by which the option is
“in-the-money” at the time the option is exercised. “In-the-money” means
the amount by
which the value of the underlying instrument exceeds, in the case of a call
option, or is less than, in the case of a put option, the exercise price of the
option. Frequently, rather than taking or making delivery of the underlying
instrument through the process of exercising the option, listed options are
closed by entering into offsetting purchase or sale transactions that do not
result in ownership of the new option.
A fund’s
ability to close out its position as a purchaser or seller of an OCC-issued or
exchange-listed put or call option is dependent, in part, upon the liquidity of
the particular option market. Among the possible reasons for the absence of a
liquid option market on an exchange are:
●
insufficient
trading interest in certain options;
●
restrictions
on transactions imposed by an exchange;
●
trading halts,
suspensions or other restrictions imposed with respect to particular classes or
series of options or underlying securities, including reaching daily
price limits;
●
interruption
of the normal operations of the OCC or an exchange;
●
inadequacy of
the facilities of an exchange or the OCC to handle current trading volume;
or
●
a decision by
one or more exchanges to discontinue the trading of options (or a particular
class or series of options), in which event the relevant market for
that option on that exchange would cease to exist, although any such outstanding
options on that exchange would continue to be exercisable in
accordance with their terms.
The hours of
trading for listed options may not coincide with the hours during which the
underlying financial instruments are traded. To the extent that the option
markets close before the markets for the underlying financial instruments,
significant price and rate movements can take place in the underlying
markets that would not be reflected in the corresponding option
markets.
OTC
Options.
OTC options
are purchased from or sold to counterparties such as securities dealers or
financial institutions through direct bilateral agreement with
the counterparty. In contrast to exchange-listed options, which generally have
standardized terms and performance mechanics, all of the terms of
an OTC option, including such terms as method of settlement, term, exercise
price, premium, guaranties and security, are determined by negotiation of
the parties. It is anticipated that a fund authorized to use OTC options
generally will only enter into OTC options that have cash settlement
provisions,
although it will not be required to do so.
Unless the
parties provide for it, no central clearing or guaranty function is involved in
an OTC option. As a result, if a counterparty fails to make or take delivery of
the security, currency or other instrument underlying an OTC option it has
entered into with a fund or fails to make a cash settlement payment due in
accordance with the terms of that option, the fund will lose any premium it paid
for the option as well as any anticipated benefit of the transaction.
Thus, a
subadvisor must assess the creditworthiness of each such counterparty or any
guarantor or credit enhancement of the counterparty’s credit to determine the
likelihood that the terms of the OTC option will be met. A fund will enter into
OTC option transactions only with U.S. government securities dealers
recognized by the Federal Reserve Bank of New York as “primary dealers,” or
broker dealers, domestic or foreign banks, or other financial institutions
that are deemed creditworthy by a subadvisor. In the absence of a change in the
current position of the SEC’s staff, OTC options purchased by a fund and
the amount of the fund’s obligation pursuant to an OTC option sold by the fund
(the cost of the sell-back plus the in-the-money amount, if any) will be
deemed illiquid.
Types
of Options That May Be Purchased.
A fund may
purchase and sell call options on securities indices, currencies, and futures
contracts, as well as on
Eurodollar instruments that are traded on U.S. and foreign securities exchanges
and in the OTC markets.
General
Characteristics of Futures Contracts and Options on Futures
Contracts
A fund may
trade financial futures contracts (including stock index futures contracts,
which are described below) or purchase or sell put and call options on those
contracts for the following purposes:
●
as a hedge
against anticipated interest rate, currency or market changes;
●
for duration
management;
●
for risk
management purposes; and
●
to gain
exposure to a securities market.
Futures
contracts are generally bought and sold on the commodities exchanges where they
are listed with payment of initial and variation margin as described
below. The sale of a futures contract creates a firm obligation by a fund, as
seller, to deliver to the buyer the specific type of financial instrument
called for in the contract at a specific future time for a specified price (or,
with respect to certain instruments, the net cash amount). Options on futures
contracts are similar to options on securities except that an option on a
futures contract gives the purchaser the right, in return for the premium paid,
to assume a position in a futures contract and obligates the seller to deliver
that position.
A fund will
only engage in transactions in futures contracts and related options subject to
complying with the Derivatives Rule. The Derivatives Rule requirements
are outlined in the “Government Regulation of Derivatives” section. A fund will
engage in transactions in futures contracts and related options only
to the extent such transactions are consistent with the requirements of the Code
in order to maintain its qualification as a RIC for federal income tax
purposes.
Margin.
Maintaining a
futures contract or selling an option on a futures contract will typically
require a fund to deposit with a financial intermediary, as security for
its obligations, an amount of cash or other specified assets (“initial margin”)
that initially is from 1% to 10% of the face amount of the contract (but
may be higher in some circumstances). Additional cash or assets (“variation
margin”) may be required to be deposited thereafter daily as the
mark-to-market value of the futures contract fluctuates. The purchase of an
option on a financial futures contract involves payment of a premium for
the option
without any further obligation on the part of a fund. If a fund exercises an
option on a futures contract it will be obligated to post initial margin
(and
potentially variation margin) for the resulting futures position just as it
would for any futures position.
Settlement.
Futures
contracts and options thereon are generally settled by entering into an
offsetting transaction, but no assurance can be given that a position can
be offset prior to settlement or that delivery will occur.
Definition.
A stock index
futures contract (an “Index Future”) is a contract to buy a certain number of
units of the relevant index at a specified future date at a
price agreed upon when the contract is made. A unit is the value at a given time
of the relevant index.
Uses
of Index Futures.
Below are some
examples of how a fund may use Index Futures:
●
In connection
with a fund’s investment in equity securities, a fund may invest in Index
Futures while a subadvisor seeks favorable terms from brokers to effect
transactions in equity securities selected for purchase.
●
A fund also
may invest in Index Futures when a subadvisor believes that there are not enough
attractive equity securities available to maintain the standards of
diversity and liquidity set for the fund’s pending investment in such equity
securities when they do become available.
●
Through the
use of Index Futures, a fund may maintain a pool of assets with diversified risk
without incurring the substantial brokerage costs that may be associated
with investment in multiple issuers. This may permit a fund to avoid potential
market and liquidity problems (e.g., driving up or forcing down the price
by quickly purchasing or selling shares of a portfolio security) that may result
from increases or decreases in positions already held by a
fund.
●
A fund also
may invest in Index Futures in order to hedge its equity positions.
Hedging and
other strategic transactions involving futures contracts, options on futures
contracts and swaps will be purchased, sold or entered into primarily for
bona fide hedging, risk management (including duration management) or
appropriate portfolio management purposes, including gaining exposure to a
particular securities market.
Options
on Securities Indices and Other Financial Indices
A fund may
purchase and sell call and put options on securities indices and other financial
indices (“Options on Financial Indices”). In so doing, a fund may achieve
many of the same objectives it would achieve through the sale or purchase of
options on individual securities or other instruments.
Description
of Options on Financial Indices.
Options on
Financial Indices are similar to options on a security or other instrument
except that, rather than
settling by physical delivery of the underlying instrument, Options on Financial
Indices settle by cash settlement. Cash settlement means that the
holder has the right to receive, upon exercise of the option, an amount of cash
if the closing level of the index upon which the option is based exceeds, in
the case of a call (or is less than, in the case of a put) the exercise price of
the option. This amount of cash is equal to the excess of the closing price
of the index over the exercise price of the option, which also may be multiplied
by a formula value. The seller of the option is obligated to make delivery
of this amount. The gain or loss on an option on an index depends on price
movements in the instruments comprising the market or other composite on
which the underlying index is based, rather than price movements in individual
securities, as is the case for options on securities. In the case of an OTC
option, physical delivery may be used instead of cash settlement. By purchasing
or selling Options on Financial Indices, a fund may achieve many
of the same objectives it would achieve through the sale or purchase of options
on individual securities or other instruments.
A fund also
may enter into options on the “spread,” or yield differential, between two
fixed-income securities, in transactions referred to as “yield curve”
options. In
contrast to other types of options, a yield curve option is based on the
difference between the yields of designated securities, rather than the
prices of the
individual securities, and is settled through cash payments. Accordingly, a
yield curve option is profitable to the holder if this differential widens (in the
case of a call) or narrows (in the case of a put), regardless of whether the
yields of the underlying securities increase or decrease.
Yield curve
options may be used for the same purposes as other options on securities.
Specifically, a fund may purchase or write such options for hedging
purposes. For example, a fund may purchase a call option on the yield spread
between two securities, if it owns one of the securities and anticipates
purchasing the other security and wants to hedge against an adverse change in
the yield spread between the two securities. A fund also may purchase or
write yield curve options for other than hedging purposes (i.e., in an effort to
increase its current income) if, in the judgment of a subadvisor, the fund will
be able to profit from movements in the spread between the yields of the
underlying securities. The trading of yield curve options is subject
to all of the
risks associated with the trading of other types of options. In addition,
however, such options present risk of loss even if the yield of one of
the underlying
securities remains constant, if the spread moves in a direction or to an extent
which was not anticipated. Yield curve options written by a fund will be
“covered.” A call (or put) option is covered if a fund holds another call (or
put) option on the spread between the same two securities and owns liquid
and unencumbered assets sufficient to cover the fund’s net liability under the
two options. Therefore, a fund’s liability for such a covered option is
generally limited to the difference between the amounts of the fund’s liability
under the option written by the fund less the value of the option held by it.
Yield curve options also may be covered in such other manner as may be in
accordance with the requirements of the counterparty with which
the option is
traded and applicable laws and regulations and are subject to the requirements
outlined in the “Government Regulation of Derivatives” section. Yield
curve options are traded OTC.
A fund may be
authorized to engage in currency transactions with counterparties to hedge the
value of portfolio securities denominated in particular currencies
against fluctuations in relative value, to gain exposure to a currency without
purchasing securities denominated in that currency, to facilitate the settlement
of equity trades or to exchange one currency for another. If a fund enters into
a currency hedging transaction, the fund will comply with the regulatory
limitations outlined in the “Government Regulation of Derivatives” section.
Currency transactions may include:
●
forward
currency contracts;
●
exchange-listed
currency futures contracts and options thereon;
●
exchange-listed
and OTC options on currencies;
●
spot
transactions (i.e., transactions on a cash basis based on prevailing market
rates).
A forward
currency contract involves a privately negotiated obligation to purchase or sell
(with delivery generally required) a specific currency at a future date at
a price set at the time of the contract. A currency swap is an agreement to
exchange cash flows based on the notional difference among two or more
currencies and operates similarly to an interest rate swap, which is described
under “Swap Agreements and Options on Swap Agreements.” A fund may
enter into currency transactions only with counterparties that are deemed
creditworthy by a subadvisor. Nevertheless, engaging in currency transactions
will expose a fund to counterparty risk.
A fund’s
dealings in forward currency contracts and other currency transactions such as
futures contracts, options, options on futures contracts and swaps may be
used for hedging and similar purposes, possibly including transaction hedging,
position hedging, cross hedging and proxy hedging. A fund also may
use foreign currency options and foreign currency forward contracts to increase
exposure to a foreign currency, to shift exposure to foreign
currency fluctuation from one country to another or to facilitate the settlement
of equity trades. A fund may elect to hedge less than all of its
foreign
portfolio positions as deemed appropriate by a subadvisor.
A fund also
may engage in non-deliverable forward transactions to manage currency risk or to
gain exposure to a currency without purchasing securities denominated in
that currency. A non-deliverable forward is a transaction that represents an
agreement between a fund and a counterparty (usually a commercial
bank) to buy or sell a specified (notional) amount of a particular currency at
an agreed-upon foreign exchange rate on an agreed-upon future date.
Unlike other currency transactions, there is no physical delivery of the
currency on the settlement of a non-deliverable forward transaction.
Rather, the
fund and the counterparty agree to net the settlement by making a payment in
U.S. dollars or another fully convertible currency that represents any
differential between the foreign exchange rate agreed upon at the inception of
the non-deliverable forward agreement and the actual exchange rate
on the agreed-upon future date. Thus, the actual gain or loss of a given
non-deliverable forward transaction is calculated by multiplying the
transaction’s notional amount by the difference between the agreed-upon forward
exchange rate and the actual exchange rate when the transaction is
completed.
Since a fund
generally may only close out a non-deliverable forward with the particular
counterparty, there is a risk that the counterparty will default on its obligation
to pay under the agreement. If the counterparty defaults, the fund will have
contractual remedies pursuant to the agreement related to the transaction,
but there is no assurance that contract counterparties will be able to meet
their obligations pursuant to such agreements or that, in the event of a
default, the fund will succeed in pursuing contractual remedies. The fund thus
assumes the risk that it may be delayed or prevented from obtaining
payments owed to it pursuant to non-deliverable forward
transactions.
In addition,
where the currency exchange rates that are the subject of a given
non-deliverable forward transaction do not move in the direction or to the
extent
anticipated, a fund could sustain losses on the non-deliverable forward
transaction. A fund’s investment in a particular non-deliverable forward
transaction
will be affected favorably or unfavorably by factors that affect the subject
currencies, including economic, political and legal developments that impact
the applicable countries, as well as exchange control regulations of the
applicable countries. These risks are heightened when a non-deliverable
forward transaction involves currencies of emerging market countries because
such currencies can be volatile and there is a greater risk that such
currencies will be devalued against the U.S. dollar or other
currencies.
Transaction
Hedging.
Transaction
hedging involves entering into a currency transaction with respect to specific
assets or liabilities of a fund, which generally will
arise in connection with the purchase or sale of the portfolio securities or the
receipt of income from them.
Position
Hedging.
Position
hedging involves entering into a currency transaction with respect to portfolio
securities positions denominated or generally
quoted in that currency.
Cross
Hedging.
A fund may be
authorized to cross-hedge currencies by entering into transactions to purchase
or sell one or more currencies that are expected to
increase or decline in value relative to other currencies to which the fund has
or in which the fund expects to have exposure.
Proxy
Hedging.
To reduce the
effect of currency fluctuations on the value of existing or anticipated holdings
of its securities, a fund also may be authorized to
engage in proxy hedging. Proxy hedging is often used when the currency to which
a fund’s holdings are exposed is generally difficult to hedge or
specifically difficult to hedge against the dollar. Proxy hedging entails
entering into a forward contract to sell a currency, the changes in the
value of which
are generally considered to be linked to a currency or currencies in which some
or all of a fund’s securities are or are expected to be denominated,
and to buy dollars. The amount of the contract would not exceed the market value
of the fund’s securities denominated in linked currencies.
A fund may be
authorized to enter into multiple transactions, including multiple options
transactions, multiple futures transactions, multiple currency transactions
(including forward currency contracts), multiple interest rate transactions and
any combination of futures, options, currency and interest rate
transactions. A combined transaction usually will contain elements of risk that
are present in each of its component transactions. Although a fund normally will
enter into combined transactions to reduce risk or otherwise more effectively
achieve the desired portfolio management goal, it is possible that the
combination will instead increase the risks or hinder achievement of the fund’s
investment objective.
Swap
Agreements and Options on Swap Agreements
Among the
hedging and other strategic transactions into which a fund may be authorized to
enter are swap transactions, including, but not limited to, swap
agreements on interest rates, security or commodity indexes, specific securities
and commodities, currency exchange rates, and credit and event-linked
swaps. To the extent that a fund may invest in foreign currency-denominated
securities, it also may invest in currency exchange rate swap agreements.
A fund may
enter into swap transactions for any legal purpose consistent with its
investment objective and policies, such as to attempt to obtain or preserve a
particular return or spread at a lower cost than obtaining a return or spread
through purchases and/or sales of instruments in other markets, to protect
against currency fluctuations, as a duration management technique, to protect
against any increase in the price of securities the fund anticipates
purchasing at a later date, or to gain exposure to certain markets in the most
economical way possible.
OTC swap
agreements are two-party contracts entered into primarily by institutional
investors for periods ranging from a few weeks to one or more years. In a
standard “swap” transaction, two parties agree to exchange the returns (or
differentials in rates of return) earned or realized on particular predetermined
investments or instruments, which may be adjusted for an interest factor. The
gross returns to be exchanged or “swapped” between the parties are
generally calculated with respect to a “notional amount,” i.e., the return on or
increase in value of a particular dollar amount invested at a particular
interest rate, in a particular foreign currency, or in a “basket” of securities
or commodities representing a particular index. A “quanto” or “differential”
swap combines both an interest rate and a currency transaction. Other forms of
swap agreements include interest rate caps, under which, in return for
a premium, one party agrees to make payments to the other to the extent that
interest rates exceed a specified rate, or “cap”; interest rate floors, under
which, in return for a premium, one party agrees to make payments to the other
to the extent that interest rates fall below a specified rate, or “floor”;
and interest rate collars, under which a party sells a cap and purchases a floor
or vice versa in an attempt to protect itself against interest rate movements
exceeding given minimum or maximum levels. Consistent with a fund's investment
objectives and general investment policies, a fund may be authorized
to invest in commodity swap agreements. For example, an investment in a
commodity swap agreement may involve the exchange of floating-rate
interest payments for the total return on a commodity index. In a total return
commodity swap, a fund will receive the price appreciation of a commodity
index, a portion of the index, or a single commodity in exchange for paying an
agreed-upon fee. If the commodity swap is for one period, a fund may pay a
fixed fee, established at the outset of the swap. However, if the term of the
commodity swap is more than one period, with interim swap payments, a
fund may pay an adjustable or floating fee. With a “floating” rate, the fee may
be pegged to a base rate, such as LIBOR or
SOFR, and is
adjusted each
period. Therefore, if interest rates increase over the term of the swap
contract, a fund may be required to pay a higher fee at each swap reset
date.
A fund may be
authorized to enter into options on swap agreements (“Swap Options”). A Swap
Option is a contract that gives a counterparty the right (but not the
obligation) in return for payment of a premium, to enter into a new swap
agreement or to shorten, extend, cancel or otherwise modify an existing swap
agreement, at some designated future time on specified terms. A fund also may be
authorized to write (sell) and purchase put and call Swap
Options.
Depending on
the terms of the particular agreement, a fund generally will incur a greater
degree of risk when it writes a Swap Option than it will incur when it
purchases a Swap Option. When a fund purchases a swap option, it risks losing
only the amount of the premium it has paid should it decide to let the option
expire unexercised. However, when the fund writes a Swap Option, upon exercise
of the option the fund will become obligated according to the terms of
the underlying agreement. Most other types of swap agreements entered into by a
fund would calculate the obligations of the parties to the agreement on a
“net basis.” Consequently, a fund’s current obligations (or rights) under a swap
agreement generally will be equal only to the net amount to be paid or
received under the agreement based on the relative values of the positions held
by each party to the agreement (the “net amount”). A fund’s current
obligations under a swap agreement will be accrued daily (offset against any
amounts owed to the fund). A fund's use of swap agreements or Swap Options
are subject to the regulatory limitations outlined in the “Government Regulation
of Derivatives” section.
Whether a
fund’s use of swap agreements or Swap Options will be successful in furthering
its investment objective will depend on a subadvisor’s ability to predict
correctly whether certain types of investments are likely to produce greater
returns than other investments. Because OTC swaps are two-party
contracts and because they may have terms of greater than seven days, they may
be considered to be illiquid. Moreover, a fund bears the risk of loss of the
amount expected to be received under a swap agreement in the event of the
default or bankruptcy of a swap agreement counterparty. A fund will
enter into swap agreements only with counterparties that meet certain standards
of creditworthiness. Certain restrictions imposed on a fund by the Code
may limit its ability to use swap agreements. Current regulatory initiatives,
described below, and potential future regulation could adversely
affect a
fund’s ability to terminate existing swap agreements or to realize amounts to be
received under such agreements. A fund will not enter into a swap agreement
with any single party if the net amount owed to the fund under existing
contracts with that party would exceed 5% of the fund’s total assets.
Swaps are
highly specialized instruments that require investment techniques, risk
analyses, and tax planning different from those associated with traditional
investments. The use of a swap requires an understanding not only of the
referenced asset, rate, or index but also of the swap itself, without
the benefit of
observing the performance of the swap under all possible market conditions. Swap
agreements may be subject to liquidity risk, which exists when a
particular swap is difficult to purchase or sell. If a swap transaction is
particularly large or if the relevant market is illiquid (as is the case
with many OTC
swaps), it may not be possible to initiate a transaction or liquidate a position
at an advantageous time or price, which may result in significant
losses. In addition, a swap transaction may be subject to a fund’s limitation on
investments in illiquid securities.
Like most
other investments, swap agreements are subject to the risk that the market value
of the instrument will change in a way detrimental to a fund’s interest. A
fund bears the risk that a subadvisor will not accurately forecast future market
trends or the values of assets, reference rates, indexes, or other economic
factors in establishing swap positions for it. If a subadvisor attempts to use a
swap as a hedge against, or as a substitute for, an investment,
the fund will be exposed to the risk that the swap will have or will develop
imperfect or no correlation with the investment. This could cause substantial
losses for the fund. While hedging strategies involving swap instruments can
reduce the risk of loss, they also can reduce the opportunity for gain or even
result in losses by offsetting favorable price movements in other
investments.
The swaps
market was largely unregulated prior to the enactment of federal legislation
known as the Dodd-Frank Wall Street Reform and Consumer Protection Act
(the “Dodd-Frank Act”). Among other things, the Dodd-Frank Act sets forth a new
regulatory framework for certain OTC derivatives, such as swaps, in
which the funds may be authorized to invest. The Dodd-Frank Act requires many
swap transactions to be executed on registered exchanges or through
swap execution facilities, cleared through a regulated clearinghouse, and
publicly reported. In addition, many market participants are now regulated as
swap dealers and are, or will be, subject to certain minimum capital and margin
requirements and business conduct standards. The statutory
requirements of the Dodd-Frank Act have primarily been implemented through rules
and regulations adopted by the SEC and/or the CFTC, although some
rules have not been fully implemented.
As of the date
of this SAI, central clearing is required only for certain market participants
trading certain instruments, although central clearing for additional
instruments is expected to be implemented by the CFTC. In addition, as described
below, uncleared OTC swaps may be subject to regulatory collateral
requirements that could adversely affect a fund’s ability to enter into swaps in
the OTC market. These developments could cause a fund to terminate new
or existing swap agreements, realize amounts to be received under such
instruments at an inopportune time, or increase the costs associated
with trading derivatives. It is still not possible to determine the complete
impact of the Dodd-Frank Act and related regulations on the funds. Swap dealers,
major swap market participants, and swap counterparties may also experience
other new and/or additional regulations, requirements, compliance
burdens, and associated costs. The Dodd-Frank Act and rules promulgated
thereunder may exert a negative effect on a fund’s ability to meet its
investment objective. The swap market could be disrupted or limited as a result
of the legislation, and the new requirements may increase the cost of a
fund’s investments and of doing business, which could adversely affect the
fund’s ability to buy or sell OTC derivatives. Prudential regulators
issued final
rules that will require banks subject to their supervision to exchange variation
and initial margin in respect of their obligations arising under uncleared swap
agreements. The CFTC adopted similar rules that apply to CFTC-registered swap
dealers that are not banks. Such rules may require the funds to
segregate additional assets in order to meet the new variation and initial
margin requirements when they enter into uncleared swap agreements.
The variation margin and initial margin requirements are now
effective.
In addition,
regulations adopted by prudential regulators require certain banks to include in
a range of financial contracts, including derivative and short-term
funding transactions terms delaying or restricting a counterparty’s default,
termination and other rights in the event that the bank and/or its affiliates
become subject to certain types of resolution or insolvency proceedings. The
regulations could limit a fund’s ability to exercise a range of cross-default
rights if its counterparty, or an affiliate of the counterparty, is subject to
bankruptcy or similar proceedings. Such regulations could further negatively
impact the funds’ use of derivatives.
Additional
information about certain swap agreements that the funds may utilize is provided
below.
Credit
default swap agreements (“CDS”).
CDS may have
as reference obligations one or more securities that are not currently held by a
fund. The protection
“buyer” in a CDS is generally obligated to pay the protection “seller” an
upfront or a periodic stream of payments over the term of the CDS provided that
no credit event, such as a default, on a reference obligation has occurred. If a
credit event occurs, the seller generally must pay the buyer the “par
value” (full notional value) of the CDS in exchange for an equal face amount of
deliverable obligations of the reference entity described in the CDS, or the
seller may be required to deliver the related net cash amount, if the CDS is
cash settled. A fund may be either the buyer or seller in the transaction.
If a fund is a buyer and no credit event occurs, the fund may recover nothing if
the CDS is held through its termination date. However, if a credit event
occurs, the buyer generally may elect to receive the full notional value of the
CDS in exchange for an equal face amount of deliverable obligations of
the reference entity whose value may have significantly decreased. As a seller,
a fund generally receives an upfront payment or a fixed rate of income
throughout the term of the CDS, provided that there is no credit event. As the
seller, a fund would effectively add leverage to the fund because, in addition to
its total net assets, the fund would be subject to investment exposure on the
notional amount of the CDS. If a fund enters into a CDS, the fund may be
required to report the CDS as a “listed transaction” for tax shelter reporting
purposes on the fund’s federal income tax return. If the IRS were to
determine that the CDS is a tax shelter, a fund could be subject to penalties
under the Code.
Credit default
swap indices are indices that reflect the performance of a basket of credit
default swaps and are subject to the same risks as CDS. The fund's return
from investment in a credit default swap index may not match the return of the
referenced index. Further, investment in a credit default swap index
could result in losses if the referenced index does not perform as expected.
Unexpected changes in the composition of the index may also affect
performance of the credit default swap index. If a referenced index has a
dramatic intraday move that causes a material decline in the fund's net
assets, the
terms of the fund's credit default swap index may permit the counterparty to
immediately close out the transaction. In that event, the fund may be unable
to enter into another credit default swap index or otherwise achieve desired
exposure, even if the referenced index reverses all or a portion of its
intraday move.
A fund also
may be authorized to enter into credit default swaps on index tranches. CDS on
index tranches give the fund, as a seller of credit protection, the
opportunity to take on exposures to specific segments of the CDS index default
loss distribution. Each tranche has a different sensitivity to credit
risk
correlations among entities in the index. One of the main benefits of index
tranches is higher liquidity. This has been achieved mainly through standardization,
yet it is also due to the liquidity in the single-name CDS and CDS index
markets. In contrast, possibly owing to the limited liquidity in the
corporate bond
market, securities referencing corporate bond indexes have not been traded
actively.
CDS involve
greater risks than if a fund had invested in the reference obligation directly
since, in addition to general market risks, CDS are subject to illiquidity
risk, counterparty risk and credit risk. A fund will enter into CDS only with
counterparties that meet certain standards of creditworthiness. A buyer
generally also will lose its investment and recover nothing should no credit
event occur and the CDS is held to its termination date. If a credit event
were to occur,
the value of any deliverable obligation received by the seller, coupled with the
upfront or periodic payments previously received, may be less than the
full notional value it pays to the buyer, resulting in a loss of value to the
seller. A fund’s obligations under a CDS will be accrued daily (offset
against any
amounts owing to the fund). A fund's ability to be a “buyer” or “seller” of CDS
is subject to the regulatory limitations outlined in the “Government
Regulation of Derivatives” section.
Dividend
swap agreements.
A dividend
swap agreement is a financial instrument where two parties contract to exchange
a set of future cash flows at set dates in
the future. One party agrees to pay the other the future dividend flow on a
stock or basket of stocks in an index, in return for which the other
party gives
the first call options. Dividend swaps generally are traded OTC rather than on
an exchange.
Inflation
swap agreements.
An inflation
swap agreement is a contract in which one party agrees to pay the cumulative
percentage increase in a price index (e.g.,
the CPI with respect to CPI swaps) over the term of the swap (with some lag on
the inflation index), and the other pays a compounded fixed rate.
Inflation swap agreements may be used to protect a fund’s NAV against an
unexpected change in the rate of inflation measured by an inflation index since
the value of these agreements is expected to increase if unexpected inflation
increases.
Interest
rate swap agreements.
An interest
rate swap agreement involves the exchange of cash flows based on interest rate
specifications and a specified
principal amount, often a fixed payment for a floating payment that is linked to
an interest rate. An interest rate lock specifies a future interest rate to be
paid. In an interest rate cap, one party receives payments at the end of each
period in which a specified interest rate on a specified principal amount exceeds
an agreed-upon rate; conversely, in an interest rate floor, one party may
receive payments if a specified interest rate on a specified principal
amount falls below an agreed-upon rate. Caps and floors have an effect similar
to buying or writing options. Interest rate collars involve selling a cap and
purchasing a floor, or vice versa, to protect a fund against interest rate
movements exceeding given minimum or maximum levels.
Total
return swap agreements.
A total return
swap agreement is a contract whereby one party agrees to make a series of
payments to another party based on the
change in the market value of the assets underlying such contract (which can
include a security, commodity, index or baskets thereof) during the
specified period. In exchange, the other party to the contract agrees to make a
series of payments calculated by reference to an interest rate and/or some
other agreed-upon amount (including the change in market value of other
underlying assets). A fund may use total return swaps to gain exposure to an
asset without owning it or taking physical custody of it. For example, by
investing in total return commodity swaps, a fund will receive the price
appreciation of a commodity, commodity index or portion thereof in exchange for
payment of an agreed-upon fee.
Variance
swap agreements.
Variance swap
agreements involve an agreement by two parties to exchange cash flows based on
the measured variance (or square of
volatility) of a specified underlying asset. One party agrees to exchange a
“fixed rate” or strike price payment for the “floating rate” or realized price
variance on the underlying asset with respect to the notional amount. At
inception, the strike price chosen is generally fixed at a level such
that the fair
value of the swap is zero. As a result, no money changes hands at the initiation
of the contract. At the expiration date, the amount paid by one party to
the other is the difference between the realized price variance of the
underlying asset and the strike price multiplied by the notional amount. A
receiver of the realized price variance would receive a payment when the
realized price variance of the underlying asset is greater than the strike price
and would make a payment when that variance is less than the strike price. A
payer of the realized price variance would make a payment when the
realized price variance of the underlying asset is greater than the strike price
and would receive a payment when that variance is less than the strike price.
This type of agreement is essentially a forward contract on the future realized
price variance of the underlying asset.
A fund may be
authorized to invest in Eurodollar instruments which typically are
dollar-denominated futures contracts or options on those contracts that
are linked to
SOFR. In addition,
foreign currency-denominated instruments are available from time to time.
Eurodollar futures contracts enable purchasers to
obtain a fixed rate for the lending of funds and sellers to obtain a fixed rate
for borrowings. A fund might use Eurodollar futures contracts and options
thereon to hedge against changes in SOFR, to which
many interest rate swaps and fixed income instruments are linked.
Warrants
and Rights
Warrants and
rights generally give the holder the right to receive, upon exercise and prior
to the expiration date, a security of the issuer at a stated price. Funds
typically use warrants and rights in a manner similar to their use of options on
securities, as described in “General Characteristics of Options” above
and elsewhere in this SAI. Risks associated with the use of warrants and rights
are generally similar to risks associated with the use of options.
Unlike most options, however, warrants and rights are issued in specific
amounts, and warrants generally have longer terms than options. Warrants and
rights are not likely to be as liquid as exchange-traded options backed by a
recognized clearing agency. In addition, the terms of warrants or rights may
limit a fund’s ability to exercise the warrants or rights at such time, or in
such quantities, as the fund would otherwise wish.
Non-Standard
Warrants and Participatory Notes.
From time to
time, a fund may use non-standard warrants, including low exercise price
warrants or low
exercise price options (“LEPOs”), and participatory notes (“P-Notes”) to gain
exposure to issuers in certain countries. LEPOs are different from standard
warrants in that they do not give their holders the right to receive a security
of the issuer upon exercise. Rather, LEPOs pay the holder the difference in
price of the underlying security between the date the LEPO was purchased and the
date it is sold. P-Notes are a type of equity-linked derivative
that generally are traded OTC and constitute general unsecured contractual
obligations of the banks, broker dealers or other financial institutions
that issue them. Generally, banks and broker dealers associated with
non-U.S.-based brokerage firms buy securities listed on certain foreign
exchanges and
then issue P-Notes that are designed to replicate the performance of certain
issuers and markets. The performance results of P-Notes will not
replicate exactly the performance of the issuers or markets that the notes seek
to replicate due to transaction costs and other expenses. The return on a
P-Note that is linked to a particular underlying security generally is increased
to the extent of any dividends paid in connection with the underlying
security. However, the holder of a P-Note typically does not receive voting or
other rights as it would if it directly owned the underlying security, and
P-Notes present similar risks to investing directly in the underlying security.
Additionally, LEPOs and P-Notes entail the same risks as other OTC derivatives.
These include the risk that the counterparty or issuer of the LEPO or P-Note may
not be able to fulfill its obligations, that the holder and counterparty
or issuer may disagree as to the meaning or application of contractual terms, or
that the instrument may not perform as expected. See “Principal
risks—Credit and Counterparty risk” in the Prospectus, as applicable, and “Risk
of Hedging and Other Strategic Transactions” below. Additionally,
while LEPOs or P-Notes may be listed on an exchange, there is no guarantee that
a liquid market will exist or that the counterparty or issuer of a LEPO or
P-Note will be willing to repurchase such instrument when a fund wishes to sell
it.
Risk
of Hedging and Other Strategic Transactions
Hedging and
other strategic transactions are subject to special risks,
including:
●
possible
default by the counterparty to the transaction;
●
markets for
the securities used in these transactions could be illiquid; and
●
to the extent
a subadvisor’s assessment of market movements is incorrect, the risk that the
use of the hedging and other strategic transactions could result in
losses to the fund.
Losses
resulting from the use of hedging and other strategic transactions will reduce a
fund’s NAV, and possibly income. Losses can be greater than if hedging and
other strategic transactions had not been used.
Options
and Futures Transactions.
Options
transactions are subject to the following additional risks:
●
option
transactions could force the sale or purchase of portfolio securities at
inopportune times or for prices higher than current market values (in
the case of
put options) or lower than current market values (in the case of call options),
or could cause a fund to hold a security it might otherwise sell (in the
case of a call option);
●
calls written
on securities that a fund does not own are riskier than calls written on
securities owned by the fund because there is no underlying security held
by the fund that can act as a partial hedge, and there also is a risk,
especially with less liquid securities, that the securities may not be
available for
purchase; and
●
options
markets could become illiquid in some circumstances and certain OTC options
could have no markets. As a result, in certain markets, a fund might not be
able to close out a transaction without incurring substantial
losses.
Futures
transactions are subject to the following additional risks:
●
the degree of
correlation between price movements of futures contracts and price movements in
the related securities position of a fund could create the
possibility that losses on the hedging instrument are greater than gains in the
value of the fund’s position.
●
futures
markets could become illiquid. As a result, in certain markets, a fund might not
be able to close out a transaction without incurring substantial
losses.
Although a
fund’s use of futures and options for hedging should tend to minimize the risk
of loss due to a decline in the value of the hedged position, at the same time,
it will tend to limit the potential gain that might result from an increase in
value.
Currency
Hedging.
In addition to
the general risks of hedging and other strategic transactions described above,
currency hedging transactions have the following
risks:
●
currency
hedging can result in losses to a fund if the currency being hedged fluctuates
in value to a degree or direction that is not anticipated;
●
proxy hedging
involves determining the correlation between various currencies. If a
subadvisor’s determination of this correlation is incorrect, a fund’s losses
could be greater than if the proxy hedging were not used; and
●
foreign
government exchange controls and restrictions on repatriation of currency can
negatively affect currency transactions. These forms of governmental
actions can result in losses to a fund if it is unable to deliver or receive
currency or monies to settle obligations. Such governmental actions also
could cause hedges it has entered into to be rendered useless, resulting in full
currency exposure as well as incurring transaction costs.
Currency
Futures Contracts and Options on Currency Futures Contracts.
Currency
futures contracts are subject to the same risks that apply to the use of
futures contracts generally. In addition, settlement of a currency futures
contract for the purchase of most currencies must occur at a bank based in the
issuing nation. Trading options on currency futures contracts is relatively new,
and the ability to establish and close out positions on these options is
subject to the maintenance of a liquid market that may not always be
available.
Risk
Associated with Specific Types of Derivative Debt Securities.
Different
types of derivative debt securities are subject to different combinations
of prepayment, extension and/or interest rate risk. Conventional mortgage
passthrough securities and sequential pay CMOs are subject to all of
these risks, but typically are not leveraged. Thus, the magnitude of exposure
may be less than for more leveraged mortgage-backed securities.
The risk of
early prepayments is the primary risk associated with IOs, super floaters, other
leveraged floating rate instruments and mortgage-backed securities
purchased at a premium to their par value. In some instances, early prepayments
may result in a complete loss of investment in certain of these
securities. The primary risks associated with certain other derivative debt
securities are the potential extension of average life and/or depreciation
due to rising interest rates.
Derivative
debt securities include floating rate securities based on the COFI floaters,
other “lagging rate” floating rate securities, capped floaters, mortgage-backed
securities purchased at a discount, leveraged inverse floating rate securities,
POs, certain residual or support tranches of CMOs and index
amortizing notes. Index amortizing notes are not mortgage-backed securities, but
are subject to extension risk resulting from the issuer’s failure to exercise
its option to call or redeem the notes before their stated maturity date.
Leveraged inverse IOs combine several elements of the mortgage-backed
securities described above and present an especially intense combination of
prepayment, extension and interest rate risks.
PAC and TAC
CMO bonds involve less exposure to prepayment, extension and interest rate risk
than other mortgage-backed securities, provided that prepayment
rates remain within expected prepayment ranges or “collars.” To the extent that
prepayment rates remain within these prepayment ranges, the residual
or support tranches of PAC and TAC CMOs assume the extra prepayment, extension
and interest rate risk associated with the underlying mortgage
assets.
Other types of
floating rate derivative debt securities present more complex types of interest
rate risks. For example, range floaters are subject to the risk that the
coupon will be reduced to below market rates if a designated interest rate
floats outside of a specified interest rate band or collar. Dual index or yield
curve floaters are subject to depreciation in the event of an unfavorable change
in the spread between two designated interest rates. X-reset
floaters have a coupon that remains fixed for more than one accrual period.
Thus, the type of risk involved in these securities depends on the terms of each
individual X-reset floater.
Risk
of Hedging and Other Strategic Transactions Outside the United
States
When conducted
outside the United States, hedging and other strategic transactions will not
only be subject to the risks described above, but also could be adversely
affected by:
●
foreign
governmental actions affecting foreign securities, currencies or other
instruments;
●
less stringent
regulation of these transactions in many countries as compared to the United
States;
●
the lack of
clearing mechanisms and related guarantees in some countries for these
transactions;
●
more limited
availability of data on which to make trading decisions than in the United
States;
●
delays in a
fund’s ability to act upon economic events occurring in foreign markets during
non-business hours in the United States;
●
the imposition
of different exercise and settlement terms and procedures and margin
requirements than in the United States; and
●
lower trading
volume and liquidity.
Government
Regulation of Derivatives
The regulation
of the U.S. and non-U.S. derivatives markets has undergone substantial change in
recent years and such change may continue. In particular, on
October 28, 2020, the SEC adopted new regulations governing the use of
derivatives by registered investment companies (“Rule 18f-4” or the
“Derivatives Rule”). Funds were
required to implement and comply with Rule
18f-4 by August
19, 2022. Rule 18f-4 eliminates the asset segregation framework
formerly used by funds to comply with Section 18 of the 1940 Act, as
amended.
The
Derivatives Rule mandates that a fund adopt and/or implement: (i) value-at-risk
limitations (“VaR”); (ii) a written derivatives risk management program; (iii)
new Board oversight responsibilities; and (iv) new reporting and recordkeeping
requirements. In the event that a fund’s derivative exposure is 10% or less
of its net assets, excluding certain currency and interest rate hedging
transactions, it can elect to be classified as a limited derivatives
user (“Limited
Derivatives User”) under the Derivatives Rule, in which case the fund is not
subject to the full requirements of the Derivatives Rule. Limited
Derivatives Users are excepted from VaR testing, implementing a derivatives risk
management program, and certain Board oversight and reporting
requirements mandated by the Derivatives Rule. However, a Limited Derivatives
User is still required to implement written compliance policies and procedures
reasonably designed to manage its derivatives risks.
The
Derivatives Rule also provides special treatment for reverse repurchase
agreements, similar financing transactions and unfunded commitment agreements.
Specifically, a fund may elect whether to treat reverse repurchase agreements
and similar financing transactions as “derivatives transactions”
subject to the requirements of the Derivatives Rule or as senior securities
equivalent to bank borrowings for purposes of Section 18 of the 1940 Act.
Repurchase agreements are not subject to the Derivatives Rule, but are still
subject to other provisions of the 1940 Act. In addition, when-issued or
forward settling securities transactions that physically settle within 35-days
are deemed not to involve a senior security.
Furthermore,
it is possible that additional government regulation of various types of
derivative instruments may limit or prevent a fund from using such instruments as
part of its investment strategy in the future, which could negatively impact the
fund. New position limits imposed on a fund or its counterparty
may also impact the fund’s ability to invest in futures, options, and swaps in a
manner that efficiently meets its investment objective.
Use of
extensive hedging and other strategic transactions by a fund will require, among
other things, that the fund post collateral with counterparties or clearinghouses,
and/or are subject to the Derivatives Rule regulatory limitations as outlined
above.
Futures
Contracts and Options on Futures Contracts.
In the case of
a futures contract, or an option on a futures contract, a fund must deposit
initial margin
and, in some instances, daily variation margin, to meet its obligations under
the contract. These assets may consist of cash, cash equivalents,
liquid debt, equity securities or other acceptable assets.
A fund's
investment restrictions are subject to, and may be impacted and limited by, the
federal securities laws, rules and regulations, including the 1940 Act and
Rule 18f-4 thereunder.
There are two
classes of investment restrictions to which a fund is subject in implementing
its investment policies: (a) fundamental; and (b) non-fundamental.
Fundamental restrictions may be changed only by a vote of the lesser of: (i) 67%
or more of the shares represented at a meeting at which more
than 50% of the outstanding shares are represented; or (ii) more than 50% of the
outstanding shares. Non-fundamental restrictions are subject to
change by the Board without shareholder approval.
When
submitting an investment restriction change to the holders of a fund’s
outstanding voting securities, the matter shall be deemed to have been
effectively
acted upon with respect to the fund if a majority of the outstanding voting
securities of the fund votes for the approval of the matter, notwithstanding:
(1) that the matter has not been approved by the holders of a majority of the
outstanding voting securities of any other series of the Trust affected
by the matter; and (2) that the matter has not been approved by the vote of a
majority of the outstanding voting securities of the Trust as a whole.
Fundamental
Investment Restrictions
Unless a fund
is specifically excepted by the terms of a restriction:
(1)
Concentration. A fund may
not concentrate its investments in a particular industry, as that term is used
in the 1940 Act, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to time. Real
Estate Securities Fund is not subject to this restriction.
(2)
Diversification. Each fund has
elected to be treated as a diversified investment company, as that term is used
in the 1940 Act, as amended, and as interpreted
or modified by regulatory authority having jurisdiction, from time to time. Each
fund is subject to this restriction except as otherwise stated in a
fund’s Prospectus.
(3)
Borrowing. A fund may
not borrow money, except as permitted under the 1940 Act, as amended, and as
interpreted or modified by regulatory authority
having jurisdiction, from time to time.
(4)
Underwriting. A fund may
not engage in the business of underwriting securities issued by others, except
to the extent that the fund may be deemed to be
an underwriter in connection with the disposition of portfolio
securities.
(5)
Real
Estate. A fund may
not purchase or sell real estate, which term does not include securities of
companies which deal in real estate or mortgages or
investments secured by real estate or interests therein, except that each fund
reserves freedom of action to hold and to sell real estate
acquired as a result of the fund’s ownership of securities.
(6)
Commodities. A fund may
not purchase or sell commodities, except as permitted under the 1940 Act, as
amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time.
(7)
Loans. A fund may
not make loans except as permitted under the 1940 Act, as amended, and as
interpreted or modified by regulatory authority having
jurisdiction, from time to time.
(8)
Senior
Securities. A fund may
not issue senior securities, except as permitted under the 1940 Act, as amended,
and as interpreted or modified by regulatory
authority having jurisdiction, from time to time.
Additional
Information Regarding Fundamental Restrictions
Concentration.
While the 1940
Act does not define what constitutes “concentration” in an industry, the staff
of the SEC takes the position that any fund that invests
more than 25% of its total assets in a particular industry (excluding the U.S.
government, its agencies or instrumentalities) is deemed to be “concentrated”
in that industry. With respect to a fund’s investment in loan participations, if
any, the fund treats both the borrower and the financial intermediary
under a loan participation as issuers for purposes of determining whether the
fund has concentrated in a particular industry. For purposes
of each fund
of funds' fundamental restriction regarding concentration, the fund of funds
will take into account the concentration policies of the underlying
funds in which it invests.
Diversification. A diversified
fund, as to at least 75% of the value of its total assets, generally may not,
except with respect to government securities and securities of
other investment companies, invest more than 5% of its total assets in the
securities, or own more than 10% of the outstanding voting securities, of
any one issuer. In determining the issuer of a municipal security, each state,
each political subdivision, agency, and instrumentality of each state and each
multi-state agency of which such state is a member is considered a separate
issuer. In the event that securities are backed only by assets and revenues
of a particular instrumentality, facility or subdivision, such entity is
considered the issuer.
Borrowing.
The 1940 Act
permits a fund to borrow money in amounts of up to one-third of its total
assets, at the time of borrowing, from banks for any purpose (a
fund’s total assets include the amounts being borrowed). To limit the risks
attendant to borrowing, the 1940 Act requires a fund to maintain at all times
an “asset coverage” of at least 300% of the amount of its borrowings, not
including borrowings for temporary purposes in an amount not exceeding 5%
of the value of its total assets. “Asset coverage” means the ratio that the
value of a fund’s total assets (including amounts borrowed), minus
liabilities other than borrowings, bears to the aggregate amount of all
borrowings.
Commodities.
Under the
federal securities and commodities laws, certain financial instruments such as
futures contracts and options thereon, including
currency futures, stock index futures or interest rate futures, and certain
swaps, including currency swaps, interest rate swaps, swaps on broad-based
securities indices, and certain credit default swaps, may, under certain
circumstances, also be considered to be commodities. Nevertheless,
the 1940 Act does not prohibit investments in physical commodities or contracts
related to physical commodities. Funds typically invest in futures
contracts and related options on these and other types of commodity contracts
for hedging purposes, to implement tax or cash management strategies, or
to enhance returns.
Loans.
Although the
1940 Act does not prohibit a fund from making loans, SEC staff interpretations
currently prohibit funds from lending more than one-third of
their total assets, except through the purchase of debt obligations or the use
of repurchase agreements. A repurchase agreement is an agreement to
purchase a security, coupled with an agreement to sell that security back to the
original seller on an agreed-upon date at a price that reflects
current interest rates. The SEC frequently treats repurchase agreements as
loans.
Senior
Securities.
“Senior
securities” are defined as fund obligations that have a priority over a fund’s
shares with respect to the payment of dividends or the
distribution of fund assets. The 1940 Act prohibits a fund from issuing any
class of senior securities or selling any senior securities of which it is
the issuer,
except that the fund is permitted to borrow from a bank so long as, immediately
after such borrowings, there is an asset coverage of at least 300% for all
borrowings of the fund (not including borrowings for temporary purposes in an
amount not exceeding 5% of the value of the fund’s total assets). In
the event that such asset coverage falls below this percentage, a fund must
reduce the amount of its borrowings within three days (not including
Sundays and holidays) so that the asset coverage is restored to at least 300%.
The fundamental investment restriction regarding senior securities
will be interpreted so as to permit collateral arrangements with respect to
swaps, options, forward or futures contracts or other derivatives, or
the posting of
initial or variation margin. The Derivatives Rule provides an exemption to enter
into certain transactions deemed to be senior securities subject to
compliance with the limitations outlined in “Government Regulation of
Derivatives.”
Non-Fundamental
Investment Restrictions
Unless a fund
is specifically excepted by the terms of a restriction, each fund will
not:
(9)
Knowingly
invest more than 15% of the value of its net assets in securities or other
investments, including repurchase agreements maturing in more than
seven days but excluding master demand notes, which are not readily
marketable.
(10)
Make short
sales of securities or maintain a short position, if, when added together, more
than 25% of the value of the fund’s net assets would be: (i) deposited
as collateral for the obligation to replace securities borrowed to effect short
sales; and (ii) allocated to segregated accounts in connection
with short sales, except that it may obtain such short-term credits as may be
required to clear transactions. For purposes of this restriction,
collateral arrangements with respect to hedging and other strategic transactions
will not be deemed to involve the use of margin. Short sales
“against-the-box” are not subject to this limitation. Notwithstanding the
foregoing, Opportunistic Fixed Income Fund will engage in short selling to the
extent permitted by federal securities laws and rules and interpretations
thereunder.
(11)
Pledge,
hypothecate, mortgage or transfer (except as provided in restriction (8)) as
security for indebtedness any securities held by the fund, except in an
amount of not more than 10%* of the value of the fund’s total assets and then
only to secure borrowings permitted by restrictions (3) and (10). For
purposes of this restriction, collateral arrangements with respect to hedging
and other strategic transactions will not be deemed to involve a
pledge of assets.
*
33¹/3% in the
case of Blue Chip Growth, Core Bond, Equity Income, New Opportunities, Science
& Technology, Small Cap Value, Small Cap Dynamic Growth, and Strategic
Income Opportunities.
For purposes
of restriction (11), “other strategic transactions” can include short sales and
derivative transactions intended for non-hedging purposes.
Except with
respect to the fundamental investment restriction on borrowing, if a percentage
restriction is adhered to at the time of an investment, a later increase
or decrease in the investment’s percentage of the value of a fund’s total assets
resulting from a change in such values or assets will not constitute a
violation of the percentage restriction. Any subsequent change in a rating
assigned by any rating service to a security (or, if unrated, any change in a
subadvisor’s assessment of the security), or change in the percentage of fund
assets invested in certain securities or other instruments, or change in the
average duration of a fund’s investment portfolio, resulting from market
fluctuations or other changes in a fund’s total assets will not
require the
fund to dispose of an investment until a subadvisor determines that it is
practicable to sell or close out the investment without undue market
or tax
consequences to the fund. In the event that rating services assign different
ratings to the same security, a subadvisor will determine which rating
it believes
best reflects the security’s quality and risk at that time, which may be the
highest of the several assigned ratings.
Investment
Policies that May Be Changed Only on 60 Days’ Prior Written Notice to
Shareholders
In order to
comply with Rule 35d-1 under the 1940 Act, the 80% investment policy for each of
Blue Chip Growth Fund, Core Bond Fund, Disciplined
Value
Emerging
Markets Equity
Fund, Emerging
Markets Debt Fund, Equity Income Fund, Floating Rate Income Fund, Fundamental
Global Franchise Fund, Global
Equity Fund, Health Sciences Fund, High Yield Fund, International Small Company
Fund, International Strategic Equity Allocation Fund, Opportunistic
Fixed Income Fund, Real Estate Securities Fund, Science & Technology Fund,
Small Cap Value Fund, Small Cap Dynamic Growth Fund, Strategic
Income Opportunities Fund, and U.S. Sector Rotation Fund is subject to change
only upon 60 days’ prior written notice to shareholders. Refer to the
applicable Prospectus for each fund’s “Principal investment
strategies.”
The annual
rate of portfolio turnover will normally differ for each fund and may vary from
year to year as well as within a year. A high rate of portfolio turnover (100%
or more) generally involves correspondingly greater brokerage commission
expenses, which must be borne directly by the fund. Portfolio
turnover is calculated by dividing the lesser of purchases or sales of portfolio
securities during the fiscal period by the monthly average of the value of the
fund’s portfolio securities. (Excluded from the computation are all securities,
including options, with maturities at the time of acquisition of one year or
less). Portfolio turnover rates can change from year to year due to various
factors, including among others, portfolio adjustments made in response to
market conditions.
The portfolio
turnover rates for the funds for the fiscal periods ended August 31,
2024 and August
31, 2023 were as
follows:
|
|
|
|
Alternative
Asset Allocation Fund |
|
|
|
|
|
|
Capital
Appreciation Fund |
|
|
Capital
Appreciation Value Fund |
|
|
|
|
|
|
Disciplined
Value Emerging Markets Equity Fund |
|
|
Emerging
Markets Debt Fund |
|
|
|
|
|
|
Floating
Rate Income Fund |
|
|
Fundamental
Global Franchise Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International
Small Company Fund |
|
|
International
Strategic Equity Allocation Fund |
|
|
|
|
|
|
Multi-Asset
High Income Fund |
|
|
Lifestyle
Blend Aggressive Portfolio |
|
|
Lifestyle
Blend Balanced Portfolio |
|
|
Lifestyle
Blend Conservative Portfolio |
|
|
Lifestyle
Blend Growth Portfolio |
|
|
Lifestyle
Blend Moderate Portfolio |
|
|
Multimanager
2065 Lifetime Portfolio |
|
|
Multimanager
2060 Lifetime Portfolio |
|
|
Multimanager
2055 Lifetime Portfolio |
|
|
Multimanager
2050 Lifetime Portfolio |
|
|
Multimanager
2045 Lifetime Portfolio |
|
|
Multimanager
2040 Lifetime Portfolio |
|
|
Multimanager
2035 Lifetime Portfolio |
|
|
|
|
|
|
Multimanager
2030 Lifetime Portfolio |
|
|
Multimanager
2025 Lifetime Portfolio |
|
|
Multimanager
2020 Lifetime Portfolio |
|
|
Multimanager
2015 Lifetime Portfolio |
|
|
Multimanager
2010 Lifetime Portfolio |
|
|
2065
Lifetime Blend Portfolio |
|
|
2060
Lifetime Blend Portfolio |
|
|
2055
Lifetime Blend Portfolio |
|
|
2050
Lifetime Blend Portfolio |
|
|
2045
Lifetime Blend Portfolio |
|
|
2040
Lifetime Blend Portfolio |
|
|
2035
Lifetime Blend Portfolio |
|
|
2030
Lifetime Blend Portfolio |
|
|
2025
Lifetime Blend Portfolio |
|
|
2020
Lifetime Blend Portfolio |
|
|
2015
Lifetime Blend Portfolio |
|
|
2010
Lifetime Blend Portfolio |
|
|
|
|
|
|
Opportunistic
Fixed Income Fund |
|
|
Real
Estate Securities Fund |
|
|
Science
& Technology Fund |
|
|
Small
Cap Dynamic Growth Fund |
|
|
|
|
|
|
Strategic
Income Opportunities Fund |
|
|
U.S.
Sector Rotation Fund |
|
|
Those
Responsible for Management
The business
of the Trust, an open-end management investment company, is managed by the
Board, including certain Trustees who are not “interested persons” (as
defined in the 1940 Act) of the funds or the Trust (the “Independent Trustees”).
The Trustees elect officers who are responsible for the day-to-day
operations of the funds or the Trust and who execute policies formulated by the
Trustees. Several of the Trustees and officers of the Trust also are officers
or directors of the Advisor or the Distributor. Each Trustee oversees all of the
funds and other funds in the John Hancock Fund Complex (as defined
below).
The tables
below present certain information regarding the Trustees and officers of the
Trust, including their principal occupations which, unless specific dates
are shown, are of at least five years’ duration. In addition, the tables include
information concerning other directorships held by each Trustee in
other registered investment companies or publicly traded companies. Information
is listed separately for each Trustee who is an “interested person” (as
defined in the 1940 Act) of the Trust (each a “Non-Independent Trustee”) and the
Independent Trustees. As of August 31, 2024, the “John
Hancock Fund
Complex” consisted of 185 funds
(including separate series of series mutual funds). Each Trustee,
other than
William K. Bacic and Thomas R.
Wright, has been
elected to serve on the Board. Each of William H. Cunningham, Grace K. Fey,
Deborah C. Jackson, and
Hassell H.
McClellan
was most
recently elected to serve on the Board at a shareholder meeting held on November
15, 2012. Each of Andrew G. Arnott, James R. Boyle, Noni L. Ellison,
Dean C. Garfield, Paul Lorentz, and Frances G. Rathke was most recently elected
to serve on the Board at a shareholder meeting held on September 9,
2022. The Board
appointed William K. Bacic and Thomas R. Wright to serve as Independent Trustees
effective August 1, 2024. The
address of
each Trustee and officer of the Trust is 200 Berkeley Street, Boston,
Massachusetts 02116.
|
|
|
Principal
Occupation(s) and Other
Directorships
During the Past 5 Years |
Number
of Funds in John
Hancock
Fund Complex
Overseen
by Trustee |
|
|
|
|
|
|
|
Global
Head of Retail for Manulife (since 2022); Head of Wealth and
Asset
Management, United States and Europe, for John Hancock and
Manulife
(2018-2023); Director and Chairman, John Hancock
Investment
Management LLC (2005-2023, including prior positions);
Director
and Chairman, John Hancock Variable Trust Advisers LLC
(2006-2023,
including prior positions); Director and Chairman, John
Hancock
Investment Management Distributors LLC (2004-2023,
including
prior positions); President of various trusts within the John
Hancock
Fund Complex (since 2007, including prior positions).
Trustee
of various trusts within the John Hancock Fund Complex (since
2017). |
|
|
|
|
Global
Head, Manulife Wealth and Asset Management (since 2017);
General
Manager, Manulife, Individual Wealth Management and
Insurance
(2013–2017); President, Manulife Investments
(2010–2016).
Trustee
of various trusts within the John Hancock Fund Complex (since
2022). |
|
1
Because the
Trust is not required to and does not hold regular annual shareholder meetings,
each Trustee holds office for an indefinite term until his or her successor
is duly
elected and qualified or until he or she dies, retires, resigns, is removed or
becomes disqualified. Trustees may be removed from the Trust (provided the
aggregate
number of Trustees after such removal shall not be less than one) with cause or
without cause, by the action of two-thirds of the remaining Trustees or by
action of
two-thirds of the outstanding shares of the Trust.
2
The Trustee is
a Non-Independent Trustee due to current or former positions with the Advisor
and certain of its affiliates.
|
|
|
Principal
Occupation(s) and Other
Directorships
During the Past 5 Years |
Number
of Funds in John
Hancock
Fund Complex
Overseen
by Trustee |
|
|
|
|
|
|
|
Director,
Audit Committee Chairman, and Risk Committee
Member,
DWS USA Corp. (formerly, Deutsche Asset Management)
(2018-2024);
Senior Partner, Deloitte & Touche LLP (1978-
retired
2017, including prior positions), specializing in the
investment
management industry.
Trustee
of various trusts within the John Hancock Fund Complex
(since
2024). |
|
|
|
Trustee
(2005–2014
and
since
2015) |
Board
Member, United of Omaha Life Insurance Company (since
2022);
Board Member, Mutual of Omaha Investor Services, Inc.
(since
2022); Foresters Financial, Chief Executive Officer
(2018–2022)
and board member (2017–2022); Manulife
Financial
and John Hancock, more than 20 years, retiring in
2012
as Chief Executive Officer, John Hancock and Senior
Executive
Vice President, Manulife Financial.
Trustee
of various trusts within the John Hancock Fund Complex
(2005–2014
and since 2015). |
|
William
H. Cunningham
(1944) |
Trustee
(2005–2006
and
since
2012) |
Professor,
University of Texas, Austin, Texas (since 1971); former
Chancellor,
University of Texas System and former President of
the
University of Texas, Austin, Texas; Director (since 2006),
Lincoln
National Corporation (insurance); Director, Southwest
Airlines
(since 2000).
Trustee
of various trusts within the John Hancock Fund Complex
(since
1986). |
|
|
|
Current
Position(s)
with
the Trust1 |
Principal
Occupation(s) and Other
Directorships
During the Past 5 Years |
Number
of Funds in John
Hancock
Fund Complex
Overseen
by Trustee |
|
|
|
|
|
|
|
Senior
Vice President, General Counsel & Corporate Secretary,
Tractor
Supply Company (rural lifestyle retailer) (since 2021);
General
Counsel, Chief Compliance Officer & Corporate
Secretary,
Carestream Dental, L.L.C. (2017–2021); Associate
General
Counsel & Assistant Corporate Secretary, W.W. Grainger,
Inc.
(global industrial supplier) (2015–2017); Board Member,
Goodwill
of North Georgia, 2018 (FY2019)–2020 (FY2021);
Board
Member, Howard University School of Law Board of Visitors
(since
2021); Board Member, University of Chicago Law School
Board
of Visitors (since 2016); Board member, Children’s
Healthcare
of Atlanta Foundation Board (2021–2023); Board
Member,
Congressional Black Caucus Foundation (since 2024).
Trustee
of various trusts within the John Hancock Fund Complex
(since
2022). |
|
|
|
|
Chief
Executive Officer, Grace Fey Advisors (since 2007); Director
and
Executive Vice President, Frontier Capital Management
Company
(1988–2007); Director, Fiduciary Trust (since 2009).
Trustee
of various trusts within the John Hancock Fund Complex
(since
2008). |
|
|
|
|
Vice
President, Netflix, Inc. (2019–2024); President & Chief
Executive
Officer, Information Technology Industry Council
(2009–2019);
NYU School of Law Board of Trustees (since
2021);
Member, U.S. Department of Transportation, Advisory
Committee
on Automation (since 2021); President of the
United
States Trade Advisory Council (2010–2018); Board
Member,
College for Every Student (2017–2021); Board
Member,
The Seed School of Washington, D.C. (2012–2017);
Advisory
Board Member of the Block Center for Technology and
Society
(since 2019).
Trustee
of various trusts within the John Hancock Fund Complex
(since
2022). |
|
Deborah
C. Jackson
(1952) |
Trustee
(since 2012)
and
Vice
Chairperson
of the
Board
(since 2025)
|
President,
Cambridge College, Cambridge, Massachusetts
(2011–2023);
Board of Directors, Amwell Corporation (since
2020);
Board of Directors, Massachusetts Women’s Forum
(2018–2020);
Board of Directors, National Association of
Corporate
Directors/New England (2015–2020); Chief Executive
Officer,
American Red Cross of Massachusetts Bay (2002–2011);
Board
of Directors of Eastern Bank Corporation (since 2001);
Board
of Directors of Eastern Bank Charitable Foundation (since
2001);
Board of Directors of Boston Stock Exchange
(2002–2008);
Board of Directors of Harvard Pilgrim Healthcare
(health
benefits company) (2007–2011).
Trustee
(since 2008) and Vice Chairperson of the Board (since
2025)
of various trusts within the John Hancock Fund
Complex. |
|
Hassell
H. McClellan
(1945) |
Trustee
(since 2005)
and
Chairperson of
the
Board (since
2017) |
Trustee
of Berklee College of Music (since 2022);
Director/Trustee,
Virtus Funds (2008–2020); Director, The
Barnes
Group (2010–2021); Associate Professor, The Wallace E.
Carroll
School of Management, Boston College (retired 2013).
Trustee
(since 2005) and Chairperson of the Board (since 2017)
of
various trusts within the John Hancock Fund Complex. |
|
|
|
Current
Position(s)
with
the Trust1 |
Principal
Occupation(s) and Other
Directorships
During the Past 5 Years |
Number
of Funds in John
Hancock
Fund Complex
Overseen
by Trustee |
|
|
|
|
|
|
|
Director,
Audit Committee Chair, Oatly Group AB (plant-based
drink
company) (since 2021); Director, Audit Committee Chair
and
Compensation Committee Member, Green Mountain Power
Corporation
(since 2016); Director, Treasurer and Finance &
Audit
Committee Chair, Flynn Center for Performing Arts (since
2016);
Director and Audit Committee Chair, Planet Fitness (since
2016);
Chief Financial Officer and Treasurer, Keurig Green
Mountain,
Inc. (2003–retired 2015).
Trustee
of various trusts within the John Hancock Fund Complex
(since
2020). |
|
|
|
|
Chief
Operating Officer, JMP Securities (2020-2023); Director of
Equities,
JMP Securities (2013-2023); Executive Committee
Member,
JMP Group (2013-2023); Global Head of Trading,
Sanford
C. Bernstein & Co. (2004-2012); and Head of European
Equity
Trading and Salestrading, Merrill, Lynch & Co.
(1998-2004,
including prior positions).
Trustee
of various trusts within the John Hancock Fund Complex
(since
2024). |
|
1
Because the
Trust is not required to and does not hold regular annual shareholder meetings,
each Trustee holds office for an indefinite term until his or her successor
is duly
elected and qualified or until he or she dies, retires, resigns, is removed or
becomes disqualified. Trustees may be removed from the Trust (provided the
aggregate
number of Trustees after such removal shall not be less than one) with cause or
without cause, by the action of two-thirds of the remaining Trustees or by
action of
two-thirds of the outstanding shares of the Trust.
Principal
Officers who are not Trustees
The following
table presents information regarding the current principal officers of the Trust
who are not Trustees, including their principal occupations which, unless
specific dates are shown, are of at least five years’ duration. Each of the
officers is an affiliated person of the Advisor. All of the officers
listed are
officers or employees of the Advisor or its affiliates. All of the officers also
are officers of all of the other funds for which the Advisor serves as
investment
advisor.
|
|
|
Principal
Occupation(s) During the Past 5 Years |
Kristie
M. Feinberg
(1975) |
|
Head
of Wealth & Asset Management, U.S. and Europe, for John Hancock and
Manulife
(since
2023); Director and Chairman, John Hancock Investment Management LLC
(since
2023);
Director and Chairman, John Hancock Variable Trust Advisers LLC (since
2023);
Director
and Chairman, John Hancock Investment Management Distributors LLC (since
2023);
CFO and Global Head of Strategy, Manulife Investment Management
(2021–2023,
including
prior positions); CFO Americas & Global Head of Treasury, Invesco,
Ltd., Invesco
US
(2019–2020, including prior positions); Senior Vice President, Corporate
Treasurer and
Business
Controller, OppenheimerFunds (2001–2019, including prior positions);
President
of
various trusts within the John Hancock Fund Complex (since
2023). |
|
|
Chief
Financial Officer
(since
2024) |
Director,
Fund Administration and Assistant Treasurer, John Hancock Funds
(2016-2020);
Assistant
Treasurer, John Hancock Investment Management LLC and John Hancock
Variable
Trust
Advisers LLC (since 2020); Assistant Vice President, John Hancock Life
& Health
Insurance
Company, John Hancock Life Insurance Company (U.S.A.) and John Hancock
Life
Insurance
Company of New York (since 2021); Chief Financial Officer of various
trusts
within
the John Hancock Fund Complex (since 2024). |
Salvatore
Schiavone
(1965) |
|
Assistant
Vice President, John Hancock Financial Services (since 2007); Vice
President,
John
Hancock Investment Management LLC and John Hancock Variable Trust Advisers
LLC
(since
2007); Treasurer of various trusts within the John Hancock Fund Complex
(since
2007,
including prior
positions). |
|
|
Current
Position(s)
with
the Trust1 |
Principal
Occupation(s) During the Past 5 Years |
Christopher
(Kit) Sechler
(1973) |
Secretary
and Chief Legal
Officer
(since 2018) |
Vice
President and Deputy Chief Counsel, John Hancock Investment Management
(since
2015);
Assistant Vice President and Senior Counsel (2009–2015), John Hancock
Investment
Management; Assistant Secretary of John Hancock Investment Management
LLC
and John Hancock Variable Trust Advisers LLC (since 2009); Chief Legal
Officer and
Secretary
of various trusts within the John Hancock Fund Complex (since 2009,
including
prior
positions). |
|
|
Chief
Compliance Officer
(since
2020) |
Chief
Compliance Officer, John Hancock Investment Management LLC and John
Hancock
Variable
Trust Advisers LLC (since 2020); Deputy Chief Compliance Officer, John
Hancock
Investment
Management LLC and John Hancock Variable Trust Advisers LLC (2019–2020);
Assistant
Chief Compliance Officer, John Hancock Investment Management LLC and John
Hancock
Variable Trust Advisers LLC (2016–2019); Vice President, State Street
Global
Advisors
(2015–2016); Chief Compliance Officer of various trusts within the John
Hancock
Fund
Complex (since 2016, including prior
positions). |
1
Each officer
holds office for an indefinite term until his or her successor is duly elected
and qualified or until he or she dies, retires, resigns, is removed or becomes
disqualified.
Additional
Information about the Trustees
In addition to
the description of each Trustee’s Principal Occupation(s) and Other
Directorships set forth above, the following provides further information
about each Trustee’s specific experience, qualifications, attributes or skills
with respect to the Trust. The information in this section should not be
understood to mean that any of the Trustees is an “expert” within the meaning of
the federal securities laws.
The Board
believes that the different perspectives, viewpoints, professional experience,
education, and individual qualities of each Trustee represent a diversity of
experiences and a variety of complementary skills and expertise. Each Trustee
has experience as a Trustee of the Trust as well as experience as a Trustee
of other John Hancock funds. It is the Trustees’ belief that this allows the
Board, as a whole, to oversee the business of the funds and the other funds in
the John Hancock Fund Complex in a manner consistent with the best interests of
the funds' shareholders. When considering potential nominees to
fill vacancies on the Board, and as part of its annual self-evaluation, the
Board reviews the mix of skills and other relevant experiences of the
Trustees.
William
K. Bacic –
As a retired
Certified Public Accountant, Mr. Bacic served as New England Managing Partner of
a major independent registered public
accounting firm, as well as a member of its U.S. Executive Committee, and has
deep financial and accounting expertise. He served as the lead partner on the
firm’s largest financial services companies, primarily focused on the investment
management industry and mutual funds. He also has expertise in
corporate governance and regulatory matters as well as prior experience serving
as a board member and audit committee chair of a large global asset
management company.
James
R. Boyle –
Mr. Boyle has
high-level executive, financial, operational, governance, regulatory and
leadership experience in the financial services industry,
including in the development and management of registered investment companies,
variable annuities, retirement and insurance products. Mr. Boyle is
the former President and CEO of a large international fraternal life insurance
company and is the former President and CEO of multi-line life insurance and
financial services companies. Mr. Boyle began his career as a Certified Public
Accountant with Coopers & Lybrand.
William
H. Cunningham –
Mr. Cunningham
has management and operational oversight experience as a former Chancellor and
President of a major university.
Mr. Cunningham regularly teaches a graduate course in corporate governance at
the law school and at the Red McCombs School of Business at The
University of Texas at Austin. He also has oversight and corporate governance
experience as a current and former director of a number of operating
companies, including an insurance company.
Noni
L. Ellison –
As a senior
vice president, general counsel, and corporate secretary with over 25 years of
executive leadership experience, Ms. Ellison has extensive
management and business expertise in legal, regulatory, compliance, operational,
quality assurance, international, finance and governance
matters.
Grace
K. Fey –
Ms. Fey has
significant governance, financial services, and asset management industry
expertise based on her extensive non-profit board
experience, as well as her experience as a consultant to non-profit and
corporate boards, and as a former director and executive of an investment
management
firm.
Dean
C. Garfield –
As a former
president and chief executive officer of a leading industry organization and
current vice-president of a leading international
company, Mr. Garfield has significant global executive operational, governance,
regulatory, and leadership experience. He also has experience as
a leader overseeing and implementing global public policy matters including
strategic initiatives.
Deborah
C. Jackson –
Ms. Jackson
has leadership, governance, management, and operational oversight experience as
the lead director of a large bank,
former
president of a
college, and as the former chief executive officer of a major charitable
organization. She also has expertise in financial
services
matters and oversight and corporate governance experience as a current and
former director of various other corporate organizations, including an
insurance company, a regional stock exchange, a telemedicine company, and
non-profit entities.
Hassell
H. McClellan –
As a former
professor of finance and policy in the graduate management department of a major
university, a director of a public company, and
as a former director of several privately held companies, Mr. McClellan has
experience in corporate and financial matters. He also has experience as
a director of other investment companies not affiliated with the
Trust.
Frances
G. Rathke –
Through her
former positions in senior financial roles, as a former Certified Public
Accountant, and as a consultant on strategic and financial
matters, Ms. Rathke has experience as a leader overseeing, conceiving,
implementing, and analyzing strategic and financial growth plans, and financial
statements. Ms. Rathke also has experience in the auditing of financial
statements and related materials. In addition, she has experience as a director
of various organizations, including a publicly traded company and a non-profit
entity.
Thomas
R.
Wright
–
As a retired
Chief
Operating Officer of a significant capital markets firm and a former Director of
Equities and Executive Committee Member, Mr.
Wright has
deep executive, investment
banking,
portfolio
management,
securities
brokerage,
and equity
research expertise. Mr.
Wright
has also
served
as the
Global
Head of
Trading and Head of European Equity Trading and Salestrading at an investment
bank and asset manager and has substantial
securities industry and international trading and markets expertise.
Andrew
G. Arnott –
As current and
former President of various trusts within the John Hancock Fund Complex, and
through his positions
as Global Head of Retail for
Manulife, and Trustee
of the John Hancock Fund Complex, Mr. Arnott has experience in the management of
investments, registered investment
companies, variable annuities and retirement products, enabling him to provide
management input to the Board.
Paul
Lorentz –
Through his
position as the Global Head of Manulife Wealth and Asset Management, Mr. Lorentz
has experience with retirement, retail and asset
management solutions offered by Manulife worldwide, enabling him to provide
management input to the Board.
Duties
of Trustees; Committee Structure
The Trust is
organized as a Massachusetts business trust. Under the Declaration of Trust, the
Trustees are responsible for managing the affairs of the Trust,
including the appointment of advisors and subadvisors. Each Trustee has the
experience, skills, attributes or qualifications described above (see
“Principal
Occupation(s) and Other Directorships” and “Additional Information about the
Trustees” above). The Board appoints officers who assist in managing the
day-to-day affairs of the Trust. The Board met five times during the fiscal year
ended August 31, 2024.
The Board has
appointed an Independent Trustee as Chairperson. The Chairperson presides at
meetings of the Trustees and may call meetings of the Board and any
Board committee whenever he deems it necessary. The Chairperson participates in
the preparation of the agenda for meetings of the Board and the
identification of information to be presented to the Board with respect to
matters to be acted upon by the Board. The Chairperson also acts as a
liaison with the funds' management, officers, attorneys, and other Trustees
generally between meetings. The Chairperson may perform such other
functions as may be requested by the Board from time to time. The Board also has
designated a Vice Chairperson to serve in the absence of the Chairperson.
Except for any duties specified herein or pursuant to the Trust’s Declaration of
Trust or By-laws, or as assigned by the Board, the designation of
a Trustee as Chairperson or Vice Chairperson does not impose on that Trustee any
duties, obligations or liability that are greater than the duties,
obligations or liability imposed on any other Trustee, generally. The Board has
designated a number of standing committees as further described below, each of
which has a Chairperson. The Board also may designate working groups or ad hoc
committees as it deems appropriate.
The Board
believes that this leadership structure is appropriate because it allows the
Board to exercise informed and independent judgment over matters under
its purview, and it allocates areas of responsibility among committees or
working groups of Trustees and the full Board in a manner that enhances
effective oversight. The Board considers leadership by an Independent Trustee as
Chairperson to be integral to promoting effective independent
oversight of the funds' operations and meaningful representation of the
shareholders’ interests, given the specific characteristics and circumstances
of the funds. The Board also believes that having a super-majority of
Independent Trustees is appropriate and in the best interest of the funds'
shareholders. Nevertheless, the Board also believes that having interested
persons serve on the Board brings corporate and financial viewpoints
that are, in
the Board’s view, helpful elements in its decision-making process. In addition,
the Board believes that Messrs. Arnott, Boyle, and Lorentz as current or
former senior executives of the Advisor and the Distributor (or of their parent
company, Manulife Financial Corporation), and of other affiliates of the Advisor
and the Distributor, provide the Board with the perspective of the Advisor and
the Distributor in managing and sponsoring all of the Trust’s series. The
leadership structure of the Board may be changed, at any time and in the
discretion of the Board, including in response to changes in circumstances
or the characteristics of the Trust.
The Board has
established an Audit Committee; Compliance Committee; Contracts, Legal &
Risk Committee; Nominating and Governance Committee; and Investment
Committee. The current membership of each committee is set forth
below.
Audit
Committee.
The Board has
a standing Audit Committee composed solely of Independent Trustees (Messrs.
Bacic and
Cunningham and
Ms.
Rathke). Ms.
Rathke serves as Chairperson of this Committee. Ms. Rathke and
Mr. Bacic have each been designated by the Board as an “audit committee
financial expert,” as defined in SEC rules. This
Committee reviews the internal and external accounting and auditing procedures
of the Trust and, among
other things, considers the selection of an independent registered public
accounting firm for the Trust, approves all significant services
proposed to be
performed by its independent registered public accounting firm and considers the
possible effect of such services on its independence. This Committee
met four times during the fiscal year ended August 31, 2024.
Compliance
Committee.
The Board also
has a standing Compliance Committee (Ms. Fey, Mr. Garfield and Ms. Jackson). Ms.
Fey serves as Chairperson of
this Committee. This Committee reviews and makes recommendations to the full
Board regarding certain compliance matters relating to the Trust.
This Committee met four times during the fiscal year ended August 31,
2024.
Contracts,
Legal & Risk Committee.
The Board also
has a standing Contracts, Legal & Risk Committee (Mr. Boyle, Ms. Ellison,
and Mr. Wright). Mr.
Boyle serves as
Chairperson of this Committee. This Committee oversees the initiation,
operation, and renewal of the various contracts between the Trust and
other entities. These contracts include advisory and subadvisory agreements,
custodial and transfer agency agreements and arrangements with other
service providers. The Committee also reviews the significant legal affairs of
the funds, as well as any significant regulatory and legislative actions or
proposals affecting or relating to the funds or their service providers. The
Committee also assists the Board in its oversight role with respect to the
processes pursuant to which the Advisor and the subadvisors identify, manage and
report the various risks that affect or could affect the funds. This Committee
met four times during the fiscal year ended August 31, 2024.
Nominating
and Governance Committee.
The Board also
has a Nominating and Governance Committee composed of all of the Independent
Trustees. This
Committee will consider nominees recommended by Trust shareholders. Nominations
should be forwarded to the attention of the Secretary of
the Trust at 200 Berkeley Street, Boston, Massachusetts 02116. Any shareholder
nomination must be submitted in compliance with all of the pertinent
provisions of Rule 14a-8 under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), in order to be considered by this Committee.
This Committee met five times during the fiscal year ended August 31,
2024.
Investment
Committee.
The Board also
has an Investment Committee composed of all of the Trustees. The Investment
Committee has four subcommittees
with the Trustees divided among the four subcommittees (each an “Investment
Sub-Committee”). Messrs.
Boyle
and
Cunningham
and
Mses. Ellison
and
Jackson serve as
Chairpersons of the Investment Sub-Committees. Each Investment Sub-Committee
reviews investment matters relating to a
particular group of funds in the John Hancock Fund Complex and coordinates with
the full Board regarding investment matters. The Investment
Committee met five times during the fiscal year ended August 31, 2024.
Annually, the
Board evaluates its performance and that of its Committees, including the
effectiveness of the Board’s Committee structure.
As registered
investment companies, the funds are subject to a variety of risks, including
investment risks (such as, among others, market risk, credit risk and
interest rate risk), financial risks (such as, among others, settlement risk,
liquidity risk and valuation risk), compliance risks, and operational
risks. As a
part of its overall activities, the Board oversees the funds' risk management
activities that are implemented by the Advisor, the funds' CCO and other
service providers to the funds. The Advisor has primary responsibility for the
funds' risk management on a day-to-day basis as a part of its overall
responsibilities. Each fund's subadvisor, subject to oversight of the Advisor,
is primarily responsible for managing investment and financial risks
as a part of
its day-to-day investment responsibilities, as well as operational and
compliance risks at its firm. The Advisor and the CCO also assist the
Board in
overseeing compliance with investment policies of the funds and regulatory
requirements and monitor the implementation of the various compliance
policies and procedures approved by the Board as a part of its oversight
responsibilities.
The Advisor
identifies to the Board the risks that it believes may affect the funds and
develops processes and controls regarding such risks. However, risk
management is a complex and dynamic undertaking and it is not always possible to
comprehensively identify and/or mitigate all such risks at all times since
risks are at times impacted by external events. In discharging its oversight
responsibilities, the Board considers risk management issues throughout the
year with the assistance of its various Committees as described below. Each
Committee meets at least quarterly and presents reports to the Board,
which may prompt further discussion of issues concerning the oversight of the
funds' risk management. The Board as a whole also reviews written
reports or presentations on a variety of risk issues as needed and may discuss
particular risks that are not addressed in the Committee process.
The Board has
established an Investment Committee, which consists of four Investment
Sub-Committees. Each Investment Sub-Committee assists the Board in
overseeing the significant investment policies of the relevant funds and the
performance of their subadvisors. The Advisor monitors these policies and
subadvisor activities and may recommend changes in connection with the funds to
each relevant Investment Sub-Committee in response to subadvisor
requests or other circumstances. On at least a quarterly basis, each Investment
Sub-Committee reviews reports from the Advisor regarding the relevant
funds' investment performance, which include information about investment and
financial risks and how they are managed, and from the CCO or his/her
designee regarding subadvisor compliance matters. In addition, each Investment
Sub-Committee meets periodically with the portfolio managers of
the funds' subadvisors to receive reports regarding management of the funds,
including with respect to risk management processes.
The Audit
Committee assists the Board in reviewing with the independent auditors, at
various times throughout the year, matters relating to the funds' financial
reporting. In addition, this Committee oversees the process of each fund’s
valuation of its portfolio securities, assisted by the Advisor's Pricing
Committee
(composed of officers of the Advisor), which calculates fair value
determinations pursuant to procedures established by the Advisor and
adopted by the
Board.
With respect
to valuation, the Advisor provides periodic reports to the Board and Investment
Committee that enables the Board to oversee the Advisor, as each fund's
valuation designee, in assessing, managing and reviewing material risks
associated with fair valuation determinations, including material conflicts of
interest. In addition, the Board reviews the Advisor's performance of an annual
valuation risk assessment under which the Advisor seeks to identify and
enumerate material valuation risks which are or may be impactful to the funds
including, but not limited to (1) the types of investments held
(or intended
to be held) by the funds, giving consideration to those investments'
characteristics; (2) potential market or sector shocks or dislocations
which may
affect the ongoing valuation operations; (3) the extent to which each fair value
methodology uses unobservable inputs; (4) the proportion of each fund's
investments that are fair valued as determined in good faith, as well as their
contributions to a fund's returns; (5) the use of fair value methodologies
that rely on inputs from third-party service providers; and (6) the
appropriateness and application of the methods for determining and calculating
fair value. The Advisor reports any material changes to the risk assessment,
along with appropriate actions designed to manage such risks, to the
Board.
The Compliance
Committee assists the Board in overseeing the activities of the Trusts' CCO with
respect to the compliance programs of the funds, the Advisor, the
subadvisors, and certain of the funds' other service providers (the Distributor
and transfer agent). This Committee and the Board receive and consider
periodic reports from the CCO throughout the year, including the CCO’s annual
written report, which, among other things, summarizes material
compliance issues that arose during the previous year and any remedial action
taken to address these issues, as well as any material changes to the
compliance programs.
The Contracts,
Legal & Risk Committee assists the Board in its oversight role with respect
to the processes pursuant to which the Advisor and the subadvisors
identify, assess, manage and report the various risks that affect or could
affect the funds. This Committee reviews reports from the funds' Advisor on a
periodic basis regarding the risks facing the funds, and makes recommendations
to the Board concerning risks and risk oversight matters as the
Committee deems appropriate. This Committee also coordinates with the other
Board Committees regarding risks relevant to the other Committees, as
appropriate.
The Board
considers liquidity risk management issues as part of its general oversight
responsibilities and oversees the Trust's liquidity risk through, among other
things, receiving periodic reporting and presentations that address liquidity
matters. As required by rule 22e-4 under the 1940 Act, the Board,
including a majority of the Independent Trustees, has approved the Trust's
Liquidity Risk Management Program (the “LRM Program”), which is reasonably
designed to assess and manage the Trust's liquidity risk, and has appointed the
LRM Program Administrator that is responsible for administering
the LRM Program. The Board receives liquidity risk management reports under the
funds' LRM Program and reviews, no less frequently than annually,
a written report prepared by the LRM Program Administrator that addresses, among
other items, the operation of the LRM Program and assesses its
adequacy and effectiveness of implementation as well as any material changes to
the LRM Program.
As required by
rule 18f-4 under the 1940 Act, funds that engage in derivatives transactions,
other than limited derivatives users, generally must adopt and implement
written derivatives risk management program (the “Derivatives Risk Management
Program”), that is reasonably designed to manage the funds'
derivatives risks, while taking into account the funds' derivatives and other
investments. This program includes risk guidelines, stress testing, internal
reporting and escalation and periodic review of the program. To the extent that
the funds invest in derivatives, on a quarterly and annual, the Advisor will
provide the Board with written reports that address the operation, adequacy and
effectiveness of the funds' Derivatives Risk Management Program, which
is generally designed to assess and manage derivatives risk.
In addressing
issues regarding the funds' risk management between meetings, appropriate
representatives of the Advisor communicate with the Chairperson of
the Board, the relevant Committee Chair, or the Trusts' CCO, who is directly
accountable to the Board. As appropriate, the Chairperson of the Board, the
Committee Chairs and the Trustees confer among themselves, with the Trusts' CCO,
the Advisor, other service providers, external fund counsel, and
counsel to the Independent Trustees, to identify and review risk management
issues that may be placed on the full Board’s agenda and/or that of an
appropriate Committee for review and discussion.
In addition,
in its annual review of the funds' advisory, subadvisory and distribution
agreements, the Board reviews information provided by the Advisor, the
subadvisors and the Distributor relating to their operational capabilities,
financial condition, risk management processes and resources.
The Board may,
at any time and in its discretion, change the manner in which it conducts its
risk oversight role.
The Advisor
also has its own, independent interest in risk management. In this regard, the
Advisor has appointed a Risk and Investment Operations Committee,
consisting of senior personnel from each of the Advisor’s functional
departments. This Committee reports periodically to the Board and the
Contracts,
Legal & Risk Committee on risk management matters. The Advisor’s risk
management program is part of the overall risk management program of
John Hancock, the Advisor’s parent company. John Hancock’s Chief Risk Officer
supports the Advisor’s risk management program, and at the Board’s
request will report on risk management matters.
Trustees are
reimbursed for travel and other out-of-pocket expenses. Effective
January 1, 2024, each
Independent
Trustee receives in the aggregate from the Trust
and the other open-end funds in the John Hancock Fund Complex an annual retainer
of $298,000, a fee of
$22,880 for each
regular meeting of the
Trustees (in person or via videoconference or teleconference) and a fee of
$5,000 for each special meeting of the Trustees (in person or via
videoconference or teleconference). The Chairperson of the Board receives an
additional retainer of $213,200. The Vice
Chairperson of the Board receives an
additional retainer of $20,000. The Chairperson of each of the Audit Committee,
Compliance Committee, and Contracts, Legal & Risk Committee
receives an additional $40,000 retainer. The Chairperson of each Investment
Sub-Committee receives an additional $20,000 retainer.
The following
table provides information regarding the compensation paid by the Trust and the
other investment companies in the John Hancock Fund Complex to the
Independent Trustees for their services during the fiscal year ended August 31,
2024.
|
|
Total
Compensation
from
JHF II ($) |
Total
Compensation
from
JHF II and the John
Hancock
Fund
|
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1
The Trust does
not have a pension or retirement plan for any of its Trustees or
officers.
2
There were
approximately 185 series in the
John Hancock Fund Complex as of August 31, 2024.
3
Appointed to serve as
Trustee effective August
1, 2024.
4
Mr.
Pruchansky
retired as a Trustee effective December
31, 2024.
5
Mr. Russo retired as
Trustee effective
August 1,
2024.
Trustee
Ownership of Shares of the Funds
The table
below sets forth the dollar range of the value of the shares of each fund, and
the dollar range of the aggregate value of the shares of all funds in
the John
Hancock Fund Complex overseen by a Trustee, owned beneficially by the Trustees
as of December 31, 2023. For purposes
of this table, beneficial
ownership is defined to mean a direct or indirect pecuniary interest. Trustees
may own shares beneficially through group annuity contracts. Exact dollar
amounts of securities held are not listed in the table. Rather, dollar ranges
are identified.
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Alternative
Asset
Allocation
Fund |
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Capital
Appreciation
Fund |
Capital
Appreciation
Value
Fund |
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Disciplined
Value
Emerging
Markets
Equity
Fund |
Emerging
Markets
Debt
Fund |
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Floating
Rate
Income
Fund |
Fundamental
Global
Franchise
Fund |
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International
Small
Company
Fund |
International
Strategic
Equity
Allocation
Fund |
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Lifestyle
Blend
Aggressive
Portfolio |
Lifestyle
Blend
Balanced
Portfolio |
Lifestyle
Blend
Conservative
Portfolio |
Lifestyle
Blend
Growth
Portfolio |
Lifestyle
Blend
Moderate
Portfolio |
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Lifestyle
Blend
Aggressive
Portfolio |
Lifestyle
Blend
Balanced
Portfolio |
Lifestyle
Blend
Conservative
Portfolio |
Lifestyle
Blend
Growth
Portfolio |
Lifestyle
Blend
Moderate
Portfolio |
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2010
Lifetime
Blend
Portfolio |
2015
Lifetime
Blend
Portfolio |
2020
Lifetime
Blend
Portfolio |
2025
Lifetime
Blend
Portfolio |
2030
Lifetime
Blend
Portfolio |
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2035
Lifetime
Blend
Portfolio |
2040
Lifetime
Blend
Portfolio |
2045
Lifetime
Blend
Portfolio |
2050
Lifetime
Blend
Portfolio |
2055
Lifetime
Blend
Portfolio |
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2060
Lifetime
Blend
Portfolio |
2065
Lifetime
Blend
Portfolio |
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Multi-Asset
High
Income
Fund |
Multimanager
2010
Lifetime
Portfolio |
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2060
Lifetime
Blend
Portfolio |
2065
Lifetime
Blend
Portfolio |
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Multi-Asset
High
Income
Fund |
Multimanager
2010
Lifetime
Portfolio |
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Multimanager
2015
Lifetime
Portfolio |
Multimanager
2020
Lifetime
Portfolio |
Multimanager
2025
Lifetime
Portfolio |
Multimanager
2030
Lifetime
Portfolio |
Multimanager
2035
Lifetime
Portfolio |
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Multimanager
2040
Lifetime
Portfolio |
Multimanager
2045
Lifetime
Portfolio |
Multimanager
2050
Lifetime
Portfolio |
Multimanager
2055
Lifetime
Portfolio |
Multimanager
2060
Lifetime
Portfolio |
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Multimanager
2065
Lifetime
Portfolio |
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Opportunistic
Fixed
Income
Fund |
Real
Estate
Securities
Fund |
Science
&
Technology
Fund |
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Multimanager
2065
Lifetime
Portfolio |
|
Opportunistic
Fixed
Income
Fund |
Real
Estate
Securities
Fund |
Science
&
Technology
Fund |
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Small
Cap
Dynamic
Growth
Fund |
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U.S.
Sector
Rotation
Fund |
Total
– John
Hancock
Fund
Complex |
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1
Appointed to
serve as Trustee effective August 1, 2024.
2
Dean C.
Garfield placed orders to purchase shares of certain John Hancock closed-end
funds on December 29, 2023 and such orders settled on January 2,
2024.
Shareholders
of The FUNDS
As of December
2, 2024, all the
Class 1 shares of the funds were held by JHLICO U.S.A. and JHLICO New York on
behalf of certain of their separate accounts that
are used to fund group annuity contracts issued to qualified retirement plans
and that are not registered under the 1940 Act in reliance on the
exception provided by Section 3(c)(11) of that Act.
JHLICO U.S.A.
is a stock life insurance company originally organized under the laws of
Pennsylvania and redomesticated under the laws of Michigan. Its principal
address is 201 Townsend Street, Suite 900, Lansing, Michigan 48933. JHLICO New
York is a stock life insurance company organized under the laws of
New York. Its principal address is 100 Summit Lake Drive, Second Floor,
Valhalla, New York 10595. Each of JHLICO U.S.A. and JHLICO New York is an
indirect, wholly-owned subsidiary of The Manufacturers Life Insurance Company, a
Canadian stock life insurance company. MFC is the holding
company of The Manufacturers Life Insurance Company and its subsidiaries. The
principal offices of MFC are located at 200 Bloor Street East, Toronto,
Ontario, Canada M4W 1E5.
To the best
knowledge of the Trust, as of December 2, 2024, the Trustees
and officers of the Trust, in the aggregate, beneficially owned less than 1% of
the
outstanding shares of each class of shares of each fund.
To the best
knowledge of the Trust, as of December 2, 2024, the
following shareholders (principal holders) owned beneficially or of record 5% or
more of the
outstanding shares of the funds and classes stated below. A shareholder who owns
beneficially more than 25% of a fund or any class of a fund is deemed to be a
control person of that fund or that class of the fund, as applicable, and
therefore could determine the outcome of a shareholder meeting with respect
to a proposal directly affecting that fund or that share class, as
applicable.
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2010
LIFETIME BLEND
PORTFOLIO |
|
JOHN
HANCOCK LIFE & HEALTH INS CO
CUSTODIAN
FOR THE IRA OF
DAVID
M MCKINLEY
779
CORNELIA DR SE
HUNTSVILLE
AL 35802-3778 |
|
|
2010
LIFETIME BLEND
PORTFOLIO |
|
JOHN
HANCOCK LIFE INSURANCE CO USA
200
BERKELEY ST
BOSTON
MA 02116-5022 |
|
|
2010
LIFETIME BLEND
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
2010
LIFETIME BLEND
PORTFOLIO |
|
EMPOWER
TRUST FBO
EMPLOYEE
BENEFITS CLIENTS 401K
8515
E ORCHARD RD 2T2
GREENWOOD
VILLAGE CO 80111-5002 |
|
|
2010
LIFETIME BLEND
PORTFOLIO |
|
201
TOWNSEND STREET, SUITE 900
LANSING
MI 48933 |
|
|
2015
LIFETIME BLEND
PORTFOLIO |
|
JOHN
HANCOCK LIFE & HEALTH INS CO
CUSTODIAN
FOR THE IRA OF
RONALD
L LOBERFELD
35
PRENTICE RD
NEWTON
CENTER MA 02459-1325 |
|
|
2015
LIFETIME BLEND
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
2015
LIFETIME BLEND
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
2015
LIFETIME BLEND
PORTFOLIO |
|
EMPOWER
TRUST FBO
RECORDKEEPING
FOR LARGE BENEFIT PL
8525
E ORCHARD RD
GREENWOOD
VLG CO 80111-5002 |
|
|
2015
LIFETIME BLEND
PORTFOLIO |
|
EMPOWER
TRUST FBO
RECORDKEEPING
VARIOUS BENEFIT PL NY
8525
E ORCHARD RD
C/O
MUTUAL FUND TRADING
GREENWOOD
VILLAGE CO 80111-5002 |
|
|
2015
LIFETIME BLEND
PORTFOLIO |
|
EMPOWER
TRUST FBO
EMPLOYEE
BENEFITS CLIENTS 401K
8515
E ORCHARD RD 2T2
GREENWOOD
VILLAGE CO 80111-5002 |
|
|
2015
LIFETIME BLEND
PORTFOLIO |
|
201
TOWNSEND STREET, SUITE 900
LANSING
MI 48933 |
|
|
2015
LIFETIME BLEND
PORTFOLIO |
|
100
SUMMIT LAKE DRIVE, 2ND FLOOR
VALHALLA
NY 10595 |
|
|
2020
LIFETIME BLEND
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
2020
LIFETIME BLEND
PORTFOLIO |
|
NATIONAL
FINANCIAL SERVICES LLC
499
WASHINGTON BLVD
JERSEY
CITY NJ 07310-1995 |
|
|
|
|
|
|
|
|
2020
LIFETIME BLEND
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
2020
LIFETIME BLEND
PORTFOLIO |
|
EMPOWER
TRUST FBO
RECORDKEEPING
FOR LARGE BENEFIT PL
8525
E ORCHARD RD
GREENWOOD
VLG CO 80111-5002 |
|
|
2020
LIFETIME BLEND
PORTFOLIO |
|
201
TOWNSEND STREET, SUITE 900
LANSING
MI 48933 |
|
|
2025
LIFETIME BLEND
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
2025
LIFETIME BLEND
PORTFOLIO |
|
NATIONAL
FINANCIAL SERVICES LLC
499
WASHINGTON BLVD
JERSEY
CITY NJ 07310-1995 |
|
|
2025
LIFETIME BLEND
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
2025
LIFETIME BLEND
PORTFOLIO |
|
EMPOWER
TRUST FBO
RECORDKEEPING
FOR LARGE BENEFIT PL
8525
E ORCHARD RD
GREENWOOD
VLG CO 80111-5002 |
|
|
2025
LIFETIME BLEND
PORTFOLIO |
|
201
TOWNSEND STREET, SUITE 900
LANSING
MI 48933 |
|
|
2030
LIFETIME BLEND
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
2030
LIFETIME BLEND
PORTFOLIO |
|
NATIONAL
FINANCIAL SERVICES LLC
499
WASHINGTON BLVD
JERSEY
CITY NJ 07310-1995 |
|
|
2030
LIFETIME BLEND
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
2030
LIFETIME BLEND
PORTFOLIO |
|
EMPOWER
TRUST FBO
RECORDKEEPING
FOR LARGE BENEFIT PL
8525
E ORCHARD RD
GREENWOOD
VLG CO 80111-5002 |
|
|
2030
LIFETIME BLEND
PORTFOLIO |
|
201
TOWNSEND STREET, SUITE 900
LANSING
MI 48933 |
|
|
2035
LIFETIME BLEND
PORTFOLIO |
|
NATIONAL
FINANCIAL SERVICES LLC
499
WASHINGTON BLVD
JERSEY
CITY NJ 07310-1995 |
|
|
2035
LIFETIME BLEND
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
2035
LIFETIME BLEND
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
|
|
|
|
|
|
2035
LIFETIME BLEND
PORTFOLIO |
|
EMPOWER
TRUST FBO
EMPLOYEE
BENEFITS CLIENTS 401K
8515
E ORCHARD RD 2T2
GREENWOOD
VILLAGE CO 80111-5002 |
|
|
2035
LIFETIME BLEND
PORTFOLIO |
|
201
TOWNSEND STREET, SUITE 900
LANSING
MI 48933 |
|
|
2040
LIFETIME BLEND
PORTFOLIO |
|
NATIONAL
FINANCIAL SERVICES LLC
499
WASHINGTON BLVD
JERSEY
CITY NJ 07310-1995 |
|
|
2040
LIFETIME BLEND
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
2040
LIFETIME BLEND
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
2040
LIFETIME BLEND
PORTFOLIO |
|
201
TOWNSEND STREET, SUITE 900
LANSING
MI 48933 |
|
|
2045
LIFETIME BLEND
PORTFOLIO |
|
NATIONAL
FINANCIAL SERVICES LLC
499
WASHINGTON BLVD
JERSEY
CITY NJ 07310-1995 |
|
|
2045
LIFETIME BLEND
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
2045
LIFETIME BLEND
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
2045
LIFETIME BLEND
PORTFOLIO |
|
201
TOWNSEND STREET, SUITE 900
LANSING
MI 48933 |
|
|
2050
LIFETIME BLEND
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
2050
LIFETIME BLEND
PORTFOLIO |
|
NATIONAL
FINANCIAL SERVICES LLC
499
WASHINGTON BLVD
JERSEY
CITY NJ 07310-1995 |
|
|
2050
LIFETIME BLEND
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
2050
LIFETIME BLEND
PORTFOLIO |
|
201
TOWNSEND STREET, SUITE 900
LANSING
MI 48933 |
|
|
2055
LIFETIME BLEND
PORTFOLIO |
|
NATIONAL
FINANCIAL SERVICES LLC
499
WASHINGTON BLVD
JERSEY
CITY NJ 07310-1995 |
|
|
2055
LIFETIME BLEND
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
2055
LIFETIME BLEND
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
2055
LIFETIME BLEND
PORTFOLIO |
|
NATIONAL
FINANCIAL SERVICES LLC
499
WASHINGTON BLVD
JERSEY
CITY NJ 07310-1995 |
|
|
|
|
|
|
|
|
2055
LIFETIME BLEND
PORTFOLIO |
|
201
TOWNSEND STREET, SUITE 900
LANSING
MI 48933 |
|
|
2060
LIFETIME BLEND
PORTFOLIO |
|
NATIONAL
FINANCIAL SERVICES LLC
499
WASHINGTON BLVD
JERSEY
CITY NJ 07310-1995 |
|
|
2060
LIFETIME BLEND
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
2060
LIFETIME BLEND
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
2060
LIFETIME BLEND
PORTFOLIO |
|
NATIONAL
FINANCIAL SERVICES LLC
499
WASHINGTON BLVD
JERSEY
CITY NJ 07310-1995 |
|
|
2060
LIFETIME BLEND
PORTFOLIO |
|
201
TOWNSEND STREET, SUITE 900
LANSING
MI 48933 |
|
|
2065
LIFETIME BLEND
PORTFOLIO |
|
JOHN
HANCOCK LIFE INSURANCE CO USA
200
BERKELEY ST
BOSTON
MA 02116-5022 |
|
|
2065
LIFETIME BLEND
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
2065
LIFETIME BLEND
PORTFOLIO |
|
NATIONAL
FINANCIAL SERVICES LLC
499
WASHINGTON BLVD
JERSEY
CITY NJ 07310-1995 |
|
|
2065
LIFETIME BLEND
PORTFOLIO |
|
201
TOWNSEND STREET, SUITE 900
LANSING
MI 48933 |
|
|
ALTERNATIVE
ASSET
ALLOCATION
FUND |
|
AMERICAN
ENTERPRISE INVESTMENT SVC
707
2ND AVE S
MINNEAPOLIS
MN 55402-2405 |
|
|
ALTERNATIVE
ASSET
ALLOCATION
FUND |
|
WELLS
FARGO CLEARING SERVICES, LLC
SPECIAL
CUSTODY ACCT FOR THE
EXCLUSIVE
BENEFIT OF CUSTOMER
2801
MARKET ST
SAINT
LOUIS MO 63103-2523 |
|
|
ALTERNATIVE
ASSET
ALLOCATION
FUND |
|
PERSHING
LLC
1
PERSHING PLZ
JERSEY
CITY NJ 07399-0001 |
|
|
ALTERNATIVE
ASSET
ALLOCATION
FUND |
|
NATIONAL
FINANCIAL SERVICES LLC
FEBO
CUSTOMERS
MUTUAL
FUNDS
200
LIBERTY ST # 1WFC
NEW
YORK NY 10281-1015 |
|
|
ALTERNATIVE
ASSET
ALLOCATION
FUND |
|
LPL
FINANCIAL
OMNIBUS
CUSTOMER ACCOUNT
ATTN:
MUTUAL FUND TRADING
4707
EXECUTIVE DR
SAN
DIEGO CA 92121-3091 |
|
|
ALTERNATIVE
ASSET
ALLOCATION
FUND |
|
EDWARD
D JONES & CO
FOR
THE BENEFIT OF CUSTOMERS
12555
MANCHESTER ROAD
SAINT
LOUIS MO 63131-3710 |
|
|
|
|
|
|
|
|
ALTERNATIVE
ASSET
ALLOCATION
FUND |
|
SPECIAL
CUSTODY ACCOUNT FOR THE
EXCLUSIVE
BENEFIT OF CUSTOMERS OF
UBS
FINANCIAL SERVICES INC
1000
HARBOR BLVD
WEEHAWKEN
NJ 07086-6761 |
|
|
ALTERNATIVE
ASSET
ALLOCATION
FUND |
|
CHARLES
SCHWAB & CO INC
SPECIAL
CUSTODY ACCOUNT FOR
EXCLUSIVE
BENEFIT OF CUSTOMERS
ATTN
MUTUAL FUNDS
101
MONTGOMERY ST
SAN
FRANCISCO CA 94104-4151 |
|
|
ALTERNATIVE
ASSET
ALLOCATION
FUND |
|
AMERICAN
ENTERPRISE INVESTMENT SVC
707
2ND AVE S
MINNEAPOLIS
MN 55402-2405 |
|
|
ALTERNATIVE
ASSET
ALLOCATION
FUND |
|
WELLS
FARGO CLEARING SERVICES, LLC
SPECIAL
CUSTODY ACCT FOR THE
EXCLUSIVE
BENEFIT OF CUSTOMER
2801
MARKET ST
SAINT
LOUIS MO 63103-2523 |
|
|
ALTERNATIVE
ASSET
ALLOCATION
FUND |
|
LPL
FINANCIAL
OMNIBUS
CUSTOMER ACCOUNT
ATTN:
MUTUAL FUND TRADING
4707
EXECUTIVE DRIVE
SAN
DIEGO CA 92121-3091 |
|
|
ALTERNATIVE
ASSET
ALLOCATION
FUND |
|
NATIONAL
FINANCIAL SERVICES LLC
FEBO
CUSTOMERS
MUTUAL
FUNDS
200
LIBERTY ST # 1WFC
NEW
YORK NY 10281-1015 |
|
|
ALTERNATIVE
ASSET
ALLOCATION
FUND |
|
PERSHING
LLC
1
PERSHING PLZ
JERSEY
CITY NJ 07399-0001 |
|
|
ALTERNATIVE
ASSET
ALLOCATION
FUND |
|
AMERICAN
ENTERPRISE INVESTMENT SVC
707
2ND AVE S
MINNEAPOLIS
MN 55402-2405 |
|
|
ALTERNATIVE
ASSET
ALLOCATION
FUND |
|
NATIONAL
FINANCIAL SERVICES LLC
FEBO
CUSTOMERS
MUTUAL
FUNDS
200
LIBERTY ST # 1WFC
NEW
YORK NY 10281-1015 |
|
|
ALTERNATIVE
ASSET
ALLOCATION
FUND |
|
LPL
FINANCIAL
OMNIBUS
CUSTOMER ACCOUNT
ATTN:
MUTUAL FUND TRADING
4707
EXECUTIVE DR
SAN
DIEGO CA 92121-3091 |
|
|
ALTERNATIVE
ASSET
ALLOCATION
FUND |
|
PERSHING
LLC
1
PERSHING PLZ
JERSEY
CITY NJ 07399-0001 |
|
|
ALTERNATIVE
ASSET
ALLOCATION
FUND |
|
RAYMOND
JAMES
OMNIBUS
FOR MUTUAL FUNDS
HOUSE
ACCT FIRM
880
CARILLON PKWY
ST
PETERSBURG FL 33716-1100 |
|
|
|
|
|
|
|
|
ALTERNATIVE
ASSET
ALLOCATION
FUND |
|
CAPITAL
BANK & TRUST CO TTEE FBO
NICKLE
ELECTRICAL COMPANIES 401K
C/O
FASCORE LLC
8515
E ORCHARD RD # 2T2
GREENWOOD
VLG CO 80111-5002 |
|
|
ALTERNATIVE
ASSET
ALLOCATION
FUND |
|
MLPF&S
FOR THE
SOLE
BENEFIT OF ITS CUSTOMERS
ATTN:
FUND ADMINISTRATION
4800
DEER LAKE DRIVE EAST 2ND FL
JACKSONVILLE
FL 32246-6484 |
|
|
ALTERNATIVE
ASSET
ALLOCATION
FUND |
|
ASCENSUS
TRUST COMPANY FBO
RITRON
INC 401(K) PSP II
PO
BOX 10577
FARGO
ND 58106-0577 |
|
|
ALTERNATIVE
ASSET
ALLOCATION
FUND |
|
ASCENSUS
TRUST COMPANY FBO
JASWAL
PROFESSIONAL SERVICES CORP
PO
BOX 10758
FARGO
ND 58106-0758 |
|
|
ALTERNATIVE
ASSET
ALLOCATION
FUND |
|
MID
ATLANTIC TRUST COMPANY FBO
PASCACK
DATA SERVICES INC 401 K
PROFIT
SHARING PLAN & TRUST
1251
WATERFRONT PL STE 525
PITTSBURGH
PA 15222-4228 |
|
|
ALTERNATIVE
ASSET
ALLOCATION
FUND |
|
ASCENSUS
TRUST COMPANY FBO
INTERACTIVE
BENEFIT SOLUTIONS 401K
PO
BOX 10758
FARGO
ND 58106-0758 |
|
|
ALTERNATIVE
ASSET
ALLOCATION
FUND |
|
RELIANCE
TRUST COMPANY TRUSTEE
FBO
STUART DEAN CO INC 401(K)
4350
10TH ST
LONG
IS CITY NY 11101-6910 |
|
|
ALTERNATIVE
ASSET
ALLOCATION
FUND |
|
MATRIX
TRUST COMPANY CUST FBO
LOWELL
AREA SCHOOLS 403(B) PLAN
717
17TH ST STE 1300
DENVER
CO 80202-3304 |
|
|
ALTERNATIVE
ASSET
ALLOCATION
FUND |
|
NATIONAL
FINANCIAL SERVICES LLC
499
WASHINGTON BLVD
JERSEY
CITY NJ 07310-1995 |
|
|
ALTERNATIVE
ASSET
ALLOCATION
FUND |
|
JOHN
HANCOCK LIFE INSURANCE
COMPANY
(USA)
ATTN:
JHRPS TRADING OPS ST6
200
BERKELEY ST
BOSTON
MA 02116-5022 |
|
|
ALTERNATIVE
ASSET
ALLOCATION
FUND |
|
NATIONAL
FINANCIAL SERVICES LLC
499
WASHINGTON BLVD
JERSEY
CITY NJ 07310-1995 |
|
|
ALTERNATIVE
ASSET
ALLOCATION
FUND |
|
SEI
PRIVATE TRUST COMPANY
C/O
UMB BANK
1
FREEDOM VALLEY DR
OAKS
PA 19456-9989 |
|
|
ALTERNATIVE
ASSET
ALLOCATION
FUND |
|
VOYA
RETIREMENT INS AND ANNUITY CO
1
ORANGE WAY
WINDSOR
CT 06095-4773 |
|
|
|
|
|
|
|
|
ALTERNATIVE
ASSET
ALLOCATION
FUND |
|
EMPOWER
TRUST FBO
EMPLOYEE
BENEFITS CLIENTS 401K
8515
E ORCHARD RD 2T2
GREENWOOD
VILLAGE CO 80111-5002 |
|
|
|
|
|
EDWARD
D JONES & CO
FOR
THE BENEFIT OF CUSTOMERS
12555
MANCHESTER ROAD
SAINT
LOUIS MO 63131-3710 |
|
|
|
|
|
AMERICAN
ENTERPRISE INVESTMENT SVC
707
2ND AVE S
MINNEAPOLIS
MN 55402-2405 |
|
|
|
|
|
PERSHING
LLC
1
PERSHING PLZ
JERSEY
CITY NJ 07399-0001 |
|
|
|
|
|
EDWARD
D JONES & CO
FOR
THE BENEFIT OF CUSTOMERS
12555
MANCHESTER ROAD
SAINT
LOUIS MO 63131-3710 |
|
|
|
|
|
LPL
FINANCIAL
OMNIBUS
CUSTOMER ACCOUNT
ATTN:
MUTUAL FUND TRADING
4707
EXECUTIVE DRIVE
SAN
DIEGO CA 92121-3091 |
|
|
|
|
|
NATIONAL
FINANCIAL SERVICES LLC
FEBO
CUSTOMERS
MUTUAL
FUNDS
200
LIBERTY ST # 1WFC
NEW
YORK NY 10281-1015 |
|
|
|
|
|
CHARLES
SCHWAB & CO INC
SPECIAL
CUSTODY ACCT FBO CUSTOMERS
ATTN
MUTUAL FUNDS
101
MONTGOMERY ST
SAN
FRANCISCO CA 94104-4151 |
|
|
|
|
|
JHF
II MULTIMANAGER LIFESTYLE GROWTH
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
|
|
|
JHF
II MULTIMANAGER LIFESTYLE BALANCED
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
|
|
|
JHF
II MULTIMANAGER LIFESTYLE AGGRESSIVE
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
|
|
|
201
TOWNSEND STREET, SUITE 900
LANSING
MI 48933 |
|
|
|
|
|
100
SUMMIT LAKE DRIVE, 2ND FLOOR
VALHALLA
NY 10595 |
|
|
CAPITAL
APPRECIATION
FUND |
|
JHF
II MULTIMANAGER LIFESTYLE GROWTH
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
|
|
|
|
|
|
CAPITAL
APPRECIATION
FUND |
|
JHF
II MULTIMANAGER LIFESTYLE BALANCED
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
CAPITAL
APPRECIATION
FUND |
|
T
ROWE PRICE SERVICES INC FBO
ALASKA
COLLEGE SAVINGS TRUST
JENNISON
CAPITAL APPRECIATION
100
E PRATT ST FL 7
BALTIMORE
MD 21202-1013 |
|
|
CAPITAL
APPRECIATION
FUND |
|
JHF
II MULTIMANAGER LIFESTYLE AGGRESSIVE
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
CAPITAL
APPRECIATION
FUND |
|
201
TOWNSEND STREET, SUITE 900
LANSING
MI 48933 |
|
|
CAPITAL
APPRECIATION
FUND |
|
100
SUMMIT LAKE DRIVE, 2ND FLOOR
VALHALLA
NY 10595 |
|
|
CAPITAL
APPRECIATION
VALUE
FUND |
|
JHF
II MULTIMANAGER LIFESTYLE GROWTH
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
CAPITAL
APPRECIATION
VALUE
FUND |
|
JHF
II MULTIMANAGER LIFESTYLE BALANCED
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
CAPITAL
APPRECIATION
VALUE
FUND |
|
JHF
II MULTIMANAGER LIFESTYLE MODERATE
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
CAPITAL
APPRECIATION
VALUE
FUND |
|
JHF
II MULTIMANAGER LIFESTYLE AGGRESSIVE
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
|
|
|
JHF
II MULTIMANAGER LIFESTYLE BALANCED
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
|
|
|
JHF
II MULTIMANAGER LIFESTYLE BALANCED
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
|
|
|
JHF
II MULTIMANAGER LIFESTYLE
CONSERVATIVE
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
|
|
|
JHF
II MULTIMANAGER LIFESTYLE
CONSERVATIVE
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
|
|
|
JHF
II MULTIMANAGER LIFESTYLE MODERATE
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
|
|
|
|
|
|
|
|
|
JHF
II MULTIMANAGER LIFESTYLE MODERATE
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
|
|
|
T
ROWE PRICE SERVICES INC
ALASKA
COLLEGE SAVINGS TRUST
PORTFOLIO
- COLLEGE
100
E PRATT ST FL 7
BALTIMORE
MD 21202-1013 |
|
|
|
|
|
T
ROWE PRICE SERVICES INC
ALASKA
COLLEGE SAVINGS TRUST
PORTFOLIO
2025-2028
100
E PRATT ST FL 7
BALTIMORE
MD 21202-1013 |
|
|
|
|
|
T
ROWE PRICE SERVICES INC
ALASKA
COLLEGE SAVINGS TRUST
PORTFOLIO
2029-2032
100
E PRATT ST FL 7
BALTIMORE
MD 21202-1013 |
|
|
|
|
|
JHF
II MULTIMANAGER 2030 LIFETIME
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
|
|
|
JHF
II MULTIMANAGER 2030 LIFETIME
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
|
|
|
JHF
II MULTIMANAGER 2025 LIFETIME
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
|
|
|
JHF
II MULTIMANAGER 2025 LIFETIME
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
|
|
|
201
TOWNSEND STREET, SUITE 900
LANSING
MI 48933 |
|
|
DISCIPLINED
VALUE
EMERGING
MARKETS
EQUITY
FUND |
|
EDWARD
D JONES & CO
FOR
THE BENEFIT OF CUSTOMERS
12555
MANCHESTER ROAD
SAINT
LOUIS MO 63131-3710 |
|
|
DISCIPLINED
VALUE
EMERGING
MARKETS
EQUITY
FUND |
|
AMERICAN
ENTERPRISE INVESTMENT SVC
707
2ND AVE S
MINNEAPOLIS
MN 55402-2405 |
|
|
DISCIPLINED
VALUE
EMERGING
MARKETS
EQUITY
FUND |
|
JOHN
HANCOCK LIFE & HEALTH INS CO
DUNE
VIEW GARDENS INC SIMPLE IRA
FBO
TIMOTHY M HURLEY
PO
BOX 2159
SOUTHAMPTON
NY 11969-2159 |
|
|
DISCIPLINED
VALUE
EMERGING
MARKETS
EQUITY
FUND |
|
NATIONAL
FINANCIAL SERVICES LLC
FEBO
CUSTOMERS
MUTUAL
FUNDS
200
LIBERTY ST # 1WFC
NEW
YORK NY 10281-1015 |
|
|
DISCIPLINED
VALUE
EMERGING
MARKETS
EQUITY
FUND |
|
AMERICAN
ENTERPRISE INVESTMENT SVC
707
2ND AVE S
MINNEAPOLIS
MN 55402-2405 |
|
|
|
|
|
|
|
|
DISCIPLINED
VALUE
EMERGING
MARKETS
EQUITY
FUND |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST
BOSTON
MA 02116-5022 |
|
|
DISCIPLINED
VALUE
EMERGING
MARKETS
EQUITY
FUND |
|
CHARLES
SCHWAB & CO INC
MUTUAL
FUNDS DEPT
101
MONTGOMERY ST
SAN
FRANCISCO CA 94104-4151 |
|
|
DISCIPLINED
VALUE
EMERGING
MARKETS
EQUITY
FUND |
|
NATIONAL
FINANCIAL SERVICES LLC
499
WASHINGTON BLVD
JERSEY
CITY NJ 07310-1995 |
|
|
DISCIPLINED
VALUE
EMERGING
MARKETS
EQUITY
FUND |
|
EDWARD
D JONES & CO
FOR
THE BENEFIT OF CUSTOMERS
12555
MANCHESTER ROAD
SAINT
LOUIS MO 63131-3710 |
|
|
DISCIPLINED
VALUE
EMERGING
MARKETS
EQUITY
FUND |
|
RAYMOND
JAMES
OMNIBUS
FOR MUTUAL FUNDS
HOUSE
ACCT FIRM
880
CARILLON PKWY
ST
PETERSBURG FL 33716-1100 |
|
|
DISCIPLINED
VALUE
EMERGING
MARKETS
EQUITY
FUND |
|
C/O
GWP US ADVISORS
SEI
PRIVATE TRUST COMPANY
1
FREEDOM VALLEY DR
OAKS
PA 19456-9989 |
|
|
DISCIPLINED
VALUE
EMERGING
MARKETS
EQUITY
FUND |
|
201
TOWNSEND STREET, SUITE 900
LANSING
MI 48933 |
|
|
DISCIPLINED
VALUE
EMERGING
MARKETS
EQUITY
FUND |
|
T
ROWE PRICE SERVICES INC FBO
ALASKA
COLLEGE SAVINGS TRUST
PORTFOLIO
2029-2032
100
E PRATT ST FL 7
BALTIMORE
MD 21202-1013 |
|
|
DISCIPLINED
VALUE
EMERGING
MARKETS
EQUITY
FUND |
|
T
ROWE PRICE SERVICES INC FBO
ALASKA
COLLEGE SAVINGS TRUST
PORTFOLIO
2025-2028
100
E PRATT ST FL 7
BALTIMORE
MD 21202-1013 |
|
|
DISCIPLINED
VALUE
EMERGING
MARKETS
EQUITY
FUND |
|
T
ROWE PRICE SERVICES INC
ALASKA
COLLEGE SAVINGS TRUST
PORTFOLIO
2033-2036
100
E PRATT ST FL 7
BALTIMORE
MD 21202-1013 |
|
|
DISCIPLINED
VALUE
EMERGING
MARKETS
EQUITY
FUND |
|
T
ROWE PRICE SERVICES INC FBO
ALASKA
COLLEGE SAVINGS TRUST
PORTFOLIO
EQUITY
100
E PRATT ST FL 7
BALTIMORE
MD 21202-1013 |
|
|
DISCIPLINED
VALUE
EMERGING
MARKETS
EQUITY
FUND |
|
T
ROWE PRICE SERVICES INC FBO
ALASKA
COLLEGE SAVINGS TRUST
PORTFOLIO
- COLLEGE
100
E PRATT ST FL 7
BALTIMORE
MD 21202-1013 |
|
|
|
|
|
|
|
|
DISCIPLINED
VALUE
EMERGING
MARKETS
EQUITY
FUND |
|
T
ROWE PRICE SERVICES INC
ALASKA
COLLEGE SAVINGS TRUST
PORTFOLIO
2037-2040
100
E PRATT ST FL 7
BALTIMORE
MD 21202-1013 |
|
|
EMERGING
MARKETS
DEBT
FUND |
|
CHARLES
SCHWAB & CO INC
SPECIAL
CUSTODY ACCT FBO CUSTOMERS
ATTN
MUTUAL FUNDS
101
MONTGOMERY ST
SAN
FRANCISCO CA 94104-4151 |
|
|
EMERGING
MARKETS
DEBT
FUND |
|
J
P MORGAN SECURITIES LLC OMNIBUS
ACCOUNT
FOR THE EXCLUSIVE BENEFIT
OF
CUSTOMERS
575
WASHINGTON BLVD 12TH FL
MUTUAL
FUND DEPARTMENT
JERSEY
CITY NJ 07310-1616 |
|
|
EMERGING
MARKETS
DEBT
FUND |
|
NATIONAL
FINANCIAL SERVICES LLC
FEBO
CUSTOMERS
MUTUAL
FUNDS
200
LIBERTY ST # 1WFC
NEW
YORK NY 10281-1015 |
|
|
EMERGING
MARKETS
DEBT
FUND |
|
LPL
FINANCIAL
OMNIBUS
CUSTOMER ACCOUNT
ATTN:
MUTUAL FUND TRADING
4707
EXECUTIVE DRIVE
SAN
DIEGO CA 92121-3091 |
|
|
EMERGING
MARKETS
DEBT
FUND |
|
MLPF&S
FOR THE
SOLE
BENEFIT OF ITS CUSTOMERS
ATTN:
FUND ADMINISTRATION
4800
DEER LAKE DRIVE EAST 2ND FL
JACKSONVILLE
FL 32246-6484 |
|
|
EMERGING
MARKETS
DEBT
FUND |
|
JOHN
HANCOCK LIFE & HEALTH INS CO
DUNE
VIEW GARDENS INC SIMPLE IRA
FBO
TERI A HURLEY
334
FLYING POINT RD
WATER
MILL NY 11976-3406 |
|
|
EMERGING
MARKETS
DEBT
FUND |
|
RAYMOND
JAMES
OMNIBUS
FOR MUTUAL FUNDS
HOUSE
ACCT FIRM
880
CARILLON PKWY
ST
PETERSBURG FL 33716-1100 |
|
|
EMERGING
MARKETS
DEBT
FUND |
|
VICKI
S THOMAS TOD
SUBJECT
TO (STA) TOD RULES
2143
CONWILL RD
STOW
OH 44224-3415 |
|
|
EMERGING
MARKETS
DEBT
FUND |
|
NATIONAL
FINANCIAL SERVICES LLC
FEBO
CUSTOMERS
MUTUAL
FUNDS
200
LIBERTY ST # 1WFC
NEW
YORK NY 10281-1015 |
|
|
EMERGING
MARKETS
DEBT
FUND |
|
MLPF&S
FOR THE
SOLE
BENEFIT OF ITS CUSTOMERS
ATTN:
FUND ADMINISTRATION
4800
DEER LAKE DRIVE EAST 2ND FL
JACKSONVILLE
FL 32246-6484 |
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|
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EMERGING
MARKETS
DEBT
FUND |
|
NATIONAL
FINANCIAL SERVICES LLC
FEBO
CUSTOMERS
MUTUAL
FUNDS
200
LIBERTY ST # 1WFC
NEW
YORK NY 10281-1015 |
|
|
EMERGING
MARKETS
DEBT
FUND |
|
MANULIFE
ASSET MANAGEMENT (EUROPE)
EMPLOYEE
BENEFITS TRUST
CSC
EMPLOYEE BENEFIT TRUSTEE
(JERSEY)
LIMITED
44
ESPLANADE
ST
HELIER JERSEY JE4 9WG |
|
|
EMERGING
MARKETS
DEBT
FUND |
|
JOHN
HANCOCK LIFE INSURANCE
COMPANY
(USA)
ATTN:
JHRPS TRADING OPS ST6
200
BERKELEY ST
BOSTON
MA 02116-5022 |
|
|
EMERGING
MARKETS
DEBT
FUND |
|
MANULIFE
INVESTMENT MANAGEMENT (US)
2023
MAN INVESTMENT MGMT BUCK PLAN
197
CLARENDON ST
BOSTON
MA 02116-5010 |
|
|
EMERGING
MARKETS
DEBT
FUND |
|
MANULIFE
ASSET MANAGEMENT (EUROPE)
LIMITED
DIP RABBI TRUST
CSC
EMPLOYEE BENEFIT TRUSTEE
(JERSEY)
LIMITED
44
ESPLANADE
ST
HELIER JERSEY JE4 9WG |
|
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EMERGING
MARKETS
DEBT
FUND |
|
MANULIFE
ASSET MANAGEMENT (US) LLC
2021
MAN INVESTMENT MGMT ABCD
197
CLARENDON ST
BOSTON
MA 02116-5010 |
|
|
EMERGING
MARKETS
DEBT
FUND |
|
MANULIFE
ASSET MANAGEMENT (US) LLC
2022
MAN INVESTMENT MGMT BUCK PLAN
197
CLARENDON ST
BOSTON
MA 02116-5010 |
|
|
EMERGING
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FUND |
|
JHF
II MULTIMANAGER LIFESTYLE BALANCED
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
EMERGING
MARKETS
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FUND |
|
JHF
II MULTIMANAGER LIFESTYLE GROWTH
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
EMERGING
MARKETS
DEBT
FUND |
|
JHF
II MULTIMANAGER LIFESTYLE
CONSERVATIVE
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
EMERGING
MARKETS
DEBT
FUND |
|
JHF
II MULTIMANAGER LIFESTYLE MODERATE
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200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
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EDWARD
D JONES & CO
FOR
THE BENEFIT OF CUSTOMERS
12555
MANCHESTER ROAD
SAINT
LOUIS MO 63131-3710 |
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EDWARD
D JONES & CO
FOR
THE BENEFIT OF CUSTOMERS
12555
MANCHESTER ROAD
SAINT
LOUIS MO 63131-3710 |
|
|
|
|
|
AMERICAN
ENTERPRISE INVESTMENT SVC
707
2ND AVE S
MINNEAPOLIS
MN 55402-2405 |
|
|
|
|
|
NATIONAL
FINANCIAL SERVICES LLC
FEBO
CUSTOMERS
MUTUAL
FUNDS
200
LIBERTY ST # 1WFC
NEW
YORK NY 10281-1015 |
|
|
|
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|
LPL
FINANCIAL
OMNIBUS
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ATTN:
MUTUAL FUND TRADING
4707
EXECUTIVE DRIVE
SAN
DIEGO CA 92121-3091 |
|
|
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JHF
II MULTIMANAGER LIFESTYLE GROWTH
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
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|
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|
|
JHF
II MULTIMANAGER LIFESTYLE BALANCED
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
|
|
|
JHF
II MULTIMANAGER LIFESTYLE AGGRESSIVE
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
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|
201
TOWNSEND STREET, SUITE 900
LANSING
MI 48933 |
|
|
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100
SUMMIT LAKE DRIVE, 2ND FLOOR
VALHALLA
NY 10595 |
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|
FLOATING
RATE
INCOME
FUND |
|
EDWARD
D JONES & CO
FOR
THE BENEFIT OF CUSTOMERS
12555
MANCHESTER ROAD
SAINT
LOUIS MO 63131-3710 |
|
|
FLOATING
RATE
INCOME
FUND |
|
NATIONAL
FINANCIAL SERVICES LLC
FEBO
CUSTOMERS
MUTUAL
FUNDS
200
LIBERTY ST # 1WFC
NEW
YORK NY 10281-1015 |
|
|
FLOATING
RATE
INCOME
FUND |
|
PERSHING
LLC
1
PERSHING PLZ
JERSEY
CITY NJ 07399-0001 |
|
|
FLOATING
RATE
INCOME
FUND |
|
RAYMOND
JAMES
OMNIBUS
FOR MUTUAL FUNDS
HOUSE
ACCT FIRM
880
CARILLON PKWY
ST
PETERSBURG FL 33716-1100 |
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|
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|
FLOATING
RATE
INCOME
FUND |
|
WELLS
FARGO CLEARING SERVICES, LLC
SPECIAL
CUSTODY ACCT FOR THE
EXCLUSIVE
BENEFIT OF CUSTOMER
2801
MARKET ST
SAINT
LOUIS MO 63103-2523 |
|
|
FLOATING
RATE
INCOME
FUND |
|
AMERICAN
ENTERPRISE INVESTMENT SVC
707
2ND AVE S
MINNEAPOLIS
MN 55402-2405 |
|
|
FLOATING
RATE
INCOME
FUND |
|
LPL
FINANCIAL
OMNIBUS
CUSTOMER ACCOUNT
ATTN:
MUTUAL FUND TRADING
4707
EXECUTIVE DRIVE
SAN
DIEGO CA 92121-3091 |
|
|
FLOATING
RATE
INCOME
FUND |
|
RAYMOND
JAMES
OMNIBUS
FOR MUTUAL FUNDS
HOUSE
ACCT FIRM
880
CARILLON PKWY
ST
PETERSBURG FL 33716-1100 |
|
|
FLOATING
RATE
INCOME
FUND |
|
WELLS
FARGO CLEARING SERVICES, LLC
SPECIAL
CUSTODY ACCT FOR THE
EXCLUSIVE
BENEFIT OF CUSTOMER
2801
MARKET ST
SAINT
LOUIS MO 63103-2523 |
|
|
FLOATING
RATE
INCOME
FUND |
|
PERSHING
LLC
1
PERSHING PLZ
JERSEY
CITY NJ 07399-0001 |
|
|
FLOATING
RATE
INCOME
FUND |
|
RBC
CAPITAL MARKETS LLC
MUTUAL
FUND OMNIBUS PROCESSING
ATTN
MUTUAL FUND PRODUCT GRP
250
NICOLLETT MALL STE 1800
MINNEAPOLIS
MN 55401-7583 |
|
|
FLOATING
RATE
INCOME
FUND |
|
NATIONAL
FINANCIAL SERVICES LLC
FEBO
CUSTOMERS
MUTUAL
FUNDS
200
LIBERTY ST # 1WFC
NEW
YORK NY 10281-1015 |
|
|
FLOATING
RATE
INCOME
FUND |
|
AMERICAN
ENTERPRISE INVESTMENT SVC
707
2ND AVE S
MINNEAPOLIS
MN 55402-2405 |
|
|
FLOATING
RATE
INCOME
FUND |
|
CHARLES
SCHWAB & CO INC
MUTUAL
FUNDS DEPT
101
MONTGOMERY ST
SAN
FRANCISCO CA 94104-4151 |
|
|
FLOATING
RATE
INCOME
FUND |
|
AMERICAN
ENTERPRISE INVESTMENT SVC
707
2ND AVE S
MINNEAPOLIS
MN 55402-2405 |
|
|
FLOATING
RATE
INCOME
FUND |
|
NATIONAL
FINANCIAL SERVICES LLC
FEBO
CUSTOMERS
MUTUAL
FUNDS
200
LIBERTY ST # 1WFC
NEW
YORK NY 10281-1015 |
|
|
|
|
|
|
|
|
FLOATING
RATE
INCOME
FUND |
|
LPL
FINANCIAL
OMNIBUS
CUSTOMER ACCOUNT
ATTN:
MUTUAL FUND TRADING
4707
EXECUTIVE DRIVE
SAN
DIEGO CA 92121-3091 |
|
|
FLOATING
RATE
INCOME
FUND |
|
PERSHING
LLC
1
PERSHING PLZ
JERSEY
CITY NJ 07399-0001 |
|
|
FLOATING
RATE
INCOME
FUND |
|
WELLS
FARGO CLEARING SERVICES, LLC
SPECIAL
CUSTODY ACCT FOR THE
EXCLUSIVE
BENEFIT OF CUSTOMER
2801
MARKET ST
SAINT
LOUIS MO 63103-2523 |
|
|
FLOATING
RATE
INCOME
FUND |
|
CAPINCO
C/O
US
BANK NA
PO
BOX 1787
MILWAUKEE
WI 53201-1787 |
|
|
FLOATING
RATE
INCOME
FUND |
|
EDWARD
D JONES & CO
FOR
THE BENEFIT OF CUSTOMERS
12555
MANCHESTER ROAD
SAINT
LOUIS MO 63131-3710 |
|
|
FLOATING
RATE
INCOME
FUND |
|
SG
AMERICAS SECURITIES LLC
SGNY
FBO BAIN CAPITAL
INSURANCE
DEDICATED FUND
SERIES
INTERESTS OF THE SALI
200
CLARENDON STREET |
|
|
FLOATING
RATE
INCOME
FUND |
|
SG
AMERICAS SECURITIES LLC
SGNY
FBO BAIN CAPITAL
INSURANCE
DEDICATED FUND II
SERIES
INTERESTS OF THE SALI
200
CLARENDON STREET |
|
|
FLOATING
RATE
INCOME
FUND |
|
J
P MORGAN SECURITIES LLC OMNIBUS
ACCOUNT
FOR THE EXCLUSIVE BENEFIT
OF
CUSTOMERS
575
WASHINGTON BLVD 12TH FL
MUTUAL
FUND DEPARTMENT
JERSEY
CITY NJ 07310-1616 |
|
|
FLOATING
RATE
INCOME
FUND |
|
JHF
II MULTIMANAGER LIFESTYLE BALANCED
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
FLOATING
RATE
INCOME
FUND |
|
JHF
II MULTIMANAGER LIFESTYLE GROWTH
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
FLOATING
RATE
INCOME
FUND |
|
JHF
II MULTIMANAGER LIFESTYLE MODERATE
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
FLOATING
RATE
INCOME
FUND |
|
JHF
II MULTIMANAGER LIFESTYLE
CONSERVATIVE
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
|
|
|
|
|
|
FLOATING
RATE
INCOME
FUND |
|
201
TOWNSEND STREET, SUITE 900
LANSING
MI 48933 |
|
|
FUNDAMENTAL
GLOBAL
FRANCHISE
FUND |
|
JOHN
HANCOCK LIFE & HEALTH INS CO
CUSTODIAN
FOR THE IRA OF
LORI
ROUSCHE
236
BRIARWOOD DR
SELLERSVILLE
PA 18960-2963 |
|
|
FUNDAMENTAL
GLOBAL
FRANCHISE
FUND |
|
PERSHING
LLC
1
PERSHING PLZ
JERSEY
CITY NJ 07399-0001 |
|
|
FUNDAMENTAL
GLOBAL
FRANCHISE
FUND |
|
RAYMOND
JAMES
OMNIBUS
FOR MUTUAL FUNDS
HOUSE
ACCT FIRM
880
CARILLON PKWY
ST
PETERSBURG FL 33716-1100 |
|
|
FUNDAMENTAL
GLOBAL
FRANCHISE
FUND |
|
NATIONAL
FINANCIAL SERVICES LLC
FEBO
CUSTOMERS
MUTUAL
FUNDS
200
LIBERTY ST # 1WFC
NEW
YORK NY 10281-1015 |
|
|
FUNDAMENTAL
GLOBAL
FRANCHISE
FUND |
|
LPL
FINANCIAL
OMNIBUS
CUSTOMER ACCOUNT
ATTN:
MUTUAL FUND TRADING
4707
EXECUTIVE DRIVE
SAN
DIEGO CA 92121-3091 |
|
|
FUNDAMENTAL
GLOBAL
FRANCHISE
FUND |
|
MANULIFE
ASSET MANAGEMENT (US) LLC
2021
MAN INVESTMENT MGMT ABCD
197
CLARENDON ST
BOSTON
MA 02116-5010 |
|
|
FUNDAMENTAL
GLOBAL
FRANCHISE
FUND |
|
MANULIFE
INVESTMENT MANAGEMENT (US)
2023
MAN INVESTMENT MGMT BUCK PLAN
197
CLARENDON ST
BOSTON
MA 02116-5010 |
|
|
FUNDAMENTAL
GLOBAL
FRANCHISE
FUND |
|
JONATHAN
T WHITE
227
WATERMAN HILL RD
NORWICH
VT 05055-9687 |
|
|
FUNDAMENTAL
GLOBAL
FRANCHISE
FUND |
|
JOHN
HANCOCK LIFE INSURANCE
COMPANY
(USA)
ATTN:
JHRPS TRADING OPS ST6
200
BERKELEY ST
BOSTON
MA 02116-5022 |
|
|
FUNDAMENTAL
GLOBAL
FRANCHISE
FUND |
|
MANULIFE
ASSET MANAGEMENT (US) LLC
2022
MAN INVESTMENT MGMT BUCK PLAN
197
CLARENDON ST
BOSTON
MA 02116-5010 |
|
|
|
|
|
EDWARD
D JONES & CO
FOR
THE BENEFIT OF CUSTOMERS
12555
MANCHESTER ROAD
SAINT
LOUIS MO 63131-3710 |
|
|
|
|
|
NATIONAL
FINANCIAL SERVICES LLC
FEBO
CUSTOMERS
MUTUAL
FUNDS
200
LIBERTY ST # 1WFC
NEW
YORK NY 10281-1015 |
|
|
|
|
|
|
|
|
|
|
|
AMERICAN
ENTERPRISE INVESTMENT SVC
707
2ND AVE S
MINNEAPOLIS
MN 55402-2405 |
|
|
|
|
|
PERSHING
LLC
1
PERSHING PLZ
JERSEY
CITY NJ 07399-0001 |
|
|
|
|
|
AMERICAN
ENTERPRISE INVESTMENT SVC
707
2ND AVE S
MINNEAPOLIS
MN 55402-2405 |
|
|
|
|
|
PERSHING
LLC
1
PERSHING PLZ
JERSEY
CITY NJ 07399-0001 |
|
|
|
|
|
WELLS
FARGO CLEARING SERVICES, LLC
SPECIAL
CUSTODY ACCT FOR THE
EXCLUSIVE
BENEFIT OF CUSTOMER
2801
MARKET ST
SAINT
LOUIS MO 63103-2523 |
|
|
|
|
|
SAMUEL
H NADELL
PAIGE
NADELL JT WROS
10
DELTA DR
NEW
CITY NY 10956-6705 |
|
|
|
|
|
ASCENSUS
TRUST COMPANY FBO
STEINKEMPER
LAW PC LLO 401K
PO
BOX 10758
FARGO
ND 58106-0758 |
|
|
|
|
|
ASCENSUS
TRUST COMPANY FBO
ROY
THOMAS RETIREMENT PLAN
PO
BOX 10758
FARGO
ND 58106-0758 |
|
|
|
|
|
ASCENSUS
TRUST COMPANY FBO
ROBIN
CARATHANASIS-ROSH 401K PLAN
PO
BOX 10758
FARGO
ND 58106-0758 |
|
|
|
|
|
NATIONAL
FINANCIAL SERVICES LLC
FEBO
CUSTOMERS
MUTUAL
FUNDS
200
LIBERTY ST # 1WFC
NEW
YORK NY 10281-1015 |
|
|
|
|
|
LPL
FINANCIAL
OMNIBUS
CUSTOMER ACCOUNT
ATTN:
MUTUAL FUND TRADING
4707
EXECUTIVE DRIVE
SAN
DIEGO CA 92121-3091 |
|
|
|
|
|
NATIONAL
FINANCIAL SERVICES LLC
FEBO
CUSTOMERS
MUTUAL
FUNDS
200
LIBERTY ST # 1WFC
NEW
YORK NY 10281-1015 |
|
|
|
|
|
AMERICAN
ENTERPRISE INVESTMENT SVC
707
2ND AVE S
MINNEAPOLIS
MN 55402-2405 |
|
|
|
|
|
|
|
|
|
|
|
RAYMOND
JAMES
OMNIBUS
FOR MUTUAL FUNDS
HOUSE
ACCT FIRM
880
CARILLON PKWY
ST
PETERSBURG FL 33716-1100 |
|
|
|
|
|
CHARLES
SCHWAB & CO INC
SPECIAL
CUSTODY ACCT FBO CUSTOMERS
ATTN
MUTUAL FUNDS
101
MONTGOMERY ST
SAN
FRANCISCO CA 94104-4151 |
|
|
|
|
|
ASCENSUS
TRUST COMPANY FBO
ROSEMAR
CONSTRUCTION INC 401(K) PS
PO
BOX 10758
FARGO
ND 58106-0758 |
|
|
|
|
|
ASCENSUS
TRUST COMPANY FBO
HANS
J MANSETH CFP - 401K P/S PLAN
PO
BOX 10758
FARGO
ND 58106-0758 |
|
|
|
|
|
JOHN
HANCOCK LIFE INSURANCE CO USA
200
BERKELEY ST
BOSTON
MA 02116-5022 |
|
|
|
|
|
MATRIX
TRUST COMPANY CUST FBO
BARBERS
HILL ISD (TX) 403(B) PLAN
717
17TH ST STE 1300
DENVER
CO 80202-3304 |
|
|
|
|
|
MATRIX
TRUST COMPANY AS AGENT FOR
ADVISOR
TRUST, INC.
VANCOUVER
SD #37 403(B) PLAN
717
17TH ST STE 1300
DENVER
CO 80202-3304 |
|
|
|
|
|
EDWARD
D JONES & CO
FOR
THE BENEFIT OF CUSTOMERS
12555
MANCHESTER ROAD
SAINT
LOUIS MO 63131-3710 |
|
|
|
|
|
CAPINCO
C/O US BANK NA
1555
N RIVERCENTER DR STE 302
MILWAUKEE
WI 53212-3958 |
|
|
|
|
|
JOHN
HANCOCK LIFE INSURANCE
COMPANY
(USA)
ATTN:
JHRPS TRADING OPS ST6
200
BERKELEY ST
BOSTON
MA 02116-5022 |
|
|
|
|
|
NORTHERN
TRUST AS CUSTODIAN
FBO
MCCULLOUGH HYDE (NON-GIFT)
PO
BOX 92956
CHICAGO |
|
|
|
|
|
MANULIFE
ASSET MANAGEMENT (US) LLC
2022
MAN INVESTMENT MGMT BUCK PLAN
197
CLARENDON ST
BOSTON
MA 02116-5010 |
|
|
|
|
|
MANULIFE
ASSET MANAGEMENT (US) LLC
2021
MAN INVESTMENT MGMT ABCD
197
CLARENDON ST
BOSTON
MA 02116-5010 |
|
|
|
|
|
|
|
|
|
|
|
JHF
II MULTIMANAGER LIFESTYLE GROWTH
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
|
|
|
JHF
II MULTIMANAGER LIFESTYLE BALANCED
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
|
|
|
JHF
II MULTIMANAGER LIFESTYLE MODERATE
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
|
|
|
JHF
II MULTIMANAGER LIFESTYLE AGGRESSIVE
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
|
|
|
JHF
II MULTIMANAGER LIFESTYLE GROWTH
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
|
|
|
JHF
II MULTIMANAGER LIFESTYLE BALANCED
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
|
|
|
JHF
II MULTIMANAGER LIFESTYLE AGGRESSIVE
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
|
|
|
201
TOWNSEND STREET, SUITE 900
LANSING
MI 48933 |
|
|
INTERNATIONAL
SMALL
COMPANY
FUND |
|
EDWARD
D JONES & CO
FOR
THE BENEFIT OF CUSTOMERS
12555
MANCHESTER ROAD
SAINT
LOUIS MO 63131-3710 |
|
|
INTERNATIONAL
SMALL
COMPANY
FUND |
|
EDWARD
D JONES & CO
FOR
THE BENEFIT OF CUSTOMERS
12555
MANCHESTER ROAD
SAINT
LOUIS MO 63131-3710 |
|
|
INTERNATIONAL
SMALL
COMPANY
FUND |
|
PERSHING
LLC
1
PERSHING PLZ
JERSEY
CITY NJ 07399-0001 |
|
|
INTERNATIONAL
SMALL
COMPANY
FUND |
|
NATIONAL
FINANCIAL SERVICES LLC
FEBO
CUSTOMERS
MUTUAL
FUNDS
200
LIBERTY ST # 1WFC
NEW
YORK NY 10281-1015 |
|
|
INTERNATIONAL
SMALL
COMPANY
FUND |
|
AMERICAN
ENTERPRISE INVESTMENT SVC
707
2ND AVE S
MINNEAPOLIS
MN 55402-2405 |
|
|
INTERNATIONAL
SMALL
COMPANY
FUND |
|
CHARLES
SCHWAB & CO INC
MUTUAL
FUNDS DEPT
101
MONTGOMERY ST
SAN
FRANCISCO CA 94104-4151 |
|
|
|
|
|
|
|
|
INTERNATIONAL
SMALL
COMPANY
FUND |
|
LPL
FINANCIAL
OMNIBUS
CUSTOMER ACCOUNT
ATTN:
MUTUAL FUND TRADING
4707
EXECUTIVE DRIVE
SAN
DIEGO CA 92121-3091 |
|
|
INTERNATIONAL
SMALL
COMPANY
FUND |
|
PERSHING
LLC
1
PERSHING PLZ
JERSEY
CITY NJ 07399-0001 |
|
|
INTERNATIONAL
SMALL
COMPANY
FUND |
|
RAYMOND
JAMES
OMNIBUS
FOR MUTUAL FUNDS
HOUSE
ACCT FIRM
880
CARILLON PKWY
ST
PETERSBURG FL 33716-1100 |
|
|
INTERNATIONAL
SMALL
COMPANY
FUND |
|
AMERICAN
ENTERPRISE INVESTMENT SVC
707
2ND AVE S
MINNEAPOLIS
MN 55402-2405 |
|
|
INTERNATIONAL
SMALL
COMPANY
FUND |
|
EDWARD
D JONES & CO
FOR
THE BENEFIT OF CUSTOMERS
12555
MANCHESTER ROAD
SAINT
LOUIS MO 63131-3710 |
|
|
INTERNATIONAL
SMALL
COMPANY
FUND |
|
LPL
FINANCIAL
OMNIBUS
CUSTOMER ACCOUNT
ATTN:
MUTUAL FUND TRADING
4707
EXECUTIVE DRIVE
SAN
DIEGO CA 92121-3091 |
|
|
INTERNATIONAL
SMALL
COMPANY
FUND |
|
JHF
II MULTIMANAGER LIFESTYLE GROWTH
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
INTERNATIONAL
SMALL
COMPANY
FUND |
|
JHF
II MULTIMANAGER LIFESTYLE AGGRESSIVE
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
INTERNATIONAL
SMALL
COMPANY
FUND |
|
JHF
II MULTIMANAGER LIFESTYLE BALANCED
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
INTERNATIONAL
STRATEGIC
EQUITY
ALLOCATION
FUND |
|
JHF
II MULTIMANAGER LIFESTYLE GROWTH
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
INTERNATIONAL
STRATEGIC
EQUITY
ALLOCATION
FUND |
|
JHF
II MULTIMANAGER LIFESTYLE BALANCED
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
INTERNATIONAL
STRATEGIC
EQUITY
ALLOCATION
FUND |
|
JHF
II LIFESTYLE BLEND GROWTH PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
INTERNATIONAL
STRATEGIC
EQUITY
ALLOCATION
FUND |
|
JHF
II MULTIMANAGER LIFESTYLE AGGRESSIVE
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
|
|
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|
|
INTERNATIONAL
STRATEGIC
EQUITY
ALLOCATION
FUND |
|
JHF
II LIFESTYLE BLEND BALANCED PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
LIFESTYLE
BLEND
AGGRESSIVE
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
LIFESTYLE
BLEND
AGGRESSIVE
PORTFOLIO |
|
STATE
STREET BANK AND TRUST AS
TRUSTEE
AND OR CUSTODIAN FBO ADP
ACCESS
PRODUCT
1
LINCOLN ST
BOSTON
MA 02111-2901 |
|
|
LIFESTYLE
BLEND
AGGRESSIVE
PORTFOLIO |
|
ASCENSUS
TRUST COMPANY FBO
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PO
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|
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|
201
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|
LIFESTYLE
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|
100
SUMMIT LAKE DRIVE, 2ND FLOOR
VALHALLA
NY 10595 |
|
|
LIFESTYLE
BLEND
BALANCED
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
LIFESTYLE
BLEND
BALANCED
PORTFOLIO |
|
STATE
STREET BANK AND TRUST AS
TRUSTEE
AND OR CUSTODIAN FBO ADP
ACCESS
PRODUCT
1
LINCOLN ST
BOSTON
MA 02111-2901 |
|
|
LIFESTYLE
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BALANCED
PORTFOLIO |
|
201
TOWNSEND STREET, SUITE 900
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|
LIFESTYLE
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PORTFOLIO |
|
100
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NY 10595 |
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LIFESTYLE
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|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
LIFESTYLE
BLEND
CONSERVATIVE
PORTFOLIO |
|
STATE
STREET BANK AND TRUST AS
TRUSTEE
AND OR CUSTODIAN FBO ADP
ACCESS
PRODUCT
1
LINCOLN ST
BOSTON
MA 02111-2901 |
|
|
LIFESTYLE
BLEND
CONSERVATIVE
PORTFOLIO |
|
201
TOWNSEND STREET, SUITE 900
LANSING
MI 48933 |
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LIFESTYLE
BLEND
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PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
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|
LIFESTYLE
BLEND
GROWTH
PORTFOLIO |
|
STATE
STREET BANK AND TRUST AS
TRUSTEE
AND OR CUSTODIAN FBO ADP
ACCESS
PRODUCT
1
LINCOLN ST
BOSTON
MA 02111-2901 |
|
|
|
|
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|
LIFESTYLE
BLEND
GROWTH
PORTFOLIO |
|
201
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|
LIFESTYLE
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MODERATE
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|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
LIFESTYLE
BLEND
MODERATE
PORTFOLIO |
|
STATE
STREET BANK AND TRUST AS
TRUSTEE
AND OR CUSTODIAN FBO ADP
ACCESS
PRODUCT
1
LINCOLN ST
BOSTON
MA 02111-2901 |
|
|
LIFESTYLE
BLEND
MODERATE
PORTFOLIO |
|
201
TOWNSEND STREET, SUITE 900
LANSING
MI 48933 |
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|
LIFESTYLE
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PORTFOLIO |
|
100
SUMMIT LAKE DRIVE, 2ND FLOOR
VALHALLA
NY 10595 |
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|
|
|
|
JHF
II MULTIMANAGER LIFESTYLE GROWTH
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200
BERKELEY STREET
BOSTON
MA 02116 |
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|
|
|
|
JHF
II MULTIMANAGER LIFESTYLE BALANCED
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200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
|
|
|
JHF
II MULTIMANAGER LIFESTYLE AGGRESSIVE
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
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|
MULTI-ASSET
HIGH
INCOME
FUND |
|
JOHN
HANCOCK LIFE & HEALTH INS CO
CUSTODIAN
FOR THE IRA OF
TODD
A BORCHARDT
110
N ELM AVE
ELMHURST
IL 60126-2607 |
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MULTI-ASSET
HIGH
INCOME
FUND |
|
NATIONAL
FINANCIAL SERVICES LLC
FEBO
CUSTOMERS
MUTUAL
FUNDS
200
LIBERTY ST # 1WFC
NEW
YORK NY 10281-1015 |
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|
MULTI-ASSET
HIGH
INCOME
FUND |
|
LPL
FINANCIAL
OMNIBUS
CUSTOMER ACCOUNT
ATTN:
MUTUAL FUND TRADING
4707
EXECUTIVE DRIVE
SAN
DIEGO CA 92121-3091 |
|
|
MULTI-ASSET
HIGH
INCOME
FUND |
|
PERSHING
LLC
1
PERSHING PLZ
JERSEY
CITY NJ 07399-0001 |
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|
MULTI-ASSET
HIGH
INCOME
FUND |
|
JOHN
HANCOCK LIFE & HEALTH INS CO
CUSTODIAN
FOR THE IRA OF
ROSEMARY
B FINAN
102
N 10TH ST
EASTON
PA 18042-3310 |
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|
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MULTI-ASSET
HIGH
INCOME
FUND |
|
NATIONAL
FINANCIAL SERVICES LLC
FEBO
CUSTOMERS
MUTUAL
FUNDS
200
LIBERTY ST # 1WFC
NEW
YORK NY 10281-1015 |
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|
MULTI-ASSET
HIGH
INCOME
FUND |
|
LPL
FINANCIAL
OMNIBUS
CUSTOMER ACCOUNT
ATTN:
MUTUAL FUND TRADING
4707
EXECUTIVE DRIVE
SAN
DIEGO CA 92121-3091 |
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|
MULTI-ASSET
HIGH
INCOME
FUND |
|
JOHN
HANCOCK LIFE & HEALTH INS CO
CUSTODIAN
FOR THE IRA OF
PO
BOX 443
FAYETTE
CITY PA 15438-0443 |
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MULTI-ASSET
HIGH
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FUND |
|
JOHN
HANCOCK LIFE & HEALTH INS CO
KIMBERLY
D CARSON SIMPLE IRA
FBO
KIMBERLY D CARSON
16
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VERNON PA 15012-1002 |
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|
MULTI-ASSET
HIGH
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FUND |
|
NATIONAL
FINANCIAL SERVICES LLC
FEBO
CUSTOMERS
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FUNDS
200
LIBERTY ST # 1WFC
NEW
YORK NY 10281-1015 |
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MULTI-ASSET
HIGH
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FUND |
|
PERSHING
LLC
1
PERSHING PLZ
JERSEY
CITY NJ 07399-0001 |
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MULTI-ASSET
HIGH
INCOME
FUND |
|
MANULIFE
ASSET MANAGEMENT (US) LLC
2021
MAN INVESTMENT MGMT ABCD
197
CLARENDON ST
BOSTON
MA 02116-5010 |
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|
MULTI-ASSET
HIGH
INCOME
FUND |
|
MANULIFE
ASSET MANAGEMENT (US) LLC
2022
MAN INVESTMENT MGMT BUCK PLAN
197
CLARENDON ST
BOSTON
MA 02116-5010 |
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MULTI-ASSET
HIGH
INCOME
FUND |
|
MANULIFE
INVESTMENT MANAGEMENT (US)
2023
MAN INVESTMENT MGMT BUCK PLAN
197
CLARENDON ST
BOSTON
MA 02116-5010 |
|
|
MULTI-ASSET
HIGH
INCOME
FUND |
|
MANULIFE
INVESTMENT MANAGEMENT (US)
2023
MAN INVESTMENT MGMT EWM PLAN
197
CLARENDON ST
BOSTON
MA 02116-5010 |
|
|
MULTI-ASSET
HIGH
INCOME
FUND |
|
JHF
II MULTIMANAGER LIFESTYLE BALANCED
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
MULTI-ASSET
HIGH
INCOME
FUND |
|
JHF
II MULTIMANAGER LIFESTYLE MODERATE
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
|
|
|
|
|
|
MULTI-ASSET
HIGH
INCOME
FUND |
|
JHF
II MULTIMANAGER LIFESTYLE
CONSERVATIVE
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
MULTIMANAGER
2010
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PORTFOLIO |
|
JOHN
HANCOCK LIFE & HEALTH INS CO
CUSTODIAN
FOR THE IRA OF
KARI
A ZURECK
7
SOMA LN
COMMACK
NY 11725-1807 |
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|
MULTIMANAGER
2010
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PORTFOLIO |
|
MORGAN
STANLEY SMITH BARNEY LLC
FOR
EXCLUSIVE BENEFIT OF CUSTOMERS
1
NEW YORK PLAZA FL. 12
NEW
YORK NY 10004-1965 |
|
|
MULTIMANAGER
2010
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
MULTIMANAGER
2010
LIFETIME
PORTFOLIO |
|
MATRIX
TRUST COMPANY CUST FBO
PERDUE
ENVIRONMENTAL CONTRACTING CO
717
17TH ST STE 1300
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CO 80202-3304 |
|
|
MULTIMANAGER
2010
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
MULTIMANAGER
2010
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
MULTIMANAGER
2010
LIFETIME
PORTFOLIO |
|
NATIONAL
FINANCIAL SERVICES LLC
499
WASHINGTON BLVD
JERSEY
CITY NJ 07310-1995 |
|
|
MULTIMANAGER
2010
LIFETIME
PORTFOLIO |
|
MATRIX
TRUST COMPANY CUST FBO
SEI
HEAT TREAT 401(K) PLAN
717
17TH ST STE 1300
DENVER
CO 80202-3304 |
|
|
MULTIMANAGER
2010
LIFETIME
PORTFOLIO |
|
201
TOWNSEND STREET, SUITE 900
LANSING
MI 48933 |
|
|
MULTIMANAGER
2010
LIFETIME
PORTFOLIO |
|
100
SUMMIT LAKE DRIVE, 2ND FLOOR
VALHALLA
NY 10595 |
|
|
MULTIMANAGER
2015
LIFETIME
PORTFOLIO |
|
AMERICAN
ENTERPRISE INVESTMENT SVC
707
2ND AVE S
MINNEAPOLIS
MN 55402-2405 |
|
|
MULTIMANAGER
2015
LIFETIME
PORTFOLIO |
|
NATIONAL
FINANCIAL SERVICES LLC
FEBO
CUSTOMERS
MUTUAL
FUNDS
200
LIBERTY ST # 1WFC
NEW
YORK NY 10281-1015 |
|
|
MULTIMANAGER
2015
LIFETIME
PORTFOLIO |
|
PERSHING
LLC
1
PERSHING PLZ
JERSEY
CITY NJ 07399-0001 |
|
|
MULTIMANAGER
2015
LIFETIME
PORTFOLIO |
|
STATE
STREET BANK AND TRUST AS
TRUSTEE
AND OR CUSTODIAN FBO ADP
ACCESS
PRODUCT
1
LINCOLN ST
BOSTON
MA 02111-2901 |
|
|
|
|
|
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|
|
MULTIMANAGER
2015
LIFETIME
PORTFOLIO |
|
MG
TRUSTCO CUST FBO
GILPIN
AMBULANCE 457 B PLAN
717
17TH ST STE 1300
DENVER
CO 80202-3304 |
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|
MULTIMANAGER
2015
LIFETIME
PORTFOLIO |
|
MG
TRUSTCO CUST FBO
HORTONVILLE
AREA SCHOOL DIST 403B
717
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DENVER
CO 80202-3304 |
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|
MULTIMANAGER
2015
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
MULTIMANAGER
2015
LIFETIME
PORTFOLIO |
|
MG
TRUSTCO CUST FBO
RENAISSANCE
ELECTRONICS CORP
717
17TH ST STE 1300
DENVER
CO 80202-3304 |
|
|
MULTIMANAGER
2015
LIFETIME
PORTFOLIO |
|
ASCENSUS
TRUST COMPANY FBO
PERMIT
PLACE 401(K)
PO
BOX 10758
FARGO
ND 58106-0758 |
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|
MULTIMANAGER
2015
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK INVESTMENT
MANAGEMENT
LLC
200
BERKELEY ST
BOSTON
MA 02116-5022 |
|
|
MULTIMANAGER
2015
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
MULTIMANAGER
2015
LIFETIME
PORTFOLIO |
|
STATE
STREET BANK AND TRUST AS
TRUSTEE
AND OR CUSTODIAN FBO ADP
ACCESS
PRODUCT
1
LINCOLN ST
BOSTON
MA 02111-2901 |
|
|
MULTIMANAGER
2015
LIFETIME
PORTFOLIO |
|
NATIONAL
FINANCIAL SERVICES LLC
499
WASHINGTON BLVD
JERSEY
CITY NJ 07310-1995 |
|
|
MULTIMANAGER
2015
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
MULTIMANAGER
2015
LIFETIME
PORTFOLIO |
|
MID
ATLANTIC TRUST COMPANY FBO
WESTON
DENTAL SPECIALISTS GROU 401(
1251
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PA 15222-4228 |
|
|
MULTIMANAGER
2015
LIFETIME
PORTFOLIO |
|
MID
ATLANTIC TRUST COMPANY FBO
HMC
CORPORATION 401(K) PROFIT SHARI
1251
WATERFRONT PL STE 525
PITTSBURGH
PA 15222-4228 |
|
|
MULTIMANAGER
2015
LIFETIME
PORTFOLIO |
|
NATIONAL
FINANCIAL SERVICES LLC
499
WASHINGTON BLVD
JERSEY
CITY NJ 07310-1995 |
|
|
MULTIMANAGER
2015
LIFETIME
PORTFOLIO |
|
201
TOWNSEND STREET, SUITE 900
LANSING
MI 48933 |
|
|
MULTIMANAGER
2015
LIFETIME
PORTFOLIO |
|
100
SUMMIT LAKE DRIVE, 2ND FLOOR
VALHALLA
NY 10595 |
|
|
|
|
|
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|
|
MULTIMANAGER
2020
LIFETIME
PORTFOLIO |
|
MLPF&S
FOR THE
SOLE
BENEFIT OF ITS CUSTOMERS
ATTN:
FUND ADMINISTRATION
4800
DEER LAKE DRIVE EAST 2ND FL
JACKSONVILLE
FL 32246-6484 |
|
|
MULTIMANAGER
2020
LIFETIME
PORTFOLIO |
|
LPL
FINANCIAL
OMNIBUS
CUSTOMER ACCOUNT
ATTN:
MUTUAL FUND TRADING
4707
EXECUTIVE DRIVE
SAN
DIEGO CA 92121-3091 |
|
|
MULTIMANAGER
2020
LIFETIME
PORTFOLIO |
|
AMERICAN
ENTERPRISE INVESTMENT SVC
707
2ND AVE S
MINNEAPOLIS
MN 55402-2405 |
|
|
MULTIMANAGER
2020
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
MULTIMANAGER
2020
LIFETIME
PORTFOLIO |
|
STATE
STREET BANK AND TRUST AS
TRUSTEE
AND OR CUSTODIAN FBO ADP
ACCESS
PRODUCT
1
LINCOLN ST
BOSTON
MA 02111-2901 |
|
|
MULTIMANAGER
2020
LIFETIME
PORTFOLIO |
|
ASCENSUS
TRUST COMPANY FBO
PO
BOX 10758
FARGO
ND 58106-0758 |
|
|
MULTIMANAGER
2020
LIFETIME
PORTFOLIO |
|
ASCENSUS
TRUST COMPANY FBO
DPLIVE401K
PO
BOX 10758
FARGO
ND 58106-0758 |
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|
MULTIMANAGER
2020
LIFETIME
PORTFOLIO |
|
MATRIX
TRUST COMPANY CUST FBO
KENTUCKY
INSTITUTE FOR EYE
717
17TH ST STE 1300
DENVER
CO 80202-3304 |
|
|
MULTIMANAGER
2020
LIFETIME
PORTFOLIO |
|
MG
TRUSTCO CUST FBO
STILLWATER
ISD # 834 403 B PLAN
717
17TH ST STE 1300
DENVER
CO 80202-3304 |
|
|
MULTIMANAGER
2020
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
MULTIMANAGER
2020
LIFETIME
PORTFOLIO |
|
NATIONAL
FINANCIAL SERVICES LLC
499
WASHINGTON BLVD
JERSEY
CITY NJ 07310-1995 |
|
|
MULTIMANAGER
2020
LIFETIME
PORTFOLIO |
|
EMPOWER
TRUST FBO
EMPLOYEE
BENEFIT CLIENTS 401K
8515
E ORCHARD RD # 2T2
GREENWOOD
VLG CO 80111-5002 |
|
|
MULTIMANAGER
2020
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
MULTIMANAGER
2020
LIFETIME
PORTFOLIO |
|
NATIONAL
FINANCIAL SERVICES LLC
499
WASHINGTON BLVD
JERSEY
CITY NJ 07310-1995 |
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|
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|
MULTIMANAGER
2020
LIFETIME
PORTFOLIO |
|
CHARLES
SCHWAB & CO INC
MUTUAL
FUNDS DEPT
101
MONTGOMERY ST
SAN
FRANCISCO CA 94104-4151 |
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|
MULTIMANAGER
2020
LIFETIME
PORTFOLIO |
|
201
TOWNSEND STREET, SUITE 900
LANSING
MI 48933 |
|
|
MULTIMANAGER
2020
LIFETIME
PORTFOLIO |
|
100
SUMMIT LAKE DRIVE, 2ND FLOOR
VALHALLA
NY 10595 |
|
|
MULTIMANAGER
2025
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
MULTIMANAGER
2025
LIFETIME
PORTFOLIO |
|
RAYMOND
JAMES
OMNIBUS
FOR MUTUAL FUNDS
HOUSE
ACCT FIRM
880
CARILLON PKWY
ST
PETERSBURG FL 33716-1100 |
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|
MULTIMANAGER
2025
LIFETIME
PORTFOLIO |
|
MG
TRUSTCO CUST FBO
RENAISSANCE
ELECTRONICS CORP
717
17TH ST STE 1300
DENVER
CO 80202-3304 |
|
|
MULTIMANAGER
2025
LIFETIME
PORTFOLIO |
|
STATE
STREET BANK AND TRUST AS
TRUSTEE
AND OR CUSTODIAN FBO ADP
ACCESS
PRODUCT
1
LINCOLN ST
BOSTON
MA 02111-2901 |
|
|
MULTIMANAGER
2025
LIFETIME
PORTFOLIO |
|
ASCENSUS
TRUST COMPANY FBO
FIVE
STAR PERFORMANCE LLC
RETIREMENT
PLAN
PO
BOX 10758
FARGO
ND 58106-0758 |
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|
MULTIMANAGER
2025
LIFETIME
PORTFOLIO |
|
GREAT-WEST
TRUST CO
FBO
EMPLOYEE BENEFITS CLIENTS
8515
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GREENWOOD
VILLAGE CO 80111-5002 |
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2025
LIFETIME
PORTFOLIO |
|
COUNSEL
TRUST DBA MATC FBO
PRESTONCREST
CHURCH OF CHRIST
403
B PLAN
1251
WATERFRONT PL STE 525
PITTSBURGH
PA 15222-4228 |
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|
MULTIMANAGER
2025
LIFETIME
PORTFOLIO |
|
NATIONAL
FINANCIAL SERVICES LLC
499
WASHINGTON BLVD
JERSEY
CITY NJ 07310-1995 |
|
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MULTIMANAGER
2025
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
MULTIMANAGER
2025
LIFETIME
PORTFOLIO |
|
EMPOWER
TRUST FBO
EMPLOYEE
BENEFIT CLIENTS 401K
8515
E ORCHARD RD # 2T2
GREENWOOD
VLG CO 80111-5002 |
|
|
MULTIMANAGER
2025
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
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|
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|
MULTIMANAGER
2025
LIFETIME
PORTFOLIO |
|
NATIONAL
FINANCIAL SERVICES LLC
499
WASHINGTON BLVD
JERSEY
CITY NJ 07310-1995 |
|
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MULTIMANAGER
2025
LIFETIME
PORTFOLIO |
|
MLPF&S
FOR THE
SOLE
BENEFIT OF ITS CUSTOMERS
ATTN:
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4800
DEER LAKE DRIVE EAST 2ND FL
JACKSONVILLE
FL 32246-6484 |
|
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MULTIMANAGER
2025
LIFETIME
PORTFOLIO |
|
201
TOWNSEND STREET, SUITE 900
LANSING
MI 48933 |
|
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MULTIMANAGER
2025
LIFETIME
PORTFOLIO |
|
100
SUMMIT LAKE DRIVE, 2ND FLOOR
VALHALLA
NY 10595 |
|
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MULTIMANAGER
2030
LIFETIME
PORTFOLIO |
|
LPL
FINANCIAL
OMNIBUS
CUSTOMER ACCOUNT
ATTN:
MUTUAL FUND TRADING
4707
EXECUTIVE DRIVE
SAN
DIEGO CA 92121-3091 |
|
|
MULTIMANAGER
2030
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
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MULTIMANAGER
2030
LIFETIME
PORTFOLIO |
|
NATIONAL
FINANCIAL SERVICES LLC
FEBO
CUSTOMERS
MUTUAL
FUNDS
200
LIBERTY ST # 1WFC
NEW
YORK NY 10281-1015 |
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MULTIMANAGER
2030
LIFETIME
PORTFOLIO |
|
ASCENSUS
TRUST COMPANY FBO
PYRAMID
CONSTRUCTION AND AGGREGATES
PO
BOX 10758
FARGO
ND 58106-0758 |
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MULTIMANAGER
2030
LIFETIME
PORTFOLIO |
|
STATE
STREET BANK AND TRUST AS
TRUSTEE
AND OR CUSTODIAN FBO ADP
ACCESS
PRODUCT
1
LINCOLN ST
BOSTON
MA 02111-2901 |
|
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MULTIMANAGER
2030
LIFETIME
PORTFOLIO |
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ASCENSUS
TRUST COMPANY FBO
SOFTWARE
SCIENCES GROUP, INC 401(K
PO
BOX 10758
FARGO
ND 58106-0758 |
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MULTIMANAGER
2030
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ASCENSUS
TRUST COMPANY FBO
FRANKS
PHONE INC DBA THE PHONE GU
PO
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FARGO
ND 58106-0758 |
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2030
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GREAT-WEST
TRUST CO
FBO
EMPLOYEE BENEFITS CLIENTS
8515
E ORCHARD RD 2T2
GREENWOOD
VILLAGE CO 80111-5002 |
|
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MULTIMANAGER
2030
LIFETIME
PORTFOLIO |
|
ASCENSUS
TRUST COMPANY FBO
DEB
VANROY INDIVIDUAL 401(K)
PO
BOX 10758
FARGO
ND 58106-0758 |
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MULTIMANAGER
2030
LIFETIME
PORTFOLIO |
|
COUNSEL
TRUST DBA MATC FBO
PRESTONCREST
CHURCH OF CHRIST
403
B PLAN
1251
WATERFRONT PL STE 525
PITTSBURGH
PA 15222-4228 |
|
|
MULTIMANAGER
2030
LIFETIME
PORTFOLIO |
|
MG
TRUSTCO CUST FBO
STILLWATER
ISD # 834 403 B PLAN
717
17TH ST STE 1300
DENVER
CO 80202-3304 |
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MULTIMANAGER
2030
LIFETIME
PORTFOLIO |
|
MATRIX
TRUST COMPANY AS AGENT FOR
ADVISOR
TRUST INC
GRANITE
CITY CUSD #9 403(B) PLAN
717
17TH ST STE 1300
DENVER
CO 80202-3304 |
|
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MULTIMANAGER
2030
LIFETIME
PORTFOLIO |
|
ASCENSUS
TRUST COMPANY FBO
MUSE
ARCHITECTS P C 401 K PS PLA
PO
BOX 10758
FARGO
ND 58106-0758 |
|
|
MULTIMANAGER
2030
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
MULTIMANAGER
2030
LIFETIME
PORTFOLIO |
|
NATIONAL
FINANCIAL SERVICES LLC
499
WASHINGTON BLVD
JERSEY
CITY NJ 07310-1995 |
|
|
MULTIMANAGER
2030
LIFETIME
PORTFOLIO |
|
EMPOWER
TRUST FBO
EMPLOYEE
BENEFIT CLIENTS 401K
8515
E ORCHARD RD # 2T2
GREENWOOD
VLG CO 80111-5002 |
|
|
MULTIMANAGER
2030
LIFETIME
PORTFOLIO |
|
201
TOWNSEND STREET, SUITE 900
LANSING
MI 48933 |
|
|
MULTIMANAGER
2035
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
MULTIMANAGER
2035
LIFETIME
PORTFOLIO |
|
WELLS
FARGO CLEARING SERVICES, LLC
SPECIAL
CUSTODY ACCT FOR THE
EXCLUSIVE
BENEFIT OF CUSTOMER
2801
MARKET ST
SAINT
LOUIS MO 63103-2523 |
|
|
MULTIMANAGER
2035
LIFETIME
PORTFOLIO |
|
PERSHING
LLC
1
PERSHING PLZ
JERSEY
CITY NJ 07399-0001 |
|
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MULTIMANAGER
2035
LIFETIME
PORTFOLIO |
|
STATE
STREET BANK AND TRUST AS
TRUSTEE
AND OR CUSTODIAN FBO ADP
ACCESS
PRODUCT
1
LINCOLN ST
BOSTON
MA 02111-2901 |
|
|
MULTIMANAGER
2035
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
MULTIMANAGER
2035
LIFETIME
PORTFOLIO |
|
MG
TRUSTCO CUST FBO
DOUBLE
D BOLT 401K PS
717
17TH ST STE 1300
DENVER
CO 80202-3304 |
|
|
|
|
|
|
|
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MULTIMANAGER
2035
LIFETIME
PORTFOLIO |
|
ASCENSUS
TRUST COMPANY FBO
PYRAMID
CONSTRUCTION AND AGGREGATES
PO
BOX 10758
FARGO
ND 58106-0758 |
|
|
MULTIMANAGER
2035
LIFETIME
PORTFOLIO |
|
COUNSEL
TRUST DBA MATC FBO
PRESTONCREST
CHURCH OF CHRIST
403
B PLAN
1251
WATERFRONT PL STE 525
PITTSBURGH
PA 15222-4228 |
|
|
MULTIMANAGER
2035
LIFETIME
PORTFOLIO |
|
RAYMOND
JAMES
OMNIBUS
FOR MUTUAL FUNDS
HOUSE
ACCT FIRM
880
CARILLON PKWY
ST
PETERSBURG FL 33716-1100 |
|
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MULTIMANAGER
2035
LIFETIME
PORTFOLIO |
|
MATRIX
TRUST COMPANY AS AGENT FOR
ADVISOR
TRUST INC
NORTH
CENTRAL AREA SCHOOL (MI) 403B
717
17TH ST STE 1300
DENVER
CO 80202-3304 |
|
|
MULTIMANAGER
2035
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
MULTIMANAGER
2035
LIFETIME
PORTFOLIO |
|
EMPOWER
TRUST FBO
EMPLOYEE
BENEFIT CLIENTS 401K
8515
E ORCHARD RD # 2T2
GREENWOOD
VLG CO 80111-5002 |
|
|
MULTIMANAGER
2035
LIFETIME
PORTFOLIO |
|
NATIONAL
FINANCIAL SERVICES LLC
499
WASHINGTON BLVD
JERSEY
CITY NJ 07310-1995 |
|
|
MULTIMANAGER
2035
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
MULTIMANAGER
2035
LIFETIME
PORTFOLIO |
|
NATIONAL
FINANCIAL SERVICES LLC
499
WASHINGTON BLVD
JERSEY
CITY NJ 07310-1995 |
|
|
MULTIMANAGER
2035
LIFETIME
PORTFOLIO |
|
NATIONAL
FINANCIAL SERVICES LLC
499
WASHINGTON BLVD
JERSEY
CITY NJ 07310-1995 |
|
|
MULTIMANAGER
2035
LIFETIME
PORTFOLIO |
|
EMPOWER
TRUST FBO
EMPLOYEE
BENEFITS CLIENTS 401K
8515
E ORCHARD RD 2T2
GREENWOOD
VILLAGE CO 80111-5002 |
|
|
MULTIMANAGER
2035
LIFETIME
PORTFOLIO |
|
201
TOWNSEND STREET, SUITE 900
LANSING
MI 48933 |
|
|
MULTIMANAGER
2040
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
MULTIMANAGER
2040
LIFETIME
PORTFOLIO |
|
NATIONAL
FINANCIAL SERVICES LLC
FEBO
CUSTOMERS
MUTUAL
FUNDS
200
LIBERTY ST # 1WFC
NEW
YORK NY 10281-1015 |
|
|
|
|
|
|
|
|
MULTIMANAGER
2040
LIFETIME
PORTFOLIO |
|
LPL
FINANCIAL
OMNIBUS
CUSTOMER ACCOUNT
ATTN:
MUTUAL FUND TRADING
4707
EXECUTIVE DRIVE
SAN
DIEGO CA 92121-3091 |
|
|
MULTIMANAGER
2040
LIFETIME
PORTFOLIO |
|
PERSHING
LLC
1
PERSHING PLZ
JERSEY
CITY NJ 07399-0001 |
|
|
MULTIMANAGER
2040
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
MULTIMANAGER
2040
LIFETIME
PORTFOLIO |
|
GREAT-WEST
TRUST CO
FBO
EMPLOYEE BENEFITS CLIENTS
8515
E ORCHARD RD 2T2
GREENWOOD
VILLAGE CO 80111-5002 |
|
|
MULTIMANAGER
2040
LIFETIME
PORTFOLIO |
|
ASCENSUS
TRUST COMPANY FBO
PYRAMID
CONSTRUCTION AND AGGREGATES
PO
BOX 10758
FARGO
ND 58106-0758 |
|
|
MULTIMANAGER
2040
LIFETIME
PORTFOLIO |
|
ASCENSUS
TRUST COMPANY FBO
SIGMOVIR
BIOSYSTEMS INC 401K PLAN
PO
BOX 10758
FARGO
ND 58106-0758 |
|
|
MULTIMANAGER
2040
LIFETIME
PORTFOLIO |
|
STATE
STREET BANK AND TRUST AS
TRUSTEE
AND OR CUSTODIAN FBO ADP
ACCESS
PRODUCT
1
LINCOLN ST
BOSTON
MA 02111-2901 |
|
|
MULTIMANAGER
2040
LIFETIME
PORTFOLIO |
|
MG
TRUST COMPANY CUST FBO
ENGLANDS
STOVE WORKS INC
717
17TH ST STE 1300
DENVER
CO 80202-3304 |
|
|
MULTIMANAGER
2040
LIFETIME
PORTFOLIO |
|
ASCENSUS
TRUST COMPANY FBO
LOGO
MASTERS SOLO 401K
PO
BOX 10758
FARGO
ND 58106-0758 |
|
|
MULTIMANAGER
2040
LIFETIME
PORTFOLIO |
|
MG
TRUSTCO CUST FBO
STILLWATER
ISD # 834 403 B PLAN
717
17TH ST STE 1300
DENVER
CO 80202-3304 |
|
|
MULTIMANAGER
2040
LIFETIME
PORTFOLIO |
|
COUNSEL
TRUST DBA MATC FBO
PRESTONCREST
CHURCH OF CHRIST
403
B PLAN
1251
WATERFRONT PL STE 525
PITTSBURGH
PA 15222-4228 |
|
|
MULTIMANAGER
2040
LIFETIME
PORTFOLIO |
|
RAYMOND
JAMES
OMNIBUS
FOR MUTUAL FUNDS
HOUSE
ACCT FIRM
880
CARILLON PKWY
ST
PETERSBURG FL 33716-1100 |
|
|
|
|
|
|
|
|
MULTIMANAGER
2040
LIFETIME
PORTFOLIO |
|
MATRIX
TRUST COMPANY AS AGENT FOR
ADVISOR
TRUST INC
CALVERT
COUNTY BOE (MD) 403B PLAN
717
17TH ST STE 1300
DENVER
CO 80202-3304 |
|
|
MULTIMANAGER
2040
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
MULTIMANAGER
2040
LIFETIME
PORTFOLIO |
|
EMPOWER
TRUST FBO
EMPLOYEE
BENEFIT CLIENTS 401K
8515
E ORCHARD RD # 2T2
GREENWOOD
VLG CO 80111-5002 |
|
|
MULTIMANAGER
2040
LIFETIME
PORTFOLIO |
|
STATE
STREET BANK AND TRUST AS
TRUSTEE
AND OR CUSTODIAN FBO ADP
ACCESS
PRODUCT
1
LINCOLN ST
BOSTON
MA 02111-2901 |
|
|
MULTIMANAGER
2040
LIFETIME
PORTFOLIO |
|
NATIONAL
FINANCIAL SERVICES LLC
499
WASHINGTON BLVD
JERSEY
CITY NJ 07310-1995 |
|
|
MULTIMANAGER
2040
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
MULTIMANAGER
2040
LIFETIME
PORTFOLIO |
|
NATIONAL
FINANCIAL SERVICES LLC
499
WASHINGTON BLVD
JERSEY
CITY NJ 07310-1995 |
|
|
MULTIMANAGER
2040
LIFETIME
PORTFOLIO |
|
201
TOWNSEND STREET, SUITE 900
LANSING
MI 48933 |
|
|
MULTIMANAGER
2045
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
MULTIMANAGER
2045
LIFETIME
PORTFOLIO |
|
ASCENSUS
TRUST COMPANY FBO
KUAR
RETIREMENT PLAN
PO
BOX 10758
FARGO
ND 58106-0758 |
|
|
MULTIMANAGER
2045
LIFETIME
PORTFOLIO |
|
STATE
STREET BANK AND TRUST AS
TRUSTEE
AND OR CUSTODIAN FBO ADP
ACCESS
PRODUCT
1
LINCOLN ST
BOSTON
MA 02111-2901 |
|
|
MULTIMANAGER
2045
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
MULTIMANAGER
2045
LIFETIME
PORTFOLIO |
|
ASCENSUS
TRUST COMPANY FBO
PYRAMID
CONSTRUCTION AND AGGREGATES
PO
BOX 10758
FARGO
ND 58106-0758 |
|
|
MULTIMANAGER
2045
LIFETIME
PORTFOLIO |
|
ASCENSUS
TRUST COMPANY FBO
LOGO
MASTERS SOLO 401K
PO
BOX 10758
FARGO
ND 58106-0758 |
|
|
|
|
|
|
|
|
MULTIMANAGER
2045
LIFETIME
PORTFOLIO |
|
MG
TRUSTCO CUST FBO
STILLWATER
ISD # 834 403 B PLAN
717
17TH ST STE 1300
DENVER
CO 80202-3304 |
|
|
MULTIMANAGER
2045
LIFETIME
PORTFOLIO |
|
ASCENSUS
TRUST COMPANY FBO
MUSE
ARCHITECTS P C 401 K PS PLA
PO
BOX 10758
FARGO
ND 58106-0758 |
|
|
MULTIMANAGER
2045
LIFETIME
PORTFOLIO |
|
EMPOWER
TRUST FBO
EMPLOYEE
BENEFIT CLIENTS 401K
8515
E ORCHARD RD # 2T2
GREENWOOD
VLG CO 80111-5002 |
|
|
MULTIMANAGER
2045
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
MULTIMANAGER
2045
LIFETIME
PORTFOLIO |
|
NATIONAL
FINANCIAL SERVICES LLC
499
WASHINGTON BLVD
JERSEY
CITY NJ 07310-1995 |
|
|
MULTIMANAGER
2045
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
MULTIMANAGER
2045
LIFETIME
PORTFOLIO |
|
NATIONAL
FINANCIAL SERVICES LLC
499
WASHINGTON BLVD
JERSEY
CITY NJ 07310-1995 |
|
|
MULTIMANAGER
2045
LIFETIME
PORTFOLIO |
|
201
TOWNSEND STREET, SUITE 900
LANSING
MI 48933 |
|
|
MULTIMANAGER
2050
LIFETIME
PORTFOLIO |
|
AMERICAN
ENTERPRISE INVESTMENT SVC
707
2ND AVE S
MINNEAPOLIS
MN 55402-2405 |
|
|
MULTIMANAGER
2050
LIFETIME
PORTFOLIO |
|
LPL
FINANCIAL
OMNIBUS
CUSTOMER ACCOUNT
ATTN:
MUTUAL FUND TRADING
4707
EXECUTIVE DRIVE
SAN
DIEGO CA 92121-3091 |
|
|
MULTIMANAGER
2050
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST
BOSTON
MA 02116-5022 |
|
|
MULTIMANAGER
2050
LIFETIME
PORTFOLIO |
|
STATE
STREET BANK AND TRUST AS
TRUSTEE
AND OR CUSTODIAN FBO ADP
ACCESS
PRODUCT
1
LINCOLN ST
BOSTON
MA 02111-2901 |
|
|
MULTIMANAGER
2050
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
MULTIMANAGER
2050
LIFETIME
PORTFOLIO |
|
ASCENSUS
TRUST COMPANY FBO
1776
HOLDINGS RETIREMENT PLAN
PO
BOX 10758
FARGO
ND 58106-0758 |
|
|
MULTIMANAGER
2050
LIFETIME
PORTFOLIO |
|
ASCENSUS
TRUSTCO FBO
ASTRIDIA
LLC 401K
PO
BOX 10758
FARGO
ND 58106-0758 |
|
|
|
|
|
|
|
|
MULTIMANAGER
2050
LIFETIME
PORTFOLIO |
|
ASCENSUS
TRUST COMPANY FBO
PHYSICIANS
SURGERY CTR LG 401(K) PL
ASCENSUS
TRUST COMPANY
PO
BOX 10577
FARGO
ND 58106-0577 |
|
|
MULTIMANAGER
2050
LIFETIME
PORTFOLIO |
|
MID
ATLANTIC TRUST COMPANY FBO
TRANSPORTATION
CHILDREN S CENT 401(
1251
WATERFRONT PL STE 525
PITTSBURGH
PA 15222-4228 |
|
|
MULTIMANAGER
2050
LIFETIME
PORTFOLIO |
|
ASCENSUS
TRUST COMPANY FBO
COMMAND
CAPITAL 401K RETIREMENT PLA
PO
BOX 10758
FARGO
ND 58106-0758 |
|
|
MULTIMANAGER
2050
LIFETIME
PORTFOLIO |
|
MATRIX
TRUST COMPANY AS AGENT FOR
ADVISOR
TRUST INC
CITY
OF WYLIE
717
17TH ST STE 1300
DENVER
CO 80202-3304 |
|
|
MULTIMANAGER
2050
LIFETIME
PORTFOLIO |
|
MATRIX
TRUST COMPANY AS AGENT FOR
ADVISOR
TRUST INC
SHENANDOAH
COUNTY GOVERN (VA) 457
717
17TH ST STE 1300
DENVER
CO 80202-3304 |
|
|
MULTIMANAGER
2050
LIFETIME
PORTFOLIO |
|
EMPOWER
TRUST FBO
EMPLOYEE
BENEFIT CLIENTS 401K
8515
E ORCHARD RD # 2T2
GREENWOOD
VLG CO 80111-5002 |
|
|
MULTIMANAGER
2050
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
MULTIMANAGER
2050
LIFETIME
PORTFOLIO |
|
DCGT
AS TTEE AND/OR CUST
FBO
PLIC VARIOUS RETIREMENT PLANS
OMNIBUS
ATTN
NPIO TRADE DESK
711
HIGH ST
DES
MOINES IA 50392-0001 |
|
|
MULTIMANAGER
2050
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
MULTIMANAGER
2050
LIFETIME
PORTFOLIO |
|
NATIONAL
FINANCIAL SERVICES LLC
499
WASHINGTON BLVD
JERSEY
CITY NJ 07310-1995 |
|
|
MULTIMANAGER
2050
LIFETIME
PORTFOLIO |
|
201
TOWNSEND STREET, SUITE 900
LANSING
MI 48933 |
|
|
MULTIMANAGER
2055
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
MULTIMANAGER
2055
LIFETIME
PORTFOLIO |
|
STATE
STREET BANK AND TRUST AS
TRUSTEE
AND OR CUSTODIAN FBO ADP
ACCESS
PRODUCT
1
LINCOLN ST
BOSTON
MA 02111-2901 |
|
|
|
|
|
|
|
|
MULTIMANAGER
2055
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
MULTIMANAGER
2055
LIFETIME
PORTFOLIO |
|
MATRIX
TRUST COMPANY CUST FBO
NEVADA
ADVANCED PAIN SPECIALISTS
717
17TH ST STE 1300
DENVER
CO 80202-3304 |
|
|
MULTIMANAGER
2055
LIFETIME
PORTFOLIO |
|
MATRIX
TRUST COMPANY CUST FBO
PERDUE
ENVIRONMENTAL
717
17TH ST STE 1300
DENVER
CO 80202-3304 |
|
|
MULTIMANAGER
2055
LIFETIME
PORTFOLIO |
|
MATRIX
TRUST COMPANY CUST FBO
KENTUCKY
INSTITUTE FOR EYE HEALTH
717
17TH ST STE 1300
DENVER
CO 80202-3304 |
|
|
MULTIMANAGER
2055
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK LIFE INSURANCE CO USA
200
BERKELEY ST
BOSTON
MA 02116-5023 |
|
|
MULTIMANAGER
2055
LIFETIME
PORTFOLIO |
|
MATRIX
TRUST COMPANY AS AGENT FOR
ADVISOR
TRUST INC
VALLEY
CENTRAL SCHOOL DISTRICT 403B
717
17TH ST STE 1300
DENVER
CO 80202-3304 |
|
|
MULTIMANAGER
2055
LIFETIME
PORTFOLIO |
|
EMPOWER
TRUST FBO
EMPLOYEE
BENEFIT CLIENTS 401K
8515
E ORCHARD RD # 2T2
GREENWOOD
VLG CO 80111-5002 |
|
|
MULTIMANAGER
2055
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
MULTIMANAGER
2055
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
MULTIMANAGER
2055
LIFETIME
PORTFOLIO |
|
NATIONAL
FINANCIAL SERVICES LLC
499
WASHINGTON BLVD
JERSEY
CITY NJ 07310-1995 |
|
|
MULTIMANAGER
2055
LIFETIME
PORTFOLIO |
|
201
TOWNSEND STREET, SUITE 900
LANSING
MI 48933 |
|
|
MULTIMANAGER
2060
LIFETIME
PORTFOLIO |
|
WELLS
FARGO CLEARING SERVICES
1
N JEFFERSON AVE
SAINT
LOUIS MO 63103-2287 |
|
|
MULTIMANAGER
2060
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK LIFE INSURANCE CO USA
200
BERKELEY ST
BOSTON
MA 02116-5023 |
|
|
MULTIMANAGER
2060
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
MULTIMANAGER
2060
LIFETIME
PORTFOLIO |
|
PERSHING
LLC
1
PERSHING PLZ
JERSEY
CITY NJ 07399-0001 |
|
|
|
|
|
|
|
|
MULTIMANAGER
2060
LIFETIME
PORTFOLIO |
|
STATE
STREET BANK AND TRUST AS
TRUSTEE
AND OR CUSTODIAN FBO ADP
ACCESS
PRODUCT
1
LINCOLN ST
BOSTON
MA 02111-2901 |
|
|
MULTIMANAGER
2060
LIFETIME
PORTFOLIO |
|
MATRIX
TRUST COMPANY CUST FBO
PERDUE
ENVIRONMENTALCONTRACTING COM
717
17TH ST STE 1300
DENVER
CO 80202-3304 |
|
|
MULTIMANAGER
2060
LIFETIME
PORTFOLIO |
|
ASCENSUS
TRUST COMPANY FBO
PHYSICIANS
SURGERY CTR LG 401(K) PL
ASCENSUS
TRUST COMPANY
PO
BOX 10577
FARGO
ND 58106-0577 |
|
|
MULTIMANAGER
2060
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK LIFE INSURANCE CO USA
200
BERKELEY ST
BOSTON
MA 02116-5023 |
|
|
MULTIMANAGER
2060
LIFETIME
PORTFOLIO |
|
CHARLES
SCHWAB & CO INC
MUTUAL
FUNDS DEPT
101
MONTGOMERY ST
SAN
FRANCISCO CA 94104-4151 |
|
|
MULTIMANAGER
2060
LIFETIME
PORTFOLIO |
|
EMPOWER
TRUST FBO
EMPLOYEE
BENEFIT CLIENTS 401K
8515
E ORCHARD RD # 2T2
GREENWOOD
VLG CO 80111-5002 |
|
|
MULTIMANAGER
2060
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
MULTIMANAGER
2060
LIFETIME
PORTFOLIO |
|
STATE
STREET BANK AND TRUST AS
TRUSTEE
AND OR CUSTODIAN FBO ADP
ACCESS
PRODUCT
1
LINCOLN ST
BOSTON
MA 02111-2901 |
|
|
MULTIMANAGER
2060
LIFETIME
PORTFOLIO |
|
DCGT
AS TTEE AND/OR CUST
FBO
PLIC VARIOUS RETIREMENT PLANS
OMNIBUS
ATTN
NPIO TRADE DESK
711
HIGH ST
DES
MOINES IA 50392-0001 |
|
|
MULTIMANAGER
2060
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
MULTIMANAGER
2060
LIFETIME
PORTFOLIO |
|
NATIONAL
FINANCIAL SERVICES LLC
499
WASHINGTON BLVD
JERSEY
CITY NJ 07310-1995 |
|
|
MULTIMANAGER
2060
LIFETIME
PORTFOLIO |
|
201
TOWNSEND STREET, SUITE 900
LANSING
MI 48933 |
|
|
MULTIMANAGER
2065
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK LIFE & HEALTH INS CO
CUSTODIAN
FOR THE IRA OF
BENNET
YEUNG
1230
LAWSON COVE CIR
VIRGINIA
BCH VA 23455-6825 |
|
|
|
|
|
|
|
|
MULTIMANAGER
2065
LIFETIME
PORTFOLIO |
|
PERSHING
LLC
PO
BOX 2052
JERSEY
CITY NJ 07303-2052 |
|
|
MULTIMANAGER
2065
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK LIFE & HEALTH INS CO
CUSTODIAN
FOR THE IRA OF
YUMIKO
SHEARD
279
CENTRAL PARK WEST 15C
NEW
YORK NY 10024-3080 |
|
|
MULTIMANAGER
2065
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK LIFE & HEALTH INS CO
CUSTODIAN
FOR THE IRA OF
WILLIAM
SCOTT BRADLEY
15242
WYANDOTTE ST
VAN
NUYS CA 91405-1749 |
|
|
MULTIMANAGER
2065
LIFETIME
PORTFOLIO |
|
RAYMOND
JAMES
OMNIBUS
FOR MUTUAL FUNDS
HOUSE
ACCT FIRM
880
CARILLON PKWY
ST
PETERSBURG FL 33716-1100 |
|
|
MULTIMANAGER
2065
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK LIFE INSURANCE CO USA
200
BERKELEY ST
BOSTON
MA 02116-5022 |
|
|
MULTIMANAGER
2065
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST
BOSTON
MA 02116-5022 |
|
|
MULTIMANAGER
2065
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK LIFE INSURANCE CO USA
200
BERKELEY ST
BOSTON
MA 02116-5022 |
|
|
MULTIMANAGER
2065
LIFETIME
PORTFOLIO |
|
EMPOWER
TRUST FBO
EMPLOYEE
BENEFIT CLIENTS 401K
8515
E ORCHARD RD # 2T2
GREENWOOD
VLG CO 80111-5002 |
|
|
MULTIMANAGER
2065
LIFETIME
PORTFOLIO |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
MULTIMANAGER
2065
LIFETIME
PORTFOLIO |
|
NATIONAL
FINANCIAL SERVICES LLC
499
WASHINGTON BLVD
JERSEY
CITY NJ 07310-1995 |
|
|
MULTIMANAGER
2065
LIFETIME
PORTFOLIO |
|
MANULIFE
ASSET MANAGEMENT (US) LLC
2022
MAN INVESTMENT MGMT EWM
197
CLARENDON ST
BOSTON
MA 02116-5010 |
|
|
MULTIMANAGER
2065
LIFETIME
PORTFOLIO |
|
201
TOWNSEND STREET, SUITE 900
LANSING
MI 48933 |
|
|
MULTIMANAGER
LIFESTYLE
AGGRESSIVE
PORTFOLIO |
|
201
TOWNSEND STREET, SUITE 900
LANSING
MI 48933 |
|
|
MULTIMANAGER
LIFESTYLE
BALANCED
PORTFOLIO |
|
201
TOWNSEND STREET, SUITE 900
LANSING
MI 48933 |
|
|
MULTIMANAGER
LIFESTYLE
CONSERVATIVE
PORTFOLIO |
|
201
TOWNSEND STREET, SUITE 900
LANSING
MI 48933 |
|
|
|
|
|
|
|
|
MULTIMANAGER
LIFESTYLE
GROWTH
PORTFOLIO |
|
201
TOWNSEND STREET, SUITE 900
LANSING
MI 48933 |
|
|
MULTIMANAGER
LIFESTYLE
MODERATE
PORTFOLIO |
|
201
TOWNSEND STREET, SUITE 900
LANSING
MI 48933 |
|
|
|
|
|
NATIONAL
FINANCIAL SERVICES LLC
FEBO
CUSTOMERS
MUTUAL
FUNDS
200
LIBERTY ST # 1WFC
NEW
YORK NY 10281-1015 |
|
|
|
|
|
NATIONAL
FINANCIAL SERVICES LLC
FEBO
CUSTOMERS
MUTUAL
FUNDS
200
LIBERTY ST # 1WFC
NEW
YORK NY 10281-1015 |
|
|
|
|
|
JOHN
HANCOCK LIFE & HEALTH INS CO
FT
LORAMIE MACHINE TOOL CO INC
FBO
SCOTT A SELANDERS SIM
14170
CHARM HILL DR
SIDNEY
OH 45365-9472 |
|
|
|
|
|
ASCENSUS
TRUST COMPANY FBO
WILLIAM
PELLEGRINO, INC 401(K) PLA
PO
BOX 10758
FARGO
ND 58106-0758 |
|
|
|
|
|
ASCENSUS
TRUST COMPANY FBO
METHODOLOGIES
INC 401(K) PLAN
PO
BOX 10758
FARGO
ND 58106-0758 |
|
|
|
|
|
NATIONAL
FINANCIAL SERVICES LLC
FEBO
CUSTOMERS
MUTUAL
FUNDS
200
LIBERTY ST # 1WFC
NEW
YORK NY 10281-1015 |
|
|
|
|
|
SPECIAL
CUSTODY ACCOUNT FOR THE
EXCLUSIVE
BENEFIT OF CUSTOMERS OF
UBS
FINANCIAL SERVICES INC
1000
HARBOR BLVD
WEEHAWKEN
NJ 07086-6761 |
|
|
|
|
|
AMERICAN
ENTERPRISE INVESTMENT SVC
707
2ND AVE S
MINNEAPOLIS
MN 55402-2405 |
|
|
|
|
|
NABANK
& CO
PO
BOX 2180
TULSA
OK 74101-2180 |
|
|
|
|
|
CHARLES
SCHWAB & CO INC
MUTUAL
FUNDS DEPT
101
MONTGOMERY ST
SAN
FRANCISCO CA 94104-4151 |
|
|
|
|
|
LPL
FINANCIAL
OMNIBUS
CUSTOMER ACCOUNT
ATTN:
MUTUAL FUND TRADING
4707
EXECUTIVE DRIVE
SAN
DIEGO CA 92121-3091 |
|
|
|
|
|
|
|
|
|
|
|
RAYMOND
JAMES
OMNIBUS
FOR MUTUAL FUNDS
HOUSE
ACCT FIRM
880
CARILLON PKWY
ST
PETERSBURG FL 33716-1100 |
|
|
|
|
|
MID
ATLANTIC FBO
FISHMAN
& FISHMAN LLC 401(K) PROFIT
SHARING
PLAN
1251
WATERFRONT PLACE, SUITE 525
PITTSBURGH
PA 15222-4228 |
|
|
|
|
|
MATRIX
TRUST COMPANY AS AGENT FOR
ADVISOR
TRUST, INC.
WEST
AURORA UNIT SCH DIST #129 403B
717
17TH ST STE 1300
DENVER
CO 80202-3304 |
|
|
|
|
|
ASCENSUS
TRUST COMPANY FBO
MOVING
MOUNTAINS SOLO K PLAN
PO
BOX 10758
FARGO
ND 58106-0758 |
|
|
|
|
|
ASCENSUS
TRUST COMPANY FBO
CHANDLER
COASTAL ENTERPRISES SOLO K
PO
BOX 10758
FARGO
ND 58106-0758 |
|
|
|
|
|
ASCENSUS
TRUST COMPANY FBO
FWR
III REAL ESTATE SOLOK PLAN
PO
BOX 10758
FARGO
ND 58106-0758 |
|
|
|
|
|
ASCENSUS
TRUST COMPANY FBO
LEXMAR
SOLO K PLAN 523231
PO
BOX 10758
FARGO
ND 58106-0758 |
|
|
|
|
|
JOHN
HANCOCK LIFE INSURANCE CO USA
200
BERKELEY ST
BOSTON
MA 02116-5023 |
|
|
|
|
|
CHARLES
SCHWAB & CO INC
MUTUAL
FUNDS DEPT
101
MONTGOMERY ST
SAN
FRANCISCO CA 94104-4151 |
|
|
|
|
|
STANDARD
INSURANCE
COMPANY
1100
SW 6TH AVE
PORTLAND
OR 97204-1093 |
|
|
|
|
|
SEI
PRIVATE TRUST COMPANY
C/O
ID 636
ATTN
MUTUAL FUNDS
1
FREEDOM VALLEY DR
OAKS
PA 19456-9989 |
|
|
|
|
|
201
TOWNSEND STREET, SUITE 900
LANSING
MI 48933 |
|
|
OPPORTUNISTIC
FIXED
INCOME
FUND |
|
EDWARD
D JONES & CO
FOR
THE BENEFIT OF CUSTOMERS
12555
MANCHESTER ROAD
SAINT
LOUIS MO 63131-3710 |
|
|
|
|
|
|
|
|
OPPORTUNISTIC
FIXED
INCOME
FUND |
|
MORGAN
STANLEY SMITH BARNEY LLC
FOR
EXCLUSIVE BENEFIT OF CUSTOMERS
1
NEW YORK PLAZA FL. 12
NEW
YORK NY 10004-1965 |
|
|
OPPORTUNISTIC
FIXED
INCOME
FUND |
|
LPL
FINANCIAL
OMNIBUS
CUSTOMER ACCOUNT
ATTN:
MUTUAL FUND TRADING
4707
EXECUTIVE DRIVE
SAN
DIEGO CA 92121-3091 |
|
|
OPPORTUNISTIC
FIXED
INCOME
FUND |
|
NATIONAL
FINANCIAL SERVICES LLC
FEBO
CUSTOMERS
MUTUAL
FUNDS
200
LIBERTY ST # 1WFC
NEW
YORK NY 10281-1015 |
|
|
OPPORTUNISTIC
FIXED
INCOME
FUND |
|
RAYMOND
JAMES
OMNIBUS
FOR MUTUAL FUNDS
HOUSE
ACCT FIRM
880
CARILLON PKWY
ST
PETERSBURG FL 33716-1100 |
|
|
OPPORTUNISTIC
FIXED
INCOME
FUND |
|
PERSHING
LLC
1
PERSHING PLZ
JERSEY
CITY NJ 07399-0001 |
|
|
OPPORTUNISTIC
FIXED
INCOME
FUND |
|
LPL
FINANCIAL
OMNIBUS
CUSTOMER ACCOUNT
ATTN:
MUTUAL FUND TRADING
4707
EXECUTIVE DRIVE
SAN
DIEGO CA 92121-3091 |
|
|
OPPORTUNISTIC
FIXED
INCOME
FUND |
|
CHARLES
SCHWAB & CO INC
MUTUAL
FUNDS DEPT
101
MONTGOMERY ST
SAN
FRANCISCO CA 94104-4151 |
|
|
OPPORTUNISTIC
FIXED
INCOME
FUND |
|
MORGAN
STANLEY SMITH BARNEY LLC
FOR
EXCLUSIVE BENEFIT OF CUSTOMERS
1
NEW YORK PLAZA FL. 12
NEW
YORK NY 10004-1965 |
|
|
OPPORTUNISTIC
FIXED
INCOME
FUND |
|
NATIONAL
FINANCIAL SERVICES LLC
FEBO
CUSTOMERS
MUTUAL
FUNDS
200
LIBERTY ST # 1WFC
NEW
YORK NY 10281-1015 |
|
|
OPPORTUNISTIC
FIXED
INCOME
FUND |
|
EDWARD
D JONES & CO
FOR
THE BENEFIT OF CUSTOMERS
12555
MANCHESTER ROAD
SAINT
LOUIS MO 63131-3710 |
|
|
OPPORTUNISTIC
FIXED
INCOME
FUND |
|
NATIONAL
FINANCIAL SERVICES LLC
499
WASHINGTON BLVD
JERSEY
CITY NJ 07310-1995 |
|
|
OPPORTUNISTIC
FIXED
INCOME
FUND |
|
NATIONAL
FINANCIAL SERVICES LLC
499
WASHINGTON BLVD
JERSEY
CITY NJ 07310-1995 |
|
|
OPPORTUNISTIC
FIXED
INCOME
FUND |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
|
|
|
|
|
|
OPPORTUNISTIC
FIXED
INCOME
FUND |
|
201
TOWNSEND STREET, SUITE 900
LANSING
MI 48933 |
|
|
OPPORTUNISTIC
FIXED
INCOME
FUND |
|
100
SUMMIT LAKE DRIVE, 2ND FLOOR
VALHALLA
NY 10595 |
|
|
REAL
ESTATE
SECURITIES
FUND |
|
NATIONAL
FINANCIAL SERVICES LLC
FEBO
CUSTOMERS
MUTUAL
FUNDS
200
LIBERTY ST # 1WFC
NEW
YORK NY 10281-1015 |
|
|
REAL
ESTATE
SECURITIES
FUND |
|
JOHN
HANCOCK LIFE & HEALTH INS CO
CUSTODIAN
FOR THE IRA OF
KENDALL
C CROOK
15039
QUINN LN
WESTFIELD
IN 46074-6094 |
|
|
REAL
ESTATE
SECURITIES
FUND |
|
JOHN
HANCOCK LIFE INSURANCE CO USA
200
BERKELEY ST
BOSTON
MA 02116-5022 |
|
|
REAL
ESTATE
SECURITIES
FUND |
|
LPL
FINANCIAL
OMNIBUS
CUSTOMER ACCOUNT
ATTN:
MUTUAL FUND TRADING
4707
EXECUTIVE DRIVE
SAN
DIEGO CA 92121-3091 |
|
|
REAL
ESTATE
SECURITIES
FUND |
|
AMERICAN
ENTERPRISE INVESTMENT SVC
707
2ND AVE S
MINNEAPOLIS
MN 55402-2405 |
|
|
REAL
ESTATE
SECURITIES
FUND |
|
MLPF&S
FOR THE
SOLE
BENEFIT OF ITS CUSTOMERS
ATTN:
FUND ADMINISTRATION
4800
DEER LAKE DRIVE EAST 2ND FL
JACKSONVILLE
FL 32246-6484 |
|
|
REAL
ESTATE
SECURITIES
FUND |
|
LPL
FINANCIAL
OMNIBUS
CUSTOMER ACCOUNT
ATTN:
MUTUAL FUND TRADING
4707
EXECUTIVE DRIVE
SAN
DIEGO CA 92121-3091 |
|
|
REAL
ESTATE
SECURITIES
FUND |
|
SEI
PRIVATE TRUST COMPANY
C/O
ID 337
ATTN
MUTUAL FUNDS
1
FREEDOM VALLEY DR
OAKS
PA 19456-9989 |
|
|
REAL
ESTATE
SECURITIES
FUND |
|
JOHN
HANCOCK TRUST COMPANY LLC
200
BERKELEY ST STE 7
BOSTON
MA 02116-5038 |
|
|
REAL
ESTATE
SECURITIES
FUND |
|
ASCENSUS
TRUST COMPANY FBO
CENTRAL
STATES INDUSTRIAL EQUIPMENT
PO
BOX 10758
FARGO
ND 58106-0758 |
|
|
REAL
ESTATE
SECURITIES
FUND |
|
201
TOWNSEND STREET, SUITE 900
LANSING
MI 48933 |
|
|
REAL
ESTATE
SECURITIES
FUND |
|
100
SUMMIT LAKE DRIVE, 2ND FLOOR
VALHALLA
NY 10595 |
|
|
|
|
|
|
|
|
SCIENCE
&
TECHNOLOGY
FUND |
|
JHF
II MULTIMANAGER LIFESTYLE GROWTH
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
SCIENCE
&
TECHNOLOGY
FUND |
|
JHF
II MULTIMANAGER LIFESTYLE BALANCED
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
SCIENCE
&
TECHNOLOGY
FUND |
|
JHF
II MULTIMANAGER LIFESTYLE AGGRESSIVE
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
SMALL
CAP DYNAMIC
GROWTH
FUND |
|
PERSHING
LLC
1
PERSHING PLZ
JERSEY
CITY NJ 07399-0001 |
|
|
SMALL
CAP DYNAMIC
GROWTH
FUND |
|
JOHN
HANCOCK LIFE & HEALTH INS CO
JCB
INC DBA CPTS SIMPLE IRA
FBO
THOMAS H DAVENPORT
403
N RED ST
SHERIDAN
AR 72150-7669 |
|
|
SMALL
CAP DYNAMIC
GROWTH
FUND |
|
JOHN
HANCOCK LIFE & HEALTH INS CO
CUSTODIAN
FOR THE JHF SEP IRA OF
DRS
FOSTER STEELE AND STONE
FBO
CHARLES J FOSTER
508
3RD ST
NEWPORT
TN 37821-3707 |
|
|
SMALL
CAP DYNAMIC
GROWTH
FUND |
|
JOHN
HANCOCK LIFE & HEALTH INS CO
CUSTODIAN
FOR THE SEP IRA OF
CHARLES
KUEHN ARCHITECT
FBO
CHARLES KUEHN
15
AVENUE B
NORTHPORT
NY 11768-1602 |
|
|
SMALL
CAP DYNAMIC
GROWTH
FUND |
|
JOHN
HANCOCK LIFE & HEALTH INS CO
CHAROLOTTE
INDUSTRIES SIM IRA
FBO
TODD A DEVENBURGH
352
RUTH RIDGE DR
LANCASTER
PA 17601-3829 |
|
|
SMALL
CAP DYNAMIC
GROWTH
FUND |
|
LPL
FINANCIAL
OMNIBUS
CUSTOMER ACCOUNT
ATTN:
MUTUAL FUND TRADING
4707
EXECUTIVE DRIVE
SAN
DIEGO CA 92121-3091 |
|
|
SMALL
CAP DYNAMIC
GROWTH
FUND |
|
PERSHING
LLC
1
PERSHING PLZ
JERSEY
CITY NJ 07399-0001 |
|
|
SMALL
CAP DYNAMIC
GROWTH
FUND |
|
JHF
II MULTIMANAGER LIFESTYLE GROWTH
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
SMALL
CAP DYNAMIC
GROWTH
FUND |
|
JHF
II MULTIMANAGER LIFESTYLE BALANCED
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
|
|
|
|
|
|
SMALL
CAP DYNAMIC
GROWTH
FUND |
|
JHF
II MULTIMANAGER LIFESTYLE AGGRESSIVE
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
SMALL
CAP DYNAMIC
GROWTH
FUND |
|
JHVIT
MANAGED VOLATILITY GROWTH
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
|
|
|
EDWARD
D JONES & CO
FOR
THE BENEFIT OF CUSTOMERS
12555
MANCHESTER ROAD
SAINT
LOUIS MO 63131-3710 |
|
|
|
|
|
PERSHING
LLC
1
PERSHING PLZ
JERSEY
CITY NJ 07399-0001 |
|
|
|
|
|
NATIONAL
FINANCIAL SERVICES LLC
FEBO
CUSTOMERS
MUTUAL
FUNDS
200
LIBERTY ST # 1WFC
NEW
YORK NY 10281-1015 |
|
|
|
|
|
EDWARD
D JONES & CO
FOR
THE BENEFIT OF CUSTOMERS
12555
MANCHESTER ROAD
SAINT
LOUIS MO 63131-3710 |
|
|
|
|
|
SHAUN
F PEDERSEN
273
BEACON ST APT 2
BOSTON
MA 02116-1208 |
|
|
|
|
|
JHF
II MULTIMANAGER LIFESTYLE GROWTH
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
|
|
|
JHF
II MULTIMANAGER LIFESTYLE BALANCED
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
|
|
|
JHF
II MULTIMANAGER LIFESTYLE AGGRESSIVE
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
|
|
|
JHF
II MULTIMANAGER LIFESTYLE MODERATE
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
STRATEGIC
INCOME
OPPORTUNITIES
FUND |
|
EDWARD
D JONES & CO
FOR
THE BENEFIT OF CUSTOMERS
12555
MANCHESTER ROAD
SAINT
LOUIS MO 63131-3710 |
|
|
STRATEGIC
INCOME
OPPORTUNITIES
FUND |
|
AMERICAN
ENTERPRISE INVESTMENT SVC
707
2ND AVE S
MINNEAPOLIS
MN 55402-2405 |
|
|
|
|
|
|
|
|
STRATEGIC
INCOME
OPPORTUNITIES
FUND |
|
NATIONAL
FINANCIAL SERVICES LLC
FEBO
CUSTOMERS
MUTUAL
FUNDS
200
LIBERTY ST # 1WFC
NEW
YORK NY 10281-1015 |
|
|
STRATEGIC
INCOME
OPPORTUNITIES
FUND |
|
CHARLES
SCHWAB & CO INC
MUTUAL
FUNDS DEPT
101
MONTGOMERY ST
SAN
FRANCISCO CA 94104-4151 |
|
|
STRATEGIC
INCOME
OPPORTUNITIES
FUND |
|
LPL
FINANCIAL
OMNIBUS
CUSTOMER ACCOUNT
ATTN:
MUTUAL FUND TRADING
4707
EXECUTIVE DRIVE
SAN
DIEGO CA 92121-3091 |
|
|
STRATEGIC
INCOME
OPPORTUNITIES
FUND |
|
AMERICAN
ENTERPRISE INVESTMENT SVC
707
2ND AVE S
MINNEAPOLIS
MN 55402-2405 |
|
|
STRATEGIC
INCOME
OPPORTUNITIES
FUND |
|
LPL
FINANCIAL
OMNIBUS
CUSTOMER ACCOUNT
ATTN:
MUTUAL FUND TRADING
4707
EXECUTIVE DRIVE
SAN
DIEGO CA 92121-3091 |
|
|
STRATEGIC
INCOME
OPPORTUNITIES
FUND |
|
MORGAN
STANLEY SMITH BARNEY LLC
FOR
EXCLUSIVE BENEFIT OF CUSTOMERS
1
NEW YORK PLAZA FL. 12
NEW
YORK NY 10004-1965 |
|
|
STRATEGIC
INCOME
OPPORTUNITIES
FUND |
|
NATIONAL
FINANCIAL SERVICES LLC
FEBO
CUSTOMERS
MUTUAL
FUNDS
200
LIBERTY ST # 1WFC
NEW
YORK NY 10281-1015 |
|
|
STRATEGIC
INCOME
OPPORTUNITIES
FUND |
|
PERSHING
LLC
1
PERSHING PLZ
JERSEY
CITY NJ 07399-0001 |
|
|
STRATEGIC
INCOME
OPPORTUNITIES
FUND |
|
WELLS
FARGO CLEARING SERVICES, LLC
SPECIAL
CUSTODY ACCT FOR THE
EXCLUSIVE
BENEFIT OF CUSTOMER
2801
MARKET ST
SAINT
LOUIS MO 63103-2523 |
|
|
STRATEGIC
INCOME
OPPORTUNITIES
FUND |
|
RAYMOND
JAMES
OMNIBUS
FOR MUTUAL FUNDS
HOUSE
ACCT FIRM
880
CARILLON PKWY
ST
PETERSBURG FL 33716-1100 |
|
|
STRATEGIC
INCOME
OPPORTUNITIES
FUND |
|
AMERICAN
ENTERPRISE INVESTMENT SVC
707
2ND AVE S
MINNEAPOLIS
MN 55402-2405 |
|
|
STRATEGIC
INCOME
OPPORTUNITIES
FUND |
|
NATIONAL
FINANCIAL SERVICES LLC
FEBO
CUSTOMERS
MUTUAL
FUNDS
200
LIBERTY ST # 1WFC
NEW
YORK NY 10281-1015 |
|
|
|
|
|
|
|
|
STRATEGIC
INCOME
OPPORTUNITIES
FUND |
|
MORGAN
STANLEY SMITH BARNEY LLC
FOR
EXCLUSIVE BENEFIT OF CUSTOMERS
1
NEW YORK PLAZA FL. 12
NEW
YORK NY 10004-1965 |
|
|
STRATEGIC
INCOME
OPPORTUNITIES
FUND |
|
CHARLES
SCHWAB & CO INC
MUTUAL
FUNDS DEPT
101
MONTGOMERY ST
SAN
FRANCISCO CA 94104-4151 |
|
|
STRATEGIC
INCOME
OPPORTUNITIES
FUND |
|
CHARLES
SCHWAB TRUST BANK TTEE
DC
PLAN FOR FT EES OF TOWN OF EAST
HARTFORD
2423
E LINCOLN DR
PHOENIX
AZ 85016-1215 |
|
|
STRATEGIC
INCOME
OPPORTUNITIES
FUND |
|
ASCENSUS
TRUSTCO FBO
BRIAN
W DOSSETT M D LTD PROFIT SHA
PO
BOX 10758
FARGO
ND 58106-0758 |
|
|
STRATEGIC
INCOME
OPPORTUNITIES
FUND |
|
MID
ATLANTIC TRUST COMPANY FBO
STRAWN
ARNOLD INC 401(K) PLAN
1251
WATERFRONT PL STE 525
PITTSBURGH
PA 15222-4228 |
|
|
STRATEGIC
INCOME
OPPORTUNITIES
FUND |
|
ASCENSUS
TRUST COMPANY FBO
SILVERADO
FAMILY DENTAL 401(K) PLAN
PO
BOX 10758
FARGO
ND 58106-0758 |
|
|
STRATEGIC
INCOME
OPPORTUNITIES
FUND |
|
MID
ATLANTIC TRUST COMPANY FBO
SANTA
BARBARA CLUB 401(K) PROFIT SH
1251
WATERFRONT PLACE, SUITE 525
PITTSBURGH
PA 15222-4228 |
|
|
STRATEGIC
INCOME
OPPORTUNITIES
FUND |
|
ASCENSUS
TRUST COMPANY FBO
COUNTRY
LINE ELECTRICAL DISTRIBUTOR
PO
BOX 10758
FARGO
ND 58106-0758 |
|
|
STRATEGIC
INCOME
OPPORTUNITIES
FUND |
|
EDWARD
D JONES & CO
FOR
THE BENEFIT OF CUSTOMERS
12555
MANCHESTER ROAD
SAINT
LOUIS MO 63131-3710 |
|
|
STRATEGIC
INCOME
OPPORTUNITIES
FUND |
|
EMPOWER
TRUST FBO
EMPLOYEE
BENEFIT CLIENTS 401K
8515
E ORCHARD RD # 2T2
GREENWOOD
VLG CO 80111-5002 |
|
|
STRATEGIC
INCOME
OPPORTUNITIES
FUND |
|
J
P MORGAN SECURITIES LLC OMNIBUS
ACCOUNT
FOR THE EXCLUSIVE BENEFIT
OF
CUSTOMERS
575
WASHINGTON BLVD 12TH FL
MUTUAL
FUND DEPARTMENT
JERSEY
CITY NJ 07310-1616 |
|
|
STRATEGIC
INCOME
OPPORTUNITIES
FUND |
|
JHF
II MULTIMANAGER LIFESTYLE BALANCED
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
|
|
|
|
|
|
STRATEGIC
INCOME
OPPORTUNITIES
FUND |
|
JHF
II MULTIMANAGER LIFESTYLE GROWTH
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
STRATEGIC
INCOME
OPPORTUNITIES
FUND |
|
JHF
II MULTIMANAGER LIFESTYLE MODERATE
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
STRATEGIC
INCOME
OPPORTUNITIES
FUND |
|
JHF
II MULTIMANAGER LIFESTYLE
CONSERVATIVE
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
U.S.
SECTOR ROTATION
FUND |
|
JHF
II MULTIMANAGER LIFESTYLE GROWTH
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
U.S.
SECTOR ROTATION
FUND |
|
JHF
II MULTIMANAGER LIFESTYLE BALANCED
PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
U.S.
SECTOR ROTATION
FUND |
|
JHF
II LIFESTYLE BLEND GROWTH PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
U.S.
SECTOR ROTATION
FUND |
|
JHF
II LIFESTYLE BLEND BALANCED PORTFOLIO
200
BERKELEY STREET
BOSTON
MA 02116 |
|
|
Investment
Management Arrangements and Other Services
The Advisor
serves as investment advisor to the funds and is responsible for the supervision
of the subadvisor services to the funds pursuant to the Advisory
Agreement. Pursuant to the Advisory Agreement and subject to general oversight
by the Board, the Advisor manages and supervises the investment
operations and business affairs of the funds. The Advisor provides the funds
with all necessary office facilities and equipment and any personnel
necessary for the oversight and/or conduct of the investment operations of the
funds. The Advisor also coordinates and oversees the services provided to
the funds under other agreements, including custodial, administrative and
transfer agency services. Additionally, the Advisor provides certain
administrative and other non-advisory services to the funds pursuant to a
separate Service Agreement, as discussed below.
The Advisor is
responsible for overseeing and implementing a fund’s investment program and
provides a variety of advisory oversight and investment research
services, including: (i) monitoring fund portfolio compositions and risk
profiles and (ii) evaluating fund investment characteristics, such as
investment
strategies, and recommending to the Board potential enhancements to such
characteristics. The Advisor provides management and transition
services associated with certain fund events (e.g., strategy, portfolio manager
or subadvisor changes).
The Advisor
has the responsibility to oversee the subadvisors and recommend to the Board:
(i) the hiring, termination, and replacement of a subadvisor; and (ii) the
allocation and reallocation of a fund’s assets among multiple subadvisors, when
appropriate. In this capacity, the Advisor negotiates with potential
subadvisors and, once retained, among other things: (i) monitors the compliance
of the subadvisor with the investment objectives and related policies of
the funds; (ii) reviews the performance of the subadvisor; and (iii) reports
periodically on such performance to the Board. The Advisor utilizes the expertise
of a team of investment professionals in manager research and oversight who
provide these research and monitoring services.
The Advisor is
not liable for any error of judgment or mistake of law or for any loss suffered
by a fund in connection with the matters to which the Advisory Agreement
relates, except a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Advisor in the performance of its duties or from
its reckless disregard of its obligations and duties under the Advisory
Agreement.
Under the
Advisory Agreement, a fund may use the name “John Hancock” or any name derived
from or similar to it only for so long as the Advisory Agreement or
any extension, renewal or amendment thereof remains in effect. If the Advisory
Agreement is no longer in effect, the fund (to the extent that it
lawfully can) will cease to use such name or any other name indicating that it
is advised by or otherwise connected with the Advisor. In addition, the Advisor or
JHLICO U.S.A., a subsidiary of Manulife Financial, may grant the nonexclusive
right to use the name “John Hancock” or any similar name
to any other
corporation or entity, including but not limited to any investment company of
which the JHLICO U.S.A. or any subsidiary or affiliate thereof or any
successor to the business of any subsidiary or affiliate thereof shall be the
investment advisor.
The
continuation of the Advisory Agreement and the Distribution Agreement (discussed
below) were each approved by all Trustees. The Advisory Agreement and
the Distribution Agreement will continue in effect from year to year, provided
that each Agreement’s continuance is approved annually both: (i) by
the holders of a majority of the outstanding voting securities of the Trust or
by the Trustees; and (ii) by a majority of the Trustees who are not parties to the
Agreement, or “interested persons” of any such parties. Each of these Agreements
may be terminated on 60 days’ written notice by any party or by a
vote of a majority of the outstanding voting securities of the funds and will
terminate automatically if assigned.
The Trust
bears all costs of its organization and operation, including but not limited to
expenses of preparing, printing and mailing all shareholders’ reports,
notices, prospectuses, proxy statements and reports to regulatory agencies;
expenses relating to the issuance, registration and qualification of shares;
government fees; interest charges; expenses of furnishing to shareholders their
account statements; taxes; expenses of redeeming shares; brokerage and
other expenses connected with the execution of portfolio securities
transactions; expenses pursuant to a fund’s plan of distribution; fees
and expenses
of custodians including those for keeping books and accounts maintaining a
committed line of credit and calculating the NAV of shares; fees and
expenses of transfer agents and dividend disbursing agents; legal, accounting,
financial, management, tax and auditing fees and expenses of the funds
(including an allocable portion of the cost of the Advisor’s employees rendering
such services to the funds); the compensation and expenses of officers
and Trustees (other than persons serving as President or Trustee who are
otherwise affiliated with the funds the Advisor or any of their affiliates);
expenses of Trustees’ and shareholders’ meetings; trade association memberships;
insurance premiums; and any extraordinary expenses.
Securities
held by a fund also may be held by other funds or investment advisory clients
for which the Advisor, the subadvisor or their respective affiliates
provide investment advice. Because of different investment objectives or other
factors, a particular security may be bought for one or more funds or
clients when one or more are selling the same security. If opportunities for
purchase or sale of securities by the Advisor or subadvisor for a fund
or for other
funds or clients for which the Advisor or subadvisor renders investment advice
arise for consideration at or about the same time, transactions
in such securities will be made, insofar as feasible, for the respective fund,
funds or clients in a manner deemed equitable to all of them. To the extent
that transactions on behalf of more than one client of the Advisor or subadvisor
or their respective affiliates may increase the demand for securities
being purchased or the supply of securities being sold, there may be an adverse
effect on price.
Advisor
Compensation.
As
compensation for its advisory services under the Advisory Agreement, the Advisor
receives a fee from the funds, computed
separately for each fund. The fee for each fund is stated as an annual
percentage of the current value of the “aggregate net assets” of the
fund.
“Aggregate net assets” of a fund include the net assets of the fund and, in many
cases, the net assets of one or more other funds (or portions thereof)
advised by the Advisor, but in each case only for the period during which the
Advisor also serves as the advisor to the other fund(s) (or portions
thereof). The
fee for each fund is based on the applicable annual rate that, for each day, is
equal to: (i) the sum of the amounts determined by applying the annual
percentage rates for the fund to the applicable portions of aggregate net assets
divided by: (ii) aggregate net assets (totaling the “Applicable Annual Fee
Rate”). The fee for each fund accrues and is paid daily to the Advisor for each
calendar day. The daily fee accruals are computed by multiplying
the fraction of one over the number of calendar days in the year by the
Applicable Annual Fee Rate, and multiplying this product by the net assets of the
fund. The management fees that each fund currently is obligated to pay the
Advisor are as set forth in its Prospectus.
The Advisor
has contractually agreed to reduce its management fee for each fund of funds or,
if necessary, make payment to a fund of funds in an amount equal
to the amount by which certain expenses of the fund of funds, including those
expenses attributable to investments in underlying funds (“Acquired
Fund Fees and Expenses”) exceed the percentage of average daily net assets (on
an annualized basis) of the fund of funds as set forth in the prospectus.
For purposes of this contractual limitation on fund expenses, Acquired Fund Fees
and Expenses will be calculated monthly per the formulation
below, and provided to the funds' custodian for use in determining the amount of
the expense limitation. The calculation of AFFE represents the indirect
expenses of a fund's investments in underlying investment companies. Acquired
Fund Fees and Expenses are determined based on the sum of the average
investment in an underlying fund for the previous month during the fiscal year
and by taking the product of the underlying fund's operating
expense ratio as determined from the most recent published financial statement
over the fund of funds' average monthly net assets. The formula to
determine the Acquired Fund Fees and Expenses is as follows:
Latest
Underlying Fund expense ratio X [Sum of Underlying Fund market value for the
month / # of business days in the month]
--------------------------------------------------------------------------------------------------------Fund
of
Funds' Monthly Average Market Value
From time to
time, the Advisor may reduce its fee or make other arrangements to limit a
fund’s expenses to a specified percentage of average daily net assets. The
Advisor retains the right to re-impose a fee and recover any other payments to
the extent that, during the fiscal year in which such expense limitation is
in place, a fund’s annual expenses fall below this limit.
The following
table shows the advisory fees that each fund incurred and paid to the Advisor
for the fiscal periods ended August 31, 2024, August 31,
2023, and August
31, 2022.
|
|
Advisory
Fee Paid in Fiscal Year Ended August 31, |
|
|
|
|
|
Alternative
Asset Allocation Fund |
|
|
|
|
|
|
|
Advisory
Fee Paid in Fiscal Year Ended
August
31, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
Appreciation Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
Appreciation Value Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disciplined
Value Emerging Markets Equity Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Emerging
Markets Debt Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating
Rate Income Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fundamental
Global Franchise Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advisory
Fee Paid in Fiscal Year Ended
August
31, |
|
|
|
|
|
International
Small Company Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International
Strategic Equity Allocation Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multi-Asset
High Income Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lifestyle
Blend Aggressive Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lifestyle
Blend Balanced Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lifestyle
Blend Conservative Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lifestyle
Blend Growth Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lifestyle
Blend Moderate Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multimanager
2065 Lifetime Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multimanager
2060 Lifetime Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multimanager
2055 Lifetime Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multimanager
2050 Lifetime Portfolio |
|
|
|
|
|
|
|
Advisory
Fee Paid in Fiscal Year Ended
August
31, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multimanager
2045 Lifetime Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multimanager
2040 Lifetime Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multimanager
2035 Lifetime Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multimanager
2030 Lifetime Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multimanager
2025 Lifetime Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multimanager
2020 Lifetime Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multimanager
2015 Lifetime Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multimanager
2010 Lifetime Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2065
Lifetime Blend Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2060
Lifetime Blend Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2055
Lifetime Blend Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2050
Lifetime Blend Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advisory
Fee Paid in Fiscal Year Ended
August
31, |
|
|
|
|
|
2045
Lifetime Blend Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2040
Lifetime Blend Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2035
Lifetime Blend Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2030
Lifetime Blend Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2025
Lifetime Blend Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
Lifetime Blend Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
Lifetime Blend Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
Lifetime Blend Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
Opportunistic
Fixed Income Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
Estate Securities Fund |
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
Science
& Technology Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Small
Cap Dynamic Growth Fund |
|
|
|
|
|
|
|
Advisory
Fee Paid in Fiscal Year Ended
August
31, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
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|
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|
|
|
|
|
|
Strategic
Income Opportunities Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Sector Rotation Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pursuant to a
Service Agreement, the Advisor is responsible for providing, at the expense of
the Trust, certain financial, accounting and administrative services such
as legal services, tax, accounting, valuation, financial reporting and
performance, compliance and service provider oversight. Pursuant to the Service
Agreement, the Advisor shall determine, subject to Board approval, the expenses
to be reimbursed by each fund, including an overhead allocation.
The payments under the Service Agreement are not intended to provide a profit to
the Advisor. Instead, the Advisor provides the services under the
Service Agreement because it also provides advisory services under the Advisory
Agreement. The reimbursement shall be calculated and paid monthly
in arrears.
The Advisor is
not liable for any error of judgment or mistake of law or for any loss suffered
by a fund in connection with the matters to which the Service Agreement
relates, except losses resulting from willful misfeasance, bad faith or
negligence by the Advisor in the performance of its duties or from reckless
disregard by the Advisor of its obligations under the Agreement.
The Service
Agreement had an initial term of two years, and continues thereafter so long as
such continuance is specifically approved at least annually by a majority
of the Board and a majority of the Independent Trustees. The Trust, on behalf of
any or all of the funds, or the Advisor may terminate the Agreement at
any time without penalty on 60 days’ written notice to the other party. The
Agreement may be amended by mutual written agreement of the parties,
without obtaining shareholder approval.
The following
table shows the fees that each fund incurred and paid to the Advisor for
non-advisory services pursuant to the Service Agreement for the fiscal periods
ended August 31, 2024, August 31,
2023, and August
31, 2022.
|
|
|
Service
Fee Paid in Fiscal Year Ended August 31, |
|
|
|
|
|
Alternative
Asset Allocation Fund |
|
|
|
|
|
|
|
|
Capital
Appreciation Fund |
|
|
|
Capital
Appreciation Value Fund |
|
|
|
|
|
|
|
|
Disciplined
Value Emerging Markets Equity Fund |
|
|
|
Emerging
Markets Debt Fund |
|
|
|
|
|
|
|
|
Floating
Rate Income Fund |
|
|
|
Fundamental
Global Franchise Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International
Small Company Fund |
|
|
|
International
Strategic Equity Allocation Fund |
|
|
|
|
|
|
|
|
|
|
|
Service
Fee Paid in Fiscal Year Ended August 31, |
|
|
|
|
|
Multi-Asset
High Income Fund |
|
|
|
Lifestyle
Blend Aggressive Portfolio |
|
|
|
Lifestyle
Blend Balanced Portfolio |
|
|
|
Lifestyle
Blend Conservative Portfolio |
|
|
|
Lifestyle
Blend Growth Portfolio |
|
|
|
Lifestyle
Blend Moderate Portfolio |
|
|
|
Multimanager
2065 Lifetime Portfolio |
|
|
|
Multimanager
2060 Lifetime Portfolio |
|
|
|
Multimanager
2055 Lifetime Portfolio |
|
|
|
Multimanager
2050 Lifetime Portfolio |
|
|
|
Multimanager
2045 Lifetime Portfolio |
|
|
|
Multimanager
2040 Lifetime Portfolio |
|
|
|
Multimanager
2035 Lifetime Portfolio |
|
|
|
Multimanager
2030 Lifetime Portfolio |
|
|
|
Multimanager
2025 Lifetime Portfolio |
|
|
|
Multimanager
2020 Lifetime Portfolio |
|
|
|
Multimanager
2015 Lifetime Portfolio |
|
|
|
Multimanager
2010 Lifetime Portfolio |
|
|
|
2065
Lifetime Blend Portfolio |
|
|
|
2060
Lifetime Blend Portfolio |
|
|
|
2055
Lifetime Blend Portfolio |
|
|
|
2050
Lifetime Blend Portfolio |
|
|
|
2045
Lifetime Blend Portfolio |
|
|
|
2040
Lifetime Blend Portfolio |
|
|
|
2035
Lifetime Blend Portfolio |
|
|
|
2030
Lifetime Blend Portfolio |
|
|
|
2025
Lifetime Blend Portfolio |
|
|
|
2020
Lifetime Blend Portfolio |
|
|
|
2015
Lifetime Blend Portfolio |
|
|
|
2010
Lifetime Blend Portfolio |
|
|
|
|
|
|
|
|
Opportunistic
Fixed Income Fund |
|
|
|
Real
Estate Securities Fund |
|
|
|
Science
& Technology Fund |
|
|
|
Small
Cap Dynamic Growth Fund |
|
|
|
|
|
|
|
|
Strategic
Income Opportunities Fund |
|
|
|
U.S.
Sector Rotation Fund |
|
|
|
Duties
of the Subadvisors.
Under the
terms of each of the current subadvisory agreements, including multiple
sub-subadvisory arrangements (each a “Subadvisory
Agreement” and collectively, the “Subadvisory Agreements”), the subadvisors
manage the investment and reinvestment of the assets of the funds,
subject to the supervision of the Board and the Advisor. In addition, for a fund
with a sub-subadvisory arrangement as indicated in its Prospectus,
the activities of the sub-subadvisor are subject to the supervision of that
fund’s subadvisor. Each subadvisor formulates a continuous investment
program for each such fund consistent with its investment objectives and
policies outlined in the Prospectus. Each subadvisor implements such programs
by purchases and sales of securities and regularly reports to the Advisor and
the Board with respect to the implementation of such programs. Each
subadvisor, at its expense, furnishes all necessary investment and management
facilities, including salaries of personnel required for it to execute its
duties, as well as administrative facilities, including bookkeeping, clerical
personnel, and equipment necessary for the conduct of the investment
affairs of the assigned funds. Additional information about the funds’ portfolio
managers, including other accounts managed, ownership of fund shares,
and compensation structure, can be found at Appendix B to this SAI.
The Advisor
has delegated to the subadvisors the responsibility to vote all proxies relating
to the securities held by the funds. See “Other Services — Proxy Voting”
below, for additional information.
Subadvisory
Fees.
As
compensation for its services, each subadvisor receives fees from the Advisor
computed separately for each fund. In respect of a
sub-subadvisory agreement, the fees are paid by the subadvisor to the entity
providing the sub-subadvisory services described below.
Subadvisory
Arrangement for Emerging Markets Debt Fund.
In rendering
investment advisory services to Emerging Markets Debt Fund, Manulife
IM (US), the
subadvisor to the fund, may use the portfolio management, research and other
resources of Manulife Investment Management (Hong Kong) Limited
(“Manulife IM (HK)”), an affiliate of Manulife IM (US). Manulife IM (HK) is not
registered with the SEC as an investment advisor under the Advisers Act. Manulife
IM (US) has entered into a memorandum of understanding and supervisory agreement
(collectively, the “Participating Affiliate Agreement”)
with Manulife IM (HK) pursuant to which Manulife IM (HK) is considered a
participating affiliate of the subadvisor as that term is used in relief granted
by the staff of the SEC allowing U.S. registered investment advisors to use
portfolio management or research resources of advisory affiliates
subject to the supervision of a registered advisor. Investment professionals
from Manulife IM (HK) may render portfolio management, research and other
services to Emerging Markets Debt Fund under the Participating Affiliate
Agreement and are subject to supervision by Manulife IM (US).
Sub-Subadvisory
Arrangements.
Under a
sub-subadvisory arrangement, the sub-subadvisor provides certain investment
advisory services to the fund’s
subadvisor for the benefit of the fund. In each case, the subadvisor pays the
sub-subadvisor, as full compensation for all services provided under
the
sub-subadvisory arrangement, a portion of its subadvisory fee. The Trust does
not incur any expenses in connection with any sub-subadvisor’s services other
than the advisory fee.
|
|
|
|
Capital
Appreciation Value Fund |
T. Rowe
Price Associates, Inc. |
T. Rowe
Price
Investment
Management,
Inc. |
|
|
Western
Asset Management Company, LLC |
Western
Asset
Management
Company
Limited |
Affiliated
Subadvisors.
The Advisor
and the Affiliated Subadvisors are controlled by Manulife
Financial.
Advisory
arrangements involving Affiliated Subadvisors and investment in affiliated
underlying funds present certain conflicts of interest.
For each fund
subadvised by an Affiliated Subadvisor, the Affiliated Subadvisor will benefit
from increased subadvisory fees. In addition, MFC will benefit,
not only from the net advisory fee retained by the Advisor but also from the
subadvisory fee paid by the Advisor to the Affiliated Subadvisor. Consequently,
the Affiliated Subadvisors and MFC may be viewed as benefiting financially from:
(i) the appointment of or continued service of Affiliated Subadvisors to
manage the funds; and (ii) the allocation of the assets of the funds to the
funds having Affiliated Subadvisors. Similarly, the Advisor may be viewed as
having a conflict of interest in the allocation of the assets of the funds to
affiliated underlying funds as opposed to unaffiliated underlying funds.
However, both the Advisor, in recommending to the Board the appointment or
continued service of Affiliated Subadvisors, and such Subadvisors, in allocating
the assets of the funds, have a fiduciary duty to act in the best interests of
the funds and their shareholders. The Advisor has a duty to recommend that
Affiliated Subadvisors be selected, retained, or replaced only when the Advisor
believes it is in the best interests of shareholders. In addition,
under the Trust's “Manager of Managers” exemptive order received from the SEC,
the Trust is required to obtain shareholder approval of any subadvisory
agreement appointing an Affiliated Subadvisor as the subadvisor except as
otherwise permitted by applicable SEC No-Action Letter to a fund (in the
case of a new fund, the initial sole shareholder of the fund, an affiliate of
the Advisor and MFC, may provide this approval). Similarly, each Affiliated
Subadvisor has a duty to allocate assets to Affiliated Subadvised funds, and
affiliated underlying funds more broadly, only when it believes this
is in
shareholders’ best interests and without regard for the financial incentives
inherent in making such allocations. The Independent Trustees are aware of and
monitor these conflicts of interest.
Additional
Information Applicable to Subadvisory Agreements
Term
of each Subadvisory Agreement.
Each
Subadvisory Agreement will initially continue in effect as to a fund for a
period no more than two years from the date
of its execution (or the execution of an amendment making the agreement
applicable to that fund) and thereafter if such continuance is specifically
approved at least annually either: (a) by the Trustees; or (b) by the vote of a
majority of the outstanding voting securities of that fund. In either event,
such continuance also shall be approved by the vote of the majority of the
Trustees who are not interested persons of any party to the Subadvisory
Agreements.
Any required
shareholder approval of any continuance of any Subadvisory Agreement shall be
effective with respect to any fund if a majority of the outstanding
voting securities of that fund votes to approve such continuance, even if such
continuance may not have been approved by a majority of the outstanding
voting securities of: (a) any other series of the Trust affected by the
Subadvisory Agreement; or (b) all of the series of the Trust.
Failure
of Shareholders to Approve Continuance of any Subadvisory Agreement.
If the
outstanding voting securities of any fund fail to approve any
continuance of any Subadvisory Agreement, the party may continue to act as
investment subadvisor with respect to such fund pending the required
approval of
the continuance of the Subadvisory Agreement or a new agreement with either that
party or a different subadvisor, or other definitive action.
Termination
of a Subadvisory Agreement.
A Subadvisory
Agreement may be terminated at any time without the payment of any penalty on 60
days’ written notice
to the other party or parties to the Agreement, and also to the relevant fund.
The following parties may terminate a Subadvisory Agreement:
●
with respect
to any fund, a majority of the outstanding voting securities of such
fund;
●
the applicable
subadvisor.
A Subadvisory
Agreement will automatically terminate in the event of its assignment or upon
termination of the Advisory Agreement.
Amendments
to the Subadvisory Agreements.
A Subadvisory
Agreement may be amended by the parties to the agreement, provided that the
amendment is
approved by the vote of a majority of the outstanding voting securities of the
relevant fund (except as noted below) and by the vote of a majority of
the Independent Trustees. The required shareholder approval of any amendment to
a Subadvisory Agreement shall be effective with respect to any fund if
a majority of the outstanding voting securities of that fund votes to approve
the amendment, even if the amendment may not have been approved by a
majority of the outstanding voting securities of: (a) any other series of the
Trust affected by the amendment; or (b) all the series of the Trust.
As noted under
“Who’s who — Investment advisor” in the Prospectus, an SEC order permits the
Advisor, subject to approval by the Board and a majority of the
Independent Trustees, to appoint a subadvisor (other than an Affiliated
Subadvisor), or change a subadvisory fee or otherwise amend a subadvisory
agreement (other than with an Affiliated Subadvisor) pursuant to an agreement
that is not approved by shareholders.
Proxy
Voting.
Based on the
terms of the current Subadvisory Agreements, the Trust’s proxy voting policies
and procedures (the “Trust Procedures”) delegate to
the subadvisors of each of its funds the responsibility to vote all proxies
relating to securities held by that fund in accordance with the subadvisor’s
proxy voting policies and procedures. A subadvisor has a duty to vote or not
vote such proxies in the best interests of the fund it subadvises and its
shareholders, and to avoid the influence of conflicts of interest. In the event
that the Advisor assumes day-to-day management responsibilities for the fund,
the Trust's Procedures delegate proxy voting responsibilities to the Advisor.
Complete descriptions of the Trust Procedures and the proxy voting
procedures of the Advisor and the subadvisors are set forth in Appendix C to
this SAI.
It is possible
that conflicts of interest could arise for a subadvisor when voting proxies.
Such conflicts could arise, for example, when a subadvisor or its affiliate has
an existing business relationship with the issuer of the security being voted or
with a third party that has an interest in the vote. A conflict of interest also
could arise when a fund, its Advisor or principal underwriter or any of their
affiliates has an interest in the vote.
In the event a
subadvisor becomes aware of a material conflict of interest, the Trust
Procedures generally require the subadvisor to follow any conflicts procedures
that may be included in the subadvisor’s proxy voting procedures. Although
conflicts procedures will vary among subadvisors, they generally
include one or more of the following:
(a)
voting
pursuant to the recommendation of a third party voting service;
(b)
voting
pursuant to pre-determined voting guidelines; or
(c)
referring
voting to a special compliance or oversight committee.
The specific
conflicts procedures of each subadvisor are set forth in its proxy voting
procedures included in Appendix C. While these conflicts procedures may
reduce the influence of conflicts of interest on proxy voting, such influence
will not necessarily be eliminated.
Although a
subadvisor may have a duty to vote all proxies on behalf of the fund that it
subadvises, it is possible that the subadvisor may not be able to vote proxies
under certain circumstances. For example, it may be impracticable to translate
in a timely manner voting materials that are written in a foreign
language or to travel to a foreign country when voting in person rather than by
proxy is required. In addition, if the voting of proxies for shares of
a
security prohibits a subadvisor from trading the shares in the marketplace for a
period of time, the subadvisor may determine that it is not in the best
interests of
the fund to vote the proxies. In addition, consistent with its duty to vote
proxies in the best interests of a fund’s shareholders, a subadvisor
may refrain
from voting one or more of the fund’s proxies if the subadvisor believes that
the costs of voting such proxies may outweigh the potential benefits. For
example, the subadvisor may choose not to recall securities where the subadvisor
believes the costs of voting may outweigh the potential benefit of
voting. A subadvisor also may choose not to recall securities that have been
loaned in order to vote proxies for shares of the security since the
fund would
lose security lending income if the securities were recalled.
Information
regarding how a fund voted proxies relating to portfolio securities during the
most recent 12-month period ended June 30th is available: (1) without
charge, upon request,
by calling 800-225-5291;
(2) on
www.jhinvestments.com; and
(3) on the SEC’s
website at sec.gov.
The Trust has
a Distribution Agreement with John Hancock Investment Management Distributors
LLC, an affiliate of the Advisor, and the principal underwriter of
the funds, located at 200 Berkeley Street, Boston, Massachusetts 02116. Under
the Distribution Agreement, the Distributor is obligated to use its
best efforts to sell shares of each class of the funds. Shares of the funds also
are sold by selected broker-dealers, banks and registered investment
advisors (“Selling Firms”) that have entered into selling agreements with the
Distributor. These Selling Firms are authorized to designate other
intermediaries to receive purchase and redemption orders on behalf of the funds.
The Distributor accepts orders for the purchase of the shares of the funds that
are continually offered at the NAV next determined, plus any applicable sales
charge. Class I, Class NAV, Class R2, Class R4, Class R5,
Class R6, and
Class 1 shares of the funds are offered without a front-end sales load or CDSC.
In connection with the sale of Class A shares, the Distributor
and Selling Firms typically receive compensation from a sales charge imposed at
the time of sale. In the case of both Class A shares and Class C shares
where a CDSC is applicable, the Selling Firms receive compensation immediately,
but the Distributor is compensated on a deferred basis. Neither
the Distributor nor Selling Firms receive any compensation with respect to the
sale of Class R6 shares of the funds.
With respect
to share classes other than Class R6, the Distributor may make, either from Rule
12b-1 distribution fees, if applicable, or out of its own resources,
additional payments to financial intermediaries (firms), such as broker-dealers,
banks, registered investment advisors, independent financial
planners, and retirement plan administrators. These payments are sometimes
referred to as “revenue sharing.” No such payments are made with respect
to the funds’ Class R6 shares.
The funds do
not issue share certificates. Shares are electronically recorded. The Board
reserves the right to change or waive a fund’s minimum investment
requirements and to reject any order to purchase shares (including purchase by
exchange) when, in the judgment of the Advisor or the relevant
subadvisor, such rejection is in the fund’s best interest.
Underwriting
Commissions.
The following
table shows the underwriting commissions that the Distributor charged and
retained with respect to transactions
in Class A and Class C shares of the funds for the fiscal periods ended August
31, 2024, August 31,
2023, and August
31, 2022.
|
|
|
Fiscal
Period Ended August 31, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alternative
Asset
Allocation
Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disciplined
Value
Emerging
Markets
Equity
Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Emerging
Markets
Debt
Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating
Rate
Income
Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fundamental
Global
Franchise
Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International
Small
Company
Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multi-Asset
High
Income
Fund |
|
|
|
|
|
|
|
|
|
|
Fiscal
Period Ended August 31, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lifestyle
Blend
Aggressive
Portfolio |
|
|
|
|
|
|
|
Lifestyle
Blend
Balanced
Portfolio |
|
|
|
|
|
|
|
Lifestyle
Blend
Conservative
Portfolio |
|
|
|
|
|
|
|
Lifestyle
Blend
Growth
Portfolio |
|
|
|
|
|
|
|
Lifestyle
Blend
Moderate
Portfolio |
|
|
|
|
|
|
|
2065
Lifetime
Blend
Portfolio |
|
|
|
|
|
|
|
2060
Lifetime
Blend
Portfolio |
|
|
|
|
|
|
|
2055
Lifetime
Blend
Portfolio |
|
|
|
|
|
|
|
2050
Lifetime
Blend
Portfolio |
|
|
|
|
|
|
|
2045
Lifetime
Blend
Portfolio |
|
|
|
|
|
|
|
2040
Lifetime
Blend
Portfolio |
|
|
|
|
|
|
|
2035
Lifetime
Blend
Portfolio |
|
|
|
|
|
|
|
2030
Lifetime
Blend
Portfolio |
|
|
|
|
|
|
|
2025
Lifetime
Blend
Portfolio |
|
|
|
|
|
|
|
2020
Lifetime
Blend
Portfolio |
|
|
|
|
|
|
|
2015
Lifetime
Blend
Portfolio |
|
|
|
|
|
|
|
2010
Lifetime
Blend
Portfolio |
|
|
|
|
|
|
|
Multimanager
2065
Lifetime
Portfolio |
|
|
|
|
|
|
|
Multimanager
2060
Lifetime
Portfolio |
|
|
|
|
|
|
|
Multimanager
2055
Lifetime
Portfolio |
|
|
|
|
|
|
|
Multimanager
2050
Lifetime
Portfolio |
|
|
|
|
|
|
|
|
|
|
Fiscal
Period Ended August 31, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multimanager
2045
Lifetime
Portfolio |
|
|
|
|
|
|
|
Multimanager
2040
Lifetime
Portfolio |
|
|
|
|
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Multimanager
2035
Lifetime
Portfolio |
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Multimanager
2030
Lifetime
Portfolio |
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Multimanager
2025
Lifetime
Portfolio |
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Multimanager
2020
Lifetime
Portfolio |
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Multimanager
2015
Lifetime
Portfolio |
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Multimanager
2010
Lifetime
Portfolio |
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Opportunistic
Fixed
Income
Fund |
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Real
Estate
Securities
Fund |
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Small
Cap
Dynamic
Growth
Fund |
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Strategic
Income
Opportunities
Fund |
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Distribution
Plans.
The Board has
adopted distribution plans with respect to Class A , Class C, Class R2, Class
R4, Class R5, and Class 1 shares pursuant to
Rule 12b-1 under the 1940 Act (the “Rule 12b-1 Plans”). Under the Rule 12b-1
Plans, a fund may pay distribution and service fees based on average daily
net assets attributable to those classes, at the maximum aggregate annual rates
shown in the following table. However, the service portion of the Rule
12b-1 fees borne by a class of shares of a fund will not exceed 0.25% of average
daily net assets attributable to such class of shares.
|
|
|
Class
A (Each fund other than Floating Rate Income Fund, Multi-Asset High Income
Fund, New Opportunities
Fund,
Opportunistic Fixed Income Fund, Real Estate Securities Fund, and Small
Cap Dynamic Growth Fund) |
|
Class
A (Floating Rate Income Fund, Multi-Asset High Income Fund, New
Opportunities Fund, Opportunistic
Fixed
Income Fund, Real Estate Securities Fund, and Small Cap Dynamic Growth
Fund) |
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1
The
Distributor has contractually agreed to limit the Rule 12b-1 distribution and
service fees for Class R4 shares of Alternative
Asset Allocation Fund, Global Equity Fund, New
Opportunities Fund, the
2010-2065 Lifetime
Blend Portfolios and the 2010-2065 Multimanager Lifetime Portfolios to 0.15% until
December 31, 2025.
The
distribution portion of the fees payable pursuant to the Rule 12b-1 Plans may be
spent on any activities or expenses primarily intended to result in the sale of
shares of the particular class, including but not limited to: (i) compensation
to Selling Firms and others (including affiliates of the Distributor)
that are
engaged in or support the sale of fund shares; and (ii) marketing, promotional
and overhead expenses incurred in connection with the distribution
of fund shares. The service portion of the fees payable pursuant to the Rule
12b-1 Plans may be used to compensate Selling Firms and others for
providing personal and account maintenance services to shareholders. The fees
paid under the Class 1 shares’ Rule 12b-1 Plans also may be used for
certain shareholder and administrative services.
The Rule 12b-1
Plans and all amendments were approved by the Board, including a majority of the
Independent Trustees, by votes cast in person at meetings
called for the purpose of voting on the Rule 12b-1 Plans. Pursuant to the Rule
12b-1 Plans, at least quarterly, the Distributor provides the Board with a
written report of the amounts expended under the Rule 12b-1 Plans and the
purpose for which these expenditures were made. The Board reviews these
reports on a quarterly basis to determine the continued appropriateness of such
expenditures.
Each Rule
12b-1 Plan provides that it will continue in effect only so long as its
continuance is approved at least annually by a majority of both the Board
and the
Independent Trustees. Each Rule 12b-1 Plan provides that it may be terminated
without penalty: (a) by a vote of a majority of the Independent Trustees; and
(b) by a vote of a majority of the fund’s outstanding shares of the applicable
class, in each case upon 60 days’ written notice to the Distributor.
Each Rule 12b-1 Plan further provides that it may not be amended to increase
materially the maximum amount of the fees for the services described
therein without the approval of a majority of the outstanding shares of the
class of a fund that has voting rights with respect to the Rule 12b-1
Plan. The Rule
12b-1 Plans provide that no material amendment to the Rule 12b-1 Plans will be
effective unless it is approved by a majority vote of the Board and the
Independent Trustees of the Trust. The holders of Class A , Class C, Class R2,
Class R4, Class R5, and Class 1 shares have exclusive voting rights
with respect to the Rule 12b-1 Plans applicable to their class of shares. In
adopting the Rule 12b-1 Plans, the Board, including the Independent
Trustees, concluded that, in their judgment, there is a reasonable likelihood
that the Rule 12b-1 Plans will benefit the holders of the applicable
classes of shares of each fund.
Class I, Class
NAV, and Class R6 shares of the funds are not subject to any Rule 12b-1 Plan.
Expenses associated with the obligation of the Distributor to use its best
efforts to sell Class I, Class NAV, and Class R6 shares will be paid by the
Advisor or by the Distributor and will not be paid from the fees paid
under the Rule
12b-1 Plan for any other class of shares. In addition, expenses associated with
the obligation of the Distributor to use its best efforts to sell Class R5
shares will be paid by the Advisor or by the Distributor and will not be paid by
the funds.
Amounts paid
to the Distributor by any class of shares of a fund will not be used to pay the
expenses incurred with respect to any other class of shares of that fund;
provided, however, that expenses attributable to the fund as a whole will be
allocated, to the extent permitted by law, according to a formula based upon
gross sales dollars and/or average daily net assets of each such class, as may
be approved from time to time by vote of a majority of the Trustees. From
time to time, a fund may participate in joint distribution activities with other
funds and the costs of those activities will be borne by the fund in
proportion to the relative NAVs of the fund and the other funds.
Each Rule
12b-1 Plan recognizes that the Advisor may use its management fee revenue under
the Advisory Agreement with a fund as well as its past profits or
other resources from any source to make payments with respect to expenses
incurred in connection with the distribution of shares of the fund. To the extent
that the payment of management fees by a fund to the Advisor should be deemed to
be the indirect financing of any activity primarily intended to
result in the sale of shares of a class within the meaning of Rule 12b-1, such
payments are deemed to be authorized by the Rule 12b-1 Plan.
During the
fiscal period ended August 31, 2024, the
following amounts were paid to the Distributor pursuant to each fund’s Rule
12b-1 Plans.
|
|
|
Rule 12b-1
Service Fee
Payments
($) |
Rule 12b-1
Distribution Fee Payments
($) |
Alternative
Asset Allocation Fund |
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|
Alternative
Asset Allocation Fund |
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|
Rule 12b-1
Service Fee
Payments
($) |
Rule 12b-1
Distribution Fee Payments
($) |
Alternative
Asset Allocation Fund |
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Alternative
Asset Allocation Fund |
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Capital
Appreciation Fund |
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Disciplined
Value Emerging Markets
Equity
Fund |
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Disciplined
Value Emerging Markets
Equity
Fund |
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Emerging
Markets Debt Fund |
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Emerging
Markets Debt Fund |
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Floating
Rate Income Fund |
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Floating
Rate Income Fund |
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Floating
Rate Income Fund |
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Fundamental
Global Franchise Fund |
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International
Small Company Fund |
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International
Small Company Fund |
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Multi-Asset
High Income Fund |
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Multi-Asset
High Income Fund |
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Lifestyle
Blend Aggressive Portfolio |
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Lifestyle
Blend Aggressive Portfolio |
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Lifestyle
Blend Balanced Portfolio |
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Lifestyle
Blend Balanced Portfolio |
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Lifestyle
Blend Conservative Portfolio |
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Lifestyle
Blend Conservative Portfolio |
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Lifestyle
Blend Growth Portfolio |
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Lifestyle
Blend Growth Portfolio |
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Lifestyle
Blend Moderate Portfolio |
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Lifestyle
Blend Moderate Portfolio |
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Multimanager
2065 Lifetime Portfolio |
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Multimanager
2065 Lifetime Portfolio |
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Multimanager
2065 Lifetime Portfolio |
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Multimanager
2065 Lifetime Portfolio |
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Multimanager
2060 Lifetime Portfolio |
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Multimanager
2060 Lifetime Portfolio |
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Multimanager
2060 Lifetime Portfolio |
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Multimanager
2060 Lifetime Portfolio |
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Multimanager
2055 Lifetime Portfolio |
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|
Rule 12b-1
Service Fee
Payments
($) |
Rule 12b-1
Distribution Fee Payments
($) |
Multimanager
2055 Lifetime Portfolio |
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Multimanager
2055 Lifetime Portfolio |
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Multimanager
2055 Lifetime Portfolio |
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Multimanager
2050 Lifetime Portfolio |
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Multimanager
2050 Lifetime Portfolio |
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Multimanager
2050 Lifetime Portfolio |
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Multimanager
2050 Lifetime Portfolio |
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Multimanager
2045 Lifetime Portfolio |
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Multimanager
2045 Lifetime Portfolio |
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Multimanager
2045 Lifetime Portfolio |
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Multimanager
2045 Lifetime Portfolio |
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Multimanager
2040 Lifetime Portfolio |
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Multimanager
2040 Lifetime Portfolio |
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Multimanager
2040 Lifetime Portfolio |
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Multimanager
2040 Lifetime Portfolio |
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Multimanager
2035 Lifetime Portfolio |
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Multimanager
2035 Lifetime Portfolio |
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|
Multimanager
2035 Lifetime Portfolio |
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Multimanager
2035 Lifetime Portfolio |
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|
Multimanager
2030 Lifetime Portfolio |
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Multimanager
2030 Lifetime Portfolio |
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Multimanager
2030 Lifetime Portfolio |
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Multimanager
2030 Lifetime Portfolio |
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Multimanager
2025 Lifetime Portfolio |
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Multimanager
2025 Lifetime Portfolio |
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Multimanager
2025 Lifetime Portfolio |
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Multimanager
2025 Lifetime Portfolio |
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Multimanager
2020 Lifetime Portfolio |
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Multimanager
2020 Lifetime Portfolio |
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Multimanager
2020 Lifetime Portfolio |
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Multimanager
2020 Lifetime Portfolio |
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Multimanager
2015 Lifetime Portfolio |
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Multimanager
2015 Lifetime Portfolio |
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Multimanager
2015 Lifetime Portfolio |
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Multimanager
2015 Lifetime Portfolio |
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Multimanager
2010 Lifetime Portfolio |
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Multimanager
2010 Lifetime Portfolio |
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Multimanager
2010 Lifetime Portfolio |
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|
2065
Lifetime Blend Portfolio |
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2065
Lifetime Blend Portfolio |
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2065
Lifetime Blend Portfolio |
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2060
Lifetime Blend Portfolio |
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2060
Lifetime Blend Portfolio |
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2060
Lifetime Blend Portfolio |
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2055
Lifetime Blend Portfolio |
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2055
Lifetime Blend Portfolio |
|
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|
2055
Lifetime Blend Portfolio |
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|
2050
Lifetime Blend Portfolio |
|
|
|
|
|
|
Rule 12b-1
Service Fee
Payments
($) |
Rule 12b-1
Distribution Fee Payments
($) |
2050
Lifetime Blend Portfolio |
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|
2050
Lifetime Blend Portfolio |
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2045
Lifetime Blend Portfolio |
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|
2045
Lifetime Blend Portfolio |
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|
2045
Lifetime Blend Portfolio |
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|
2040
Lifetime Blend Portfolio |
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|
2040
Lifetime Blend Portfolio |
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|
2040
Lifetime Blend Portfolio |
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|
2035
Lifetime Blend Portfolio |
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|
2035
Lifetime Blend Portfolio |
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|
2035
Lifetime Blend Portfolio |
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2030
Lifetime Blend Portfolio |
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|
2030
Lifetime Blend Portfolio |
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|
2030
Lifetime Blend Portfolio |
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|
2025
Lifetime Blend Portfolio |
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|
2025
Lifetime Blend Portfolio |
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|
2025
Lifetime Blend Portfolio |
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2020
Lifetime Blend Portfolio |
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2020
Lifetime Blend Portfolio |
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2020
Lifetime Blend Portfolio |
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2015
Lifetime Blend Portfolio |
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2015
Lifetime Blend Portfolio |
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2015
Lifetime Blend Portfolio |
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2010
Lifetime Blend Portfolio |
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2010
Lifetime Blend Portfolio |
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2010
Lifetime Blend Portfolio |
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Opportunistic
Fixed Income Fund |
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|
Opportunistic
Fixed Income Fund |
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|
Opportunistic
Fixed Income Fund |
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|
Real
Estate Securities Fund |
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|
Real
Estate Securities Fund |
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|
Real
Estate Securities Fund |
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|
Small
Cap Dynamic Growth Fund |
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|
|
Small
Cap Dynamic Growth Fund |
|
|
|
Strategic
Income Opportunities Fund |
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|
Strategic
Income Opportunities Fund |
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|
Strategic
Income Opportunities Fund |
|
|
|
Class
R Service Plans.
The Trust has
adopted a separate service plan with respect to Class R2, Class R4, and Class R5
shares of the applicable funds (the “Class R
Service Plans”). The Class R Service Plans authorize a fund to pay securities
dealers, plan administrators or other service organizations who agree to
provide certain services to retirement plans, or plan participants holding
shares of the fund a service fee of up to a specified percentage of the fund’s
average daily net assets attributable to the applicable class of shares held by
such plan participants. The percentages are 0.25% for Class R2 shares, 0.10%
for Class R4 shares, and 0.05% for Class R5 shares. The services may include (a)
acting, directly or through an agent, as the shareholder
and nominee
for all plan participants; (b) maintaining account records for each plan
participant that beneficially owns the applicable class of shares; (c)
processing
orders to purchase, redeem and exchange the applicable class of shares on behalf
of plan participants, and handling the transmission of funds
representing the purchase price or redemption proceeds; (d) addressing plan
participant questions regarding their accounts and the funds; and (e) other
services related to servicing such retirement plans.
As part of
their business strategy, the funds, along with the Distributor, pay compensation
to Selling Firms that sell the shares of the funds. These firms typically pass
along a portion of this compensation to the shareholder’s broker or financial
professional.
The primary
sources of Selling Firm compensation payments for sales of shares of the funds
are: (1) the Rule 12b-1 fees that are applicable to the class of shares
being sold and that are paid out of a fund’s assets; and (2) in the case of
Class A and Class C shares, sales charges paid by investors. The sales
charges and
Rule 12b-1 fees are detailed in the relevant Prospectus and under “Distribution
Agreements,” “Sales Charges on Class A and Class C Shares,” and
“Deferred Sales Charge on Class A and Class C Shares” in this SAI. For Class I
shares, the Distributor may make a one-time payment at the time of
initial purchase out of its own resources to a Selling Firm that sells Class I
shares of the funds. This payment may not exceed 0.15% of the amount
invested.
Initial
Compensation.
Whenever an
investor purchases Class A or Class C shares of a fund, the Selling Firm
receives a reallowance/payment/commission as described
in the section “First Year Broker or Other Selling Firm
Compensation.”
Annual
Compensation.
Except as
provided below, for Class A share purchases of a fund, beginning with the first
year an investment is made, the Selling Firm
receives an annual Rule 12b-1 fee of 0.25% of its average daily net assets
invested in the fund. This Rule 12b-1 fee is paid monthly in arrears.
For Class A
investments of $1 million or more in most funds, investments by certain
retirement plans where a finder's fee has been paid, and investments
made in Class C shares of a fund, beginning in the second year after an
investment is made, the Selling Firm receives an annual Rule 12b-1 service fee of
up to 0.25% of its average daily net (eligible) assets invested in the fund. The
term “(eligible) assets” used in this context refers to shares held for more
than one year. In addition, beginning in the second year after an investment is
made in Class C shares of a fund, the Distributor will pay the Selling Firm a
distribution fee in an amount not to exceed 0.75% of the average daily net
(eligible) assets invested in the fund. These service and distribution
fees are paid monthly in arrears.
For Class R2
and Class R4 shares of a fund, beginning in the first year after an investment
is made, the Selling Firm receives an annual Rule 12b-1 service fee of
0.25% of its average daily net (eligible) assets, except that the annual Rule
12b-1 distribution and service fee payable to Selling Firms for Class R4
shares of certain funds is limited to 0.15% of the average daily net assets of
Class R4 shares for each such fund until December 31, 2025, as
described in
each such fund’s Class R4 Prospectus.
The
Distributor may pay all or part of the Rule 12b-1 fees applicable to Class 1
shares of a fund to one or more affiliated and unaffiliated insurance
companies that
have issued group annuity contracts for which the fund serves as an investment
vehicle as compensation for providing some or all of the types of
services contemplated by the Class 1 Rule 12b-1 Plan. In addition, as further
compensation for providing these services, the Advisor, but not any of the
funds, pays each Affiliated Insurance Company an administrative fee equal to
0.25% of the total average daily net assets of the funds attributable
to variable contracts issued by the Affiliated Insurance
Company.
For more
information, see the table below under the column captioned “Selling Firm
receives Rule 12b-1 service fee.” These service and distribution fees are paid
monthly in arrears.
Additional
Payments to Financial Intermediaries.
Shares of the
funds are primarily sold through financial intermediaries (firms), such as
broker-dealers,
banks, registered investment advisors, independent financial planners, and
retirement plan administrators. In addition to sales charges, which are
payable by shareholders, and Rule 12b-1 distribution fees, which are paid by the
funds, the Advisor, the Distributor or another affiliate makes additional
payments to firms out of its own resources. These payments are sometimes
referred to as “revenue sharing.” Many firms involved in the sale of fund shares
receive one or more types of these cash payments. The categories of payments
that the Advisor, the Distributor or another affiliate provides to
firms are described below. These categories are not mutually exclusive and the
Advisor, the Distributor or another affiliate may make additional
types of revenue sharing payments in the future. Some firms receive payments
under more than one or all categories. These payments assist in the efforts
of the Advisor, the Distributor or another affiliate to promote the sale of the
funds’ shares. The Advisor, the Distributor or another affiliate agrees with
the firm on the methods for calculating any additional compensation, which may
include the level of sales or assets attributable to the firm. Not all firms
receive additional compensation and the amount of compensation varies. These
payments could be significant to a firm and are an important
factor in a firm’s willingness to support the sale of the funds through its
distribution system. To the extent firms receiving such payments purchase
shares of the funds on behalf of their clients, the Advisor and/or the
Distributor benefit from increased management and other fees with respect to
those assets. The Advisor, the Distributor or another affiliate determines which
firms to make payments to and the extent of the payments it is willing to
make. The Advisor, the Distributor or another affiliate generally chooses to
compensate firms that have a strong capability to distribute shares of the funds
and that are willing to cooperate with the promotional efforts of the Advisor,
the Distributor or another affiliate. The Advisor, the Distributor or another
affiliate does not make an independent assessment of the cost of providing such
services.
The provision
of these additional payments, the varying fee structures and the basis on which
a firm compensates its registered representatives or salespersons
creates an incentive for a particular firm, registered representative, or
salesperson to highlight, feature or recommend funds, including the funds, or
other investments based, at least in part, on the level of compensation paid.
Additionally, if greater payments are made with respect to one mutual fund
complex than another, a firm has an incentive to recommend one fund complex over
another. Similarly, if a firm receives greater compensation
for one share class versus another, that firm has an incentive to recommend the
share class with the greater compensation. Shareholders
should consider whether such incentives exist when evaluating any
recommendations from a firm to purchase or sell shares of the funds and when
considering which share class is most appropriate. Shareholders should ask their
salesperson or visit their firm’s website for more information about the
additional payments they receive and any potential conflicts of interest, as
well as for information regarding any fees and/or commissions the firm charges.
Firms may categorize and disclose these arrangements differently than the
Distributor and its affiliates.
As of August
31, 2024, the
following member firms of the Financial Industry Regulatory Authority, Inc.
(“FINRA”) have arrangements in effect with the Advisor, the
Distributor or another affiliate pursuant to which the firm is entitled to a
revenue sharing payment at an annual rate of up to 0.25% of the value of the
fund shares sold or serviced by the firm:
|
|
Ameriprise
Financial Services, Inc. |
Avantax
Wealth Management |
Avantax
Planning Partners, Inc. |
|
|
Banc
of America/Merrill Lynch |
BOK
Financial Securities, Inc. |
Centaurus
Financial, Inc. |
Cetera
- Advisor Network LLC |
|
|
Cetera
- Financial Institutions |
Cetera
- Financial Specialists, Inc. |
|
|
Commonwealth
Financial Network |
Concourse
Financial Group Securities |
Crown
Capital Securities L.P. |
|
|
|
|
Fidelity
- Fidelity Brokerage Services LLC |
Fidelity
- Fidelity Investments Institutional Operations Company,
Inc. |
Fidelity
- National Financial Services LLC |
Fifth
Third Securities, Inc. |
First
Command Financial Planning |
|
|
|
|
|
|
|
|
Independent
Financial Group |
J.P.
Morgan Securities
LLC |
|
|
|
|
|
|
MML
Investor Services, Inc. |
Money
Concepts Capital Corp. |
Morgan
Stanley Wealth Management, LLC |
Northwestern
Mutual Investment Services, LLC |
Osaic
- American Portfolios Financial Services, Inc. |
Osaic
- FSC Securities Corporation |
Osaic
- Osaic Institutions, Inc. |
Osaic
- Osaic Services, Inc. |
Osaic
- Osaic Wealth, Inc. |
Osaic
- Woodbury Financial Services |
Osaic
- Securities America, Inc. |
Osaic
- Triad Advisors, LLC. |
Principal
Securities, Inc. |
Raymond
James and Associates, Inc. |
Raymond
James Financial Services, Inc. |
RBC
Capital Markets Corporation |
|
|
Sanctuary
Wealth Group, LLC |
Stifel,
Nicolaus, & Co, Inc. |
|
|
The
Investment Center, Inc. |
Transamerica
Financial Advisors, Inc. |
UBS
Financial Services, Inc. |
Unionbanc
Investment Services |
|
|
The Advisor,
the Distributor or another affiliate also has arrangements with intermediaries
that are not members of FINRA.
The Advisor,
the Distributor or another affiliate may revise the terms of any existing
revenue sharing arrangement, and may enter into additional revenue sharing
arrangements with other firms in the future.
Sales
and Asset Based Payments.
The Advisor,
the Distributor or another affiliate makes revenue sharing payments as
incentives to certain firms to promote and
sell shares of the funds. The Advisor, the Distributor or another affiliate
hopes to benefit from revenue sharing by increasing the funds’ net assets, which,
as well as benefiting the funds, would result in additional management and other
fees for the Advisor and its affiliates. In consideration for revenue
sharing compensation, some firms will feature certain funds in their sales
systems or give the Advisor, the Distributor or another affiliate additional
access to members of their sales forces or management. In addition, some firms
agree to participate in the marketing efforts of the Advisor, the
Distributor or another affiliate by allowing the Advisor, the Distributor or
another affiliate to participate in conferences, seminars or other programs
attended by
the firm’s sales force. Although certain firms seek revenue sharing payments to
offset costs incurred by the firm in servicing the firm’s clients that
have invested in the funds, such firms may still earn a profit on these
payments. Revenue sharing payments provide a firm with an incentive to recommend
the funds.
The payments
to firms generally are negotiated based on a number of factors including, but
not limited to, quality of service, reputation in the industry, ability to
attract and retain assets, target markets, customer relationships, and
relationship with the Advisor, the Distributor or another affiliate. No one
factor is
determinative of the type or amount of additional compensation to be provided.
The amount of these payments, as determined from time to time by the
Advisor, the Distributor or another affiliate in its sole discretion, may be
different for different firms. For example, one way in which revenue
sharing
payments made by the Advisor, the Distributor or another affiliate are
calculated is on sales of shares of the funds (“Sales-Based Payments”).
Such payments
can also be calculated on the average daily net assets of the applicable funds
attributable to that particular financial intermediary or on another subset
of assets of funds in the John Hancock Fund Complex (“Asset-Based Payments”).
Sales-Based Payments primarily create incentives for firms to sell
shares of the funds and Asset-Based Payments primarily create incentives for
firms to retain previously sold shares of the funds in investor accounts. The
Advisor, the Distributor or another affiliate pays firms either or both
Sales-Based Payments and Asset-Based Payments. The compensation
arrangements described in this section are not mutually exclusive, and a single
firm may receive multiple types of compensation. Such payments may
be calculated by reference to the gross or net sales by such person, the average
net assets of shares held by the customers of such person, the
number of accounts of the funds attributable to such person, on the basis of a
flat fee or a negotiated lump sum payment for services provided, or
otherwise.
Administrative,
Technology, and Processing Support Payments.
The Advisor,
the Distributor or another affiliate also pays certain firms that sell
shares of the
funds for certain administrative services, including recordkeeping and
sub-accounting shareholder accounts, to the extent that the funds do not pay for
these costs directly. The Advisor, the Distributor or another affiliate also
makes payments to certain firms that sell shares of the funds in connection
with client account maintenance support, statement preparation and transaction
processing. The types of payments that the Advisor, the Distributor or
another affiliate makes under this category include, among others, payment of
ticket charges per purchase or exchange order placed by a financial
intermediary, payment of networking fees in connection with certain fund trading
systems, or one-time payments for ancillary services such as setting up
funds on a firm’s fund trading system. The Advisor, the Distributor or another
affiliate also makes platform support payments to some firms for the purpose of
supporting services provided by a financial firm’s servicing of shareholder
accounts, including, but not limited to, platform education and communications,
relationship management support, development to support new or changing
products, eligibility for inclusion on sample fund line-ups, trading or
order taking platforms and related infrastructure/technology and/or legal, risk
management and regulatory compliance infrastructure in support of
investment related products, programs and services. In addition, the Advisor,
the Distributor or another affiliate may pay for certain services including
technology, operations, tax, “due diligence,” or audit consulting
services.
Retirement
Plan Program Servicing Payments.
The Advisor,
the Distributor or another affiliate may make payments to certain financial
intermediaries
who sell fund shares through retirement plan programs. A financial intermediary
may perform retirement plan program services itself or may arrange
with a third party to perform retirement plan program services. In addition to
participant recordkeeping, reporting or transaction processing,
retirement plan program services may include: services rendered to a plan in
connection with fund/investment selection and monitoring; employee
enrollment and education; plan balance rollover or separation; or other similar
services.
Marketing
Support Payments.
The Advisor,
the Distributor or another affiliate makes payments to some firms for marketing
support services, including:
providing periodic and ongoing education and training and support of firm
personnel regarding the funds; disseminating to firm personnel information
and product marketing materials regarding the funds; explaining to firms’
clients the features and characteristics of the funds; conducting due diligence
regarding the funds; granting access (in some cases on a preferential basis over
other competitors) to sales meetings, sales representatives
and management representatives of the firm; and providing business planning
assistance, marketing support, advertising and other services.
Other
Cash Payments.
From time to
time, the Advisor, the Distributor or another affiliate provides, either from
Rule 12b-1 distribution fees or out of its own
resources, additional compensation to firms that sell or arrange for the sale of
shares of the funds. Such compensation provided by the Advisor, the
Distributor or another affiliate may take various forms, including payments for
the receipt of analytical data in relation to sales of fund shares, financial
assistance to firms that enable the Advisor, the Distributor or another
affiliate to participate in and/or present at conferences or seminars,
sales or
training programs for invited registered representatives and other employees,
client entertainment, client and investor events, and other firm-sponsored
events, and travel expenses, including lodging incurred by registered
representatives and other employees in connection with client prospecting,
retention and due diligence trips. Other compensation may be offered to the
extent not prohibited by federal or state laws or any self-regulatory
agency, such as FINRA. The Advisor, the Distributor or another affiliate makes
payments for entertainment events it deems appropriate, subject to its
guidelines and applicable law. These payments vary depending upon the nature of
the event or the relationship.
In certain
circumstances, the Advisor, the Distributor or another affiliate has other
relationships with some firms relating to the provisions of services to
the funds,
such as providing omnibus account services or transaction processing services,
or effecting portfolio transactions for the funds. If a firm provides these
services, the Advisor or the funds may compensate the firm for these services.
In addition, in certain circumstances, some firms have other
compensated or uncompensated relationships with the Advisor or its affiliates
that are not related to the funds.
First
Year Broker or Other Selling Firm Compensation |
|
|
Investor
pays sales
charge
(% of offering
|
|
Selling
Firm Receives
Rule
12b-1 service fee
(%) |
|
Class
A investments of less than
$1
million (Equity Funds and
Alternative
Funds)5 |
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|
Class
A investments of less than
$500,000
(Emerging Markets Debt
Fund,
Opportunistic Fixed Income
Fund
and Strategic Income
Opportunities
Fund)5 |
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Class
A investments of less than
$250,000
(Floating Rate Income
Fund)5 |
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Class
A investments of less than
$250,000
(Multi-Asset High Income
Fund)5 |
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Class
A investments of $1 million or
more
(excluding Floating Rate
Income
Fund, Multi-Asset High
Income
Fund, Emerging Markets
Debt
Fund, Opportunistic Fixed
Income
Fund and Strategic Income
Opportunities
Fund)6 |
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Next
$1 or more above that |
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Class
A investments of $500,000 or
more
(Emerging Markets Debt Fund,
Opportunistic
Fixed Income Fund and
Strategic
Income Opportunities
|
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Next
$1 or more above that |
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Class
A investments of $250,000 or
more
(Floating Rate Income Fund)6 |
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Next
$1 or more above that |
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Class
A investments of $250,000 or
more
(Multi-Asset High Income
|
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Next
$1 or more above that |
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First
Year Broker or Other Selling Firm Compensation |
|
|
Investor
pays sales
charge
(% of offering
price)1 |
Selling
Firm receives
commission
(%)2 |
Selling
Firm Receives
Rule
12b-1 service fee
(%) |
Total
Selling Firm
compensation
(%)3,4 |
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1
See “Sales
Charges on Class A and Class C Shares” for discussion on how to qualify for a
reduced sales charge. The Distributor may take recent redemptions into
account in
determining if an investment qualifies as a new investment.
2
For Class A
investments under $1 million(under $500,000 for
Emerging Markets Debt Fund, Opportunistic Fixed Income Fund and Strategic Income
Opportunities Fund, and
under $250,000 for
Floating Rate Income Fund), a portion of the Selling Firm’s commission is paid
out of the front-end sales charge.
3
Selling Firm
commission, Rule 12b-1 service fee, and any underwriter fee percentages are
calculated from different amounts, and therefore may not equal the total
Selling Firm
compensation percentages due to rounding, when combined using simple
addition.
4
The
Distributor retains the balance.
5
For purchases
of Class A, Class R2, and Class R4 shares, beginning with the first year an
investment is made, the Selling Firm receives an annual Rule 12b-1 service
fee paid
monthly in arrears. See “Distribution Agreements” for a description of Class A,
Class R2, and Class R4 Rule 12b-1 Plan charges and payments.
6
Certain
retirement platforms may invest in Class A shares without being subject to sales
charges. Purchases via these platforms may pay a commission from the first
dollar
invested. Additionally, commissions (up to 1.00%) are paid to dealers who
initiate and are responsible for certain Class A share purchases not subject to
sales charges. In
both cases, the Selling Firm receives Rule 12b-1 fees in the first year as a
percentage of the amount invested. After the first year, the Selling Firm
receives Rule 12b-1
fees as a percentage of average daily net eligible assets paid monthly in
arrears.
7
For Class C
shares, the Selling Firm receives Rule 12b-1 fees in the first year as a
percentage of the amount invested. After the first year, the Selling Firm
receives Rule 12b-1
fees as a percentage of average daily net eligible assets paid monthly in
arrears.
8
The
Distributor may make a one-time payment at time of initial purchase out of its
own resources to a Selling Firm that sells Class I shares of the funds. This
payment may be up to
0.15% of the amount invested.
The NAV for
each class of shares of each fund is normally determined once daily as of the
close of regular trading on the NYSE (typically 4:00 p.m. Eastern time,
on each business day that the NYSE is open). Each class of shares of each fund
has its own NAV, which is computed by dividing the total
assets, minus liabilities, allocated to each share class by the number of fund
shares outstanding for that class. The current NAV of a fund is available on
our website at jhinvestments.com.
In case of
emergency or other disruption resulting in the NYSE not opening for trading or
the NYSE closing at a time other than the regularly scheduled close, the NAV
may be determined as of the regularly scheduled close of the NYSE pursuant to
the Advisor's Valuation Policies and Procedures. The time at which
shares and transactions are priced and until which orders are accepted may vary
to the extent permitted by the SEC and applicable regulations.
On holidays or other days when the NYSE is closed, the NAV is not calculated and
the fund does not transact purchase or redemption requests.
Trading of securities that are primarily listed on foreign exchanges may take
place on weekends and U.S. business holidays on which the fund’s NAV is not
calculated. Consequently, the fund’s portfolio securities may trade and the NAV
of the fund’s shares may be significantly affected on days when a
shareholder will not be able to purchase or redeem shares of the
fund.
The Board has
designated the funds’ advisor as the valuation designee to perform fair value
functions for each fund in accordance with the advisor's valuation
policies and procedures. As valuation designee, the advisor will determine the
fair value, in good faith, of securities and other assets held by each fund for
which market quotations are not readily available and, among other things, will
assess and manage material risks associated with fair value
determinations, select, apply and test fair value methodologies, and oversee and
evaluate pricing services and other valuation agents used in valuing a
fund's investments. The advisor is subject to Board oversight and reports to the
Board information regarding the fair valuation process and related
material matters. The advisor carries out its responsibilities as valuation
designee through its Pricing Committee.
Portfolio
securities are valued by various methods that are generally described below.
Portfolio securities also may be fair valued by the Advisor's Pricing
Committee in certain instances pursuant to procedures established by the Advisor
and adopted by the Board. Equity securities are generally valued at the
last sale price or, for certain markets, the official closing price as of the
close of the relevant exchange. Securities not traded on a particular day
are valued using last available bid prices. A security that is listed or traded
on more than one exchange is typically valued at the price on the exchange
where the security was acquired or most likely will be sold. In certain
instances, the Pricing Committee may determine to value equity
securities
using prices obtained from another exchange or market if trading on the exchange
or market on which prices are typically obtained did not open for
trading as scheduled, or if trading closed earlier than scheduled, and trading
occurred as normal on another exchange or market. Equity securities
traded principally in foreign markets are typically valued using the last sale
price or official closing price in the relevant exchange or market, as adjusted by
an independent pricing vendor to reflect fair value as of the
close of the NYSE. On any day a
foreign market is closed and the NYSE is open, any
foreign securities will typically be valued using the last price or official
closing price obtained from the relevant exchange on the prior business day
adjusted based on information provided by an independent pricing vendor to
reflect fair value as of the
close of the NYSE. Debt
obligations are typically
valued based on evaluated prices provided by an independent pricing vendor. The
value of securities denominated in foreign currencies is converted into
U.S. dollars at the exchange rate supplied by an independent pricing vendor.
Forward foreign currency contracts are valued at the prevailing
forward rates which are based on foreign currency exchange spot rates and
forward points supplied by an independent pricing vendor. Exchange-traded
options are valued at the mid-price of the last quoted bid and ask prices.
Futures contracts whose settlement prices are determined as of the close
of the NYSE are typically valued based on the settlement price, while other
futures contracts are typically valued at the last traded price on the exchange
on which they trade as of the
close of the NYSE. Foreign
equity index futures that trade in the electronic trading market subsequent to
the close of
regular trading may be valued at the last traded price in the electronic trading
market as of the close of the NYSE, or may be fair valued based on fair value
adjustment factors provided by an independent pricing vendor in order to adjust
for events that may occur between the close of foreign exchanges or
markets and the close of the NYSE. Swaps and unlisted options are generally
valued using evaluated prices obtained from an independent pricing
vendor. Shares of other open-end investment companies that are not ETFs
(underlying funds) are valued based on the NAVs of such underlying funds.
Pricing
vendors may use matrix pricing or valuation models that utilize certain inputs
and assumptions to derive values, including transaction data, broker-dealer
quotations, credit quality information, general market conditions, news, and
other factors and assumptions. The fund may receive different
prices when it sells odd-lot positions than it would receive for sales of
institutional round lot positions. Pricing vendors generally value securities
assuming orderly transactions of institutional round lot sizes, but a fund may
hold or transact in such securities in smaller, odd lot sizes.
The Pricing
Committee engages in oversight activities with respect to pricing vendors, which
includes, among other things, monitoring significant or unusual price
fluctuations above predetermined tolerance levels from the prior day,
back-testing of pricing vendor prices against actual trades, conducting
periodic due diligence meetings and reviews, and periodically reviewing the
inputs, assumptions and methodologies used by these vendors. Nevertheless,
market quotations, official closing prices, or information furnished by a
pricing vendor could be inaccurate, which could lead to a security being valued
incorrectly.
If market
quotations, official closing prices, or information furnished by a pricing
vendor are not readily available or are otherwise deemed unreliable or
not
representative of the fair value of such security because of market- or
issuer-specific events, a security will be valued at its fair value as
determined in good faith
by the Board's valuation designee, the Advisor. In certain instances, therefore,
the Pricing Committee may determine that a reported valuation does
not reflect fair value, based on additional information available or other
factors, and may accordingly determine in good faith the fair value of the
assets, which may differ from the reported valuation.
Fair value
pricing of securities is intended to help ensure that a fund’s NAV reflects the
fair market value of the fund’s portfolio securities as of the close
of regular
trading on the NYSE (as opposed to a value that no longer reflects market value
as of such close), thus limiting the opportunity for aggressive traders or
market timers to purchase shares of the fund at deflated prices reflecting stale
security valuations and promptly sell such shares at a gain, thereby
diluting the interests of long term shareholders. However, a security’s
valuation may differ depending on the method used for determining value,
and no
assurance can be given that fair value pricing of securities will successfully
eliminate all potential opportunities for such trading gains.
The use of
fair value pricing has the effect of valuing a security based upon the price a
fund might reasonably expect to receive if it sold that security in an orderly
transaction between market participants, but does not guarantee that the
security can be sold at the fair value price. Further, because of the
inherent
uncertainty and subjective nature of fair valuation, a fair valuation price may
differ significantly from the value that would have been used had a readily
available market price for the investment existed and these differences could be
material.
Regarding a
fund’s investment in an underlying fund that is not an ETF, which (as noted
above) is valued at such underlying fund’s NAV, the prospectus for such
underlying fund explains the circumstances and effects of fair value pricing for
that underlying fund.
Policy
Regarding Disclosure of Portfolio Holdings
The Board has
adopted a Policy Regarding Disclosure of Portfolio Holdings, to protect the
interests of the shareholders of the funds and to address potential
conflicts of interest that could arise between the interests of shareholders and
the interests of the Advisor, or the interests of the funds’ subadvisors,
principal underwriter or affiliated persons of the Advisor, subadvisors or
principal underwriter. The Trust's general policy with respect to the release of
a fund’s portfolio holdings to unaffiliated persons is to do so only in limited
circumstances and only to provide nonpublic information regarding
portfolio holdings to any person, including affiliated persons, on a “need to
know” basis and, when released, to release such information only as consistent
with applicable legal requirements and the fiduciary duties owed to
shareholders. The Trust applies its policy uniformly to all potential
recipients of
such information, including individual and institutional investors,
intermediaries, affiliated persons of a fund, and all third party service
providers and
rating agencies.
The Trust
posts to its website at jhinvestments.com complete portfolio holdings a number
of days after each calendar month end as described in the Prospectus.
Each fund also discloses its complete portfolio holdings information as of the
end of the third month of every fiscal quarter on Form N-PORT
within 60 days
of the end of the fiscal quarter and on Form N-CSR within 70 days after the
second and fourth quarter ends of the Trust's fiscal year. The portfolio
holdings information in Form N-PORT is not required to be delivered to
shareholders, but is made public through the SEC electronic filings.
Shareholders
can access
the complete
portfolio holdings information of a
fund's portfolio
holdings online and
upon request.
Firms that
provide administrative, custody, financial, accounting, legal or other services
to a fund may receive nonpublic information about a fund's portfolio
holdings for purposes relating to their services. Additionally, portfolio
holdings information for a fund that is not publicly available will be
released only
pursuant to the exceptions described in the Policy Regarding Disclosure of
Portfolio Holdings. A fund’s material nonpublic holdings information
may be provided to the following unaffiliated persons as part of the investment
activities of the fund: entities that, by explicit agreement, are required to
maintain the confidentiality of the information disclosed; rating organizations,
such as Moody’s, S&P, Fitch, Morningstar and Lipper, Vestek (Thomson
Financial) or other entities for the purpose of compiling reports and preparing
data; proxy voting services for the purpose of voting proxies; entities
providing computer software; courts (including bankruptcy courts) or regulators
with jurisdiction over the Trust and its affiliates; and institutional
traders to assist in research and trade execution. Exceptions to the portfolio
holdings release policy can be approved only by the Trust's CCO or the
CCO’s duly authorized delegate after considering: (a) the purpose of providing
such information; (b) the procedures that will be used to ensure that
such information remains confidential and is not traded upon; and (c) whether
such disclosure is in the best interest of the shareholders.
As of August
31, 2024, the entities
that may receive information described in the preceding paragraph, and the
purpose for which such information is disclosed, are
as presented in the table below. Portfolio holdings information is provided as
frequently as daily with a one-day lag.
Entity
Receiving Portfolio Information |
|
Abel
Noser (f.k.a. Trade Informatics), (f.k.a. SJ
Levinson) |
|
|
|
Messaging
application to be used for margins |
|
|
|
|
|
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|
|
Back
Office Functions, Middle Office Functions, Reconciliation
Services |
|
|
Pricing
and Risk Analysis, Reporting Agency, Order Management & Fixed Income
Attribution,
Master Data Management, Portfolio Analysis |
Broadridge
Financial Solutions |
Proxy
Voting, Software Vendor |
Brown
Brothers Harriman & Co. |
Reconciliation,
Corporate Actions |
Capital
Institutional Services (CAPIS) |
Broker
Dealer, Commission Recapture, Transition Services |
|
|
Initial
Margin calculation for bi-lateral OTC swaps |
|
|
Trading
and Guideline Monitoring |
|
|
Clearing
for ETD and Swaps |
|
|
Cash
& Securities Reconciliation |
Citicorp
Global Transactions Services |
|
|
|
Analysis
& Reporting Services |
|
|
Collateral
Management Tool |
|
|
|
|
|
Securities
Lending Analytics |
Depository
Trust and Clearing Corp |
Various
services to support settlement |
|
|
Financial
Reporting, Type Setting |
Donnelley
Financial Solutions |
Financial
Reporting, Printing |
|
|
|
|
|
|
|
|
Fair
Value and Private Transactions Support |
|
|
Performance,
Portfolio Accounting |
Electra
Information Systems |
|
|
|
|
|
|
Data
Gathering, Analytics, Performance, Reconciliation Equity Attribution,
Client
Reporting |
|
|
|
|
|
Foreign
Currency Trade Review |
|
|
Analysis
& Evaluation of FX transactions |
|
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|
Credit
Derivative Trade
Confirmation |
Entity
Receiving Portfolio Information |
|
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|
Service
Provider, Operational Functions, Data Management, Bank Loan confirmation,
Settlement
Platform |
|
|
|
Institutional
Shareholder Services (ISS) |
Proxy
Voting, Class Action |
|
|
|
|
|
Cash
and Position Reconciliation |
|
|
|
Law
Firm of Davis and Harman |
Development
of Revenue Ruling |
|
|
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|
|
Rates
Derivative Trade Confirmation |
|
|
Service
Provider-Valuation Oversight |
|
|
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|
|
Portfolio
Liquidity Evaluation Services
and
Analytics |
National
Financial Services |
|
|
|
|
|
|
Bi-Lateral
Credit Derivative Trade Confirmation |
|
|
Portfolio
reconciliation and exception management |
PricewaterhouseCoopers
LLP |
|
|
|
|
Rimes
/ Matrix Software Platform |
Enterprise
Data Management System, replacing Pace |
|
|
|
Russell
Implementation Services |
|
|
|
Corporate
Actions monitoring |
|
|
Cash
& Securities Reconciliation |
|
|
|
|
|
Reconciliation,
Trade Settlement |
|
|
Code
of Ethics Monitoring |
|
|
Collateral
Services, Middle-office operations, Fund Administration Functions,
Liquidity |
State
Street Closed End Financing |
|
State
Street Investment Management Solutions |
|
|
|
Accounting
Messages, Custody Messages, Trade Messaging |
|
|
FX
Reconciliation, Operational Functions |
|
|
Corporate
Action Management System |
|
|
Back
office and operational processes services |
|
|
|
The CCO is
required to pre-approve the disclosure of nonpublic information regarding a
fund’s portfolio holdings to any affiliated persons of the Trust. The CCO will
use the following three considerations before approving disclosure of a fund’s
nonpublic information to affiliated persons: (a) the purpose of providing
such information; (b) the procedures that will be used to ensure that such
information remains confidential and is not traded upon; and (c) whether such
disclosure is in the best interest of the shareholders.
The CCO shall
report to the Board whenever additional disclosures of a fund’s portfolio
holdings are approved. The CCO’s report shall be presented at the Board
meeting following such approval.
When the CCO
believes that the disclosure of a fund’s nonpublic information to an
unaffiliated person presents a potential conflict of interest between
the interest
of the shareholders and the interest of affiliated persons of the Trust, the CCO
shall refer the potential conflict to the Board. The Board shall then permit
such disclosure of a fund’s nonpublic information only if in its reasonable
business judgment it concludes that such disclosure will be in the best interests
of the Trust’s shareholders.
The receipt of
compensation by a fund, the Advisor, a subadvisor or an affiliate as
consideration for disclosing a fund’s nonpublic portfolio holdings information is
not deemed a legitimate business purpose and is strictly forbidden.
Registered
investment companies and separate accounts that are advised or subadvised by the
funds’ subadvisors may have investment objectives and strategies
and, therefore, portfolio holdings, that potentially are similar to those of a
fund. Neither such registered investment companies and separate accounts nor
the funds’ subadvisors are subject to the Trust's Policy Regarding Disclosure of
Portfolio Holdings, and may be subject to different
portfolio
holdings disclosure policies. The funds’ subadvisors may not, and the Trust's
Board cannot, exercise control over policies applicable to separate
subadvised funds and accounts.
In addition,
the Advisor or the funds’ subadvisors may receive compensation for furnishing to
separate account clients (including sponsors of wrap accounts)
model portfolios, the composition of which may be similar to those of a
particular fund. Such clients have access to their portfolio holdings
and are not
subject to the Trust's Policy Regarding Disclosure of Portfolio Holdings. In
general, the provision of portfolio management services and/or model
portfolio information to wrap program sponsors is subject to contractual
confidentiality provisions that the sponsor will only use such information
in connection
with the program, although there can be no assurance that this would be the case
in an agreement between any particular fund subadvisor
that is not affiliated with the Advisor and a wrap account sponsor. Finally, the
Advisor or the funds’ subadvisors may distribute to investment advisory
clients analytical information concerning a model portfolio, which information
may correspond substantially to the characteristics of a particular
fund’s portfolio, provided that the applicable fund is not identified in any
manner as being the model portfolio.
The potential
provision of information in the various ways discussed in the preceding
paragraph is not subject to the Trust's Policy Regarding Disclosure of Portfolio
Holdings, as discussed above, and is not deemed to be the disclosure of a fund’s
nonpublic portfolio holdings information. As a result of the funds’
inability to control the disclosure of information as noted above, there can be
no guarantee that this information would not be used in a way that adversely
impacts a fund. Nonetheless, each fund has oversight processes in place to
attempt to minimize this risk.
Sales
Charges On Class A and Class C Shares
Class A and
Class C shares of the funds, as applicable, are offered at a price equal to
their NAV plus a sales charge that, in the case of Class A shares, is
imposed at the
time of purchase (the “initial sales charge”), or, in the case of Class C
shares, on a contingent deferred basis (the “contingent deferred sales charge”
or “CDSC”).
The Trustees
reserve the right to change or waive a fund’s minimum investment requirements
and to reject any order to purchase shares (including purchase by
exchange) when in the judgment of the Advisor such rejection is in the fund’s
best interest.
The
availability of certain sales charge waivers and discounts will depend on
whether you purchase your shares directly from the funds or through a
financial
intermediary. Intermediaries may have different policies and procedures
regarding the availability of front-end sales charge waivers or CDSC
waivers (See
Appendix 1 to the Prospectus, “Intermediary sales charge waivers,” which
includes information about specific sales charge waivers applicable to
the intermediaries identified therein).
The sales
charges applicable to purchases of Class A shares of a fund are described in the
Prospectus. Please note, these waivers are distinct from those
described in Appendix 1 to the Prospectus, “Intermediary sales charge waivers,”
and are not intended to describe the sales load cost structure of, or be
exclusive to, any particular intermediary. Methods of obtaining reduced sales
charges referred to generally in the Prospectus are described in detail below.
In calculating the sales charge applicable to current purchases of Class A
shares of a fund, the investor is entitled to accumulate current purchases with
the current offering price of the Class A, Class C, Class I, Class R6, or all
Class R shares of the John Hancock funds owned by the investor (see
“Combination and Accumulation Privileges” below).
In order to
receive the reduced sales charge, the investor must notify his or her financial
professional and/or the financial professional must notify the funds’
transfer agent, John Hancock Signature Services, Inc. (“Signature Services”) at
the time of purchase of the Class A shares, about any other John Hancock funds
owned by the investor, the investor’s spouse and their children under the age of
21 (see “Combination and Accumulation Privileges” below).
This
includes investments held in an IRA, including those held at a broker or
financial professional other than the one handling the
investor’s current purchase. Additionally, individual purchases by a trustee(s)
or other fiduciary(ies) also may be aggregated if the investments
are for a single trust estate or for a group retirement plan. Assets held within
a group retirement plan may not be combined with
any assets held by those same participants outside of the plan.
John Hancock
will credit the combined value, at the current offering price, of all eligible
accounts to determine whether an investor qualifies for a reduced sales
charge on the current purchase. Signature Services will automatically link
certain accounts registered in the same client name, with the same taxpayer
identification number, for the purpose of qualifying an investor for lower
initial sales charge rates. An investor must notify Signature Services and
his or her broker-dealer (financial professional) at the time of purchase of any
eligible accounts held by the investor’s spouse or children under 21 in
order to ensure these assets are linked to the investor’s accounts. Also, see
Appendix 1 to the Prospectus, “Intermediary sales charge waivers,” for
more information regarding the availability of sales charge waivers through
particular intermediaries.
Without
Sales Charges.
Class A shares
may be offered without a front-end sales charge or CDSC to various individuals
and institutions as follows:
●
A Trustee or
officer of the Trust; a director or officer of the Advisor and its affiliates,
subadvisors or Selling Firms; employees or sales representatives of any of the
foregoing; retired officers, employees or directors of any of the foregoing; a
member of the immediate family (spouse, child, grandparent,
grandchild, parent, sibling, mother-in-law, father-in-law, daughter-in-law,
son-in-law, brother-in-law, sister-in-law, niece, nephew and same sex
domestic partner; “Immediate Family”) of any of the foregoing; or any fund,
pension, profit sharing or other benefit plan for the individuals described
above.
●
A broker,
dealer, financial planner, consultant or registered investment advisor that uses
fund shares in certain eligible retirement platforms, fee-based
investment products or services made available to their clients.
●
Financial
intermediaries who offer shares to self-directed investment brokerage accounts
that may or may not be charged a transaction fee. Also, see
Appendix 1 to
the Prospectus, “Intermediary sales charge waivers,” for more information
regarding the availability of sales charge waivers through particular
intermediaries.
●
Individuals
transferring assets held in a SIMPLE IRA, SEP, or SARSEP invested in John
Hancock funds directly to an IRA.
●
Individuals
converting assets held in an IRA, SIMPLE IRA, SEP, or SARSEP invested in John
Hancock funds directly to a Roth IRA.
●
Individuals
recharacterizing assets from an IRA, Roth IRA, SEP, SARSEP or SIMPLE IRA
invested in John Hancock funds back to the original account type from
which it was converted.
●
Terminating
participants in a pension, profit sharing or other plan qualified under Section
401(a) of the Code, or described in Section 457(b) of the Code, (i) that
is funded by certain John Hancock group annuity contracts, (ii) for which John
Hancock Trust Company serves as trustee or custodian, or (iii) the
trustee or custodian of which has retained RPS as a service provider, rolling
over assets (directly or within 60 days after distribution) from such a plan
(or from a John Hancock Managed IRA or John Hancock Annuities IRA into which
such assets have already been rolled over) to a John Hancock
custodial IRA or John Hancock custodial Roth IRA or other John
Hancock branded IRA offered through Manulife | John Hancock Brokerage
Services LLC
that invests
in John Hancock funds, or the subsequent establishment of or any rollover into a
new John Hancock fund account by such terminating
participants and/or their Immediate Family (as defined above), including
subsequent investments into such accounts, and
that are held
directly at
John Hancock funds or at the PFS Financial Center.
●
Participants
in a terminating pension, profit sharing or other plan qualified under Section
401(a) of the Code, or described in Section 457(b) of the Code (the
assets of which, immediately prior to such plan’s termination, were (a) held in
certain John Hancock group annuity contracts, (b) in trust or custody by
John Hancock Trust Company, or (c) by a trustee or custodian which has retained
John Hancock RPS as a service provider, but have been transferred
from such contracts or trust funds and are held either: (i) in trust by a
distribution processing organization; or (ii) in a custodial IRA or custodial Roth
IRA sponsored by an authorized third party trust company and made available
through John Hancock), rolling over assets (directly or within 60 days
after distribution) from such a plan to a John Hancock custodial IRA or John
Hancock custodial Roth IRA or other John
Hancock branded IRA
offered through Manulife | John Hancock Brokerage Services LLC that invests
in John Hancock funds, or the subsequent establishment of or any
rollover into a new John Hancock fund account by such participants and/or their
Immediate Family (as defined above), including subsequent investments
into such accounts, and
that are held
directly at John Hancock funds or at the PFS Financial Center.
●
Participants
actively enrolled in a John Hancock RPS plan account (or an account
the trustee of which has retained John Hancock RPS as a service provider) rolling over
or transferring assets into a new John Hancock custodial IRA or John Hancock
custodial Roth IRA or other John
Hancock branded IRA
offered through Manulife | John Hancock Brokerage Services LLC that invests
in John Hancock funds through John Hancock PFS (to the extent such
assets are otherwise prohibited from rolling over or transferring into
such
participants John Hancock
RPS plan account), including subsequent
investments into such accounts, and
that are held
directly at John Hancock funds or at the John Hancock PFS Financial
Center.
●
Individuals
rolling over assets held in a John Hancock custodial 403(b)(7) account into a
John Hancock custodial IRA account.
●
Individuals
exchanging shares held in an eligible fee-based program for Class A Shares,
provided however, subsequent purchases in Class A Shares will be
subject to applicable sales charges.
●
Former
employees/associates of John Hancock, its affiliates or agencies rolling over
(directly or indirectly within 60 days after distribution) to a new John Hancock
custodial IRA or John Hancock custodial Roth IRA from the John Hancock Employee
Investment-Incentive Plan (TIP), John Hancock Savings
Investment Plan (SIP) or the John Hancock Pension Plan and such participants and
their Immediate Family (as defined above) subsequently establishing
or rolling over assets into a new John Hancock account through John Hancock PFS,
including subsequent investments into such accounts and
which are held directly at John Hancock funds or at the John Hancock PFS
Financial Center.
●
Participants
in group retirement plans that are eligible and permitted to purchase Class A
shares. This waiver is contingent upon the group retirement
plan being in a recordkeeping arrangement and does not apply to group retirement
plans transacting business with a fund through a brokerage
relationship in which sales charges are customarily imposed. In addition, this
waiver does not apply to a group retirement plan that leaves its current
recordkeeping arrangement and subsequently transacts business with the fund
through a brokerage relationship in which sales charges are
customarily imposed. Whether a sales charge waiver is available to your group
retirement plan through its record keeper depends upon the policies and
procedures of your intermediary. Please consult your financial professional for
further information.
NOTE: Rollover
investments to Class A shares from assets withdrawn from SIMPLE 401(k), TSA,
457, 403(b), 401(k), Money Purchase Pension Plan, Profit-Sharing
Plan, and any other qualified plans as described in Code Sections 401(a),
403(b), or 457 and not specified above as waiver-eligible, will be subject to
applicable sales charges.
●
A member of a
class action lawsuit against insurance companies who is investing settlement
proceeds.
In-Kind
Re-Registrations.
A shareholder
who has previously paid a sales charge, withdraws funds via a tax-reportable
transaction from one John Hancock fund
account and reregisters those assets directly to another John Hancock fund
account, without the assets ever leaving the John Hancock Fund Complex,
may do so without paying a sales charge. The beneficial owner must remain the
same, i.e., in-kind.
NOTE: Rollover
investments to Class A shares from assets withdrawn from SIMPLE 401(k), TSA,
457, 403(b), 401(k), Money Purchase Pension Plan, Profit-Sharing
Plan, and any other qualified plans as described in Sections 401(a), 403(b), or
457 of the Code are not eligible for this provision, and will be subject to
applicable sales charges.
Class A shares
also may be purchased without an initial sales charge in connection with certain
liquidation, merger or acquisition transactions involving other
investment companies or personal holding companies.
Reducing
Class A Sales Charges
Combination
and Accumulation Privileges.
In calculating
the sales charge applicable to purchases of Class A shares made at one time, the
purchases will
be combined to reduce sales charges if made by an individual, his or her spouse,
and their children under the age of 21 when purchasing securities in
the following:
●
his or her own
individual or their joint account;
●
his or her
trust account of which one of the above persons is the grantor or the beneficial
owner;
●
a Uniform
Gift/Transfer to Minor Account or Coverdell Education Savings Account (“ESA”) in
which one of the above persons is the custodian or beneficiary;
●
a single
participant retirement/benefit plan account, as long as it is established solely
for the benefit of the individual account owner;
●
an IRA,
including traditional IRAs, Roth IRAs, and SEP IRAs; and
●
his or her
sole proprietorship.
Group
Retirement Plans, including 403(b)(7), Money Purchase Pension Plans,
Profit-Sharing Plans, SARSEPs, and Simple IRAs with multiple participants
may combine Class A share purchases to reduce their sales charge.
Individual
qualified and non-qualified investments can be combined to take advantage of
this privilege; however, assets held within a group retirement plan may not
be combined with any assets held by those same participants outside of the
plan.
Class A
investors also may reduce their Class A sales charge by taking into account not
only the amount being invested but also the current offering price of all
the Class A, Class C, Class I, Class R6, and all Class R shares of all funds in
the John Hancock Fund Complex already held by such persons. However, Class
A shares of John Hancock Money Market Fund, a series of John Hancock Current
Interest (the “Money Market Fund”), will be eligible for the
accumulation privilege only if the investor has previously paid a sales charge
on the amount of those shares. To receive a reduced sales charge, the
investor must
tell his or her financial professional or Signature Services at the time of the
purchase about any other John Hancock funds held by that investor, his
or her spouse, and their children under the age of 21. Further information about
combined purchases, including certain restrictions on combined group
purchases, is available from Signature Services or a Selling Firm’s
representative.
Group
Investment Program.
Under the
Combination and Accumulation Privileges, all members of a group may combine
their individual purchases of Class A shares
to potentially qualify for breakpoints in the sales charge schedule. This
feature is provided to any group that: (1) has been in existence for
more than six
months, (2) has a legitimate purpose other than the purchase of fund shares at a
discount for its members, (3) utilizes salary deduction or similar group
methods of payment, and (4) agrees to allow sales materials of the funds in its
mailings to its members at a reduced or no cost to the Distributor.
Letter
of Intention.
Reduced Class
A sales charges are applicable to investments made pursuant to an LOI, which
should be read carefully prior to its execution by
an investor. All investors have the option of making their investments over a
specified period of thirteen (13) months. An individual’s non-retirement
and qualified retirement plan investments can be combined to satisfy an LOI. The
retirement accounts eligible for combination include traditional
IRAs, Roth IRAs, Coverdell ESAs, SEPs, SARSEPs, and SIMPLE IRAs. Since some
assets are held in omnibus accounts, an investor wishing to count those
eligible assets towards a Class A purchase must notify Signature Services and
his or her financial professional of these holdings. The aggregate
amount of such an investment must be equal to or greater than a fund’s first
breakpoint level (generally $50,000 or $100,000 depending on the specific
fund) over a period of 13 months from the date of the LOI. Any shares for which
no sales charge was paid will not be credited as purchases made under the
LOI.
The sales
charge applicable to all amounts invested after an LOI is signed is computed as
if the aggregate amount intended to be invested had been invested
immediately. If such aggregate amount is not actually invested, the difference
in the sales charge actually paid and the sales charge that would have been paid
had the LOI not been in effect is due from the investor. In such cases, the
sales charge applicable will be assessed based on the amount actually
invested. However, for the purchases actually made within the specified period
of 13 months, the applicable sales charge will not be higher than that which
would have applied (including accumulations and combinations) had the LOI been
for the amount actually invested. The asset inclusion criteria
stated under the Combination and Accumulation Privilege applies to accounts
eligible under the LOI. If such assets exceed the LOI amount at the conclusion
of the LOI period, the LOI will be considered to have been met.
The LOI
authorizes Signature Services to hold in escrow sufficient Class A shares
(approximately 5% of the aggregate) to make up any difference in sales
charges on the
amount intended to be invested and the amount actually invested, until such
investment is completed within the 13-month period. At that time, the
escrowed shares will be released. If the total investment specified in the LOI
is not completed, the shares held in escrow may be redeemed and the
proceeds used as required to pay such sales charge as may be due. By signing the
LOI, the investor authorizes Signature Services to act as his or her
attorney-in-fact to redeem any escrowed Class A shares and adjust the sales
charge, if necessary. An LOI does not constitute a binding commitment by
an investor to purchase, or by a fund to sell, any additional Class A shares,
and may be terminated at any time.
Deferred
Sales Charge on Class A and Class C Shares
Class A shares
are available with no front-end sales charge on investments of $1 million
($500,000 for
Emerging Markets Debt Fund, Opportunistic Fixed Income
Fund and Strategic Income Opportunities Fund, and $250,000 for
Floating Rate Income Fund) or more. Class C shares are purchased at NAV without
the imposition of an initial sales charge. In each of these cases, the funds
will receive the full amount of the purchase payment. Also, see
Appendix 1 to
the Prospectus “Intermediary sales charge waivers,” for more information
regarding the availability of sales charge waivers through particular
intermediaries.
Contingent
Deferred Sales Charge.
There is a
CDSC on any Class A shares upon which a commission or finder’s fee was paid that
are sold within one year
(0.75% within
18 months for
Emerging
Markets Debt Fund, Opportunistic Fixed Income Fund and Strategic Income
Opportunities Fund and 0.50% within
18 months for
Floating Rate
Income Fund) of purchase. Class C shares that are redeemed within one year of
purchase will be subject to a CDSC at the rates set
forth in the applicable Prospectus as a percentage of the dollar amount subject
to the CDSC. The CDSC will be assessed on an amount equal to the
lesser of the current market value or the original purchase cost of the Class A
or Class C shares being redeemed. No CDSC will be imposed on increases
in account value above the initial purchase prices or on shares derived from
reinvestment of dividends or capital gains distributions.
In determining
whether a CDSC applies to a redemption, the calculation will be determined in a
manner that results in the lowest possible rate being charged. It
will be assumed that a shareholder’s redemption comes first from shares the
shareholder has held beyond the one-year (18-month for Emerging
Markets Debt Fund, Floating Rate
Income Fund,
Opportunistic Fixed Income Fund and Strategic Income Opportunities
Fund) CDSC
redemption
period for Class A or one-year CDSC redemption period for Class C shares, or
those the shareholder acquired through dividend and capital gain
reinvestment. For this purpose, the amount of any increase in a share’s value
above its initial purchase price is not subject to a CDSC. Thus, when a
share that has
appreciated in value is redeemed during the CDSC period, a CDSC is assessed only
on its initial purchase price.
When
requesting a redemption for a specific dollar amount, a shareholder should state
if proceeds to equal the dollar amount requested are required. If not stated,
only the specified dollar amount will be redeemed from the shareholder’s account
and the proceeds will be less any applicable CDSC.
With respect
to a CDSC imposed on a redemption of Class A shares, proceeds from the
imposition of a CDSC are paid to the Distributor and are used in whole or in
part by the Distributor to defray its expenses related to paying a commission or
finder’s fee in connection with the purchase at NAV of Class A shares with a
value of $1 million ($500,000 for
Emerging Markets Debt Fund, Opportunistic Fixed Income Fund and Strategic Income
Opportunities Fund, and
$250,000 for
Floating Rate Income Fund) or more.
With respect
to a CDSC imposed on a redemption of Class C shares, proceeds from the
imposition of a CDSC are paid to the Distributor and are used in whole or in
part by the Distributor to defray its expenses related to providing
distribution-related services to the funds in connection with the sale of
Class C
shares, such as the payment of compensation to select Selling Firms for selling
Class C shares. The combination of the CDSC and the distribution
and service fees facilitates the ability of the funds to sell Class C shares
without a sales charge being deducted at the time of the
purchase.
Waiver
of Contingent Deferred Sales Charge.
The CDSC will
be waived on redemptions of Class A and Class C shares, unless stated otherwise,
in the
circumstances defined below:
●
Redemptions of
Class A shares by a group retirement plan that continues to offer the same or
another John Hancock mutual fund as an investment to its
participants.
●
Redemptions
made pursuant to a fund’s right to liquidate an account if the investor owns
shares worth less than the stated account minimum in the section “Small
accounts” in the Prospectus.
●
Redemptions
made under certain liquidation, merger or acquisition transactions involving
other investment companies or personal holding companies.
●
Redemptions
due to death or disability. (Does not apply to trust accounts unless trust is
being dissolved.)
●
Redemptions
made under the Reinstatement Privilege, as described in “Sales Charge Reductions
and Waivers” in the Prospectus.
●
Redemption of
Class C shares made under a systematic withdrawal plan or redemptions for fees
charged by planners or advisors for advisory services, as
long as the shareholder’s annual redemptions do not exceed 12% of the account
value, including reinvested dividends, at the time the systematic
withdrawal plan was established and 12% of the value of subsequent investments
(less redemptions) in that account at the time Signature Services is
notified. (Please note that this waiver does not apply to systematic withdrawal
plan redemptions of Class A shares that are subject to a CDSC).
●
Rollovers,
contract exchanges or transfers of John Hancock custodial 403(b)(7) account
assets required by Signature Services as a result of its decision to
discontinue maintaining and administering 403(b)(7) accounts.
For Retirement
Accounts (such as traditional, Roth IRAs and Coverdell ESAs, SIMPLE IRAs, SIMPLE
401(k), Rollover IRA, TSA, 457, 403(b), 401(k), Money Purchase
Pension Plan, Profit-Sharing Plan and other plans as described in the Code)
unless otherwise noted.
●
Redemptions
made to effect mandatory or life expectancy distributions under the Code.
(Waiver based on required minimum distribution calculations
for John Hancock mutual fund IRA assets only.)
●
Returns of
excess contributions made to these plans.
●
Redemptions
made to effect certain distributions, as outlined in the following table, to
participants or beneficiaries from employer sponsored retirement
plans under sections 401(a) (such as Money Purchase Pension Plans and
Profit-Sharing Plan/401(k) Plans), 403(b), 457 and 408 (SEPs and SIMPLE
IRAs) of the Code.
Please see the
following table for some examples.
|
|
401(a)
Plan
(401(k),
MPP,
PSP)
& 457 |
|
|
IRA,
SEP IRA &
Simple
IRA |
|
|
|
|
|
|
|
|
Over
70½ (or 72, in the
case
of individuals for
whom
the minimum
distribution
requirements
begin
at age 72) |
|
|
|
|
12%
of account
value
annually in
periodic
payments |
Between
59½ and 70½ (or
72,
in the case of
individuals
for whom the
minimum
distribution
requirements
begin at age
72) |
|
|
12%
of account
value
annually in
periodic
payments |
Waived
for Life
Expectancy
or 12%
of
account value
annually
in periodic
payments |
12%
of account
value
annually in
periodic
payments |
|
|
Waived
for annuity
payments
(72t2)
or
12%
of account
value
annually in
periodic
payments |
Waived
for annuity
payments
(72t) or
12%
of account
value
annually in
periodic
payments |
12%
of account
value
annually in
periodic
payments |
Waived
for annuity
payments
(72t) or
12%
of account
value
annually in
periodic
payments |
12%
of account
value
annually in
periodic
payments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qualified
Domestic
Relations
Orders |
|
|
|
|
|
Termination
of Employment
Before
Normal Retirement
Age |
|
|
|
|
|
|
|
|
|
|
|
|
1
External
direct rollovers and transfer of assets are excluded.
2
Refers to
withdrawals from retirement accounts under Section 72(t) of the
Code.
If a
shareholder qualifies for a CDSC waiver under one of these situations, Signature
Services must be notified at the time of redemption. The waiver will
be granted
once Signature Services has confirmed that the shareholder is entitled to the
waiver.
Although it
would not normally do so, each fund has the right to pay the redemption price of
its shares in whole or in part in portfolio securities as prescribed by
the Trustees. When a shareholder sells any securities received in a redemption
of fund shares, the shareholder will incur a brokerage charge. Any
such securities would be valued for the purposes of fulfilling such a redemption
request in the same manner as they are in computing the fund’s
NAV.
The Trust has
adopted Procedures Regarding Redemptions in Kind by Affiliates (the
“Procedures”) to facilitate the efficient and cost effective movement
of assets of a
fund and other funds managed by the Advisor or its affiliates (“affiliated
funds”) in connection with certain investment and marketing strategies. It
is the position of the SEC that the 1940 Act prohibits an investment company,
such as each fund, from satisfying a redemption request from a
shareholder that is affiliated with the investment company by means of an
in-kind distribution of portfolio securities. However, under a no-action
letter issued
by the SEC staff, a redemption in kind to an affiliated shareholder is
permissible provided certain conditions are met. The Procedures, which are
intended to conform to the requirements of this no-action letter, allow for
in-kind redemptions by fund and affiliated fund shareholders subject
to specified
conditions, including that:
●
the
distribution is effected through a pro rata distribution of securities of the
distributing fund or affiliated fund;
●
the
distributed securities are valued in the same manner as they are in computing
the fund’s or affiliated fund’s NAV;
●
neither the
affiliated shareholder nor any other party with the ability and the pecuniary
incentive to influence the redemption in kind may select or influence the
selection of the distributed securities; and
●
the Board,
including a majority of the Independent Trustees, must determine on a quarterly
basis that any redemptions in kind to affiliated shareholders
made during the prior quarter were effected in accordance with the Procedures,
did not favor the affiliated shareholder to the detriment of any other
shareholder and were in the best interests of the fund and the affiliated
fund.
Potential
Adverse Effects of Large Shareholder Transactions
A fund may
from time to time sell to one or more investors, including other funds advised
by the Advisor or third parties, a substantial amount of its shares, and
may thereafter be required to satisfy redemption requests by such shareholders.
The Advisor and/or the subadvisor, as seed investors, may have
significant ownership in certain funds. The Advisor and subadvisor, as
applicable, face conflicts of interest when considering the effect of
redemptions on
any such funds and on other shareholders in deciding whether and when to redeem
its respective shares. Such sales and redemptions may be very
substantial relative to the size of such fund. While it is not possible to
predict the overall effect of such sales and redemptions over time, such
transactions may adversely affect such fund’s performance to the extent that the
fund is required to invest cash received in connection with a sale or to sell
portfolio securities to facilitate a redemption at, in either case, a time when
the fund otherwise would not invest or sell. As a result, the fund may have
greater or lesser market exposure than would otherwise be the case. Such
transactions also may accelerate the realization of capital gains or
increase a
fund’s transaction costs, which would detract from fund performance.
A large
redemption could significantly reduce the assets of a fund, causing decreased
liquidity and, depending on any applicable expense caps and/or waivers, a
higher expense ratio. If a fund is forced to sell portfolio securities that have
appreciated in value, such sales may accelerate the realization of taxable income
to shareholders if such sales of investments result in gains. If a fund has
difficulty selling portfolio securities in a timely manner to meet a large
redemption request, the fund may have to borrow money to do so. In such an
instance, the fund’s remaining shareholders would bear the costs of such
borrowings, and such costs could reduce the fund’s returns. In addition, a large
redemption could result in a fund’s current expenses being allocated over
a smaller asset base, leading to an increase in the fund’s expense ratio and
possibly resulting in the fund’s becoming too small to be economically
viable.
Non-U.S.
market closures and redemptions.
Market
closures during regular holidays in an applicable non-U.S. market that are not
holidays observed in
the U.S. market may prevent the fund from executing securities transactions
within the normal settlement period. Unforeseeable closures of applicable
non-U.S. markets may have a similar impact. During such closures, the fund may
be required to rely on other methods to satisfy shareholder
redemption requests, including the use of its line of credit, interfund lending
facility, redemptions in kind, or such other liquidity means or facilities as
the fund may have in place from time to time, or the delivery of redemption
proceeds may be extended beyond the normal settlement cycle.
Additional
Services and Programs
Exchange
Privilege.
The Trust
permits exchanges of shares of any class of a fund for shares of the same class
of any other fund within the John Hancock Fund
Complex offering that same class at the time of the exchange. Class I, Class R2,
Class R4, Class R5, or Class R6 shareholders also may exchange their
shares for Class A shares of Money Market Fund. If a shareholder exchanges into
Class A shares of the Money Market Fund, any future exchanges out
of Money Market Fund Class A shares must be to the same share class from which
they were originally exchanged.
The
registration for both accounts involved must be identical. Identical
registration is determined by having the same beneficial owner on both accounts
involved in
the exchange.
Exchanges
between funds are based on their respective NAVs. No sales charge is imposed,
except on exchanges of Class A shares from Money Market Fund to
another John Hancock fund, if a sales charge has not previously been paid on
those shares. Shares acquired in an exchange will be subject to the CDSC rate
and holding schedule of the fund in which such shares were originally purchased
if and when such shares are redeemed. For Class C shares, this
will have no impact on shareholders because the CDSC rates and holding schedules
are the same for all Class C shares across the John Hancock Fund
Complex. For Class A shares, certain funds within the John Hancock Fund Complex
have different CDSC rates and holding schedules and shareholders
should review the Prospectus for funds with Class A shares before considering an
exchange. For purposes of determining the holding period for
calculating the CDSC, shares will continue to age from their original purchase
date.
If a group
retirement plan, whose financial advisor has received finder’s fee compensation
on the plan’s investments, exchanges all its Class A assets out of a John
Hancock fund to a non-John Hancock investment, a CDSC may apply.
Each fund
reserves the right to require that previously exchanged shares (and reinvested
dividends) be in the fund for 90 days before a shareholder is permitted a
new exchange.
An exchange of
shares is treated as a redemption of shares of one fund and the purchase of
shares of another for federal income tax purposes. An exchange may
result in a taxable gain or loss. See “Additional Information Concerning
Taxes.”
Conversion
Privilege.
Provided a
fund’s eligibility requirements are met, and to the extent the referenced share
class is offered by the fund, an investor in
the fund pursuant to a fee-based, wrap or other investment platform program of
certain firms, as determined by the fund, may be afforded an opportunity to
make a conversion of (i) Class A and/or Class C shares (not subject to a CDSC)
also owned by the investor in the same fund to Class I shares or
Class R6 shares of the fund; or (ii) Class I shares also owned by the investor
in the same fund to Class R6 shares of the same fund. Investors that no longer
participate in a fee-based, wrap, or other investment platform program of
certain firms may be afforded an opportunity to make a conversion to
Class A shares of the same fund. Class C shares may be converted to Class A at
the request of the applicable financial intermediary after the expiration
of the CDSC period, provided that the financial intermediary through which a
shareholder purchased or holds Class C shares has records verifying that
the Class C share CDSC period has expired and the position is held in an omnibus
or dealer-controlled account. The fund may in its sole discretion
permit a conversion of one share class to another share class of the same fund
in certain circumstances other than those described above.
In addition,
Trustees, employees of the Advisor or its affiliates, employees of the
subadvisor, members of the fund's portfolio management team and the spouses and
children (under age 21) of the aforementioned, may make a conversion of Class A
or Class I shares also owned by the investor in the same fund to Class
R6 shares. If Class R6 shares are unavailable, such investors may make a
conversion of Class A shares in the same fund to Class I shares.
The conversion
of one share class to another share class of the same fund in the particular
circumstances described above, should not cause the investor to
realize taxable gain or loss. For further details, see “Additional Information
Concerning Taxes” for information regarding the tax treatment of such
conversions.
Systematic
Withdrawal Plan.
The Trust
permits the establishment of a Systematic Withdrawal Plan. Payments under this
plan represent proceeds arising from
the redemption of fund shares. Since the redemption price of fund shares may be
more or less than the shareholder’s cost, depending upon the market
value of the securities owned by a fund at the time of redemption, the
distribution of cash pursuant to this plan may result in realization of
gain or loss
for purposes of federal, state and local income taxes. The maintenance of a
Systematic Withdrawal Plan concurrently with purchases of additional
shares of a fund could be disadvantageous to a shareholder because of the
initial sales charge payable on such purchases of Class A shares,
if
applicable, and the CDSC
imposed on redemptions of Class C shares and because redemptions are taxable
events. Therefore, a shareholder should not purchase
shares at the same time that a Systematic Withdrawal Plan is in effect. Each
fund reserves the right to modify or discontinue the Systematic
Withdrawal Plan of any shareholder on 30 days’ prior written notice to such
shareholder, or to discontinue the availability of such plan in the future. The
shareholder may terminate the plan at any time by giving proper notice to
Signature Services.
Monthly
Automatic Accumulation Program (“MAAP”).
This program
is explained in a Prospectus that describes Class A or Class C shares. The
program, as it
relates to automatic investment checks, is subject to the following
conditions:
●
The
investments will be drawn on or about the day of the month
indicated;
●
The privilege
of making investments through the MAAP may be revoked by Signature Services
without prior notice if any investment is not honored by the
shareholder’s bank. The bank shall be under no obligation to notify the
shareholder as to the nonpayment of any checks; and
●
The program
may be discontinued by the shareholder either by calling Signature Services or
upon written notice to Signature Services that is received at
least five (5) business days prior to the due date of any
investment.
Reinstatement
or Reinvestment Privilege.
If Signature
Services and the financial professional are notified prior to reinvestment, a
shareholder who has redeemed
fund shares may, within 120 days after the date of redemption, reinvest, without
payment of a sales charge any part of the redemption proceeds in
shares back into the same share class of the same John Hancock fund and account
from which it was removed, subject to the minimum investment
limit of that fund. The proceeds from the redemption of Class A shares of a fund
may be reinvested at NAV without paying a sales charge for Class A shares
of the fund. If a CDSC was paid upon a redemption, a shareholder may reinvest
the proceeds from this redemption at NAV in additional shares of the
same class, fund, and account from which the redemption was made. The
shareholder’s account will be credited with the amount of any CDSC charged
upon the prior redemption and the new shares will continue to be subject to the
CDSC. The holding period of the shares acquired through reinvestment
will, for purposes of computing the CDSC payable upon a subsequent redemption,
include the holding period of the redeemed shares.
Redemption
proceeds that are otherwise prohibited from being reinvested in the same account
or the same fund may be invested in another account for the same
shareholder in the same share class of the same fund (or different John Hancock
fund if the original fund is no longer available) without paying a sales
charge. Any such reinvestment is subject to the minimum investment
limit.
A fund may
refuse any reinvestment request and may change or cancel its reinvestment
policies at any time.
A redemption
or exchange of fund shares is a taxable transaction for federal income tax
purposes even if the reinvestment privilege is exercised, and any gain or
loss realized by a shareholder on the redemption or other disposition of fund
shares will be treated for tax purposes as described under the caption
“Additional Information Concerning Taxes.”
Section
403(b)(7) Accounts.
Section
403(b)(7) of the Code permits public school employers and employers of certain
types of tax-exempt organizations
to establish for their eligible employees custodial accounts for the purpose of
providing for retirement income for such employees. Treasury
regulations impose certain conditions on exchanges between one custodial account
intended to qualify under Section 403(b)(7) (the “exchanged
account”) and another contract or custodial account intended to qualify under
Section 403(b) (the “replacing account”) under the same employer plan
(a “Section 403(b) Plan”). Specifically, the replacing account agreement must
include distribution restrictions that are no less stringent than those
imposed under the exchanged account agreement, and the employer must enter into
an agreement with the custodian (or other issuer) of the replacing
account under which the employer and the custodian (or other issuer) of the
replacing account will from time to time in the future provide each other
with certain information.
Due to
Treasury regulations:
1
The funds do
not accept requests to establish new John Hancock custodial 403(b)(7) accounts
intended to qualify as a Section 403(b) Plan.
2
The funds do
not accept requests for exchanges or transfers into John Hancock custodial
403(b)(7) accounts (i.e., where the investor holds the replacing
account).
3
The funds
require certain signed disclosure documentation in the event:
●
A shareholder
established a John Hancock custodial 403(b)(7) account with a fund prior to
September 24, 2007; and
●
A shareholder
directs the fund to exchange or transfer some or all of the John Hancock
custodial 403(b)(7) account assets to another custodial
403(b) contract or account (i.e., where the exchanged account is with the
fund).
4
The funds do
not accept salary deferrals into custodial 403(b)(7) accounts.
In the event
that a fund does not receive the required documentation, and the fund is
nonetheless directed to proceed with the transfer, the transfer may be treated as
a taxable transaction.
Purchases
and Redemptions Through Third Parties
Shares of the
funds may be purchased or redeemed through certain Selling Firms. Selling Firms
may charge the investor additional fees for their services. A
fund will be deemed to have received a purchase or redemption order when an
authorized Selling Firm, or if applicable, a Selling Firm’s authorized
designee, receives the order. Orders may be processed at the NAV next calculated
after the Selling Firm receives the order. The Selling Firm must segregate
any orders it receives after the close of regular trading on the NYSE and
transmit those orders to the fund for execution at the NAV next determined.
Some Selling Firms that maintain network/omnibus/nominee accounts with a fund
for their clients charge an annual fee on the average net assets held in
such accounts for accounting, servicing, and distribution services they provide
with respect to the underlying fund shares. This fee is paid by the
Advisor, the fund and/or the Distributor.
Certain
accounts held on a fund’s books, known as omnibus accounts, contain the
investments of multiple underlying clients that are invested in shares
of the funds.
These underlying client accounts are maintained by entities such as financial
intermediaries. Indirect investments in a John Hancock fund through a
financial intermediary such as, but not limited to: a broker-dealer, a bank
(including a bank trust department), an investment advisor, a record
keeper or
trustee of a retirement plan or qualified tuition plan or a sponsor of a
fee-based program that maintains an omnibus account with a fund for trading on
behalf of its customers, may be subject to guidelines, conditions, services and
restrictions that are different from those discussed in a fund’s Prospectus.
These differences may include, but are not limited to: (i) eligibility standards
to purchase, exchange, and sell shares depending on that intermediary’s
policies; (ii) availability of sales charge waivers and fees; (iii) minimum and
maximum initial and subsequent purchase amounts; and (iv) unavailability
of LOI privileges. With respect to the availability of sales charge waivers and
fees, and LOI privileges, see Appendix 1 to the Prospectus, “Intermediary
sales charge waivers.” Additional conditions may apply to an investment in a
fund, and the investment professional or intermediary may charge a
transaction-based, administrative or other fee for its services. These
conditions and fees are in addition to those imposed by a fund and its
affiliates.
Description
of Fund Shares
The Trustees
are responsible for the management and supervision of the Trust. The Declaration
of Trust permits the Trustees to issue an unlimited number of full
and fractional shares of beneficial interest of each fund or other series of the
Trust without par value. Under the Declaration of Trust, the Trustees have
the authority to create and classify shares of beneficial interest in separate
series and classes without further action by shareholders. As of the date of
this SAI, the Trustees have authorized shares of 72 series of the Trust.
Additional series may be added in the future. The Trustees also have
authorized the
issuance of nine classes of shares of the funds, designated as Class A, Class C,
Class I, Class R2, Class R4, Class R5, Class R6, Class NAV, and
Class 1. Additional classes of shares may be authorized in the
future.
Each share of
each class of a fund represents an equal proportionate interest in the aggregate
net assets attributable to that class of the fund. Holders of each class
of shares have certain exclusive voting rights on matters relating to their
respective distribution plan, if any. The different classes of a fund
may bear
different expenses relating to the cost of holding shareholder meetings
necessitated by the exclusive voting rights of any class of shares.
Dividends paid
by a fund, if any, with respect to each class of shares will be calculated in
the same manner, at the same time and on the same day and will be in the
same amount, except for differences resulting from the fact that: (i) the
distribution and service fees, if any, relating to each class of shares
will be borne
exclusively by that class, and (ii) each class of shares will bear any class
expenses properly allocable to that class of shares. Similarly, the NAV per share
may vary depending on which class of shares is purchased. No interest will be
paid on uncashed dividend or redemption checks.
In the event
of liquidation, shareholders of each class are entitled to share pro rata in the
net assets of a fund that are available for distribution to these shareholders.
Shares entitle their holders to one vote per share (and fractional votes for
fractional shares), are freely transferable and have no preemptive,
subscription or conversion rights. When issued, shares are fully paid and
non-assessable, except as set forth below.
Unless
otherwise required by the 1940 Act or the Declaration of Trust, the Trust has no
intention of holding annual meetings of shareholders. Trust shareholders
may remove a Trustee by the affirmative vote of at least two-thirds of the
Trust’s outstanding shares and the Trustees shall promptly call a meeting for
such purpose when requested to do so in writing by the record holders of not
less than 10% of the outstanding shares of the Trust. Shareholders
may, under certain circumstances, communicate with other shareholders in
connection with a request for a special meeting of shareholders.
However, at any time that less than a majority of the Trustees holding office
were elected by the shareholders, the Trustees will call a special
meeting of shareholders for the purpose of electing Trustees.
Under
Massachusetts law, shareholders of a Massachusetts business trust could, under
certain circumstances, be held personally liable for acts or obligations of
such trust or a series thereof. However, the Declaration of Trust contains an
express disclaimer of shareholder liability for acts, obligations or affairs of
the Trust. The Declaration of Trust also provides for indemnification out of the
Trust’s assets for all losses and expenses of any shareholder held
personally liable by reason of being or having been a shareholder. The
Declaration of Trust also provides that no series of the Trust shall be liable
for
the
liabilities of any other series. Furthermore, no series of the Trust shall be
liable for the liabilities of any other fund within the John Hancock Fund
Complex.
Liability is therefore limited to circumstances in which a fund itself would be
unable to meet its obligations, and the possibility of this occurrence is
remote.
The
Declaration of Trust also provides that the Board may approve mergers without
shareholder approval, in accordance with the 1940 Act.
Each fund
reserves the right to reject any application that conflicts with the fund’s
internal policies or the policies of any regulatory authority. The Distributor
does not accept starter, credit card, or third party checks. All checks returned
by the post office as undeliverable will be reinvested at NAV in the fund or
funds from which a redemption was made or dividend paid. Information provided on
the account application may be used by the funds to verify the
accuracy of the information or for background or financial history purposes. A
joint account will be administered as a joint tenancy with right of survivorship,
unless the joint owners notify Signature Services of a different intent. A
shareholder’s account is governed by the laws of The Commonwealth
of Massachusetts. For telephone transactions, the transfer agent will take
measures to verify the identity of the caller, such as asking for name, account
number, Social Security, or other taxpayer ID number and other relevant
information. If appropriate measures are taken, the transfer agent is not
responsible for any losses that may occur to any account due to an unauthorized
telephone call. Also, for shareholders’ protection, telephone
redemptions are not permitted on accounts whose names or addresses have changed
within the past 30 days. Proceeds from telephone transactions
can be mailed only to the address of record.
Except as
otherwise provided, shares of a fund generally may be sold only to U.S.
citizens, U.S. residents, and U.S. domestic corporations, partnerships,
trusts or
estates. For purposes of this policy, U.S. citizens and U.S. residents must
reside in the U.S. and U.S. domestic corporations, partnerships, trusts, and
estates must have a U.S. address of record.
The Trust's
amended and restated Declaration of Trust: (i) sets forth certain duties,
responsibilities, and powers of the Trustees; (ii) clarifies that, other
than as
provided under federal securities laws, the shareholders may only bring actions
involving a fund derivatively; (iii) provides that any action brought by a
shareholder related to a fund will be brought in Massachusetts state or federal
court, and that, if a claim is brought in a different jurisdiction
and subsequently changed to a Massachusetts venue, the shareholder will be
required to reimburse the fund for such expenses; and (iv) clarifies that
shareholders are not intended to be third-party beneficiaries of fund contracts.
The foregoing description of the Declaration of Trust is qualified in
its entirety by the full text of the Declaration of Trust, effective as of
January 22, 2016, which is available by writing to the Secretary of the
Trust at 200
Berkeley Street, Boston, Massachusetts 02116, and also on the SEC’s and
Secretary of the Commonwealth of Massachusetts’ websites.
Sample
Calculation of Maximum Offering Price
Class A shares
are sold with a maximum initial sales charge of 5.00%, 4.50%,
4.00% or 2.50%.
Class C shares are sold at NAV without any initial sales charges and
with a 1.00% CDSC on shares redeemed within 12 months of purchase. Class I,
Class NAV, Class R2, Class R4, Class R5, Class R6, and Class 1 shares
of each fund, as applicable, are sold at NAV without any initial sales charges
or CDSCs. The following tables show the maximum offering price per
share of each class of each fund using the fund's relevant NAV as of August 31,
2024.
|
|
NAV
and Redemption
Price
per Class A Share ($) |
Maximum
Sales Charge
(5.00%
of offering price,
unless
otherwise noted) ($) |
Maximum
Offering
Price
to Public ($) |
Alternative
Asset Allocation Fund |
|
|
|
|
|
|
|
|
Disciplined
Value Emerging Markets Equity Fund |
|
|
|
Emerging
Markets Debt Fund |
|
|
|
|
|
|
|
|
Floating
Rate Income Fund |
|
|
|
Fundamental
Global Franchise Fund |
|
|
|
|
|
|
|
|
International
Small Company Fund |
|
|
|
Lifestyle
Blend Aggressive Portfolio |
|
|
|
Lifestyle
Blend Balanced Portfolio |
|
|
|
Lifestyle
Blend Conservative Portfolio |
|
|
|
Lifestyle
Blend Growth Portfolio |
|
|
|
Lifestyle
Blend Moderate Portfolio |
|
|
|
2065
Lifetime Blend Portfolio |
|
|
|
2060
Lifetime Blend Portfolio |
|
|
|
2055
Lifetime Blend Portfolio |
|
|
|
2050
Lifetime Blend Portfolio |
|
|
|
2045
Lifetime Blend Portfolio |
|
|
|
2040
Lifetime Blend Portfolio |
|
|
|
|
|
NAV
and Redemption
Price
per Class A Share ($) |
Maximum
Sales Charge
(5.00%
of offering price,
unless
otherwise noted) ($) |
Maximum
Offering
Price
to Public ($) |
2035
Lifetime Blend Portfolio |
|
|
|
2030
Lifetime Blend Portfolio |
|
|
|
2025
Lifetime Blend Portfolio |
|
|
|
2020
Lifetime Blend Portfolio |
|
|
|
2015
Lifetime Blend Portfolio |
|
|
|
2010
Lifetime Blend Portfolio |
|
|
|
Multi-Asset
High Income Fund |
|
|
|
Multimanager
2065 Lifetime Portfolio |
|
|
|
Multimanager
2060 Lifetime Portfolio |
|
|
|
Multimanager
2055 Lifetime Portfolio |
|
|
|
Multimanager
2050 Lifetime Portfolio |
|
|
|
Multimanager
2045 Lifetime Portfolio |
|
|
|
Multimanager
2040 Lifetime Portfolio |
|
|
|
Multimanager
2035 Lifetime Portfolio |
|
|
|
Multimanager
2030 Lifetime Portfolio |
|
|
|
Multimanager
2025 Lifetime Portfolio |
|
|
|
Multimanager
2020 Lifetime Portfolio |
|
|
|
Multimanager
2015 Lifetime Portfolio |
|
|
|
Multimanager
2010 Lifetime Portfolio |
|
|
|
|
|
|
|
|
Opportunistic
Fixed Income Fund |
|
|
|
Real
Estate Securities Fund |
|
|
|
Small
Cap Dynamic Growth Fund |
|
|
|
|
|
|
|
|
Strategic
Income Opportunities Fund |
|
|
|
|
|
NAV,
Shares Offering Price, and Redemption Price per
Share |
|
|
|
|
|
|
|
|
|
|
Alternative
Asset Allocation Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
Appreciation Fund |
|
|
|
|
|
|
|
|
Capital
Appreciation Value Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disciplined
Value Emerging Markets Equity Fund |
|
|
|
|
|
|
|
|
Emerging
Markets Debt Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating
Rate Income Fund |
|
|
|
|
|
|
|
|
Fundamental
Global Franchise Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International
Small Company Fund |
|
|
|
|
|
|
|
|
International
Strategic Equity Allocation Fund |
|
|
|
|
|
|
|
|
Lifestyle
Blend Aggressive Portfolio |
|
|
|
|
|
|
|
|
Lifestyle
Blend Balanced Portfolio |
|
|
|
|
|
|
|
|
Lifestyle
Blend Conservative Portfolio |
|
|
|
|
|
|
|
|
Lifestyle
Blend Growth Portfolio |
|
|
|
|
|
|
|
|
Lifestyle
Blend Moderate Portfolio |
|
|
|
|
|
|
|
|
2065
Lifetime Blend Portfolio |
|
|
|
|
|
|
|
|
2060
Lifetime Blend Portfolio |
|
|
|
|
|
|
|
|
|
|
NAV,
Shares Offering Price, and Redemption Price per
Share |
|
|
|
|
|
|
|
|
|
|
2055
Lifetime Blend Portfolio |
|
|
|
|
|
|
|
|
2050
Lifetime Blend Portfolio |
|
|
|
|
|
|
|
|
2045
Lifetime Blend Portfolio |
|
|
|
|
|
|
|
|
2040
Lifetime Blend Portfolio |
|
|
|
|
|
|
|
|
2035
Lifetime Blend Portfolio |
|
|
|
|
|
|
|
|
2030
Lifetime Blend Portfolio |
|
|
|
|
|
|
|
|
2025
Lifetime Blend Portfolio |
|
|
|
|
|
|
|
|
2020
Lifetime Blend Portfolio |
|
|
|
|
|
|
|
|
2015
Lifetime Blend Portfolio |
|
|
|
|
|
|
|
|
2010
Lifetime Blend Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multi-Asset
High Income Fund |
|
|
|
|
|
|
|
|
Multimanager
2065 Lifetime Portfolio |
|
|
|
|
|
|
|
|
Multimanager
2060 Lifetime Portfolio |
|
|
|
|
|
|
|
|
Multimanager
2055 Lifetime Portfolio |
|
|
|
|
|
|
|
|
Multimanager
2050 Lifetime Portfolio |
|
|
|
|
|
|
|
|
Multimanager
2045 Lifetime Portfolio |
|
|
|
|
|
|
|
|
Multimanager
2040 Lifetime Portfolio |
|
|
|
|
|
|
|
|
Multimanager
2035 Lifetime Portfolio |
|
|
|
|
|
|
|
|
Multimanager
2030 Lifetime Portfolio |
|
|
|
|
|
|
|
|
Multimanager
2025 Lifetime Portfolio |
|
|
|
|
|
|
|
|
Multimanager
2020 Lifetime Portfolio |
|
|
|
|
|
|
|
|
Multimanager
2015 Lifetime Portfolio |
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Multimanager
2010 Lifetime Portfolio |
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Opportunistic
Fixed Income Fund |
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Real
Estate Securities Fund |
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Science
& Technology Fund |
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Small
Cap Dynamic Growth Fund |
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Strategic
Income Opportunities Fund |
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U.S.
Sector Rotation Fund |
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Additional
Information Concerning Taxes
The following
discussion is a general and abbreviated summary of certain tax considerations
affecting the funds and their shareholders. No attempt is made to
present a detailed explanation of all federal, state, local and foreign tax
concerns, and the discussions set forth here and in the Prospectus do
not constitute
tax advice. Investors are urged to consult their own tax advisors with specific
questions relating to federal, state, local or foreign taxes.
Each fund is
treated as a separate entity for accounting and tax purposes and intends to
qualify as a RIC under Subchapter M of the Code for each taxable year.
In order to qualify for the special tax treatment accorded RICs and their
shareholders, a fund must, among other things:
(a)
derive at
least 90% of its gross income from dividends, interest, payments with respect to
certain securities loans, and gains from the sale or other
disposition of stock, securities, and foreign currencies, or other income
(including but not limited to gains from options, futures, or forward
contracts) derived with respect to its business of investing in such stock,
securities, or currencies, and net income derived from interests in
qualified publicly traded partnerships (as defined below);
(b)
distribute
with respect to each taxable year at least the sum of 90% of its investment
company taxable income (as that term is defined in the Code without
regard to the deduction for dividends paid-generally, taxable ordinary income
and the excess, if any, of net short-term capital gains over net
long-term capital losses) and 90% of net tax-exempt interest income, for such
year; and
(c)
diversify its
holdings so that, at the end of each quarter of the fund’s taxable year: (i) at
least 50% of the market value of the fund’s total assets is represented by
cash and cash items, U.S. government securities, securities of other RICs, and
other securities limited in respect of any one issuer to a
value not greater than 5% of the value of the fund’s total assets and not more
than 10% of the outstanding voting securities of such issuer; and
(ii) not more than 25% of the value of the fund’s total assets is invested (x)
in the securities (other than those of the U.S. government
or other RICs)
of any one issuer or of two or more issuers that the fund controls and that are
engaged in the same, similar, or related trades or businesses, or
(y) in the securities of one or more qualified publicly traded partnerships (as
defined below).
With respect
to gains from the sale or other disposition of foreign currencies, the Treasury
Department can, by regulation, exclude from qualifying income foreign
currency gains which are not directly related to a RIC’s principal business of
investing in stock (or options or futures with respect to stock or
securities), but no regulations have been proposed or adopted pursuant to this
grant of regulatory authority.
In general,
for purposes of the 90% gross income requirement described in paragraph (a)
above, income derived from a partnership will be treated as qualifying
income only to the extent such income is attributable to items of income of the
partnership which would be qualifying income if realized by the RIC. However,
100% of the net income derived from an interest in a “qualified publicly traded
partnership” will be treated as qualifying income. A “qualified
publicly traded partnership” is a publicly traded partnership that satisfies
certain requirements with respect to the type of income it produces.
In addition,
although in general the passive loss rules of the Code do not apply to RICs,
such rules do apply to a RIC with respect to items attributable to an interest in
a qualified publicly traded partnership. Finally, for purposes of paragraph (c)
above, the term “outstanding voting securities of such issuer” will include
the equity securities of a qualified publicly traded partnership. If a fund
invests in publicly traded partnerships, it might be required to recognize in
its taxable year income in excess of its cash distributions from such publicly
traded partnerships during that year. Such income, even if not reported to a
fund by the publicly traded partnerships until after the end of that year, would
nevertheless be subject to the RIC income distribution requirements
and would be taken into account for purposes of the 4% excise tax described
below.
Each fund may
use “equalization payments” in determining the portion of its net investment
income and net realized capital gains that have been distributed. A
fund that elects to use equalization payments will allocate a portion of its
investment income and capital gains to the amounts paid in redemption of
fund shares, and such income and gains will be deemed to have been distributed
by the fund for purposes of the distribution requirements
described above. This may have the effect of reducing the amount of income and
gains that the fund is required to distribute to shareholders
in order for the fund to avoid federal income tax and excise tax and also may
defer the recognition of taxable income by shareholders. This process does
not affect the tax treatment of redeeming shareholders and, since the amount of
any undistributed income and/or gains will be reflected in the value
of the fund's shares, the total return on a shareholder's investment will not be
reduced as a result of the fund's distribution policy. The IRS has not
published any guidance concerning the methods to be used in allocating
investment income and capital gain to redemptions of shares. In the event that the
IRS determines that a fund is using an improper method of allocation and has
under-distributed its net investment income or net realized capital gains
for any taxable year, such fund may be liable for additional federal income or
excise tax or may jeopardize its treatment as a RIC.
A fund may
invest in certain commodity investments including commodity-based ETFs. Under an
IRS revenue ruling effective after September 30, 2006, income from
certain commodities-linked derivatives in which certain funds invest is not
considered qualifying income for purposes of the 90% qualifying income test.
This ruling limits the extent to which a fund may receive income from such
commodity-linked derivatives to a maximum of 10% of its annual gross
income.
As a result of
qualifying as a RIC, a fund will not be subject to U.S. federal income tax on
its investment company taxable income (as that term is defined in the Code,
determined without regard to the deduction for dividends paid) and net capital
gain (i.e., the excess of its net realized long-term capital gain over its net
realized short-term capital loss), if any, that it distributes to its
shareholders in each taxable year, provided that it distributes to its
shareholders
at least the sum of 90% of its investment company taxable income and 90% of its
net exempt interest income for such taxable year.
A fund will be
subject to a non-deductible 4% excise tax to the extent that the fund does not
distribute by the end of each calendar year: (a) at least 98% of its
ordinary income for the calendar year; (b) at least 98.2% of its capital gain
net income for the one-year period ending, as a general rule, on October 31 of
each year; and (c) 100% of the undistributed ordinary income and capital gain
net income from the preceding calendar years (if any). For this purpose,
any income or gain retained by a fund that is subject to corporate tax will be
considered to have been distributed by year-end. To the extent possible, each
fund intends to make sufficient distributions to avoid the application of both
federal income and excise taxes. Under current law, distributions
of net investment income and net capital gain are not taxed to a life insurance
company to the extent applied to increase the reserves for the company’s
variable annuity and life insurance contracts.
If a fund
fails to meet the annual gross income test or asset diversification test or
fails to satisfy the 90% distribution requirement as described above,
for any
taxable year, the fund would incur income tax as a regular corporation on its
taxable income and net capital gains for that year, it would lose its
deduction for
dividends paid to shareholders, and it would be subject to certain gain
recognition and distribution requirements upon requalification. Further
distributions of income by the fund to its shareholders would be treated as
dividend income, although distributions to individual shareholders generally
would constitute qualified dividend income subject to reduced federal income tax
rates if the shareholder satisfies certain holding period requirements
with respect to its shares in the fund and distributions to corporate
shareholders generally should be eligible for the DRD. Compliance with the RIC
90% qualifying income test and with the asset diversification requirements is
carefully monitored by the Advisor and the subadvisors and it is intended
that each fund will comply with the requirements for qualification as a
RIC.
If a fund
fails to meet the annual gross income test described above, the fund will
nevertheless be considered to have satisfied the test if (i) (a) such
failure is due
to reasonable cause and not due to willful neglect and (b) the fund reports the
failure, and (ii) the fund pays an excise tax equal to the excess
non-qualifying income. If a fund fails to meet the asset diversification test
described above with respect to any quarter, the fund will nevertheless
be considered
to have satisfied the requirements for such quarter if the fund cures such
failure within six months and either: (i) such failure is de minimis; or
(ii) (a) such failure is due to reasonable cause and not due to willful neglect;
and (b) the fund reports the failure and pays an excise tax.
A fund may
make investments that produce income that is not matched by a corresponding cash
distribution to the fund, such as investments in pay-in-kind
bonds or in obligations such as certain Brady Bonds and zero-coupon securities
having OID (i.e., an amount equal to the excess of the stated redemption
price of the security at maturity over its issue price), or market discount
(i.e., an amount equal to the excess of the stated redemption price at maturity of
the security (appropriately adjusted if it also has OID) over its basis
immediately after it was acquired) if the fund elects to accrue market
discount on a
current basis. In addition, income may continue to accrue for federal income tax
purposes with respect to a non-performing investment. Any such
income would be treated as income earned by the fund and therefore would be
subject to the distribution requirements of the Code. Because such income
may not be matched by a corresponding cash distribution to the fund, the fund
may be required to borrow money or dispose of other securities to
be able to make distributions to its investors. In addition, if an election is
not made to currently accrue market discount with respect to a market
discount bond, all or a portion of any deduction for any interest expense
incurred to purchase or hold such bond may be deferred until such bond
is sold or
otherwise disposed of.
Investments in
debt obligations that are at risk of or are in default present special tax
issues for a fund. Tax rules are not entirely clear about issues such
as when a fund
may cease to accrue interest, OID, or market discount, when and to what extent
deductions may be taken for bad debts or worthless securities,
how payments received on obligations in default should be allocated between
principal and income, and whether exchanges of debt obligations in
a workout context are taxable. These and other issues will be addressed by a
fund that holds such obligations in order to reduce the risk of distributing
insufficient income to preserve its status as a RIC and seek to avoid becoming
subject to federal income or excise tax.
A fund may
make investments in convertible securities and exchange traded notes.
Convertible debt ordinarily is treated as a “single property” consisting of
a pure debt interest until conversion, after which the investment becomes an
equity interest. If the security is issued at a premium (i.e., for cash in excess
of the face amount payable on retirement), the creditor-holder may amortize the
premium over the life of the bond. If the security is issued for
cash at a price below its face amount, the creditor-holder must accrue OID in
income over the life of the debt. The creditor-holder’s exercise of the conversion
privilege is treated as a nontaxable event. Mandatorily convertible debt, such
as an exchange traded note issued in the form of an unsecured
obligation that pays a return based on the performance of a specified market
index, currency or commodity, is often treated as a contract to buy or sell
the reference property rather than debt. Similarly, convertible preferred stock
with a mandatory conversion feature is ordinarily, but not always,
treated as equity rather than debt. In general, conversion of preferred stock
for common stock of the same corporation is tax-free. Conversion of preferred
stock for cash is a taxable redemption. Any redemption premium for preferred
stock that is redeemable by the issuing company might be required to be
amortized under OID principles.
Certain funds
may engage in hedging or derivatives transactions involving foreign currencies,
forward contracts, options and futures contracts (including
options, futures and forward contracts on foreign currencies) and short sales
(see “Hedging and Other Strategic Transactions”). Such transactions
will be subject to special provisions of the Code that, among other things, may
affect the character of gains and losses realized by a fund (that is, may
affect whether gains or losses are ordinary or capital), accelerate recognition
of income of a fund and defer recognition of certain of the fund’s losses.
These rules could therefore affect the character, amount and timing of
distributions to shareholders. The futures that are traded on a regulated
exchange, such as NYSE or NASDAQ, will be treated as Code Section 1256
contracts, and the capital gain/loss will be reflected as 40% short-term
capital gain/loss and 60% long-term capital gain/loss. Any futures that are not
traded on a regulated exchange will follow the 365 day rule of short-term
capital or long-term capital treatment. In addition, these provisions: (1) will
require a fund to “mark-to-market” certain types of positions in its
portfolio
(that is, treat them as if they were closed out); and (2) may cause a fund to
recognize income without receiving cash with which to pay dividends or
make distributions in amounts necessary to satisfy the distribution requirement
and avoid the 4% excise tax. Each fund intends to monitor its
transactions, will make the appropriate tax elections and will make the
appropriate entries in its books and records when it acquires any option,
futures
contract, forward contract or hedged investment in order to mitigate the effect
of these rules.
Foreign
exchange gains and losses realized by a fund in connection with certain
transactions involving foreign currency denominated debt securities,
certain
foreign currency options, foreign currency forward contracts, foreign
currencies, or payables or receivables denominated in a foreign currency
are subject to
Section 988 of the Code, which generally causes such gains and losses to be
treated as ordinary income and losses and may affect the amount, timing
and character of distributions to shareholders. If the net foreign exchange loss
for a year treated as ordinary loss under Section 988 were to exceed
a fund’s investment company taxable income computed without regard to such loss,
the resulting overall ordinary loss for such year would not be
deductible by the fund or its shareholders in future years. Under such
circumstances, distributions paid by the fund could be deemed return of
capital.
Certain funds
may be required to account for their transactions in forward rolls or swaps,
caps, floors and collars in a manner that, under certain circumstances,
may limit the extent of their participation in such transactions. Additionally,
a fund may be required to recognize gain, but not loss, if a swap or other
transaction is treated as a constructive sale of an appreciated financial
position in a fund’s portfolio. Additionally, some countries restrict
repatriation
which may make it difficult or impossible for a fund to obtain cash
corresponding to its earnings or assets in those countries. However, a
fund must
distribute to shareholders for each taxable year substantially all of its net
income and net capital gains, including such income or gain, to qualify as a
RIC and avoid liability for any federal income or excise tax. Therefore, a fund
may have to dispose of its portfolio securities under disadvantageous
circumstances to generate cash, or borrow cash, to satisfy these distribution
requirements.
Certain funds
may invest in REITs and/or MLPs. Effective for taxable years beginning after
December 31, 2017 and before January 1, 2026, the Code generally
allows individuals and certain non-corporate entities a deduction for 20% of
“qualified publicly traded partnership income,” such as income from MLPs, and
a deduction for 20% of qualified REIT dividends. Treasury regulations allow a
RIC to pass the character of its qualified REIT dividends through to its
shareholders provided certain holding period requirements are met. A similar
pass-through by RICs of qualified publicly traded
partnership
income is not currently available. As a result, an investor who invests directly
in MLPs will be able to receive the benefit of such deductions, while a
shareholder in a fund that invests in MLPs currently will not.
If a fund
invests in stock (including an option to acquire stock such as is inherent in a
convertible bond) in certain foreign corporations that receive at least 75% of
their annual gross income from passive sources (such as interest, dividends,
certain rents and royalties or capital gain) or hold at least 50% of their
assets in investments producing such passive income (“passive foreign investment
companies” or “PFICs”), the fund could be subject to federal income
tax and additional interest charges on “excess distributions” received from such
companies or gain from the sale of stock in such companies,
even if all income or gain actually received by the fund is timely distributed
to its shareholders. The fund would not be able to pass through to its
shareholders any credit or deduction for such a tax.
If a fund were
to invest in a PFIC and elected to treat the PFIC as a “qualified electing fund”
under the Code, in lieu of the foregoing requirements, the fund would be
required to include in income each year a portion of the ordinary earnings and
net capital gain of the qualified electing fund, even if not distributed to
the fund. Alternatively, a fund can elect to mark-to-market at the end of each
taxable year its shares in a PFIC; in this case, the fund would recognize as
ordinary income any increase in the value of such shares, and as ordinary loss
any decrease in such value to the extent it did not exceed prior
increases included in income. Under either election, a fund might be required to
recognize in a year income in excess of its distributions from PFICs and its
proceeds from dispositions of PFIC stock during that year, and such income would
nevertheless be subject to the distribution requirements
and would be taken into account for purposes of the 4% excise
tax.
A fund may be
subject to withholding and other taxes imposed by foreign countries with respect
to its investments in foreign securities. Some tax conventions
between certain countries and the U.S. may reduce or eliminate such taxes.
Rather than deducting these foreign taxes, if a fund invests more than 50%
of its assets in the stock or securities of foreign corporations or foreign
governments at the end of its taxable year, the fund may make an election to
treat a proportionate amount of eligible foreign taxes as constituting a taxable
distribution to each shareholder or to a qualified fund of funds, which
would, subject to certain limitations, generally allow the shareholder or the
qualified fund of funds to either (i) credit that proportionate amount of
taxes against U.S. Federal income tax liability as a foreign tax credit or (ii)
to take that amount as an itemized deduction. A qualified fund of funds is a RIC
that has at least 50% of the value of its total interests invested in other RICs
at the end of each quarter for the taxable year. Such foreign taxes will
reduce the amount a fund has available to distribute to
shareholders.
If this
election is made, a shareholder generally subject to tax will be required to
include in gross income (in addition to taxable dividends actually received) his
or her pro rata share of the foreign taxes paid by the fund, and may be entitled
either to deduct (as an itemized deduction) his or her pro rata share of
foreign taxes in computing his or her taxable income or to use it (subject to
limitations) as a foreign tax credit against his or her U.S. federal
income tax liability. No deduction for foreign taxes may be claimed by a
shareholder who does not itemize deductions. Each shareholder will be notified
after the close of the fund’s taxable year whether the foreign taxes paid by the
fund will “pass-through” for that taxable year.
For United
States federal income tax purposes, distributions paid out of a fund’s current
or accumulated earnings and profits will, except in the case of distributions
of qualified dividend income and capital gain dividends described below, be
taxable as ordinary dividend income. Certain income distributions
paid by a fund (whether paid in cash or reinvested in additional fund shares) to
individual taxpayers are taxed at rates applicable to net long-term
capital gains (currently 20%, 15%, or 0%, depending on an individual’s level of
income). This tax treatment applies only if the shareholder owns fund
shares for at least 61 days during the 121-day period beginning 60 days before
the fund's ex-dividend date (or 91 days during the 181-day period
beginning 90 days before the fund's ex-dividend date in the case of certain
preferred stock dividends paid by the fund), certain other requirements
are satisfied by the shareholder, and the dividends are attributable to
qualified dividend income received by the fund itself. For this purpose,
“qualified dividend income” means dividends received by a fund from United
States corporations and “qualified foreign corporations,” as well as certain
dividends from underlying funds that are reported as qualified dividend income,
provided that the fund satisfies certain holding period and other
requirements in respect of the stock of such corporations and underlying funds.
There can be no assurance as to what portion of a fund’s dividend distributions
will qualify as qualified dividend income. Dividends paid by funds that
primarily invest in bonds and other debt securities generally will not
qualify for
the reduced tax rate applicable to qualified dividend income and will not
qualify for the corporate dividends-received deduction. Distributions
from a PFIC
are not eligible for the reduced rate of tax on “qualified dividend
income.”
If a fund
should have dividend income that qualifies for the reduced tax rate applicable
to qualified dividend income, the maximum amount allowable will be reported by
the fund. This amount will be reflected on Form 1099-DIV for the applicable
calendar year.
For purposes
of the dividends received deduction available to corporations, dividends
received by a fund, if any, from U.S. domestic corporations in respect of the
stock of such corporations held by the fund, for U.S. federal income tax
purposes, for at least 46 days (91 days in the case of certain preferred
stock) during a prescribed period extending before and after each such dividend
and distributed and reported by the fund may be treated as qualifying
dividends. Corporate shareholders must meet the holding period requirements
stated above with respect to their shares of a fund for each dividend in
order to qualify for the deduction and, if they have any debt that is deemed
under the Code directly attributable to such shares, may be denied a
portion of the dividends received deduction. Additionally, any corporate
shareholder should consult its tax advisor regarding the possibility
that its tax
basis in its shares may be reduced, for federal income tax purposes, by reason
of “extraordinary dividends” received with respect to the shares and, to
the extent such basis would be reduced below zero, that current recognition of
income would be required.
Certain
distributions reported by a fund as Section 163(j) interest dividends may be
treated as interest income by shareholders for purposes of the tax rules
applicable to interest expense limitations under Section 163(j) of the Code.
Such treatment by the shareholder is generally subject to holding period
requirements and other potential limitations, although the holding period
requirements are generally not applicable to dividends declared by
money market
funds and certain other funds that declare dividends daily and pay such
dividends on a monthly or more frequent basis. The amount that a fund is
eligible to report as a Section 163(j) dividend for a tax year is generally
limited to the excess of the fund’s business interest income over the
sum of the
fund’s (i) business interest expense and (ii) other deductions properly
allocable to the fund’s business interest income.
Shareholders
receiving any distribution from a fund in the form of additional shares pursuant
to a dividend reinvestment plan will be treated as receiving a taxable
distribution in an amount equal to the fair market value of the shares received,
determined as of the reinvestment date. Shareholders who have chosen
automatic reinvestment of their distributions will have a federal tax basis in
each share received pursuant to such a reinvestment equal to the amount of
cash they would have received had they elected to receive the distribution in
cash, divided by the number of shares received in the reinvestment.
For federal
income tax purposes, a fund is permitted to carry forward a net capital loss
incurred in any year to offset net capital gains, if any, in any subsequent
year until such loss carryforwards have been fully used. Capital losses carried
forward will retain their character as either short-term or long-term
capital losses. A fund’s ability to utilize capital loss carryforwards in a
given year or in total may be limited. To the extent subsequent net capital gains
are offset by such losses, they would not result in federal income tax liability
to a fund and would not be distributed as such to shareholders.
Below are the
capital loss carryforwards available to the funds as of August 31, 2024 to the extent
provided by regulations, to offset future net realized capital
gains:
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Short-term
Losses
(no
expiration date) ($) |
Long-term
Losses
(no
expiration date) ($) |
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Alternative
Asset Allocation Fund |
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Capital
Appreciation Fund |
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Capital
Appreciation Value Fund |
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Disciplined
Value Emerging Markets Equity Fund |
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Emerging
Markets Debt Fund |
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Floating
Rate Income Fund |
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Fundamental
Global Franchise Fund |
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International
Small Company Fund |
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International
Strategic Equity Allocation Fund |
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Multi-Asset
High Income Fund |
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Lifestyle
Blend Aggressive Portfolio |
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Lifestyle
Blend Balanced Portfolio |
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Lifestyle
Blend Conservative Portfolio |
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Lifestyle
Blend Growth Portfolio |
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Lifestyle
Blend Moderate Portfolio |
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2065
Lifetime Blend Portfolio |
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2060
Lifetime Blend Portfolio |
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2055
Lifetime Blend Portfolio |
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2050
Lifetime Blend Portfolio |
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2045
Lifetime Blend Portfolio |
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2040
Lifetime Blend Portfolio |
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2035
Lifetime Blend Portfolio |
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2030
Lifetime Blend Portfolio |
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2025
Lifetime Blend Portfolio |
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2020
Lifetime Blend Portfolio |
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2015
Lifetime Blend Portfolio |
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2010
Lifetime Blend Portfolio |
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Multimanager
2065 Lifetime Portfolio |
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Short-term
Losses
(no
expiration date) ($) |
Long-term
Losses
(no
expiration date) ($) |
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Multimanager
2060 Lifetime Portfolio |
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Multimanager
2055 Lifetime Portfolio |
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Multimanager
2050 Lifetime Portfolio |
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Multimanager
2045 Lifetime Portfolio |
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Multimanager
2040 Lifetime Portfolio |
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Multimanager
2035 Lifetime Portfolio |
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Multimanager
2030 Lifetime Portfolio |
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Multimanager
2025 Lifetime Portfolio |
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Multimanager
2020 Lifetime Portfolio |
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Multimanager
2015 Lifetime Portfolio |
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Multimanager
2010 Lifetime Portfolio |
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Opportunistic
Fixed Income Fund |
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Real
Estate Securities Fund |
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Science
& Technology Fund |
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Small
Cap Dynamic Growth Fund |
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Strategic
Income Opportunities Fund |
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U.S.
Sector Rotation Fund |
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Distributions
of net capital gain, if any, reported as capital gains dividends are taxable to
a shareholder as long-term capital gains, regardless of how long the
shareholder has held fund shares. A distribution of an amount in excess of a
fund’s current and accumulated earnings and profits will be treated by a
shareholder as a return of capital which is applied against and reduces the
shareholder’s basis in his or her shares. To the extent that the amount of
any such
distribution exceeds the shareholder’s basis in his or her shares, the excess
will be treated by the shareholder as gain from a sale or exchange of the shares.
Distributions of gains from the sale of investments that a fund owned for one
year or less will be taxable as ordinary income.
In determining
its net capital gain, including in connection with determining the amount
available to support a capital gain dividend, its taxable income and its
earnings and profits, a fund generally may elect to treat part or all of any
post-October capital loss (defined as any net capital loss attributable to
the portion,
if any, of the taxable year after October 31 or, if there is no such loss, the
net long-term capital loss or net short-term capital loss attributable
to any such portion of the taxable year) or late-year ordinary loss (generally,
the sum of its (i) net ordinary loss, if any, from the sale, exchange or
other taxable disposition of property, attributable to the portion, if any, of
the taxable year after October 31, and its (ii) other net ordinary loss, if any,
attributable to the portion, if any, of the taxable year after December 31) as
if incurred in the succeeding taxable year.
A fund may
elect to retain its net capital gain or a portion thereof for investment and be
taxed at corporate rates on the amount retained. In such case, it may designate
the retained amount as undistributed capital gains in a notice to its
shareholders who will be treated as if each received a distribution of
his pro rata
share of such gain, with the result that each shareholder will: (i) be required
to report his pro rata share of such gain on his tax return as long-term
capital gain; (ii) receive a refundable tax credit for his pro rata share of tax
paid by the fund on the gain; and (iii) increase the tax basis for his
shares by an
amount equal to the deemed distribution less the tax credit.
Selling
shareholders generally will recognize gain or loss in an amount equal to the
difference between the shareholder’s adjusted tax basis in the shares sold
and the sale proceeds. Such gain or loss will be treated as capital gain or loss
if the shares are capital assets in the shareholder’s hands and will be
long-term or short-term, depending upon the shareholder’s tax holding period for
the shares and subject to the special rules described below. The maximum
tax rate applicable to net capital gains recognized by individuals and other
non-corporate taxpayers is generally 20% for gains recognized on the sale of
capital assets held for more than one year (as well as certain capital gain
distributions) (15% or 0% for individuals at certain income levels).
A shareholder
exchanging shares of one fund for shares of another fund will be treated for tax
purposes as having sold the shares of the first fund, realizing tax
gain or loss on such exchange. A shareholder exercising a right to convert one
class of fund shares to a different class of shares of the same fund should
not realize taxable gain or loss.
Any loss
realized upon the sale or exchange of fund shares with a holding period of six
months or less will be treated as a long-term capital loss to the extent of any
capital gain distributions received (or amounts designated as undistributed
capital gains) with respect to such shares. In addition, all or a portion of a
loss realized on a sale or other disposition of fund shares may be disallowed
under “wash sale” rules to the extent the shareholder acquires other shares
of the same fund (whether through the reinvestment of distributions or
otherwise) within a period of 61 days beginning 30 days before and ending 30 days
after the date of disposition of the shares. Any disallowed loss will result in
an adjustment to the shareholder’s tax basis in some or all of the other
shares acquired.
Sales charges
paid upon a purchase of shares cannot be taken into account for purposes of
determining gain or loss on a sale of the shares before the 91st day after
their purchase to the extent a sales charge is reduced or eliminated in a
subsequent acquisition of shares of a fund, during the period beginning on
the date of such sale and ending on January 31 of the calendar year following
the calendar year in which such sale was made, pursuant to a reinvestment
or exchange privilege. Any disregarded amounts will result in an adjustment to
the shareholder’s tax basis in some or all of any other shares
acquired.
The benefits
of the reduced tax rates applicable to long-term capital gains and qualified
dividend income may be impacted by the application of the alternative
minimum tax to individual shareholders.
Certain net
investment income received by an individual having adjusted gross income in
excess of $200,000 (or $250,000 for married individuals filing
jointly) will be subject to a tax of 3.8%. Undistributed net investment income
of trusts and estates in excess of a specified amount also will be subject to
this tax. Dividends and capital gains distributed by a fund, and gain realized
on redemption of fund shares, will constitute investment income of the type
subject to this tax.
Special tax
rules apply to investments through defined contribution plans and other
tax-qualified plans. Shareholders should consult their tax advisor to
determine the
suitability of shares of a fund as an investment through such
plans.
Dividends and
distributions on a fund’s shares are generally subject to federal income tax as
described herein to the extent they do not exceed the fund’s realized
income and gains, even though such dividends and distributions may economically
represent a return of a particular shareholder’s investment. Such
distributions are likely to occur in respect of shares purchased at a time when
a fund’s NAV reflects gains that are either unrealized or realized but
not
distributed. Such realized gains may be required to be distributed even when a
fund’s NAV also reflects unrealized losses. Such gains could be substantial,
and the taxes incurred by a shareholder with respect to such distributions could
have a material impact on the value of the shareholder’s investment.
Certain
distributions declared in October, November or December to shareholders of
record of such month and paid in the following January will be taxed to
shareholders as if received on December 31 of the year in which they were
declared. In addition, certain other distributions made after the close of a
taxable year of a fund may be “spilled back” and treated as paid by the fund
(except for purposes of the non-deductible 4% federal excise tax) during such
taxable year. In such case, shareholders will be treated as having received such
dividends in the taxable year in which the distributions were actually
made.
A fund will
inform its shareholders of the source and tax status of all distributions
promptly after the close of each calendar year.
Each fund (or
its administrative agent) must report to the IRS and furnish to shareholders the
cost basis information and holding period for such fund’s shares
purchased on or after January 1, 2012, and repurchased by the fund on or after
that date. A fund will permit shareholders to elect from among several
permitted cost basis methods. In the absence of an election, each fund will use
an average cost as its default cost basis method. The cost basis method that a
shareholder elects may not be changed with respect to a repurchase of shares
after the settlement date of the repurchase. Shareholders should consult
with their tax advisors to determine the best permitted cost basis method for
their tax situation and to obtain more information about how the new
cost basis reporting rules apply to them.
A fund
generally is required to withhold and remit to the U.S. Treasury a percentage of
the taxable dividends and other distributions paid to and proceeds of
share sales, exchanges, or redemptions made by any individual shareholder
(including foreign individuals) who fails to furnish the fund with a correct
taxpayer identification number, who has under-reported dividends or interest
income, or who fails to certify to the fund that he or she is a United States
person and is not subject to such withholding. The backup withholding tax rate
is 24%. Distributions will not be subject to backup withholding to
the extent they are subject to the withholding tax on foreign persons described
in the next paragraph. Any tax withheld as a result of backup
withholding does not constitute an additional tax imposed on the record owner of
the account and may be claimed as a credit on the record owner’s
federal income tax return.
Non-U.S.
investors not engaged in a U.S. trade or business with which their investment in
a fund is effectively connected will be subject to U.S. federal income tax
treatment that is different from that described above. Such non-U.S. investors
may be subject to withholding tax at the rate of 30% (or a lower rate
under an applicable tax treaty) on amounts treated as ordinary dividends from a
fund. Capital gain distributions, if any, are not subject to the 30%
withholding tax. Unless an effective IRS Form W-8BEN or other authorized
withholding certificate is on file, backup withholding will apply to certain
other payments
from a fund. Non-U.S. investors should consult their tax advisors regarding such
treatment and the application of foreign taxes to an investment in
a fund.
Properly-reported
dividends generally are exempt from U.S. federal withholding tax where they are
(i) “interest-related dividends” paid in respect of a fund’s
“qualified net interest income” (generally, a fund’s U.S. source interest
income, other than certain contingent interest and interest from obligations of
a corporation or partnership in which the fund is at least a 10% shareholder,
reduced by expenses that are allocable to such income) or (ii) “short-term
capital gain dividends” paid in respect of a fund’s “qualified short-term gains”
(generally, the excess of a fund’s net short-term capital gain over the
fund’s long-term capital loss for such taxable year). Depending on its
circumstances, a fund may report all, some or none of its potentially
eligible
dividends as such interest-related dividends or as short-term capital gain
dividends and/or treat such dividends, in whole or in part, as ineligible
for this
exemption from withholding.
Under FATCA, a
30% U.S. withholding tax may apply to any U.S.-source “withholdable payments”
made to a non-U.S. entity unless the non-U.S. entity enters into an
agreement with either the IRS or a governmental authority in its own country, as
applicable, to collect and provide substantial information regarding the
entity’s owners, including “specified United States persons” and “United States
owned foreign entities,” or otherwise demonstrates compliance
with or exemption from FATCA. The term “withholdable payment” includes any
payment of interest (even if the interest is otherwise exempt from the
withholding rules described above) or dividends, in each case with respect to
any U.S. investment. The IRS has issued proposed regulations, which have
immediate effect, while pending, to eliminate the withholding tax that was
scheduled to begin in 2019 with respect to U.S.-source investment
sale proceeds. A specified United States person is essentially any U.S. person,
other than publicly traded corporations, their affiliates, tax-exempt
organizations, governments, banks, REITs, RICs, and
common trust funds. A United States owned foreign entity is a foreign entity
with one or more
“substantial United States owners,” generally defined as United States person
owning a greater than 10% interest. Non-U.S. investors should consult their
own tax advisers regarding the impact of this legislation on their investment in
a fund.
If a
shareholder realizes a loss on disposition of a fund's shares of $2 million or
more for an individual shareholder or $10 million or more for a corporate
shareholder, the shareholder must file with the IRS a disclosure statement on
Form 8886. Direct shareholders of portfolio securities are in many cases
excepted from this reporting requirement, but under current guidance,
shareholders of a RIC are not excepted. Future guidance may extend the
current exception from this reporting requirement to shareholders of most or all
RICs.
The foregoing
is a general and abbreviated summary of the applicable provisions of the Code
and Treasury Regulations currently in effect. It is not intended to be
a complete explanation or a substitute for consultation with individual tax
advisors. For the complete provisions, reference should be made to the
pertinent Code sections and the Treasury Regulations promulgated thereunder. The
Code and Treasury Regulations are subject to change, possibly with
retroactive effect.
Pursuant to
the Subadvisory Agreements, the subadvisors are responsible for placing all
orders for the purchase and sale of portfolio securities of the funds. The
subadvisors have no formula for the distribution of the funds’ brokerage
business; rather they place orders for the purchase and sale of securities
with the primary objective of obtaining the most favorable overall results for
the applicable fund. The cost of securities transactions for each fund will
consist primarily of brokerage commissions or dealer or underwriter spreads.
Fixed-income securities and money market instruments are generally
traded on a net basis and do not normally involve either brokerage commissions
or transfer taxes.
Occasionally,
securities may be purchased directly from the issuer. For securities traded
primarily in the OTC market, the subadvisors will, where possible, deal
directly with dealers who make a market in the securities unless better prices
and execution are available elsewhere. Such dealers usually act as
principals for their own account.
Selection
of Brokers or Dealers to Effect Trades.
In selecting
brokers or dealers to implement transactions, the subadvisors will give
consideration to a number of
factors, including:
●
price, dealer
spread or commission, if any;
●
the
reliability, integrity and financial condition of the broker dealer;
●
size of the
transaction;
●
difficulty of
execution;
●
brokerage and
research services provided (unless prohibited by applicable law);
and
●
confidentiality
and anonymity.
Consideration
of these factors by a subadvisor, either in terms of a particular transaction or
the subadvisor’s overall responsibilities with respect to the fund and any
other accounts managed by the subadvisor, could result in the applicable fund
paying a commission or spread on a transaction that is in excess of the
amount of commission or spread another broker dealer might have charged for
executing the same transaction.
Securities
of Regular Broker Dealers.
The table
below presents information regarding the securities of the funds’ regular broker
dealers (or parents of the regular
broker dealers) that were held by the funds as of August 31, 2024. A “Regular
Broker Dealer” of a fund is defined by the SEC as one of the 10 brokers or
dealers that during the fund's most recent fiscal year: (a) received the
greatest dollar amount of brokerage commissions by virtue of direct or
indirect participation in the fund's portfolio transactions; (b) engaged as
principal in the largest dollar amount of portfolio transactions of the
fund; or (c)
sold the largest dollar amount of securities of the fund.
|
|
|
|
Alternative
Asset Allocation Fund |
|
|
|
|
Morgan
Stanley & Company, Inc. |
|
|
|
|
|
|
|
|
|
|
|
The
Goldman Sachs Group, Inc. |
|
Capital
Appreciation Fund |
|
|
|
|
|
|
|
|
The
Goldman Sachs Group, Inc. |
|
Capital
Appreciation Value Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Morgan
Stanley & Company, Inc. |
|
|
|
|
|
|
|
|
|
|
|
The
Goldman Sachs Group, Inc. |
|
|
|
|
|
Disciplined
Value Emerging Markets Equity Fund |
|
|
Emerging
Markets Debt Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Morgan
Stanley & Company, Inc. |
|
|
|
|
|
|
|
|
|
|
|
The
Goldman Sachs Group, Inc. |
|
Floating
Rate Income Fund |
|
|
Fundamental
Global Franchise Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International
Small Company Fund |
|
|
International
Strategic Equity Allocation Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multi-Asset
High Income Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Goldman Sachs Group, Inc. |
|
Lifestyle
Blend Aggressive Portfolio |
|
|
Lifestyle
Blend Balanced Portfolio |
|
|
Lifestyle
Blend Conservative Portfolio |
|
|
Lifestyle
Blend Growth Portfolio |
|
|
Lifestyle
Blend Moderate Portfolio |
|
|
2065
Lifetime Blend Portfolio |
|
|
2060
Lifetime Blend Portfolio |
|
|
|
|
|
|
2055
Lifetime Blend Portfolio |
|
|
2050
Lifetime Blend Portfolio |
|
|
2045
Lifetime Blend Portfolio |
|
|
2040
Lifetime Blend Portfolio |
|
|
2035
Lifetime Blend Portfolio |
|
|
2030
Lifetime Blend Portfolio |
|
|
2025
Lifetime Blend Portfolio |
|
|
2020
Lifetime Blend Portfolio |
|
|
2015
Lifetime Blend Portfolio |
|
|
2010
Lifetime Blend Portfolio |
|
|
Multimanager
2065 Lifetime Portfolio |
|
|
Multimanager
2060 Lifetime Portfolio |
|
|
Multimanager
2055 Lifetime Portfolio |
|
|
Multimanager
2050 Lifetime Portfolio |
|
|
Multimanager
2045 Lifetime Portfolio |
|
|
Multimanager
2040 Lifetime Portfolio |
|
|
Multimanager
2035 Lifetime Portfolio |
|
|
Multimanager
2030 Lifetime Portfolio |
|
|
Multimanager
2025 Lifetime Portfolio |
|
|
Multimanager
2020 Lifetime Portfolio |
|
|
Multimanager
2015 Lifetime Portfolio |
|
|
Multimanager
2010 Lifetime Portfolio |
|
|
|
|
|
|
Opportunistic
Fixed Income Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Morgan
Stanley & Company, Inc. |
|
|
|
|
|
|
|
The
Goldman Sachs Group, Inc. |
|
|
|
|
|
Real
Estate Securities Fund |
|
|
Science
& Technology Fund |
|
|
|
|
|
|
Small
Cap Dynamic Growth Fund |
|
|
|
|
|
|
Strategic
Income Opportunities Fund |
|
|
|
|
Morgan
Stanley & Company, Inc. |
|
|
|
|
|
|
|
The
Goldman Sachs Group, Inc. |
|
U.S.
Sector Rotation Fund |
|
|
|
|
|
|
|
|
|
|
|
|
Morgan
Stanley & Company, Inc. |
|
|
|
|
|
|
|
|
|
|
|
The
Goldman Sachs Group, Inc. |
|
1
Amount is less
than $500.
Soft
Dollar Considerations.
In selecting
brokers and dealers, the subadvisors will give consideration to the value and
quality of any research, statistical,
quotation, brokerage or valuation services provided by the broker or dealer to
the subadvisor. In placing a purchase or sale order, unless prohibited by
applicable law, the subadvisor may use a broker whose commission in effecting
the transaction is higher than that of some other broker if the subadvisor
determines in good faith that the amount of the higher commission is reasonable
in relation to the value of the brokerage and research
services
provided by such broker, viewed in terms of either the particular transaction or
the subadvisor’s overall responsibilities with respect to a fund and any other
accounts managed by the subadvisor. In addition to statistical, quotation,
brokerage or valuation services, a subadvisor may receive from brokers or
dealers products or research that are used for both research and other purposes,
such as administration or marketing. In such case, the subadvisor
will make a good faith determination as to the portion attributable to research.
Only the portion attributable to research will be paid through portfolio
brokerage. The portion not attributable to research will be paid by the
subadvisor. Research products and services may be acquired or received
either
directly from executing brokers or indirectly through other brokers in step-out
transactions. A “step-out” is an arrangement by which a subadvisor executes a
trade through one broker dealer but instructs that entity to step-out all or a
portion of the trade to another broker dealer. This second broker dealer will
clear and settle, and receive commissions for, the stepped-out portion. The
second broker dealer may or may not have a trading desk of its own.
Under MiFID
II, EU investment managers, including certain subadvisors to funds in the John
Hancock Fund Complex, may only pay for research from brokers and
dealers directly out of their own resources or by establishing “research payment
accounts” for each client, rather than through client commissions.
MiFID II limits the use of soft dollars by subadvisors located in the EU, if
applicable, and in certain circumstances may result in other subadvisors
reducing the use of soft dollars as to certain groups of clients or as to all
clients.
The
subadvisors also may receive research or research credits from brokers that are
generated from underwriting commissions when purchasing new issues of
fixed-income securities or other assets for a fund. These services, which in
some cases also may be purchased for cash, include such matters as general
economic and security market reviews, industry and company reviews, evaluations
of securities and recommendations as to the purchase and sale of
securities. Some of these services are of value to the subadvisor in advising
several of its clients (including the funds), although not all of these services
are necessarily useful and of value in managing the funds. The management fee
paid by a fund is not reduced because a subadvisor and its affiliates
receive such services.
As noted
above, a subadvisor may purchase new issues of securities for a fund in
underwritten fixed price offerings. In these situations, the underwriter
or selling
group member may provide the subadvisor with research in addition to selling the
securities (at the fixed public offering price) to the funds or other advisory
clients. Because the offerings are conducted at a fixed price, the ability to
obtain research from a broker dealer in this situation provides knowledge that
may benefit the fund, other subadvisor clients, and the subadvisor without
incurring additional costs. These arrangements may not fall within the
safe harbor in Section 28(e) of the Exchange Act, because the broker dealer is
considered to be acting in a principal capacity in underwritten transactions.
However, FINRA has adopted rules expressly permitting broker dealers to provide
bona fide research to advisors in connection with fixed price
offerings under certain circumstances. As a general matter in these situations,
the underwriter or selling group member will provide research credits at a
rate that is higher than that which is available for secondary market
transactions.
Brokerage and
research services provided by brokers and dealers include advice, either
directly or through publications or writings, as to:
●
the value of
securities;
●
the
advisability of purchasing or selling securities;
●
the
availability of securities or purchasers or sellers of securities;
and
●
analyses and
reports concerning: (a) issuers; (b) industries; (c) securities; (d) economic,
political and legal factors and trends; and (e) portfolio strategy.
Research
services are received primarily in the form of written reports, computer
generated services, telephone contacts and personal meetings with security
analysts. In addition, such services may be provided in the form of meetings
arranged with corporate and industry spokespersons, economists, academicians
and government representatives. In some cases, research services are generated
by third parties but are provided to the subadvisor by or through a
broker.
To the extent
research services are used by the subadvisors, such services would tend to
reduce such party’s expenses. However, the subadvisors do not believe that
an exact dollar value can be assigned to these services. Research services
received by the subadvisors from brokers or dealers executing transactions
for series of the Trust, which may not be used in connection with a fund, also
will be available for the benefit of other funds managed by the subadvisors.
Allocation
of Trades by the Subadvisors.
The
subadvisors manage a number of accounts other than the funds. Although
investment determinations for the funds
will be made by a subadvisor independently from the investment determinations it
makes for any other account, investments deemed appropriate
for the funds by a subadvisor also may be deemed appropriate by it for other
accounts. Therefore, the same security may be purchased or sold at or
about the same time for both the funds and other accounts. In such
circumstances, a subadvisor may determine that orders for the purchase
or sale of the
same security for the funds and one or more other accounts should be combined.
In this event the transactions will be priced and allocated in a manner
deemed by the subadvisor to be equitable and in the best interests of the funds
and such other accounts. While in some instances combined
orders could adversely affect the price or volume of a security, each fund
believes that its participation in such transactions on balance will
produce better
overall results for the fund.
For purchases
of equity securities, when a complete order is not filled, a partial allocation
will be made to each participating account pro rata based on the order
size. For high demand issues (for example, initial public offerings), shares
will be allocated pro rata by account size as well as on the basis of
account
objective, account size (a small account’s allocation may be increased to
provide it with a meaningful position), and the account’s other holdings. In
addition, an account’s allocation may be increased if that account’s portfolio
manager was responsible for generating the investment idea or
the portfolio
manager intends to buy more shares in the secondary market. For fixed-income
accounts, generally securities will be allocated when appropriate
among accounts based on account size, except if the accounts have different
objectives or if an account is too small to receive a meaningful allocation.
For new issues, when a complete order is not filled, a partial allocation will
be made to each account pro rata based on the order size. However, if a
partial allocation is too small to be meaningful, it may be reallocated based on
such factors as account objectives, strategies, duration benchmarks and
credit and sector exposure. For example, value funds will likely not participate
in initial public offerings as frequently as growth funds. In some
instances, this investment procedure may adversely affect the price paid or
received by the funds or the size of the position obtainable for it. On
the other
hand, to the extent permitted by law, a subadvisor may aggregate securities to
be sold or purchased for the funds with those to be sold or purchased for
other clients that it manages in order to obtain best execution.
Affiliated
Underwriting Transactions by a Subadvisor.
The Trust has
approved procedures in conformity with Rule 10f-3 under the 1940 Act
whereby a fund
may purchase securities that are offered in underwritings in which an affiliate
of the subadvisors participates. These procedures prohibit a fund from
directly or indirectly benefiting a subadvisor affiliate in connection with such
underwritings. In addition, for underwritings where a subadvisor
affiliate participates as a principal underwriter, certain restrictions may
apply that could, among other things, limit the amount of securities
that the funds
could purchase.
Brokerage
Commissions Paid.
For the last
three fiscal periods, the funds paid brokerage commissions in connection with
portfolio transactions. Any material
differences from year to year reflect an increase or decrease in trading
activity by the applicable fund. The total brokerage commissions paid
by the funds
for the fiscal periods ended August 31, 2024, August 31,
2023, and August
31, 2022 are set forth
in the table below:
|
|
Total
Commissions Paid in Fiscal Period Ended August
31, |
|
|
|
|
|
Alternative
Asset Allocation Fund |
|
|
|
|
|
|
|
|
Capital
Appreciation Fund |
|
|
|
Capital
Appreciation Value Fund |
|
|
|
|
|
|
|
|
Disciplined
Value Emerging Markets Equity Fund |
|
|
|
Emerging
Markets Debt Fund |
|
|
|
|
|
|
|
|
Floating
Rate Income Fund |
|
|
|
Fundamental
Global Franchise Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International
Small Company Fund |
|
|
|
International
Strategic Equity Allocation Fund |
|
|
|
|
|
|
|
|
Multi-Asset
High Income Fund |
|
|
|
Lifestyle
Blend Aggressive Portfolio |
|
|
|
Lifestyle
Blend Balanced Portfolio |
|
|
|
Lifestyle
Blend Conservative Portfolio |
|
|
|
Lifestyle
Blend Growth Portfolio |
|
|
|
Lifestyle
Blend Moderate Portfolio |
|
|
|
2065
Lifetime Blend Portfolio |
|
|
|
2060
Lifetime Blend Portfolio |
|
|
|
2055
Lifetime Blend Portfolio |
|
|
|
2050
Lifetime Blend Portfolio |
|
|
|
2045
Lifetime Blend Portfolio |
|
|
|
2040
Lifetime Blend Portfolio |
|
|
|
2035
Lifetime Blend Portfolio |
|
|
|
2030
Lifetime Blend Portfolio |
|
|
|
2025
Lifetime Blend Portfolio |
|
|
|
2020
Lifetime Blend Portfolio |
|
|
|
2015
Lifetime Blend Portfolio |
|
|
|
2010
Lifetime Blend Portfolio |
|
|
|
Multimanager
2065 Lifetime Portfolio |
|
|
|
|
|
Total
Commissions Paid in Fiscal Period Ended August
31, |
|
|
|
|
|
Multimanager
2060 Lifetime Portfolio |
|
|
|
Multimanager
2055 Lifetime Portfolio |
|
|
|
Multimanager
2050 Lifetime Portfolio |
|
|
|
Multimanager
2045 Lifetime Portfolio |
|
|
|
Multimanager
2040 Lifetime Portfolio |
|
|
|
Multimanager
2035 Lifetime Portfolio |
|
|
|
Multimanager
2030 Lifetime Portfolio |
|
|
|
Multimanager
2025 Lifetime Portfolio |
|
|
|
Multimanager
2020 Lifetime Portfolio |
|
|
|
Multimanager
2015 Lifetime Portfolio |
|
|
|
Multimanager
2010 Lifetime Portfolio |
|
|
|
|
|
|
|
|
Opportunistic
Fixed Income Fund |
|
|
|
Real
Estate Securities Fund |
|
|
|
Science
& Technology Fund |
|
|
|
Small
Cap Dynamic Growth Fund |
|
|
|
|
|
|
|
|
Strategic
Income Opportunities Fund |
|
|
|
U.S.
Sector Rotation Fund |
|
|
|
Affiliated
Brokerage.
Pursuant to
procedures determined by the Trustees and consistent with the above policy of
obtaining best net results, a fund may execute
portfolio transactions with or through brokers affiliated with the Advisor or
subadvisor (“Affiliated Brokers”). Affiliated Brokers may act as broker for the
funds on exchange transactions, subject, however, to the general policy set
forth above and the procedures adopted by the Trustees pursuant to
the 1940 Act. Commissions paid to an Affiliated Broker must be at least as
favorable as those that the Trustees believe to be contemporaneously
charged by other brokers in connection with comparable transactions involving
similar securities being purchased or sold. A transaction
would not be placed with an Affiliated Broker if the fund would have to pay a
commission rate less favorable than the Affiliated Broker’s contemporaneous
charges for comparable transactions for its other most favored, but
unaffiliated, customers, except for accounts for which the Affiliated
Broker acts as clearing broker for another brokerage firm, and any customers of
the Affiliated Broker not comparable to the fund, as determined by
a majority of the Trustees who are not “interested persons” (as defined in the
1940 Act) of the fund, the Advisor, the subadvisor or the Affiliated
Broker. Because the Advisor or subadvisor that is affiliated with the Affiliated
Broker has, as an investment advisor to the funds, the obligation to provide
investment management services, which includes elements of research and related
investment skills such research and related skills will not be used by the
Affiliated Broker as a basis for negotiating commissions at a rate higher than
that determined in accordance with the above criteria.
The Advisor’s
indirect parent, Manulife Financial, is the parent of a broker dealer, JH
Distributors. JH Distributors is considered an Affiliated
Broker.
Brokerage
Commissions Paid to Affiliated Brokers.
For the fiscal
periods ended August 31, 2024, August 31,
2023, and August
31, 2022, no
commissions
were paid by any of the funds to brokers affiliated with the
subadvisors.
Commission
Recapture Program.
The Board has
approved each fund’s participation in a commission recapture program. Commission
recapture is a form of
institutional discount brokerage that returns commission dollars directly to a
fund. It provides a way to gain control over the commission expenses
incurred by a subadvisor, which can be significant over time and thereby reduces
expenses, improves cash flow and conserves assets. A fund can derive
commission recapture dollars from both equity trading commissions and
fixed-income (commission equivalent) spreads. From time to time, the Board
reviews whether participation in the recapture program is in the best interests
of the funds.
John Hancock
Signature Services, Inc., P.O. Box 219909, Kansas City, MO 64121-9909, a
wholly-owned indirect subsidiary of MFC, is the transfer and dividend
paying agent for the Class A, Class C, Class I, Class R2, Class R4, Class R5,
and Class R6 shares of the funds, as applicable.
The fees paid
to Signature Services are determined based on the cost to Signature Services of
providing services to the fund and to all other John Hancock
affiliated funds for which Signature Services serves as transfer agent
(“Signature Services Cost”). Signature Services Cost includes: (i) an
allocable
portion of John Hancock corporate overhead; and (ii) out-of-pocket expenses,
including payments made by Signature Services to intermediaries
and other third-parties (“Subtransfer Agency Fees”) whose clients and/or
customers invest in one or more funds for sub-transfer agency and
administrative services provided to those clients/customers. Signature Services
Cost is calculated monthly and allocated by Signature Services among
three different
categories as described below based generally on the Signature Services Cost
associated with providing services to each category in
the aggregate. Within each category, Signature Services Cost is allocated across
all of the John Hancock affiliated funds and/or classes for which
Signature Services provides transfer agent services, on the basis of relative
average net assets.
Retail
Share Classes
of Non-Municipal Bond Funds.
An amount
equal to the total Signature Services Cost associated with providing services to
Class A, Class
C, and Class I shares of all non-municipal series of the Trust and of all other
John Hancock affiliated funds for which it serves as transfer agent is
allocated pro-rata based upon assets of all Class A, Class C, and Class I shares
in the aggregate, without regard to fund or class.
Retirement
Share Classes.
An amount
equal to the total Signature Services Cost associated with providing services to
Class R2, Class R4, Class
R5,
and Class
R6 shares of the
Trust and all other John Hancock affiliated funds for which it serves as
transfer agent is allocated pro-rata based upon assets of all such
shares in the aggregate, without regard to fund or class. In addition, payments
made to intermediaries and/or record keepers under Class R Service plans
will be made by each relevant fund on a fund- and class- specific basis pursuant
to the applicable plan.
Retail
Share Classes of Municipal
Bond Funds.
An amount
equal to the total Signature Services Cost associated with providing services to
Class A, Class C, and
Class I shares of all John Hancock affiliated municipal bond funds for which it
serves as transfer agent is allocated pro-rata based upon assets of all
such shares in the aggregate, without regard to fund or class. John Hancock
municipal bond funds currently only offer Class A, Class C, Class I, and
Class R6 shares. The Trust
currently does not offer any municipal bond funds.
In applying
the foregoing methodology, Signature Services seeks to operate its aggregate
transfer agency operations on an “at cost” or “break even” basis. The
allocation of aggregate transfer agency costs to categories of funds and/or
classes assets seeks to ensure that shareholders of each class within each
category will pay the same or a very similar level of transfer agency fees for
the delivery of similar services. Under this methodology, the actual costs
associated with providing particular services to a particular fund and/or share
classes during a period of time, including payments to intermediaries
for sub-transfer agency services to clients or customers whose assets are
invested in a particular fund or share class, are not charged to and borne by
that particular fund or share classes during that period. Instead, they are
included in Signature Services Cost, which is then allocated to the applicable
aggregate asset category described above and then allocated to all assets in
that category based on relative net assets. Applying this methodology
could result in some funds and/or classes having higher or lower transfer agency
fees than they would have had if they bore only fund- or class-specific
costs directly or indirectly attributable to them.
Legal
and Regulatory Matters
There are no
legal proceedings to which the Trust, the Advisor, or the Distributor is a party
that are likely to have a material adverse effect on the funds or the ability of
either the Advisor or the Distributor to perform its contract with the
funds.
Independent
Registered Public Accounting Firm
The financial
statements of each fund
for the fiscal period ended August 31, 2024, including
the related financial highlights that appear in the Prospectus,
have been audited by PricewaterhouseCoopers LLP, independent registered public
accounting firm, as stated in their report with respect thereto, and
are incorporated herein by reference in reliance upon said report given on the
authority of said firm as experts in accounting and auditing. PricewaterhouseCoopers
LLP has offices at 101 Seaport Boulevard, Suite 500, Boston, Massachusetts
02210.
The financial
statements of each fund
for the fiscal period ended August 31, 2024, are
incorporated herein by reference from each fund’s most recent Form N-CSR
filing
pursuant to
Rule 30b2-1 under the 1940 Act.
Custody
of Portfolio Securities
Except as
noted below, State Street Bank and Trust Company, One Congress Street, Suite 1,
Boston, Massachusetts 02114, currently acts as custodian and
bookkeeping agent with respect to each fund's assets. Citibank, N.A., 388
Greenwich Street, New York, New York 10013, currently acts as custodian and
bookkeeping agent with respect to the assets of Disciplined
Value Emerging
Markets Equity
Fund, Emerging
Markets Debt Fund, Fundamental
Global Franchise Fund, Global Equity Fund, International Small Company Fund, and
International Strategic Equity Allocation Fund. State Street and
Citibank have selected various banks and trust companies in foreign countries to
maintain custody of certain foreign securities. Each fund also may use
special purpose custodian banks from time to time for certain assets. State
Street and Citibank are authorized to use the facilities of the Depository
Trust Company, the Participants Trust Company, and the book-entry system of the
Federal Reserve Banks.
The Trust, the
Advisor, the Distributor and each subadvisor to the funds have adopted Codes of
Ethics that comply with Rule 17j-1 under the 1940 Act. Each Code of
Ethics permits personnel subject to the Code of Ethics to invest in securities,
including securities that may be purchased or held by a
fund.
Appendix
A – Description of Bond Ratings
Descriptions
of Credit Rating Symbols and Definitions
The ratings of
Moody’s Investors Service, Inc. (“Moody’s”), S&P Global Ratings
and Fitch
Ratings (“Fitch”) represent their respective opinions as of the date they are
expressed and not statements of fact as to the quality of various long-term and
short-term debt instruments they undertake to rate. It should be
emphasized that ratings are general and are not absolute standards of quality.
Consequently, debt instruments with the same maturity, coupon and
rating may have different yields while debt instruments of the same maturity and
coupon with different ratings may have the same yield.
Ratings do not
constitute recommendations to buy, sell, or hold any security, nor do they
comment on the adequacy of market price, the suitability of any security
for a particular investor, or the tax-exempt nature or taxability of any
payments of any security.
Moody’s.
Ratings
assigned on Moody’s global long-term and short-term rating scales are
forward-looking opinions of the relative credit risks of financial
obligations issued by non-financial corporates, financial institutions,
structured finance vehicles, project finance vehicles, and public sector
entities.
Note that the
content of this Appendix A, to the extent that it relates to the ratings
determined by Moody’s, is derived directly from Moody’s electronic publication of
“Ratings Symbols and Definitions” which is available at: https://ratings.moodys.com/api/rmc-documents/53954.
S&P
Global Ratings.
An S&P
Global Ratings issue credit rating is a forward-looking opinion about the
creditworthiness of an obligor with respect to a specific
financial obligation, a specific class of financial obligations, or a specific
financial program (including ratings on medium-term note programs and commercial
paper programs). It takes into consideration the creditworthiness of guarantors,
insurers, or other forms of credit enhancement on the obligation and
takes into account the currency in which the obligation is denominated. The
opinion reflects S&P Global Ratings’ view of the obligor’s capacity and
willingness to meet its financial commitments as they come due, and this opinion
may assess terms, such as collateral security and subordination,
which could affect ultimate payment in the event of default.
Issue ratings
are an assessment of default risk but may incorporate an assessment of relative
seniority or ultimate recovery in the event of default. Junior
obligations are typically rated lower than senior obligations, to reflect the
lower priority in bankruptcy.
Note that the
content of this Appendix A, to the extent that it relates to the ratings
determined by S&P Global Ratings, is derived directly from S&P
Global
Ratings’ electronic publication of “S&P’s Global Ratings Definitions,” which
is available at:
https://www.standardandpoors.com/en_US/web/guest/article/-/view/sourceId/504352.
Fitch.
Fitch Ratings
publishes credit ratings that are
forward-looking
opinions on
the relative
ability of an entity or obligation to meet financial commitments. Issuer default
ratings
(IDRs) are assigned
to corporations, sovereign
entities,
financial
institutions such as banks,
leasing
companies and insurers,
and
public finance
entities
(local and
regional governments). Issue level ratings are also assigned, often include
an expectation of recovery and may be
notched above or
below
the issuer
level rating. Issue ratings
are assigned to secured and unsecured debt securities, loans,
preferred
stock and other
instruments,
Structured
finance ratings are issue ratings to securities backed
by
receivables
or other
financial assets that consider the
obligations’
relative
vulnerability to
default.
Fitch’s
credit
rating
scale
for issuers
and
issues
is
expressed
using the
categories ‘AAA’ to ‘BBB’ (investment grade) and ‘BB’ to ‘D’ (speculative
grade)
with an
additional +/- for AA through CCC levels indicating relative differences of
probability of default or recovery for issues. The terms
“investment
grade” and
“speculative
grade” are market
conventions and do not imply any recommendation or endorsement of a specific
security for investment purposes.
Investment grade categories indicate relatively low to moderate credit risk,
while ratings in the speculative categories signal
either
a
higher level of
credit risk or that a default has already occurred.
Note that the
content of this Appendix A, to the extent that it relates to the ratings
determined by Fitch, is derived directly from Fitch’s electronic publication of
“Definitions of Ratings and Other Forms of Opinion” which is available at:
https://www.fitchratings.com/products/rating-definitions.
General
Purpose Ratings
Long-Term
Issue Ratings
Moody’s
Global Long-Term Rating Scale
Long-term
ratings are assigned to issuers or obligations with an original maturity of
eleven
months or more and
reflect both on the likelihood of a default or impairment
on contractual financial obligations and the expected financial loss suffered in
the event of default or impairment.
Aaa:
Obligations
rated Aaa are judged to be of the highest quality, subject to the lowest level
of credit risk.
Aa:
Obligations
rated Aa are judged to be of high quality and are subject to very low credit
risk.
A:
Obligations
rated A are considered upper-medium grade and are subject to low credit
risk.
Baa:
Obligations
rated Baa are judged to be medium-grade and subject to moderate credit risk and
as such may possess certain speculative characteristics.
Ba:
Obligations
rated Ba are judged to be speculative and are subject to substantial credit
risk.
B:
Obligations
rated B are considered speculative and are subject to high credit
risk.
Caa:
Obligations
rated Caa are judged to be speculative of poor standing and are subject to very
high credit risk.
Ca:
Obligations
rated Ca are highly speculative and are likely in, or very near, default, with
some prospect of recovery of principal and interest.
C:
Obligations
rated C are the lowest rated and are typically in default, with little prospect
for recovery of principal or interest.
Note:
Addition of a Modifier 1, 2 or 3:
Moody’s
appends numerical modifiers 1, 2 and 3 to each generic rating classification
from Aa through Caa. The modifier 1
indicates that the obligation ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates a ranking in the lower end of that generic rating category.
Additionally, a “(hyb)” indicator is appended to all ratings of hybrid
securities
issued by banks, insurers, finance companies, and securities firms. By their
terms, hybrid securities allow for the omission of scheduled dividends,
interest, or principal payments, which can potentially result in impairment if
such an omission occurs. Hybrid securities may also be subject to
contractually allowable write-downs of principal that could result in
impairment.
Together with
the hybrid indicator, the long-term obligation rating assigned to a hybrid
security is an expression of the relative credit risk associated with
that
security.
S&P
Global Ratings’
Long-Term Issue Credit Ratings
Long-term
ratings are assigned to issuers or obligations with an original maturity of one
year or more and reflect both on the likelihood of a default or impairment on
contractual financial obligations and the expected financial loss suffered in
the event of default or impairment.
AAA:
An obligation
rated ‘AAA’ has the highest rating assigned by S&P Global Ratings. The
obligor’s capacity to meet its financial commitment on the obligation is
extremely strong.
AA:
An obligation
rated ‘AA’ differs from the highest-rated obligations only to a small degree.
The obligor’s capacity to meet its financial commitment on the obligation
is very strong.
A:
An obligation
rated ‘A’ is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than obligations in higher-rated
categories. However, the obligor’s capacity to meet its financial commitment on
the obligation is still strong.
BBB:
An obligation
rated ‘BBB’ exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to
weaken the obligor’s capacity to meet its financial commitments on the
obligation.
BB,
B, CCC, CC and C:
Obligations
rated ‘BB’, ‘B’, ‘CCC’ ‘CC’ and ‘C’ are regarded as having significant
speculative characteristics. ‘BB’ indicates the least degree
of speculation and ‘C’ the highest. While such obligations will likely have some
quality and protective characteristics, these may be outweighed by
large uncertainties or major exposures to adverse conditions.
BB:
An obligation
rated ‘BB’ is less vulnerable to nonpayment than other speculative issues.
However, it faces major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions that could lead to the obligor’s
inadequate capacity to meet its financial commitment on the obligation.
B:
An obligation
rated ‘B’ is more vulnerable to nonpayment than obligations rated ‘BB’, but the
obligor currently has the capacity to meet its financial commitments on
the obligation. Adverse business, financial, or economic conditions will likely
impair the obligor’s capacity or willingness to meet its financial
commitments on the obligation.
CCC:
An obligation
rated ‘CCC’ is currently vulnerable to nonpayment and is dependent upon
favorable business, financial, and economic conditions for the obligor to
meet its financial commitments on the obligation. In the event of adverse
business, financial or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitments on the obligation.
CC:
An obligation
rated ‘CC’ is currently highly vulnerable to nonpayment. The ‘CC’ rating is used
when a default has not yet occurred but S&P Global Ratings
expects default to be a virtual certainty, regardless of the anticipated time to
default.
C:
An obligation
rated ‘C’ is currently highly vulnerable to nonpayment, and the obligation is
expected to have lower relative seniority or lower ultimate recovery
compared to obligations that are rated higher.
D:
An obligation
rated ‘D’ is in default or in breach of an imputed promise. For non-hybrid
capital instruments, the ‘D’ rating category is used when payments on an
obligation are not made on the date due, unless S&P Global Ratings believes
that such payments will be made within the next
five
business days
in the absence of a stated grace period or within the earlier of the stated
grace period or the next
30 calendar
days. The ‘D’ rating also will be used upon
the filing of a bankruptcy petition or the
taking of
similar action and where default on an obligation is a virtual certainty, for
example due to automatic stay
provisions. A
rating on an
obligation is lowered to
‘D’ if it is subject to a distressed debt
restructuring.
Note:
Addition
of a Plus (+) or minus (-) sign: The ratings
from ‘AA’ to ‘CCC’ may be modified by the addition of a plus (+) or minus (-)
sign to show relative
standing within the major rating categories.
Dual
Ratings –
Dual ratings
may be assigned to debt issues that have a put option or demand feature. The
first component of the rating addresses the likelihood of
repayment of principal and interest as due, and the second component of the
rating addresses only the demand feature. The first component of
the rating can relate to either a short-term or long-term transaction and
accordingly use either short-term or long-term rating symbols. The second
component of the rating relates to the put option and is assigned a short-term
rating symbol (for example, ‘AAA/A-1+’ or ‘A-1+/A-1’). With U. S. municipal
short-term demand debt, the U.S. municipal short-term note rating symbols are
used for the first component of the rating (for example, ‘SP-1+/A-1+’).
Fitch
Corporate Finance Obligations – Long-Term Rating Scales
Ratings of
individual securities or financial obligations of a corporate issuer address
relative vulnerability to default on an ordinal scale. In addition, for
financial
obligations in corporate finance, a measure of recovery given default on that
liability is also included in the rating assessment. This notably applies to
covered bond ratings, which incorporate both an indication of the probability of
default and of the recovery given a default of this debt instrument.
AAA:
Highest credit
quality. ‘AAA’ ratings denote the lowest expectation of credit risk. They are
assigned only in cases of exceptionally strong capacity for payment of
financial commitments. This capacity is highly unlikely to be adversely affected
by foreseeable events.
AA:
Very high
credit quality. ‘AA’ ratings denote expectations of very low credit risk. They
indicate very strong capacity for payment of financial commitments.
This capacity is not significantly vulnerable to foreseeable events.
A:
High credit
quality. ‘A’ ratings denote expectations of low credit risk. The capacity for
payment of financial commitments is considered strong. This capacity may,
nevertheless, be more vulnerable to adverse business or economic conditions than
is the case for higher ratings.
BBB:
Good credit
quality. ‘BBB’ ratings indicate that expectations of credit risk are currently
low. The capacity for payment of financial commitments is considered
adequate but adverse business or economic conditions are more likely to impair
this capacity.
BB:
Speculative.
‘BB’ ratings indicate an elevated vulnerability to credit risk, particularly in
the event of adverse changes in business or economic conditions
over time; however, business or financial alternatives may be available to allow
financial commitments to be met.
B:
Highly
speculative. ‘B’ ratings indicate that material credit risk is
present.
CCC:
Substantial
credit risk. “CCC” ratings indicate that substantial credit risk is
present.
CC:
Very high
levels of credit risk. “CC” ratings indicate very high levels of credit
risk.
C:
Exceptionally
high levels of credit risk. “C” indicates exceptionally high levels of credit
risk.
Corporate
finance defaulted obligations typically are not assigned ‘RD’ or ‘D’ ratings but
are instead rated in the ‘CCC’ to ‘C’ rating categories, depending on their
recovery prospects and other relevant characteristics. This approach better
aligns obligations that have comparable overall expected loss but varying
vulnerability to default and loss.
Note:
Addition
of a Plus (+) or minus (-) sign: Within rating
categories, Fitch may use modifiers. The modifiers “+” or “-” may be appended to
a rating to denote
relative status within major rating categories. For example, the rating category
‘AA’ has three notch-specific rating levels (‘AA+’; ‘AA’; ‘AA-’; each
a
rating level). Such suffixes are not added to ‘AAA’ ratings and ratings below
the ‘CCC’ category. For the short-term rating category of ‘F1’, a ‘+’ may be
appended. For
Viability Ratings, the modifiers ‘+’ or ‘-’ may be appended to a rating to
denote relative status within categories from ‘aa’ to ‘ccc’.
Corporate
And Tax-Exempt Commercial Paper Ratings
Short-Term
Issue Ratings
Moody’s
Global Short-Term Rating Scale
Ratings
assigned on Moody's global long-term and short-term rating scales are
forward-looking opinions of the relative credit risks of financial obligations
issued by non-financial corporates, financial institutions, structured finance
vehicles, project finance vehicles, and public sector entities.
Short-term
ratings are assigned to obligations with an original maturity of thirteen months
or less and reflect both the likelihood of a default or impairment on
contractual financial obligations and the expected financial loss suffered in
the event of default or impairment.
Moody’s
employs the following designations to indicate the relative repayment ability of
rated issuers:
P-1:
Ratings
of
Prime-1
reflect a superior
ability to repay short-term obligations.
P-2:
Ratings
of
Prime-2
reflect a strong
ability to repay short-term obligations.
P-3:
Ratings
of
Prime-3
reflect an acceptable
ability to repay short-term obligations.
NP:
Issuers (or
supporting institutions) rated Not Prime do not fall within any of the Prime
rating categories.
The following
table indicates the long-term ratings consistent with different short-term
ratings when such long-term ratings exist. (Note: Structured finance
short-term ratings are usually based either on the short-term rating of a
support provider or on an assessment of cash flows available to retire
the financial
obligation).
S&P
Global Ratings' Short-Term Issue Credit Ratings
S&P Global
Ratings’ short-term issue credit
ratings are
generally assigned to those obligations considered short-term in the relevant
market, typically
with an
original maturity of no more than 365
days. Short-term
issue credit
ratings are
also used to indicate the creditworthiness of an obligor with respect to put
features on long-term obligations. A long-term
issue credit
rating is typically assigned to an obligation with an original maturity of
greater than
365
days. Ratings are
graded into several categories, ranging from ‘A’ for the highest-quality
obligations to ‘D’ for the lowest. These categories are as
follows:
A-1:
A short-term
obligation rated ‘A-1’ is rated in the highest category by S&P Global
Ratings. The obligor’s capacity to meet its financial commitment on the
obligation is strong. Within this category, certain obligations are designated
with a plus sign (+). This indicates that the obligor’s capacity to meet
its financial
commitments on these obligations is extremely strong.
A-2:
A short-term
obligation rated ‘A-2’ is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor’s capacity to meet
its financial commitments on the obligation is satisfactory.
A-3:
A short-term
obligation rated ‘A-3’ exhibits adequate protection parameters. However, adverse
economic conditions or changing circumstances are more
likely to weaken an obligor’s capacity to meet its financial commitments on the
obligation.
B:
A short-term
obligation rated ‘B’ is regarded as vulnerable and has significant speculative
characteristics. The obligor currently has the capacity to meet its
financial commitments; however, it faces major ongoing uncertainties that could
lead to the obligor’s inadequate capacity to meet its financial commitments.
C:
A short-term
obligation rated ‘C’ is currently vulnerable to nonpayment and is dependent upon
favorable business, financial, and economic conditions for
the obligor to meet its financial commitments on the obligation.
D:
A short-term
obligation rated ‘D’ is in default or in breach of an imputed promise. For
non-hybrid capital instruments, the ‘D’ rating category is used when payments
on an obligation are not made on the date due, unless S&P Global Ratings
believes that such payments will be made within any stated grace period.
However, any stated grace period longer than five business days will be treated
as five business days. The ‘D’ rating also will be used upon
the filing of
a bankruptcy petition or the taking of a similar action and where default on an
obligation is a virtual certainty, for example due to automatic stay
provisions. A
rating on an
obligation is lowered to
‘D’ if it is subject to a distressed debt
restructuring.
Dual
Ratings –
Dual ratings
may be assigned to debt issues that have a put option or demand feature. The
first component of the rating addresses the likelihood of
repayment of principal and interest as due, and the second component of the
rating addresses only the demand feature. The first component of
the rating can relate to either a short-term or long-term transaction and
accordingly use either short-term or long-term rating symbols. The second
component of the rating relates to the put option and is assigned a short-term
rating symbol (for example, ‘AAA/A-1+’ or ‘A-1+/A-1’). With U.S. municipal
short-term demand debt, the U.S. municipal short-term note rating symbols are
used for the first component of the rating (for example, ‘SP-1+/A-1+’).
Fitch's
Short-Term Issuer or Obligation Ratings
A short-term
issuer or obligation rating is based in all cases on the short-term
vulnerability to default of the rated entity and relates to the capacity to
meet financial
obligations in accordance with the documentation governing the relevant
obligation. Short-term deposit ratings may be adjusted for loss severity.
Short-term deposit ratings may be adjusted for loss severity. Short-Term Ratings
are assigned to obligations whose initial maturity is viewed as “short term”
based on market convention. Typically, this means up to 13 months for corporate,
sovereign, and structured obligations, and up to 36 months for
obligations in U.S. public finance markets.
F1:
Highest
short-term credit quality.
Indicates the
strongest intrinsic capacity for timely payment of financial commitments; may
have an added (“+”) to denote any exceptionally strong credit
feature.
F2:
Good
short-term credit quality.
Good intrinsic
capacity for timely payment of financial commitments.
F3:
Fair
short-term credit quality.
The intrinsic
capacity for timely payment of financial commitments is adequate.
B:
Speculative
short-term credit quality.
Minimal
capacity for timely payment of financial commitments, plus heightened
vulnerability to near term adverse changes in financial and economic
conditions.
C:
High
short-term default risk.
Default is a
real possibility.
RD:
Restricted
default.
Indicates an
entity that has defaulted on one or more of its financial commitments, although
it continues to meet other financial obligations. Typically applicable to
entity ratings only.
D:
Default.
Indicates a
broad-based default event for an entity, or the default of a short-term
obligation.
Moody's
U.S. Municipal Short-Term Debt Ratings
While the
global short-term ‘prime’ rating scale is applied to US municipal tax-exempt
commercial A-8 paper, these programs are typically backed by external
letters of credit or liquidity facilities and their short-term prime ratings
usually map to the long-term rating of the enhancing bank or financial
institution
and not to the municipality’s rating. Other short-term municipal obligations,
which generally have different funding sources for repayment, are rated
using two additional short-term rating scales (i.e., the MIG and VMIG scale
discussed below).
The Municipal
Investment Grade (MIG) scale is used to rate US municipal bond anticipation
notes of up to five years maturity. Municipal notes rated on the MIG scale
may be secured by either pledged revenues or proceeds of a take-out financing
received prior to note maturity. MIG ratings expire at the maturity of
the obligation, and the issuer’s long-term rating is only one consideration in
assigning the MIG rating. MIG ratings are divided into three levels—MIG 1
through MIG 3—while speculative grade short-term obligations are designated
SG.
MIG
1:
This
designation denotes superior credit quality. Excellent protection is afforded by
established cash flows, highly reliable liquidity support, or demonstrated
broad-based access to the market for refinancing.
MIG
2:
This
designation denotes strong credit quality. Margins of protection are ample,
although not as large as in the preceding group.
MIG
3:
This
designation denotes acceptable credit quality. Liquidity and cash-flow
protection may be narrow, and market access for refinancing is likely to be
less well-established.
SG:
This
designation denotes speculative-grade credit quality. Debt instruments in this
category may lack sufficient margins of protection.
Variable
Municipal Investment Grade (VMIG) ratings of demand obligations with
unconditional liquidity support are mapped from the short-term debt rating (or
counterparty assessment) of the support provider, or the underlying obligor in
the absence of third party liquidity support, with VMIG 1
corresponding
to P-1, VMIG 2 to P-2, VMIG 3 to P-3 and SG to not prime. For example, the VMIG
rating for an industrial revenue bond with Company XYZ as the
underlying obligor would normally have the same numerical modifier as Company
XYZ’s prime rating. Transitions of VMIG ratings of demand obligations
with conditional liquidity support, as shown in the diagram below, differ from
transitions on the Prime scale to reflect the risk that external liquidity
support will terminate if the issuer’s long-term rating drops below investment
grade.
VMIG
1:
This
designation denotes superior credit quality. Excellent protection is afforded by
the superior short-term credit strength of the liquidity provider and
structural and legal protections.
VMIG
2:
This
designation denotes strong credit quality. Good protection is afforded by the
strong short-term credit strength of the liquidity provider and structural
and legal protections.
VMIG
3:
This
designation denotes acceptable credit quality. Adequate protection is afforded
by the satisfactory short-term credit strength of the liquidity
provider and structural and legal protections.
SG:
This
designation denotes speculative-grade credit quality. Demand features rated in
this category may be supported by a liquidity provider that does not have
a
sufficiently strong short-term
rating or may lack the structural or legal
protections.
*
For VRDBs
supported with conditional liquidity support, short-term ratings transition down
at higher long-term ratings to reflect the risk of termination of liquidity
support as a
result of a downgrade below investment grade.
VMIG ratings
of VRDBs with unconditional liquidity support reflect the short-term debt rating
(or counterparty assessment) of the liquidity support provider with
VMIG 1 corresponding to P-1, VMIG 2 to P-2, VMIG 3 to P-3 and SG to not
prime.
For more
complete discussion of these rating transitions, please see Annex B of Moody’s
Methodology titled Variable Rate Instruments Supported by Conditional
Liquidity Facilities.
US
Municipal Short-Term Versus Long-Term Ratings |
|
|
|
DEMAND
OBLIGATIONS WITH
CONDITIONAL
LIQUIDITY
SUPPORT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ba1,
Ba2, Ba3 B1,
B2, B3
Caa1, Caa2,
Caa3 Ca,
C |
|
*
For
SBPA-backed VRDBs, the rating transitions are higher to allow for distance to
downgrade to below investment grade due to the presence of automatic termination
events in the
SBPAs.
S&P
Global Ratings’ Municipal Short-Term Note Ratings
An S&P
Global Ratings municipal note rating reflects S&P Global Ratings’ opinion
about the liquidity factors and market access risks unique to the notes. Notes
due in three years or less will likely receive a note rating. Notes with an
original maturity of more than three years will most likely receive a
long-term debt
rating. In determining which type of rating, if any, to assign, S&P Global
Ratings’ analysis will review the following considerations:
●
Amortization
schedule – the larger the final maturity relative to other maturities, the more
likely it will be treated as a note; and
●
Source of
payment – the more dependent the issue is on the market for its refinancing, the
more likely it will be treated as a note.
Note rating
symbols are as follows:
SP-1:
Strong
capacity to pay principal and interest. An issue determined to possess a very
strong capacity to pay debt service is given a plus (+) designation.
SP-2:
Satisfactory
capacity to pay principal and interest, with some vulnerability to adverse
financial and economic changes over the term of the notes.
SP-3:
Speculative
capacity to pay principal and interest.
D:
'D' is
assigned upon failure to pay the note when due, completion of a distressed
debt
restructuring, or the
filing of a bankruptcy petition or the taking of
similar action and where default on an obligation is a virtual certainty, for
example due to automatic stay provisions.
Fitch
Public Finance Ratings
See FITCH
SHORT-TERM ISSUER OR OBLIGATIONS RATINGS above.
Appendix
B – Portfolio Manager Information
Allspring
Global Investments, LLC
(“Allspring
Investments”)
Portfolio
Managers and Other Accounts Managed
The following
table shows the portfolio managers at the subadvisor who are jointly and
primarily responsible for the day-to-day management of the stated fund’s
portfolio.
|
|
|
|
|
Maulik
Bhansali, CFA and Jarad
Vasquez |
The following
table provides information regarding other accounts for which each portfolio
manager listed above has day-to-day management responsibilities.
Accounts are grouped into three categories: (i) other investment companies (and
series thereof); (ii) other pooled investment vehicles; and (iii)
other accounts. To the extent that any of these accounts pay advisory fees
that are based on account performance (“performance-based fees”), information on
those accounts is specifically broken out. In addition, any assets denominated
in foreign currencies have been converted into U.S. dollars
using the exchange rates as of the applicable date. Also shown below the table
is each portfolio manager’s investment in the fund and similarly
managed accounts.
The following
table provides information as of August 31, 2024:
|
|
Other
Registered Investment
Companies |
Other
Pooled Investment
Vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance-Based
Fees for Other Accounts Managed.
Of the
accounts listed in the table above, those for which the subadvisor receives a
fee based on
investment performance are listed in the table below.
|
|
Other
Registered Investment
Companies |
Other
Pooled Investment
Vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ownership
of the Fund and Similarly Managed Accounts
The following
table shows the dollar range of fund shares and shares of similarly managed
accounts beneficially owned by the portfolio managers listed above as of
August 31, 2024. For purposes
of this table, “similarly managed accounts” include all accounts that are
managed (i) by the same portfolio managers that
are jointly and primarily responsible for the day-to-day management of the fund;
and (ii) with an investment style, objective, policies and strategies
substantially similar to those that are used to manage the fund. Each portfolio
manager’s ownership of fund shares is stated in the footnote(s) below the
table.
|
|
Dollar
Range of Shares Owned1
|
|
|
|
|
|
|
1
As of August
31, 2024, Maulik
Bhansali, CFA and Jarad Vasquez beneficially owned $0 and $0, respectively, of
the fund.
Potential
Conflicts of Interest
Allspring
Investments’ portfolio managers often provide investment management for separate
accounts advised in the same or similar investment style as that
provided to mutual funds. While management of multiple accounts could
potentially lead to conflicts of interest over various issues such as trade
allocation,
fee disparities and research acquisition, Allspring Investments has implemented
policies and procedures for the express purpose of ensuring that
clients are treated fairly and that potential conflicts of interest are
minimized.
The portfolio
managers face inherent conflicts of interest in their day-to-day management of
the Fund and other accounts because the Fund may have different
investment objectives, strategies and risk profiles than the other accounts
managed by the portfolio managers. For instance, to the extent that the portfolio
managers manage accounts with different investment strategies than the Fund,
they may from time to time be inclined to purchase securities,
including initial public offerings, for one account but not for a Fund.
Additionally, some of the accounts managed by the portfolio managers
may have
different fee structures, including performance fees, which are or have the
potential to be higher or lower, in some cases significantly higher or
lower, than
the fees paid by the Funds. The differences in fee structures may provide an
incentive to the portfolio managers to allocate more favorable trades to the
higher-paying accounts.
To minimize
the effects of these inherent conflicts of interest, Allspring Investments has
adopted and implemented policies and procedures, including brokerage and
trade allocation policies and procedures, believed to address the potential
conflicts associated with managing portfolios for multiple clients and
are designed to ensure that all clients are treated fairly and equitably.
Accordingly, security block purchases are allocated to all accounts with similar
objectives in a fair and equitable manner. Furthermore, Allspring Investments
has adopted a Code of Ethics under Rule 17j-1 under the 1940 Act and
Rule 204A-1 under the Investment Advisers Act of 1940 (the “Advisers Act”) to
address potential conflicts associated with managing the Funds and any
personal accounts the portfolio managers may maintain.
The
compensation structure for Allspring Investments’ portfolio managers includes a
competitive fixed base salary plus variable incentives, payable annually and
over a deferred period. Allspring Investments participates in third party
investment management compensation surveys for market-based compensation
information to help support individual pay decisions and to ensure our
compensation is aligned with the marketplace. In addition to investment
management compensations surveys, Allspring Investments also considers prior
professional experience, tenure, seniority and a portfolio manager’s team
size, scope and assets under management when determining his/her total
compensation. In addition, portfolio managers, who meet the
eligibility requirements, may participate in Allspring Investments’ 401(k) plan
that features a limited matching contribution. Eligibility for and participation
in this plan is on the same basis for all employees.
Allspring
Investments’ investment incentive program plays an important role in aligning
the interests of our portfolio managers, investment team members,
clients and shareholders. Incentive awards for portfolio managers are determined
based on a review of relative investment and business/team
performance. Investment performance is generally evaluated for 1-, 3-, and 5-
year performance results, with a predominant weighting on the 3- and
5- year time periods, versus the relevant benchmarks and/or peer groups
consistent with the investment style.
Once
determined, incentives are awarded to portfolio managers annually, with a
portion awarded as annual cash and a portion awarded as deferred incentive. The
long-term portion of incentives generally carry a pro-rated vesting schedule
over a 3 year period. For many of our portfolio managers, Allspring
Investments further requires a portion of their annual long-term award be
allocated directly into each strategy they manage through a deferred
compensation
vehicle. In addition, our investment team members who are eligible for long term
awards also have the opportunity to invest up to 100% of their
awards into investment strategies they support (through a deferred compensation
vehicle).
As an
independent firm, approximately 20% of Allspring Group Holdings, LLC (of which
Allspring Investments is a subsidiary) is owned by employees, including
portfolio managers.
AXIOM
INVESTORS LLC
Small
Cap Dynamic Growth Fund
Portfolio
Managers and Other Accounts Managed
The following
table shows the portfolio managers at the subadvisor who are jointly and
primarily responsible for the day-to-day management of the stated fund’s
portfolio.
|
|
|
Small
Cap Dynamic Growth Fund |
Matthew
Franco, CFA, and David Kim,
CFA |
The following
table provides information regarding other accounts for which each portfolio
manager listed above has day-to-day management responsibilities.
Accounts are grouped into three categories: (i) other investment companies (and
series thereof); (ii) other pooled investment vehicles; and (iii)
other accounts. To the extent that any of these accounts pay advisory fees
that are based on account performance (“performance-based fees”), information on
those accounts is specifically broken out. In addition, any assets denominated
in foreign currencies have been converted into U.S. dollars
using the exchange rates as of the applicable date. Also shown below the table
is each portfolio manager’s investment in the fund and similarly
managed accounts.
The following
table provides information as of August 31, 2024:
|
|
Other
Registered Investment
Companies |
Other
Pooled Investment
Vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance-Based
Fees for Other Accounts Managed.
Of the
accounts listed in the table above, those for which the subadvisor receives a
fee based on
investment performance are listed in the table below.
|
|
Other
Registered Investment
Companies |
Other
Pooled Investment
Vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ownership
of the Fund and Similarly Managed Accounts
The following
table shows the dollar range of fund shares and shares of similarly managed
accounts beneficially owned by the portfolio managers listed above as of
August 31, 2024. For purposes
of this table, “similarly managed accounts” include all accounts that are
managed (i) by the same portfolio managers that
are jointly and primarily responsible for the day-to-day management of the fund;
and (ii) with an investment style, objective, policies and strategies
substantially similar to those that are used to manage the fund. Each portfolio
manager’s ownership of fund shares is stated in the footnote(s) below the
table.
|
|
Dollar
Range of Shares Owned1
|
|
|
|
|
|
|
1
As of August
31, 2024, Matthew
Franco, CFA and David Kim, CFA beneficially owned $0 and $0, respectively, of
the fund.
Potential
Conflicts of Interest
Axiom conducts
an annual review of our business practices to identify those that might pose a
conflict of interest between Axiom and its clients. The firm has adopted
policies and procedures designed to mitigate any potential conflicts of
interest. The Chief Compliance Officer assures that all relevant disclosure
concerning potential conflicts of interest are included in Form ADV, and will
review existing policies and procedures designed to address such conflicts and
will develop and implement additional policies and procedures, as needed. Axiom
summarizes the results of the annual Conflicts of Interest
review in the annual review of policies and procedures in accordance with Rule
206(4)-7.
Compensation
All employees
receive a competitive base salary and bonus. Bonuses are a function of overall
firm performance as well as individual contribution to that performance.
In addition, as the firm is 100% employee-owned, the opportunity to participate
in the ownership through direct equity is offered to key contributors.
Portfolio
Manager Compensation Structure: Base salary, equity partnership (all PMs are
partners), and bonus. A percentage of the bonus is in the form of deferred
compensation on a vesting schedule. Axiom’s portfolio managers have a mandatory
investment in the strategies they manage that are 100% vested after a
5-year period.
Analyst
Compensation Structure: Base salary, equity partnership (if applicable), and
bonus. A percentage of the analysts’ discretionary bonus comes in the form of
deferred compensation on a vesting schedule. Axiom is committed to providing a
pathway for senior analysts to become partners of the firm and share in
the long term economics which further aligns interests and best
practices.
Bcsf
Advisors, LP
Floating
Rate Income Fund
Portfolio
Managers and Other Accounts Managed
The following
table shows the portfolio managers at the subadvisor who are jointly and
primarily responsible for the day-to-day management of the stated fund’s
portfolio.
|
|
|
Floating
Rate Income Fund |
Grayson
Allison, Andrew Carlino, Kim Harris, and Nate
Whittier |
The following
table provides information regarding other accounts for which each portfolio
manager listed above has day-to-day management responsibilities.
Accounts are grouped into three categories: (i) other investment companies (and
series thereof); (ii) other pooled investment vehicles; and (iii)
other accounts. To the extent that any of these accounts pay advisory fees
that are based on account performance (“performance-based fees”), information on
those accounts is specifically broken out. In addition, any assets denominated
in foreign currencies have been converted into U.S. dollars
using the exchange rates as of the applicable date. Also shown below the table
is each portfolio manager’s investment in the fund and similarly
managed accounts.
The following
table provides information as of August 31, 2024:
|
|
Other
Registered Investment
Companies |
Other
Pooled Investment
Vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance-Based
Fees for Other Accounts Managed.
Of the
accounts listed in the table above, those for which the subadvisor receives a
fee based on
investment performance are listed in the table below.
|
|
Other
Registered Investment
Companies |
Other
Pooled Investment
Vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following
table shows the dollar range of fund shares beneficially owned by the portfolio
managers listed above as of August 31, 2024.
|
|
Dollar
Range of Shares Owned |
|
|
|
|
|
|
|
|
|
|
|
|
1
As of August
31, 2024, Grayson Allison, Andrew Carlino, Kim Harris, and Nate Whittier
beneficially owned $$0, $0, $0, and $0, respectively, of the
fund.
Potential
Conflicts of Interest
As a result of
arrangements with Bain Capital Credit, LP, the parent of the Sub-Adviser, and
its management of other investment vehicles, there may be times when the
Sub-Adviser or such persons have interests that differ from those of
shareholders, giving rise to a conflict of interest.
Conflicts
Related to Obligations of Bain Capital Credit, LP or the Portfolio
Managers
Bain Capital
Credit, LP employees, including the Portfolio Managers, serve, or may serve, as
officers, directors, members, or principals of entities that operate in the
same or a related line of business as the Fund does or of investment funds,
accounts, or investment vehicles managed by Bain Capital Credit, LP
and/or its affiliates. Similarly, Bain Capital Credit, LP and its affiliates may
have other clients with similar, different or competing investment objectives.
In serving in
these multiple capacities, they may have obligations to other clients or
investors in those entities, the fulfillment of which may not be in the
best interests
of the Fund or our stockholders. For example, Bain Capital Credit, LP has
management responsibilities for other investment funds, accounts and
investment vehicles. The Sub-Adviser also provides advisory services to other
investment vehicles. There is a potential that the Fund will compete with
these funds, and other entities managed by Bain Capital Credit, LP and its
affiliates, for capital and investment opportunities. As a result, Bain Capital
Credit, LP and the Sub-Adviser, including the Portfolio Managers who are
affiliated with them will face conflicts in the allocation of investment
opportunities among the Fund and the investment funds, accounts and investment
vehicles they and their affiliates manage. Bain Capital Credit, LP,
including the Sub-Adviser, intend to allocate investment opportunities among
eligible investment funds, accounts and investment vehicles in a manner that
is fair and equitable over time and consistent with their allocation policy.
However, the Sub-Adviser can offer no assurance that such opportunities
will be allocated to the Fund fairly or equitably in the short-term or over
time. There can be no assurance that the Fund will be able to participate in
all investment opportunities that are suitable. It is expected that not all
clients of Bain Capital Credit, LP and the Sub-Advisor, including the
Fund, even
those sharing a similar investment strategy, will participate in, or will
receive a pro rata share of, every investment opportunity.
Restricted
Ability to Enter Into Transactions with Affiliates
If the Fund is
prohibited by applicable law from investing alongside other investment funds,
accounts and investment vehicles managed by Bain Capital Credit, LP
and/or the Sub-Adviser with respect to an investment opportunity, the Fund will
not participate in such investment opportunity. There can be no assurance
that investment opportunities will be allocated to the Fund fairly or equitably
in the short-term or over time.
In situations
where co-investment with investment funds, accounts and investment vehicles
managed by Bain Capital Credit, LP and its affiliates, including the
Sub-Adviser, is not permitted or appropriate, subject to the limitations
described in the preceding paragraph, Bain Capital Credit, LP and its
affiliates, including the Sub-Adviser, will have a conflict in deciding which
client will proceed with the investment.
Operation
in a Highly Competitive Market for Investment Opportunities
The business
of investing in assets meeting the Fund’s investment objective is highly
competitive. Competition for investment opportunities includes a growing number
of nontraditional participants, such as hedge funds, senior private debt funds,
including business development companies, and other private
investors, as well as more traditional lending institutions and competitors.
Some of these competitors may have access to greater amounts of capital and to
capital that may be committed for longer periods of time or may have different
return thresholds than the Fund, and thus these competitors
may have advantages not shared by the Fund. Furthermore, many of the Fund’s
competitors are not subject to the regulatory restrictions that the 1940
Act imposes on the Fund. Increased competition for, or a diminishment in the
available supply of, investments suitable for the Fund could result in
lower returns on such investments. Moreover, the identification of attractive
investment opportunities is difficult and involves a high degree of uncertainty.
The Fund may incur significant expenses in connection with identifying
investment opportunities and investigating other potential investments
which are ultimately not consummated, including expenses relating to due
diligence, transportation, legal expenses and the fees of other third party
advisors.
The Fund may
also compete for investment opportunities with investment funds, accounts and
investment vehicles managed by Bain Capital Credit, LP and its
affiliates, including the Sub-Adviser. Although opportunities will be allocated
in accordance with Bain Capital Credit, LP’s policies and procedures,
allocations to such investment funds, accounts and investment vehicles will
reduce the amount and frequency of opportunities available to the Fund and
may not be in the best interests of the Fund and its shareholders. Moreover, the
performance of investments will not be known at the time of
allocation.
Bain Capital
Credit, LP has developed processes designed to ensure that all potential
conflicts of interest are disclosed. All employees must disclose their personal
conflicts of interest in the firm’s online compliance database. Disclosure of
personal conflicts of interest must be completed by each employee upon
joining Bain Capital Credit, LP and annually thereafter. The Sub-Adviser and
Bain Capital Credit, LP will approach all conflicts of interest using their
best judgment, but in their sole discretion. In resolving conflicts, the
Sub-Adviser (and other affiliated investment advisers as applicable) will
generally
consider various factors, including the interests of the Fund and the funds they
advise in the context of both the immediate issue at hand and the longer
term course of dealing among the Fund and the funds they advise. From time to
time and as required by applicable law the Sub-Adviser and other
affiliated investment advisers may determine to refer certain conflicts of
interest to Bain Capital, LP’s Allocation Committee (the “Allocation
Committee”),
comprised of senior Bain Capital Credit, LP personnel, for review and
resolution, particularly in situations where the Sub-Adviser and other
affiliated
investment advisers are unable to resolve such conflicts. Similarly, the
Allocation Committee may in its sole discretion determine to review and
make
determinations regarding certain conflicts of interest.
When conflicts
arise between the Fund, on the one hand, and another fund advised by the
Sub-Adviser or an affiliated investment adviser, on the other hand, the
Sub-Adviser and Bain Capital Credit, LP will seek to resolve the conflict. In
doing so, it will generally consider various factors, including the interests of
the Fund and the other fund with respect to the immediate issue and/or with
respect to the longer term course of dealing among the Fund and the other
Bain Capital Credit, LP or Sub-Adviser affiliate. In the case of such conflicts
involving the Fund, the determination by Bain Capital Credit,
LP and the
Sub-Advisor as to which factors are relevant, and the resolution of such
conflicts will be made in their sole discretion except as required by
the governing
documents of the Fund. There can be no assurance that the Sub-Adviser or Bain
Capital Credit, LP will be able to resolve any or all conflicts in a
manner that is favorable to the Fund.
Because the
portfolio managers manage assets for other pooled investment vehicles and/or
other accounts (including institutional clients, pension plans and
certain high net worth individuals) (collectively “Client Accounts”), or may be
affiliated with such Client Accounts, there may be an incentive to favor one
Client Account over another, resulting in conflicts of interest. For example,
the Sub-Adviser, directly or indirectly, receives fees from Client Accounts that
are higher than the fee it receives from the Fund, including performance-based
fees. In those instances, a portfolio manager may have an incentive to
not favor the Fund over the Client Accounts. The Sub-Adviser has adopted trade
allocation and other policies and procedures that it believes are reasonably
designed to address these and other conflicts of interest.
To avoid
conflicts or unintended outcomes related to compensation, Bain Capital Credit,
LP looks at individual performance over a 1, 3 and 5 year period. This
highlights any issues related to market conditions or other factors that may
skew an individual’s numbers either positively or negatively. For individuals
managing multiple funds, Bain Capital Credit, LP looks at performance in each
individual fund and aggregate to determine overall compensation.
Bain Capital Credit, LP then reviews all compensation recommendations for the
entire team to ensure consistency and equity across the platform.
Allocation
of Investment Opportunities Among the Fund and Other Funds Advised by Affiliated
Investment Advisers
The
Sub-Adviser and Bain Capital Credit, LP sponsor and manage various investment
vehicles (including managed accounts), and each expects to form new investment
vehicles in the future, some of which have and will have an investment strategy
or objective that overlaps (in whole or in part) with those of the
Fund.
Other funds
advised by affiliated investment advisers, as well as investment vehicles formed
in the future, will make certain investments that are appropriate
for the Fund, and the Fund may receive a smaller allocation of any such
investment or no allocation at all as a result. These relationships are
likely to
present conflicts of interest in determining how much, if any, of certain
investment opportunities to offer to the Fund. Opportunities for investments
will be allocated among the Fund and other funds advised by affiliated
investment advisers in a manner that the Sub-Adviser and the applicable
affiliated investment advisers, believe in their sole discretion to be
appropriate given factors they believe to be relevant. Such factors with
respect to the
Fund on the one hand, and the other funds advised by the Sub-Adviser or its
affiliated investment advisers on the other, will generally include, but
are not necessarily limited to, the following:
●
investment
objectives and investment focus;
●
target’s
geography, nature of its business and scale;
●
liquidity and
reserves;
●
lender
covenants and other limitations;
●
account
ramp-up or liquidation status;
●
amount of
capital available for investment, as well as projected future capacity for
investment;
●
targeted rate
of return;
●
stage of
development of the prospective investment and anticipated holding period of the
prospective investment;
●
suitability as
a follow-on investment;
●
the
availability of other suitable investments;
●
cash flow
considerations;
●
asset class
restrictions;
●
industry and
other allocation targets;
●
minimum and
maximum investment size requirements;
●
legal,
contractual or regulatory constraints; and
●
any other
relevant limitations imposed by or conditions set forth in the applicable
offering documents and limited partnership agreements (or analogous
organizational documents) of each fund.
Bain Capital
Credit, LP, the Sub-Adviser, and affiliated investment advisers have substantial
discretion in allocating investment opportunities. The foregoing
methodology for allocation of investment opportunities will likely vary over
time and will be on a case-by-case basis. As noted, it is expected that not all
clients of Bain Capital Credit, LP and the Sub-Advisor (including the Fund) will
participate in, or receive a pro rata share of, every investment opportunity.
In connection
with its investment activities, the Sub-Adviser and the other affiliated
investment advisers have in the past and may in the future encounter
situations in
which they must determine how to allocate investment opportunities among various
clients and other persons, which may include, but are not limited
to, the following:
1)
the Fund and
other funds advised by affiliated investment advisers for which this is a
suitable investment;
2)
any
co-investment vehicles that have been formed to invest side-by-side with one or
more of the Fund, or other funds advised by affiliated investment
advisers in all or particular transactions entered into by such fund(s) (the
investors in such co-investment vehicles may include employees,
business associates, and other persons related to Bain Capital Credit, LP or its
personnel; individuals and entities that are also Fund shareholders;
and/or individuals and entities that are not Fund shareholders (“Third
Parties”));
3)
Fund
shareholders and/or Third Parties that wish to make direct investments (i.e.,
not through an investment vehicle) side-by-side with one or more of the
Fund or other funds advised by affiliated investment advisers in particular
transactions entered into by the Fund or such other funds advised by
affiliated investment advisers; and
4)
Fund
shareholders and/or Third Parties acting as “co-sponsors” with the Fund with
respect to a particular transaction.
The
Sub-Adviser will devote to the Fund as much time as is necessary or appropriate,
in its judgment, to manage the Fund’s investment activities. The Sub-Adviser
and its affiliates, are not restricted from forming investment funds (including
investment funds that follow similar investment programs), from entering
into other investment advisory or subadvisory relationships, or from engaging in
other business activities. The Sub-Adviser and its affiliates
currently manage accounts other than the Fund that consist of a substantial
amount of assets. These activities could be viewed as creating a conflict of
interest in that the time and effort of the Sub-Adviser (or the portfolio
managers) will not be devoted exclusively to the business of the Fund,
but will be
allocated between the business of the Fund and its other business
activities.
Conflicts may
also arise because portfolio decisions regarding the Fund may benefit other
accounts managed by the Sub-Adviser or its affiliates. For example, the
sale of a long position or establishment of a short position by the Fund may
impair the price of the same security sold short by (and therefore
benefit) one or more affiliates or their other accounts, and the purchase of a
security or covering of a short position in a security by the Fund may increase
the price of the same security held by (and therefore benefit) one or more
affiliates or their other accounts.
The
Sub-Adviser or its affiliates and their clients may pursue or enforce rights
with respect to an issuer in which the Fund has invested, and those activities may
have an adverse effect on the Fund. As a result, prices, availability, liquidity
and terms of the Fund’s investments may be negatively impacted by
the activities of the Sub-Adviser or its affiliates or their clients, and
transactions for the Fund may be impaired or effected at prices or terms
that may be
less favorable than would otherwise have been the case.
In connection
with its management of the Fund, the Sub-Adviser may have access to certain
fundamental analysis and proprietary technical models developed by
itself or one or more of its affiliates. The Sub-Adviser will not be under any
obligation, however, to effect transactions on behalf of the Fund in accordance
with these analyses and models. In addition, neither the Sub-Adviser nor its
affiliates will have any obligation to make available any information
regarding their proprietary activities or strategies, or the activities or
strategies used for other accounts managed by them, for the benefit of the
management of the Fund and it is not anticipated that the Sub-Adviser will have
access to all information held by other of its affiliates for the purpose of
managing the Fund. The proprietary activities or portfolio strategies of
affiliates of the Sub-Adviser or the activities or strategies used for
accounts
managed by them or other customer accounts could conflict with the transactions
and strategies employed by the Sub-Adviser in managing the
Fund.
Grayson
Allison, Andrew
Carlino, Kim Harris,
Viva Hyatt
and Nate
Whittier of the Sub-Adviser are the Fund’s portfolio managers. They have joint
and primary
responsibility for management of the Fund’s investment portfolio. They each
receive a salary, retirement plan benefits and performance-based bonus from the
Sub-Adviser or its affiliates.
Bain Capital
Credit’s principals are motivated by their financial interest in the performance
of Bain Capital Credit’s respective funds. This creates a strong
alignment of interests between the individual, the Firm and its investors. Bain
Capital Credit is a principal investor and is typically among the largest
investors in each of its funds.
Investment
professionals are compensated based on individual, team and Firm performance.
Bain Capital Credit’s compensation structure aligns compensation
with broader organizational goals to drive strong risk-adjusted performance,
build cooperative, well-functioning teams and provide explicit link
between performance and compensation.
Boston
Partners Global Investors, Inc.
Disciplined
Value Emerging Markets Equity Fund
Portfolio
Managers and Other Accounts Managed
The following
table shows the portfolio manager at the subadvisor who is primarily responsible
for the day-to-day management of the stated fund’s portfolio.
|
|
|
Disciplined
Value Emerging Markets Equity Fund |
|
The following
table provides information regarding other accounts for which the portfolio
manager listed above has day-to-day management responsibilities.
Accounts are grouped into three categories: (i) other investment companies (and
series thereof); (ii) other pooled investment vehicles; and (iii)
other accounts. To the extent that any of these accounts pay advisory fees that
are based on account performance (“performance-based fees”), information on
those accounts is specifically broken out. In addition, any assets denominated
in foreign currencies have been converted into U.S. dollars
using the exchange rates as of the applicable date. Also shown below the table
is the portfolio manager’s investment in the fund and similarly
managed accounts.
The following
table provides information as of August 31, 2024:
|
|
Other
Registered Investment
Companies |
Other
Pooled Investment
Vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance-Based
Fees for Other Accounts Managed.
Of the
accounts listed in the table above, those for which the subadvisor receives a
fee based on
investment performance are listed in the table below.
|
|
Other
Registered Investment
Companies |
Other
Pooled Investment
Vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ownership
of the Fund and Similarly Managed Accounts
The following
table shows the dollar range of fund shares and shares of similarly managed
accounts beneficially owned by the portfolio managers listed above as of
August 31, 2024. For purposes of this table, “similarly managed accounts”
include all accounts that are managed (i) by the same portfolio manager that
is primarily responsible for the day-to-day management of the fund; and (ii)
with an investment style, objective, policies and strategies substantially
similar to those that are used to manage the fund. The portfolio manager’s
ownership of fund shares is stated in the footnote(s) below the table.
|
|
|
Dollar
Range of Shares Owned |
Disciplined
Value Emerging Markets Equity Fund |
|
|
1
As of August
31, 2024, David Kim beneficially owned $0 of the fund.
Potential
Conflicts of Interest
Compensation
is determined based on several factors including performance, productivity, firm
results and teamwork. Portfolio managers benefit from Boston
Partners revenues and profitability. But no portfolio managers are compensated
based directly on fee revenue earned by Boston Partners on particular
accounts in a way that would create a material conflict of interest in favoring
particular accounts over other accounts.
Execution and
research services provided by brokers may not always be utilized in connection
with the fund or other client accounts that may have provided the
commission or a portion of the commission paid to the broker providing the
services. Boston Partners allocates brokerage commissions for these
services in a manner that it believes is fair and equitable and consistent with
its fiduciary obligations to each of its clients.
Boston
Partners views all assets under management in a particular investment strategy
as one portfolio. When the firm decides that a given security warrants a 1%
position in client portfolios, it buys 1% in all portfolios unless individual
client guidelines prohibit the firm from purchasing the security for
such
portfolio. Boston Partners generally aggregates the target share amount for each
account into one large order and distributes the shares on a prorated basis
across the accounts.
If a portfolio
manager identifies a limited investment opportunity that may be suitable for
more than one fund or other client account, the fund may not be able to
take full advantage of that opportunity. To mitigate this conflict of interest,
Boston Partners aggregates orders of the funds it advises with orders from
each of its other client accounts in order to ensure that all clients are
treated fairly and equitably over time and consistent with its fiduciary
obligations to
each of its clients.
Accounts are
generally precluded from simultaneously holding a security long and short. There
are certain circumstances that would permit a long/short
portfolio to take a short position in a security that is held long in another
strategy. This happens very infrequently, and the contra position is
generally not
related to the fundamental views of the security (i.e. - initiating a long
position in a security at year-end to take advantage of tax-loss selling
as a
short-term investment, or initiating a position based solely on its relative
weight in the benchmark). However, in certain situations, the investment
constraints of
a strategy, including but not limited to country, region, industry, or
benchmark, may result in a different investment thesis for the same security. Each
situation is fully vetted and approved by the firm's Chief Investment Officer or
his designee.
All investment
professionals receive a compensation package comprised of an industry
competitive base salary, a discretionary bonus and long-term incentives.
Through our bonus program, key investment professionals are rewarded primarily
for strong investment performance. We believe this aligns our Boston
Partners team firmly with our clients’ objectives and provides the financial and
work environment incentives which keep our teams in place and has led to
industry leading investment staff continuity and extremely low unplanned staff
turnover.
Typically,
bonuses are based upon a combination of one or more of the following four
criteria:
●
Individual
Contribution: an evaluation of the professional’s individual contribution based
on the expectations established at the beginning of each year;
●
Product
Investment Performance: performance of the investment product(s) with which the
individual is involved versus the pre-designed index, based on the
excess return;
●
Investment
Team Performance: the financial results of the investment group with our
client’s assets;
●
Firm-wide
Performance: the overall financial performance of Boston Partners.
●
Our long-term
incentive program effectively confers a significant 20-30% ownership interest in
the value of the business to key employees. Annual awards are
made by the Compensation Committee and are meant to equate to an additional
10-20% of the participants cash bonus awards.
The
compensation program focuses on long term performance with an emphasis on 3- and
5-year results. The timing of receiving deferred compensation
reinforces this emphasis. Roughly 50% of compensation is based on qualitative
measures and roughly 50% is based on quantitative measures.
These compensation percentages can vary based on an individual’s role in the
firm.
Total revenues
generated by any particular product affect the total available bonus pool for
the analysts and portfolio managers associated with that product. The
discretionary bonus assessment is conducted annually. Returns are evaluated on a
pre-tax basis.
Firm:
Boston
Partners maintains a long-term incentive program which effectively confers a
20-30% ownership stake in Boston Partners and is funded by the
profitability and growth of the business. All investment professionals
participate in this plan which serves as a long-term wealth building tool that
aligns the
interests of our clients with the people responsible for managing their
portfolios.
Direct
Investments:
Boston
Partners offers or sub-advises several mutual fund vehicles that allow portfolio
managers and other employees to invest directly
alongside our clients. In fact, it is common for senior portfolio managers to
invest $1 million or more in the strategy or strategies that they manage. Direct
investments are also facilitated through Boston Partner’s 401(k) plan as Boston
Partners managed mutual funds are widely available, investments
are entirely voluntary, and are significantly used within the plan.
Deferred
Compensation:
An important
aspect of Boston Partner’s incentive program is deferred compensation. Annual
incentive compensation as well as
long-term incentive compensation is deferred in part or in total for typically 3
to 5 years. Deferred compensation promotes organizational stability and
also facilitates significant re-investment in Boston Partners strategies.
Deferred compensation is invested in established Boston Partners strategies. In
addition, Boston Partners utilizes deferred compensation to fund seed
investments in new investment offerings. This allows for the establishment
of a portfolio, the building of a track record and ultimately bring a new
investment strategy to the marketplace.
Dimensional
Fund Advisors LP
International
Small Company Fund
Portfolio
Managers and Other Accounts Managed
The following
table shows the portfolio managers at the subadvisor who are jointly and
primarily responsible for the day-to-day management of the stated funds’
portfolios.
|
|
|
International
Small Company Fund |
Jed
S. Fogdall and Joel P.
Schneider |
The following
table provides information regarding other accounts for which each portfolio
manager listed above has day-to-day management responsibilities.
Accounts are grouped into three categories: (i) other investment companies (and
series thereof); (ii) other pooled investment vehicles; and (iii)
other accounts. To the extent that any of these accounts pay advisory fees
that are based on account performance (“performance-based fees”), information on
those accounts is specifically broken out. In addition, any assets denominated
in foreign currencies have been converted into U.S. dollars
using the exchange rates as of the applicable date. Also shown below the table
is each portfolio manager’s investment in the fund or funds he or she
manages and similarly managed accounts.
The following
table provides information as of August 31, 2024:
|
|
Other
Registered Investment
Companies |
Other
Pooled Investment
Vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance-Based
Fees for Other Accounts Managed.
Of the
accounts listed in the table above, those for which the subadvisor receives a
fee based on
investment performance are listed in the table below.
|
|
Other
Registered Investment
Companies |
Other
Pooled Investment
Vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following
table shows the dollar range of fund shares beneficially owned by the portfolio
managers listed above as of August 31, 2024.
|
|
|
Dollar
Range of Shares Owned |
International
Small Company Fund |
|
|
|
|
|
|
Potential
Conflicts of Interest
Actual or
apparent conflicts of interest may arise when a portfolio manager has the
primary day-to-day responsibilities with respect to multiple accounts. In
addition to the funds, these accounts may include registered mutual funds and
ETFs, other unregistered pooled investment vehicles, and other accounts
managed for organizations and individuals (“Accounts”). An Account may have a
similar investment objective to a fund, or may purchase, sell or hold
securities that are eligible to be purchased, sold or held by a fund. Actual or
apparent conflicts of interest include:
●
Time
Management. The management of the funds and/or Accounts may result in a
portfolio manager devoting unequal time and attention to the management of
the funds and/or Accounts. Dimensional seeks to manage such competing interests
for the time and attention of portfolio managers by having
portfolio managers focus on a particular investment discipline. Most Accounts
managed by a portfolio manager are managed using the same
investment approaches that are used in connection with the management of the
funds.
●
Investment
Opportunities. It is possible that at times identical securities will be held
by
a
fund and one or more Accounts. However, positions in the same security
may vary and the length of time that a fund or an Account may choose to hold its
investment in the same security may likewise vary. If a portfolio
manager identifies a limited investment opportunity that may be suitable for a
fund and one or more Accounts, the fund may not be able to
take full
advantage of that opportunity due to an allocation of filled purchase or sale
orders across the fund and other eligible Accounts. To deal with these
situations, Dimensional has adopted procedures for allocating portfolio
transactions across the funds and other Accounts.
●
Broker
Selection. With respect to securities transactions for the funds, Dimensional
determines which broker to use to execute each order, consistent with its duty
to seek best execution of the transaction. However, with respect to certain
Accounts (such as separate accounts), Dimensional may be limited by the
client with respect to the selection of brokers or may be instructed to direct
trades through a particular broker. In these cases, Dimensional or
its affiliates may place separate, non-simultaneous, transactions for a fund and
another Account that may temporarily affect the market price
of the security or the execution of the transaction, or both, to the detriment
of a fund or an Account.
●
Performance-Based
Fees. For some Accounts, Dimensional may be compensated based on the
profitability of the Account, such as by a performance-based
management fee. These incentive compensation structures may create a conflict of
interest for Dimensional with regard to Accounts where
Dimensional is paid based on a percentage of assets because the portfolio
manager may have an incentive to allocate securities preferentially
to the Accounts where Dimensional might share in investment gains.
●
Investment in
an Account. A portfolio manager or his/her relatives may invest in an Account
that he or she manages, and a conflict may arise where he or she may
therefore have an incentive to treat an Account in which the portfolio manager
or his/her relatives invest preferentially as compared to a fund or
other Accounts for which he or she has portfolio management
responsibilities.
Dimensional
has adopted certain compliance procedures that are reasonably designed to
address these types of conflicts. However, there is no guarantee that
such procedures will detect each and every situation in which a conflict
arises.
Dimensional’s
portfolio managers receive a base salary and bonus. Compensation of a portfolio
manager is determined at the discretion of Dimensional and is based
on a portfolio manager’s experience, responsibilities, the perception of the
quality of his or her work efforts and other subjective factors. The
compensation of portfolio managers is not directly based upon the performance of
the funds or other accounts that the portfolio managers manage. Dimensional
reviews the compensation of each portfolio manager annually and may make
modifications in compensation as its Compensation Committee
deems necessary to reflect changes in the market. Each portfolio manager’s
compensation consists of the following:
●
Base
Salary. Each
portfolio manager is paid a base salary. Dimensional considers the factors
described above to determine each portfolio manager’s base
salary.
●
Semi-Annual
Bonus. Each
portfolio manager may receive a semi-annual bonus. The amount of the bonus paid
to each portfolio manager is based upon the
factors described above.
Portfolio
managers may be awarded the right to purchase restricted shares of the stock of
Dimensional, as determined from time to time by the Board
of Directors of
Dimensional or its delegates. Portfolio managers also participate in benefit and
retirement plans and other programs available generally to all
Dimensional employees.
In addition,
portfolio managers may be given the option of participating in Dimensional’s
Long Term Incentive Plan. The level of participation for eligible employees may
be dependent on overall level of compensation, among other considerations.
Participation in this program is not based on or related to the
performance of any individual strategies or any particular client
accounts.
Gw&K
Investment Management, LLC
Portfolio
Managers and Other Accounts Managed
The following
table shows the portfolio managers at the subadvisor who are jointly and
primarily responsible for the day-to-day management of the stated fund’s
portfolio.
|
|
|
|
|
Joseph
C. Craigen, CFA and Daniel L. Miller,
CFA |
The following
table provides information regarding other accounts for which each portfolio
manager listed above has day-to-day management responsibilities.
Accounts are grouped into three categories: (i) other investment companies (and
series thereof); (ii) other pooled investment vehicles; and (iii)
other accounts. To the extent that any of these accounts pay advisory fees
that are based on account performance (“performance-based fees”), information on
those accounts is specifically broken out. In addition, any assets denominated
in foreign currencies have been converted into U.S. dollars
using the exchange rates as of the applicable date. Also shown below the table
is each portfolio manager’s investment in the fund and similarly
managed accounts.
The following
table provides information as of August 31, 2024:
|
|
Other
Registered Investment
Companies |
Other
Pooled Investment
Vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance-Based
Fees for Other Accounts Managed.
Of the
accounts listed in the table above, those for which the subadvisor receives a
fee based on
investment performance are listed in the table below. GW&K maintains
policies and procedures designed to help ensure the fair and equitable
treatment of
all client accounts with the goal that all portfolios within a given strategy
share performance that is as similar as possible excluding client specific
investment guidelines or cash flows.
|
|
Other
Registered Investment
Companies |
Other
Pooled Investment
Vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ownership
of the Fund and Similarly Managed Accounts
The following
table shows the dollar range of fund shares and shares of similarly managed
accounts beneficially owned by the portfolio managers listed above as of
August 31, 2024. For purposes
of this table, “similarly managed accounts” include all accounts that are
managed (i) by the same portfolio managers that
are jointly and primarily responsible for the day-to-day management of the fund;
and (ii) with an investment style, objective, policies and strategies
substantially similar to those that are used to manage the fund. Each portfolio
manager’s ownership of fund shares is stated in the footnote(s) below the
table.
|
|
Dollar
Range of Shares Owned1
|
|
|
|
|
|
|
1
As of August
31, 2024, Joseph C.
Craigen, CFA and Daniel L. Miller, CFA beneficially owned $0 and $0,
respectively, of the fund.
Potential
Conflicts of Interest
GW&K’s
portfolio managers simultaneously manage multiple types of portfolios, including
separate accounts, wrap fee programs and sub advised mutual funds,
according to the same or a similar investment strategy as the applicable Fund.
However, the portfolios managed by a portfolio manager may not have
portfolio compositions identical to those of the Fund managed by the portfolio
manager due, for example, to specific investment limitations or
guidelines present in some portfolios or funds but not others. The portfolio
managers may purchase securities for one portfolio and not
another
portfolio, and the performance of securities purchased for one portfolio may
vary from the performance of securities purchased for other portfolios. A
portfolio manager may place transactions on behalf of other accounts that are
directly or indirectly contrary to investment decisions made on behalf of a
Fund, or make investment decisions that are similar to those made for a Fund,
both of which have the potential to adversely impact the Fund depending
on market conditions. For example, a portfolio manager may purchase a security
in one portfolio while appropriately selling that same security in
another portfolio. In addition, some of these portfolios have fee structures
that are or have the potential to be higher than the advisory fees paid by a
Fund, which can cause potential conflicts in the allocation of investment
opportunities between the Funds and the other accounts. However, the
compensation structure for portfolio managers (see “Compensation” below)
generally does not provide any incentive to favor one account over another
because that part of a manager’s bonus based on performance is not based on the
performance of one account to the exclusion of others.
While GW&K
has policies and procedures to help ensure accounts are treated fairly and
equitably over time not all accounts within a strategy will be managed the
same at all times. Different client guidelines and/or differences within the
investment strategies may lead to the use of different investment
practices for accounts within the same or similar investment
strategy.
Portfolio
Manager compensation is a process that balances investment management results
over 1, 3 and 5 year periods versus the benchmark and peer universe.
Compensation is comprised of a base salary which is determined by the
individual’s experience and position relative to market data, as well as a
bonus that incorporates 3 components:
●
Performance
Relative to Peers
●
Risk-Adjusted
Performance Relative to Index
Key employees
are eligible to receive distributions and other benefits represented by
membership interests in accordance with the terms of the LLC agreement.
Incentive compensation is paid out as cash on an annualized basis. Analyst
compensation is a process that rewards achievement of performance
based on security recommendations and consistent annual performance against
industry benchmarks. Compensation is comprised of a base salary
which is determined by the individual’s experience and position relative to
market data, as well as a bonus that incorporates 2 components:
●
Performance
relative to sectors covered over 1, 3, 5 year time periods
GW&K does
not have a deferred compensation program. GW&K’s partners hold an equity
interest in GW&K, and therefore receive customary partnership benefits and
distributions in exchange for obligations to the partnership.
GW&K
provides comprehensive benefits that are designed to meet the long-term needs of
its employees and their families. Along with competitive compensation
packages, GW&K offers health and dental care coverage, employer-matched
401k, tuition reimbursement, parental leave and a variety of other benefits
that support a healthy work/life balance.
Jennison
Associates LLC
Capital
Appreciation Fund
Portfolio
Managers and Other Accounts Managed
The following
table shows the portfolio managers at the subadvisor who are jointly and
primarily responsible for the day-to-day management of the stated fund’s
portfolio.
|
|
|
Capital
Appreciation Fund |
Blair
A. Boyer, Michael A. Del Balso, Natasha Kuhlkin, CFA, and Kathleen A.
McCarragher |
The following
table provides information regarding other accounts for which each portfolio
manager listed above has day-to-day management responsibilities.
Accounts are grouped into three categories: (i) other investment companies (and
series thereof); (ii) other pooled investment vehicles; and (iii)
other accounts. To the extent that any of these accounts pay advisory fees
that are based on account performance (“performance-based fees”), information on
those accounts is specifically broken out. In addition, any assets denominated
in foreign currencies have been converted into U.S. dollars
using the exchange rates as of the applicable date. Also shown below the table
is each portfolio manager’s investment in the fund and similarly
managed accounts.
The following
table provides information as of August 31, 2024:
|
|
Other
Registered Investment
Companies |
Other
Pooled Investment
Vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
Other Accounts
excludes the assets and number of accounts that are managed using model
portfolios.
Performance-Based
Fees for Other Accounts Managed.
Of the
accounts listed in the table above, those for which the subadvisor receives a
fee based on
investment performance are listed in the table below.
|
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Other
Registered Investment
Companies |
Other
Pooled Investment
Vehicles |
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Ownership
of the Fund and Similarly Managed Accounts
The following
table shows the dollar range of fund shares and shares of similarly managed
accounts beneficially owned by the portfolio managers listed above as of
August 31, 2024. For purposes
of this table, “similarly managed accounts” include all accounts that are
managed (i) by the same portfolio managers that
are jointly and primarily responsible for the day-to-day management of the fund;
and (ii) with an investment style, objective, policies and strategies
substantially similar to those that are used to manage the fund. Each portfolio
manager’s ownership of fund shares is stated in the footnote(s) below the
table.
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Dollar
Range of Shares Owned1
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1
As of August
31, 2024, Blair A.
Boyer, Michael A. Del Balso, Natasha Kuhlkin, CFA, and Kathleen A. McCarragher
beneficially owned $0, $0, $0, and $0, respectively, of the
fund.
Potential
Conflicts of Interest
Jennison
manages accounts with asset-based fees alongside accounts with performance-based
fees. This side-by-side management creates an
incentive for
Jennison and its investment professionals to favor one account over another.
Specifically, Jennison has the incentive to favor accounts for which it
receives performance fees, and possibly take greater investment risks in those
accounts in order to
bolster performance and increase its fees.
Other types of
side-by-side management of multiple accounts create
incentives for Jennison to favor one account over another. Examples are detailed
below,
followed by a discussion of how Jennison addresses these conflicts.
●
Long
only accounts/long-short accounts: Jennison
manages accounts in strategies that hold only long securities positions as well
as accounts in strategies
that are permitted to sell securities short. As a result, Jennison may hold a
long position in a security in some client accounts while selling the
same security short in other client accounts. For example, Jennison permits
quantitatively hedged strategies to short securities that are held long in
other strategies. Jennison also permits securities that are held long by one
fundamental portfolio manager to be held short by another fundamental
portfolio manager. Additionally, Jennison permits securities that are held long
in quantitatively derived strategies to be shorted by other
strategies. The strategies that sell a security short held long by another
strategy could lower the price for the security held long. Similarly, if a
strategy is
purchasing a security that is held short in other strategies, the strategies
purchasing the security could increase the price of the security held
short. By the same token, sales in a long only account can increase the value of
a short position while shorting could create an opportunity to
purchase a long position at a lower price. As a result, we have conflicts of
interest in determining the timing and direction of investments.
●
Multiple
strategies: Jennison may
buy or sell, or may direct or recommend that one client buy or sell, securities
of the same kind or class that are purchased or
sold for another client, at prices that may be different. Jennison may also, at
any time, execute trades of securities of the same kind or class in
one direction for an account and in the opposite direction for another account,
due to differences in investment strategy or client direction.
Different strategies effecting trading in the same securities or types of
securities may appear as inconsistencies in Jennison’s management of
multiple accounts side-by-side.
●
Investments
at different levels of an issuer’s capital structure: To the
extent different clients invest across multiple strategies or asset classes,
Jennison may
invest client assets in the same issuer, but at different levels in the capital
structure. Interests in these positions could be inconsistent
or in potential or actual conflict with each other.
●
Affiliated
accounts/unaffiliated accounts and seeded/non-seeded
accounts and accounts receiving asset allocation assets from affiliated
investment
advisers: Jennison
manages accounts for its affiliates and accounts in which it has an interest
alongside unaffiliated accounts. This
creates an incentive
to favor its affiliated accounts over unaffiliated accounts. Additionally, at
times Jennison’s affiliates provide initial funding or otherwise
invest in vehicles managed by Jennison. When an affiliate provides “seed
capital” or other capital for a fund or account, it may do so with the intention
of redeeming all or part of its interest at a particular future point in time or
when it deems that sufficient additional capital has been invested in
that fund or account. Jennison typically requests seed capital to start a track
record for a new strategy or product. Managing “seeded” accounts
alongside “non-seeded” accounts creates an incentive
to favor the “seeded” accounts to establish a track record for a new strategy or
product.
Additionally, Jennison’s affiliated investment advisers could allocate their
asset allocation clients’ assets to Jennison,
which
creates an
incentive
for Jennison
to favor
accounts used by its affiliate for their asset allocation clients to receive
more assets from the affiliate.
●
Non-discretionary
accounts or models: Jennison
provides non-discretionary model portfolios to some clients and manages other
portfolios on a discretionary
basis. Recommendations for some non-discretionary models that are derived from
discretionary portfolios are communicated after the
discretionary portfolio has traded. The non-discretionary clients could be
disadvantaged if Jennison delivers the model investment portfolio to
them after
Jennison initiates trading for the discretionary clients. Discretionary clients
could be disadvantaged if the non-discretionary clients receive their
model investment portfolio and start trading before Jennison has started trading
for the discretionary clients.
●
Higher
fee paying accounts or products or strategies: In
general, Jennison
receives more revenues from (1) larger accounts or client relationships
than smaller
accounts or client relationships and from (2) managing discretionary accounts
than advising non-discretionary models and from (3) non-wrap fee
accounts than from wrap fee accounts and from (4) charging higher fees for some
strategies than others. The differences in revenue that Jennison
receives could create an incentive for Jennison to favor the higher fee paying
or higher revenue generating account or product or strategy over
another.
●
Personal
interests: The
performance of one or more accounts managed by Jennison’s investment
professionals is taken into consideration in determining
their compensation. Jennison also manages accounts that are investment options
in its employee benefit plans such as its defined contribution
plans or deferred compensation arrangements and where its employees may have
personally invested alongside other accounts where there is
no personal interest. These factors could create an incentive for Jennison to
favor the accounts where it has a personal interest over accounts where
Jennison does not have a personal interest.
●
Side
Letters: Jennison has
entered into side letters with respect to certain of the funds that Jennison
manages, and will likely do so with respect to funds that
Jennison manages in the future. Such side letters are agreements with investors
in the funds (including affiliated investors) that grant such investors
terms and conditions more advantageous than those granted to other investors.
For example, some investors have side letters granting
reduced fees or expenses, or access to more frequent or detailed information
regarding the fund's investments. In some instances, Jennison could
have multiple side letters with respect to a single fund, each with a different
investor.
How
Jennison Addresses These Conflicts of Interest
The conflicts
of interest described above create
incentives for Jennison to favor one or more accounts or types of accounts over
others in the allocation of investment
opportunities, aggregation and timing of investments. Portfolios in a particular
strategy with similar objectives are managed similarly to the extent
possible. Accordingly, portfolio holdings and industry and sector exposure tend
to be similar across a group of accounts in a strategy that have similar
objectives, which tends to minimize the potential for conflicts of interest
among accounts within a product strategy. While these accounts have many
similarities, the investment performance of each account will be different
primarily due to differences in guidelines, individual portfolio manager’s
decisions, timing of investments, fees, expenses and cash flows.
Additionally,
Jennison has developed policies and procedures that seek to address, mitigate
and assess these conflicts of interest.
●
Jennison has
adopted trade aggregation and allocation procedures that seek to treat all
clients (including affiliated accounts) fairly. These policies and procedures
address the allocation of limited investment opportunities, such as IPOs and new
issues, and the allocation of transactions across multiple
accounts.
●
Jennison has
policies that limit the ability to short securities in portfolios that primarily
rely on its fundamental research and investment processes (fundamental
portfolios) if the security is held long by the same portfolio
manager.
●
Jennison has
adopted procedures to review allocations or performance dispersion between
accounts with performance fees and non-performance fee based
accounts and to review overlapping long and short positions among long accounts
and long-short accounts.
●
Jennison has
adopted a code of ethics and policies relating to personal trading.
●
Jennison has
adopted a conflicts of interest policy and procedures.
●
Jennison
provides disclosure of these conflicts as described in its Form ADV
brochure.
Jennison seeks
to maintain a highly competitive compensation program designed to attract and
retain outstanding investment professionals, which include
portfolio managers and research analysts, and to align the interests of its
investment professionals with those of its clients and overall firm results.
Jennison recognizes individuals for their achievements and contributions and
continues to promote those who exemplify the same values and level of
commitment that are hallmarks of the organization.
Jennison
sponsors a profit sharing retirement plan for all eligible employees. The
contribution to the profit sharing retirement plan for portfolio managers is
based on a percentage of the portfolio manager’s total compensation, subject to
a maximum determined by applicable law. In addition to eligibility to
participate in retirement and welfare plans, senior investment professionals,
including portfolio managers and senior research analysts, are eligible to
participate in a voluntary deferred compensation program where all or a portion
of the cash bonus can be deferred. Participants in the deferred
compensation plan are permitted to allocate the deferred amounts among various
options that track the gross-of-fee pre-tax performance of accounts or
composites of accounts managed by Jennison.
Investment
professionals are compensated with a combination of base salary and cash bonus.
Overall firm profitability determines the size of the investment
professional compensation pool. In general, the cash bonus represents the
majority of an investment professional’s compensation.
Investment
professionals’ total compensation is determined through a process that evaluates
numerous qualitative and quantitative factors. Not all factors are
applicable to every investment professional, and there is no particular
weighting or formula for considering the factors.
The factors
reviewed for the portfolio managers are listed below.
The
quantitative factors reviewed for the portfolio managers may
include:
●
One-, three-,
five-year and longer term pre-tax investment performance for groupings of
accounts managed in the same strategy (composite) relative to market
conditions, pre-determined passive indices and industry peer group data for the
product strategy (e.g., large cap growth, large cap value). Some portfolio
managers may manage or contribute ideas to more than one product strategy, and
the performance of the other product strategies is also
considered in determining the portfolio manager’s overall
compensation.
●
The investment
professional’s contribution to client portfolio’s pre-tax one-, three-,
five-year and longer-term performance from the investment professional’s
recommended stocks relative to market conditions, the strategy’s passive
benchmarks, and the investment professional’s respective coverage
universes.
The
qualitative factors reviewed for the portfolio managers may include:
●
The quality of
the portfolio manager’s investment ideas and consistency of the portfolio
manager’s judgment;
●
Qualitative
factors such as teamwork and responsiveness;
●
Individual
factors such as years of experience and responsibilities specific to the
individual’s role such as being a team leader or supervisor are also
factored into
the determination of an investment professional’s total compensation;
and
●
Historical and
long-term business potential of the product strategies.
Manulife
Investment Management (US) LLC
Alternative
Asset Allocation Fund
Emerging
Markets Debt Fund
Fundamental
Global Franchise Fund
Global
Equity Fund
International
Strategic Equity Allocation Fund
Lifestyle
Blend Portfolios
Lifetime
Blend Portfolios
Multi-Asset
High Income Fund
Multimanager
Lifetime Portfolios
Strategic
Income Opportunities Fund
U.S.
Sector Rotation Fund
Portfolio
Managers and Other Accounts Managed
The following
table shows the portfolio managers at the subadvisor who are jointly and
primarily responsible for the day-to-day management of the stated funds’
portfolios.
|
|
|
Alternative
Asset Allocation Fund |
Nathan
W. Thooft, CFA and Christopher Walsh, CFA |
Multi-Asset
High Income Fund |
Nathan
W. Thooft, CFA, Christopher Walsh, CFA, John F. Addeo, CFA, Geoffrey
Kelley,
CFA, and Caryn E. Rothman, CFA |
Lifestyle
Blend Portfolios, Lifetime Blend Portfolios, and
Multimanager
Lifetime Portfolios |
Geoffrey
Kelley, CFA, David Kobuszewski, CFA, Robert E. Sykes, CFA, and
Nathan
W. Thooft, CFA |
International
Strategic Equity Allocation Fund and U.S. Sector
Rotation
Fund |
Michael
J. Comer, CFA, James Robertson, CIM, and Nathan W. Thooft,
CFA |
Emerging
Markets Debt Fund |
Neal
Capecci, Roberto Sanchez-Dahl, CFA, and Elina
Theodorakopoulou |
Fundamental
Global Franchise Fund |
Emory
W. Sanders, Jr., CFA and Jonathan T. White, CFA |
|
|
Paul
Boyne, Stephen Hermsdorf, Edward Ritchie, ASIP, and Felicity
Smith |
Strategic
Income Opportunities Fund |
Christopher
M. Chapman, CFA, Thomas C. Goggins, Brad Lutz, CFA, and Kisoo
Park |
The following
table provides information regarding other accounts for which each portfolio
manager listed above has day-to-day management responsibilities.
Accounts are grouped into three categories: (i) other investment companies (and
series thereof); (ii) other pooled investment vehicles; and (iii)
other accounts. To the extent that any of these accounts pay advisory fees
that are based on account performance (“performance-based fees”), information on
those accounts is specifically broken out. In addition, any assets denominated
in foreign currencies have been converted into U.S. dollars
using the exchange rates as of the applicable date. Also shown below the table
is each portfolio manager’s investment in the fund or funds he or she
manages and similarly managed accounts.
The following
table provides information as of August 31, 2024:
|
|
Other
Registered Investment
Companies |
Other
Pooled Investment
Vehicles |
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|
Christopher
M. Chapman, CFA |
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Other
Registered Investment
Companies |
Other
Pooled Investment
Vehicles |
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Roberto
Sanchez-Dahl, CFA |
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Emory
W. Sanders, Jr., CFA |
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Performance-Based
Fees for Other Accounts Managed.
Of the
accounts listed in the table above, those for which the subadvisor receives a
fee based on
investment performance are listed in the table below.
|
|
Other
Registered Investment
Companies |
Other
Pooled Investment
Vehicles |
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Christopher
M. Chapman, CFA |
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Roberto
Sanchez-Dahl, CFA |
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Emory
W. Sanders, Jr., CFA |
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Ownership
of the Funds and Similarly Managed Accounts
The following
table shows the dollar range of fund shares and shares of similarly managed
accounts beneficially owned by the portfolio managers listed above as of
August 31, 2024. For purposes
of this table, “similarly managed accounts” include all accounts that are
managed (i) by the same portfolio managers that
are jointly and primarily responsible for the day-to-day management of the fund;
and (ii) with an investment style, objective, policies and strategies
substantially similar to those that are used to manage the fund. Each portfolio
manager’s ownership of fund shares is stated in the footnote(s) below the
table.
|
|
|
Dollar
Range of Shares Owned |
Alternative
Asset Allocation Fund1
|
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Dollar
Range of Shares Owned |
Emerging
Markets Debt Fund2 |
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|
Roberto
Sanchez-Dahl, CFA |
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|
Fundamental
Global Franchise Fund3
|
Emory
W. Sanders, Jr., CFA |
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International
Strategic Equity Allocation Fund5 |
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Multi-Asset
High Income Fund6
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Lifestyle
Blend Aggressive Portfolio7 |
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Lifestyle
Blend Balanced Portfolio8 |
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Lifestyle
Blend Conservative Portfolio9 |
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Lifestyle
Blend Growth Portfolio10 |
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Lifestyle
Blend Moderate Portfolio11 |
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2065
Lifetime Blend Portfolio12 |
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2060
Lifetime Blend Portfolio13 |
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2055
Lifetime Blend Portfolio14 |
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2050
Lifetime Blend Portfolio15 |
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Dollar
Range of Shares Owned |
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2045
Lifetime Blend Portfolio16 |
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2040
Lifetime Blend Portfolio17 |
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2035
Lifetime Blend Portfolio18 |
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2030
Lifetime Blend Portfolio19 |
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2025
Lifetime Blend Portfolio20 |
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2020
Lifetime Blend Portfolio21 |
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2015
Lifetime Blend Portfolio22 |
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2010
Lifetime Blend Portfolio23 |
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Multimanager
2065 Lifetime Portfolio24 |
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Multimanager
2060 Lifetime Portfolio25 |
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Multimanager
2055 Lifetime Portfolio26 |
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Multimanager
2050 Lifetime Portfolio27 |
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Multimanager
2045 Lifetime Portfolio28 |
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Dollar
Range of Shares Owned |
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Multimanager
2040 Lifetime Portfolio29 |
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Multimanager
2035 Lifetime Portfolio30 |
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Multimanager
2030 Lifetime Portfolio31
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Multimanager
2025 Lifetime Portfolio32 |
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Multimanager
2020 Lifetime Portfolio33 |
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Multimanager
2015 Lifetime Portfolio34 |
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Multimanager
2010 Lifetime Portfolio35 |
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Strategic
Income Opportunities Fund36 |
Christopher
M. Chapman, CFA |
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U.S.
Sector Rotation Fund37 |
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1
As of August
31, 2024, Nathan W.
Thooft, CFA and Christopher Walsh, CFA beneficially owned $100,001–$500,000 and
$10,001–$50,000, respectively, of Alternative
Asset Allocation Fund.
2
As of August
31, 2024, Neal
Capecci, Roberto Sanchez-Dahl, CFA, and Elina Theodorakopoulou beneficially
owned $100,001–$500,000,
$100,001–$500,000, and
$0 respectively,
of Emerging Markets Debt Fund.
3
As of August
31, 2024, Emory W.
(Sandy) Sanders, Jr., CFA and Jonathan T. White, CFA beneficially owned
$100,001–$500,000 and
over
$1,000,000, respectively, of Fundamental
Global Franchise Fund.
4
As of August
31, 2024, Paul Boyne,
Stephen Hermsdorf, Edward Ritchie, ASIP, and Felicity Smith beneficially owned
over $1,000,000, over
$1,000,000,
$10,001–$50,000, and
$10,001–$50,000,
respectively, of Global Equity Fund.
5
As of August
31, 2024, Michael J.
Comer, CFA, James Robertson, CIM, and Nathan
W. Thooft,
CFA
beneficially
owned $0, $0, and $0 respectively,
of International Strategic
Equity Allocation Fund.
6
As of August
31, 2024, Nathan W.
Thooft, CFA, Christopher Walsh, CFA, John F. Addeo, CFA, Geoffrey Kelley, CFA
and Caryn E. Rothman, CFA beneficially owned $100,001–$500,000,
$10,001–$50,000, $0, $50,001–$100,000, and
$500,001–$1,000,000, respectively, of Multi-Asset High Income Fund.
7
As of August
31, 2024, Geoffrey
Kelley, CFA, David Kobuszewski, CFA, Robert E. Sykes, CFA and Nathan W. Thooft,
CFA beneficially owned $0, $0, $0 and $0,
respectively,
of Lifestyle Blend Aggressive Portfolio.
8
As of August
31, 2024, Geoffrey
Kelley, CFA, David Kobuszewski, CFA, Robert E. Sykes, CFA and Nathan W. Thooft,
CFA beneficially owned $0, $0, $0 and $0,
respectively,
of Lifestyle Blend Balanced Portfolio.
9
As of August
31, 2024, Geoffrey
Kelley, CFA, David Kobuszewski, CFA, Robert E. Sykes, CFA and Nathan W. Thooft,
CFA beneficially owned $0, $0, $0 and $0,
respectively,
of Lifestyle Blend Conservative Portfolio.
10
As of August
31, 2024, Geoffrey
Kelley, CFA, David Kobuszewski, CFA, Robert E. Sykes, CFA and Nathan W. Thooft,
CFA beneficially owned $0, $0, $0 and $0,
respectively,
of Lifestyle Blend Growth Portfolio.
11
As of August
31, 2024, Geoffrey
Kelley, CFA, David Kobuszewski, CFA, Robert E. Sykes, CFA and Nathan W. Thooft,
CFA beneficially owned $0, $0, $0 and $0,
respectively,
of Lifestyle Blend Moderate Portfolio.
12
As of August
31, 2024, Geoffrey
Kelley, CFA, David Kobuszewski, CFA, Robert E. Sykes, CFA and Nathan W. Thooft,
CFA beneficially owned $0, $0, $0 and $0,
respectively,
of 2065 Lifetime Blend Portfolio.
13
As of August
31, 2024, Geoffrey
Kelley, CFA, David Kobuszewski, CFA, Robert E. Sykes, CFA and Nathan W. Thooft,
CFA beneficially owned $100,001–$500,000, $0,
$0 and $0,
respectively, of 2060 Lifetime Blend Portfolio.
14
As of August
31, 2024, Geoffrey
Kelley, CFA, David Kobuszewski, CFA, Robert E. Sykes, CFA and Nathan W. Thooft,
CFA beneficially owned $0, $0, $0 and $0,
respectively,
of 2055 Lifetime Blend Portfolio.
15
As of August
31, 2024, Geoffrey
Kelley, CFA, David Kobuszewski, CFA, Robert E. Sykes, CFA and Nathan W. Thooft,
CFA beneficially owned $0, $50,001–$100,000, $0, and
$500,001–$1,000,000,
respectively, of 2050 Lifetime Blend Portfolio.
16
As of August
31, 2024, Geoffrey
Kelley, CFA, David Kobuszewski, CFA, Robert E. Sykes, CFA and Nathan W. Thooft,
CFA beneficially owned $0, $0, $0 and
$100,001–$500,000,
respectively, of 2045 Lifetime Blend Portfolio.
17
As of August
31, 2024, Geoffrey
Kelley, CFA, David Kobuszewski, CFA, Robert E. Sykes, CFA and Nathan W. Thooft,
CFA beneficially owned $0, $0, $100,001–$500,000 and $0,
respectively, of 2040 Lifetime Blend Portfolio.
18
As of August
31, 2024, Geoffrey
Kelley, CFA, David Kobuszewski, CFA, Robert E. Sykes, CFA and Nathan W. Thooft,
CFA beneficially owned $0, $0, $0 and $0,
respectively,
of 2035 Lifetime Blend Portfolio.
19
As of August
31, 2024, Geoffrey
Kelley, CFA, David Kobuszewski, CFA, Robert E. Sykes, CFA and Nathan W. Thooft,
CFA beneficially owned $0, $0, $0 and $0,
respectively,
of 2030 Lifetime Blend Portfolio.
20
As of August
31, 2024, Geoffrey
Kelley, CFA, David Kobuszewski, CFA, Robert E. Sykes, CFA and Nathan W. Thooft,
CFA beneficially owned $0, $0, $0 and $0,
respectively,
of 2025 Lifetime Blend Portfolio.
21
As of August
31, 2024, Geoffrey
Kelley, CFA, David Kobuszewski, CFA, Robert E. Sykes, CFA and Nathan W. Thooft,
CFA beneficially owned $0, $0, $0 and $0,
respectively,
of 2015 Lifetime
Blend Portfolio.
22
As of August
31, 2024, Geoffrey
Kelley, CFA, David Kobuszewski, CFA, Robert E. Sykes, CFA and Nathan W. Thooft,
CFA beneficially owned $0, $0, $0 and $0,
respectively,
of 2010 Lifetime
Blend Portfolio.
23
As of August
31, 2024, Geoffrey
Kelley, CFA, David Kobuszewski, CFA, Robert E. Sykes, CFA and Nathan W. Thooft,
CFA beneficially owned $0, $0, $0 and $0,
respectively,
of Multimanager
2065 Lifetime
Portfolio.
24
As of August
31, 2024, Geoffrey
Kelley, CFA, David Kobuszewski, CFA, Robert E. Sykes, CFA and Nathan W. Thooft,
CFA beneficially owned $0, $0, $0 and $0,
respectively,
of Multimanager 2060 Lifetime
Portfolio.
25
As of August
31, 2024, Geoffrey
Kelley, CFA, David Kobuszewski, CFA, Robert E. Sykes, CFA and Nathan W. Thooft,
CFA beneficially owned $0, $0, $0 and $0,
respectively,
of Multimanager 2055 Lifetime
Portfolio.
26
As of August
31, 2024, Geoffrey
Kelley, CFA, David Kobuszewski, CFA, Robert E. Sykes, CFA and Nathan W. Thooft,
CFA beneficially owned $0, $0, $0 and $0,
respectively,
of Multimanager 2050 Lifetime
Portfolio.
27
As of August
31, 2024, Geoffrey
Kelley, CFA, David Kobuszewski, CFA, Robert E. Sykes, CFA and Nathan W. Thooft,
CFA beneficially owned $100,001–$500,000, $100,001–$500,000, $0, and
$100,001–$500,000,
respectively, of Multimanager 2045 Lifetime
Portfolio.
28
As of August
31, 2024, Geoffrey
Kelley, CFA, David Kobuszewski, CFA, Robert E. Sykes, CFA and Nathan W. Thooft,
CFA beneficially owned $0, $0,
$0 and $0,
respectively,
of Multimanager 2040 Lifetime Portfolio.
29
As of August
31, 2024, Geoffrey
Kelley, CFA, David Kobuszewski, CFA, Robert E. Sykes, CFA and Nathan W. Thooft,
CFA beneficially owned $0, $0, $0 and $0,
respectively,
of Multimanager 2035 Lifetime Portfolio.
30
As of August
31, 2024, Geoffrey
Kelley, CFA, David Kobuszewski, CFA, Robert E. Sykes, CFA and Nathan W. Thooft,
CFA beneficially owned $100,001–$500,000, $0, $0 and $0,
respectively, of Multimanager 2030 Lifetime Portfolio.
31
As of August
31, 2024, Geoffrey
Kelley, CFA, David Kobuszewski, CFA, Robert E. Sykes, CFA and Nathan W. Thooft,
CFA beneficially owned $0, $0, $0 and $0,
respectively,
of Multimanager 2025 Lifetime Portfolio.
32
As of August
31, 2024, Geoffrey
Kelley, CFA, David Kobuszewski, CFA, Robert E. Sykes, CFA and Nathan W. Thooft,
CFA beneficially owned $0, $0, $0 and $0,
respectively,
of Multimanager 2020 Lifetime Portfolio.
33
As of August
31, 2024, Geoffrey
Kelley, CFA, David Kobuszewski, CFA, Robert E. Sykes, CFA and Nathan W. Thooft,
CFA beneficially owned $0, $0, $0 and $0,
respectively,
of Multimanager 2015 Lifetime Portfolio.
34
As of August
31, 2024, Geoffrey
Kelley, CFA, David Kobuszewski, CFA, Robert E. Sykes, CFA and Nathan W. Thooft,
CFA beneficially owned $50,001-$100,000,
$0
and $0,
respectively, of Multimanager 2010 Lifetime
Portfolio.
35
As of August
31, 2024, Christopher
M. Chapman, CFA, Thomas C. Goggins, Brad
Lutz, CFA, and
Kisoo Park beneficially owned $500,001–$1,000,000, over
$1,000,000,
$100,001–$500,000, and $0, respectively, of the Strategic Income Opportunities
Fund.
36
As of August
31, 2024, Michael J.
Comer, CFA, James Robertson, CIM, and Nathan
W. Thooft,
CFA
beneficially
owned $0, $0 and $0,
respectively, of the U.S. Sector Rotation
Fund.
Potential
Conflicts of Interest
When a
portfolio manager is responsible for the management of more than one account,
the potential arises for the portfolio manager to favor one account over
another. The principal types of potential conflicts of interest that may arise
are discussed below. For the reasons outlined below, the funds do not believe
that any material conflicts are likely to arise out of a portfolio manager’s
responsibility for the management of the funds as well as one or more other
accounts. The Advisor and Manulife IM (US) (the “Subadvisor”) have adopted
procedures that are intended to monitor compliance with the
policies
referred to in the following paragraphs. Generally, the risks of such conflicts
of interests are increased to the extent that a portfolio manager has
a
financial incentive to favor one account over another. The Advisor and
Subadvisor have structured their compensation arrangements in a manner that
is intended to
limit such potential for conflicts of interests. See “Compensation”
below.
●
A portfolio
manager could favor one account over another in allocating new investment
opportunities that have limited supply, such as initial public offerings and
private placements. If, for example, an initial public offering that was
expected to appreciate in value significantly shortly after the offering was
allocated to a single account, that account may be expected to have better
investment performance than other accounts that did not receive an
allocation on the initial public offering. The Subadvisor has policies that
require a portfolio manager to allocate such investment opportunities
in an equitable manner and generally to allocate such investments
proportionately among all accounts with similar investment objectives.
●
A portfolio
manager could favor one account over another in the order in which trades for
the accounts are placed. If a portfolio manager determines to purchase a
security for more than one account in an aggregate amount that may influence the
market price of the security, accounts that purchased or
sold the security first may receive a more favorable price than accounts that
made subsequent transactions. The less liquid the market for the
security or the greater the percentage that the proposed aggregate purchases or
sales represent of average daily trading volume, the greater the potential
for accounts that make subsequent purchases or sales to receive a less favorable
price. When a portfolio manager intends to trade the same security
for more than one account, the policies of the Subadvisor generally require that
such trades be “bunched,” which means that the trades for the
individual accounts are aggregated and each account receives the same price.
There are some types of accounts as to which bunching may not be
possible for contractual reasons (such as directed brokerage arrangements).
Circumstances may also arise where the trader believes that bunching the
orders may not result in the best possible price. Where those accounts or
circumstances are involved, the Subadvisor will place the order in a
manner intended to result in as favorable a price as possible for such
client.
●
A portfolio
manager could favor an account if the portfolio manager’s compensation is tied
to the performance of that account rather than all accounts
managed by the portfolio manager. If, for example, the portfolio manager
receives a bonus based upon the performance of certain accounts relative to a
benchmark while other accounts are disregarded for this purpose, the portfolio
manager will have a financial incentive to seek to have the accounts
that determine the portfolio manager’s bonus achieve the best possible
performance to the possible detriment of other accounts. Similarly, if
the Subadvisor receives a performance-based advisory fee, the portfolio manager
may favor that account, whether or not the performance of
that account directly determines the portfolio manager’s compensation. The
investment performance on specific accounts is not a factor in
determining the portfolio manager’s compensation. See “Compensation” below.
Neither the Advisor nor the Subadvisor receives a performance-based
fee with respect to any of the accounts managed by the portfolio
managers.
●
A portfolio
manager could favor an account if the portfolio manager has a beneficial
interest in the account, in order to benefit a large client or to compensate a
client that had poor returns. For example, if the portfolio manager held an
interest in an investment partnership that was one of the accounts
managed by the portfolio manager, the portfolio manager would have an economic
incentive to favor the account in which the portfolio manager held
an interest. The Subadvisor imposes certain trading restrictions and reporting
requirements for accounts in which a portfolio manager or certain
family members have a personal interest in order to confirm that such accounts
are not favored over other accounts.
●
If the
different accounts have materially and potentially conflicting investment
objectives or strategies, a conflict of interest may arise. For example, if
a
portfolio manager purchases a security for one account and sells the same
security short for another account, such trading pattern could disadvantage
either the account that is long or short. In making portfolio manager
assignments, the Subadvisor seeks to avoid such potentially conflicting
situations. However, where a portfolio manager is responsible for accounts with
differing investment objectives and policies, it is possible that the
portfolio manager will conclude that it is in the best interest of one account
to sell a portfolio security while another account continues to hold or
increase the holding in such security.
The Subadvisor
has adopted a system of compensation for portfolio managers and others involved
in the investment process that is applied systematically
among investment professionals. At the Subadvisor, the structure of compensation
of investment professionals is currently comprised of the following
basic components: base salary and short- and long-term incentives. The following
describes each component of the compensation package for
the individuals identified as a portfolio manager for the funds.
●
Base salary.
Base compensation is fixed and normally reevaluated on an annual basis. The
Subadvisor seeks to set compensation at market rates, taking into
account the experience and responsibilities of the investment
professional.
●
Incentives.
Only investment professionals are eligible to participate in the short- and
long-term incentive plan. Under the plan, investment professionals
are eligible for an annual cash award. The plan is intended to provide a
competitive level of annual bonus compensation that is tied to the investment
professional achieving superior investment performance and aligns the financial
incentives of the Subadvisor and the investment professional.
Any bonus under the plan is completely discretionary, with a maximum annual
bonus that may be well in excess of base salary. Payout of a portion
of this bonus may be deferred for up to five years. While the amount of any
bonus is discretionary, the following factors are generally used in determining
bonuses under the plan:
●
Investment
Performance: The
investment performance of all accounts managed by the investment professional
over one, three and five-year periods are
considered. The pre-tax performance of each account is measured relative to an
appropriate peer group benchmark identified in the table below
(for example a Morningstar large cap growth peer group if the fund invests
primarily in large cap stocks with a growth strategy). With respect to
fixed income accounts, relative yields are also used to measure performance.
This is the most heavily weighted factor.
●
Financial
Performance: The
profitability of the Subadvisor and its parent company are also considered in
determining bonus awards.
●
Non-Investment
Performance: To a lesser
extent, intangible contributions, including the investment professional’s
support of client service and
sales
activities, new fund/strategy idea generation, professional growth and
development, and management, where applicable, are also evaluated when
determining bonus awards.
●
In addition to
the above, compensation may also include a revenue component for an investment
team derived from a number of factors including, but not
limited to, client assets under management, investment performance, and firm
metrics.
●
Manulife
equity awards. A limited number of senior investment professionals may receive
options to purchase shares of Manulife Financial stock. Generally,
such option would permit the investment professional to purchase a set amount of
stock at the market price on the date of grant. The option can be
exercised for a set period (normally a number of years or until termination of
employment) and the investment professional would exercise the
option if the market value of Manulife Financial stock increases. Some
investment professionals may receive restricted stock grants, where the
investment professional is entitled to receive the stock at no or nominal cost,
provided that the stock is forgone if the investment professional’s
employment is terminated prior to a vesting date.
●
Deferred
Incentives. Investment professionals may receive deferred incentives which are
fully invested in strategies managed by the team/individual as well as
other Manulife Investment Management strategies.
The Subadvisor
also permits investment professionals to participate on a voluntary basis in a
deferred compensation plan, under which the investment professional
may elect on an annual basis to defer receipt of a portion of their compensation
until retirement. Participation in the plan is voluntary.
|
|
Peer
Group and/or Benchmark Index for Incentive Period |
Lifestyle
Blend Aggressive Portfolio |
Morningstar
US OE Large Blend |
Lifestyle
Blend Balanced Portfolio |
Morningstar
US OE Moderate Allocation |
Lifestyle
Blend Conservative Portfolio |
Morningstar
US OE Conservative Allocation |
Lifestyle
Blend Growth Portfolio |
Morningstar
US OE Aggressive Allocation |
Lifestyle
Blend Moderate Portfolio |
Morningstar
US OE Conservative Allocation |
Multimanager
2010 Lifetime Portfolio |
Morningstar
US OE Target Date 2000-2010 |
Multimanager
2015 Lifetime Portfolio |
Morningstar
US OE Target Date 2011-2015 |
Multimanager
2020 Lifetime Portfolio |
Morningstar
US OE Target Date 2016-2020 |
Multimanager
2025 Lifetime Portfolio |
Morningstar
US OE Target Date 2021-2025 |
Multimanager
2030 Lifetime Portfolio |
Morningstar
US OE Target Date 2026-2030 |
Multimanager
2035 Lifetime Portfolio |
Morningstar
US OE Target Date 2031-2035 |
Multimanager
2040 Lifetime Portfolio |
Morningstar
US OE Target Date 2036-2040 |
Multimanager
2045 Lifetime Portfolio |
Morningstar
US OE Target Date 2041-2045 |
Multimanager
2050 Lifetime Portfolio |
Morningstar
US OE Target Date 2046-2050 |
Multimanager
2055 Lifetime Portfolio |
Morningstar
US OE Target Date 2051+ |
Multimanager
2060 Lifetime Portfolio |
Morningstar
US OE Target Date 2051+ |
Multimanager
2065 Lifetime Portfolio |
Morningstar
US OE Target Date 2051+ |
2030
Lifetime Blend Portfolio |
Morningstar
US OE Target Date 2026-2030 |
2035
Lifetime Blend Portfolio |
Morningstar
US OE Target Date 2031-2035 |
2040
Lifetime Blend Portfolio |
Morningstar
US OE Target Date 2036-2040 |
2045
Lifetime Blend Portfolio |
Morningstar
US OE Target Date 2041-2045 |
2050
Lifetime Blend Portfolio |
Morningstar
US OE Target Date 2046-2050 |
2055
Lifetime Blend Portfolio |
Morningstar
US OE Target Date 2051+ |
2060
Lifetime Blend Portfolio |
Morningstar
US OE Target Date 2051+ |
2065
Lifetime Blend Portfolio |
Morningstar
US OE Target Date 2051+ |
International
Strategic Equity Allocation Fund |
Morningstar
Foreign Large Blend |
Alternative
Asset Allocation Fund |
Morningstar
US OE Multialternative |
Multi-Asset
High Income Fund |
Morningstar
US OE Conservative Allocation |
Strategic
Income Opportunities Fund |
Morningstar
US OE Multisector Bond |
Fundamental
Global Franchise Fund |
Morningstar
US OE World Stock |
|
|
Morningstar
US OE World Stock |
Emerging
Markets Debt Fund |
Morningstar
US OE Emerging Markets Bond |
U.S.
Sector Rotation Fund |
|
T.
Rowe Price Associates, Inc.
T.
Rowe Price Investment Management, Inc. Is Sub-Subadvisor to Capital Appreciation
Value Fund
Blue
Chip Growth Fund
Capital
Appreciation Value Fund
Equity
Income Fund
Health
Sciences Fund
Mid
Value Fund
Science
& Technology Fund
Portfolio
Managers and Other Accounts Managed
The following
table shows the portfolio manager at the subadvisor who is primarily responsible
for the day-to-day management of the stated funds’ portfolios.
|
|
|
|
|
|
Capital
Appreciation Value Fund |
|
|
|
|
|
|
|
|
|
|
Science
& Technology Fund |
|
The following
table provides information regarding other accounts for which each portfolio
manager listed above has day-to-day management responsibilities.
Accounts are grouped into three categories: (i) other investment companies (and
series thereof); (ii) other pooled investment vehicles; and (iii)
other accounts. To the extent that any of these accounts pay advisory fees
that are based on account performance (“performance-based fees”), information on
those accounts is specifically broken out. In addition, any assets denominated
in foreign currencies have been converted into U.S. dollars
using the exchange rates as of the applicable date. Also shown below the table
is each portfolio manager’s investment in the fund or funds he manages and
similarly managed accounts.
The following
table provides information as of August 31, 2024:
|
|
Other
Registered Investment
Companies |
Other
Pooled Investment
Vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance-Based
Fees for Other Accounts Managed.
Of the
accounts listed in the table above, those for which the subadvisor receives a
fee based on
investment performance are listed in the table below.
|
|
Other
Registered Investment
Companies |
Other
Pooled Investment
Vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ownership
of the Funds and Similarly Managed Accounts
The following
table shows the dollar range of fund shares and shares of similarly managed
accounts beneficially owned by the portfolio managers listed above as of
August 31, 2024. For purposes
of this table, “similarly managed accounts” include all accounts that are
managed (i) by the same portfolio managers that
are jointly and primarily responsible for the day-to-day management of the fund;
and (ii) with an investment style, objective, policies and strategies
substantially similar to those that are used to manage the fund. Each portfolio
manager’s ownership of fund shares is stated in the footnote(s) below the
table.
|
|
|
Dollar
Range of Shares Owned |
|
|
|
|
Capital
Appreciation Value Fund2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Science
& Technology Fund6 |
|
|
1
As of August
31, 2024, Paul Greene
II beneficially owned $0 of Blue Chip Growth Fund.
2
As of August
31, 2024, David R.
Giroux, CFA beneficially owned over $1,000,000 of Capital Appreciation Value
Fund.
3
As of August
31, 2024, John D.
Linehan, CFA beneficially owned
over
$1,000,000 of Equity Income Fund.
4
As of August
31, 2024, Ziad Bakri,
MD, CFA beneficially owned $500,001–$1,000,000 of Health Sciences
Fund.
5
As of August
31, 2024, Vincent
DeAugustino, CFA beneficially owned over
$1,000,000 of
Mid Value Fund.
6
As of August
31, 2024, Anthony Wang
beneficially owned $500,001–$1,000,000 of Science
& Technology Fund.
Potential
Conflicts of Interest
Portfolio
managers at T. Rowe Price and its affiliates may manage multiple accounts. These
accounts may include, among others, mutual funds, exchange-traded
funds, business development companies, separate accounts (assets managed on
behalf of institutions such as pension funds, colleges and
universities, and foundations), offshore funds, private funds, and common
trust funds. T. Rowe Price also provides non-discretionary advice to
institutional investors in the form of delivery of model portfolios. Portfolio
managers make investment decisions for each portfolio based on the investment
objectives, policies, practices, and other relevant investment considerations
that they believe are applicable to that portfolio. Consequently,
portfolio managers may purchase (or sell) securities for one portfolio and not
another portfolio. T. Rowe Price and its affiliates have adopted
brokerage and trade allocation policies and procedures that they believe are
reasonably designed to address any potential conflicts associated with managing
multiple accounts. Investments
made by a fund and the results achieved by a fund at any given time are not
expected to be the same as those made by
other funds for which T. Rowe Price acts as investment adviser, including funds
with names, investment objectives and policies, and/or portfolio
management teams, similar to a fund. This may be attributable to a wide variety
of factors, including, but not limited to, large shareholder purchases or
redemptions or specific investment restrictions.
The T. Rowe
Price funds may, from time to time, own shares of Morningstar, Inc. Morningstar
is a provider of investment research to individual and institutional
investors, and publishes ratings on funds, including the T. Rowe Price funds. T.
Rowe Price acts as subadviser to two mutual funds offered by
Morningstar. T. Rowe Price and its affiliates pay Morningstar for a variety of
products and services. Morningstar may provide investment consulting
and investment
management services to clients of T. Rowe Price or its affiliates. The T. Rowe
Price funds may generally not purchase shares of stock issued by T.
Rowe Price Group, Inc. However, a T. Rowe Price Index Fund is permitted
to make such purchases to the extent T. Rowe Price Group, Inc. is represented in
the benchmark index the fund is designed to track.
Additional
potential conflicts may be inherent in our use of multiple strategies. For
example, conflicts will arise in cases where different clients invest in
different
parts of an issuer’s capital structure, including circumstances in which one or
more clients may own private securities or obligations of an issuer and
other clients may own or seek to acquire securities of the same issuer. For
example, a client may acquire a loan, loan participation or a loan assignment of
a particular borrower in which one or more other clients have an equity
investment or may invest in senior debt obligations of an issuer for
one client and
junior debt obligations or equity of the same issuer for another client.
Similarly, if an issuer in which a client and one or more other clients
directly or
indirectly hold different classes of securities (or other assets, instruments or
obligations issued by such issuer or underlying investments of such issuer)
encounters financial problems, is involved in a merger or acquisition or a going
private transaction, decisions over the terms of any workout or transaction
will raise conflicts of interests. While it is appropriate for different clients
to hold investments in different parts of the same issuer’s capital
structure under normal circumstances, the interests of stockholders and debt
holders may conflict, as the securities they hold will likely have different
voting rights, dividend or repayment priorities or other features that could be
in conflict with one another. Clients should be aware that conflicts
will not
necessarily be resolved in favor of their interests.
In some cases,
T. Rowe Price or its affiliates may refrain from taking certain actions or
making certain investments on behalf of clients in order to avoid or mitigate
certain conflicts of interest or to prevent adverse regulatory actions or other
implications for T. Rowe Price or its affiliates, or may sell investments
for certain clients, in such case potentially disadvantaging the clients on
whose behalf the actions are not taken, investments not made, or
investments
sold. In other cases, T. Rowe Price or its affiliates may take actions in order
to mitigate legal risks to T. Rowe Price or its affiliates, even if disadvantageous
to a client.
Conflicts such
as those described above may also occur between clients on the one hand, and T.
Rowe Price or its affiliates, on the other. These conflicts will not
always be resolved in the favor of the client. In addition, conflicts may exist
between different clients of T. Rowe Price or its affiliates. T. Rowe
Price and one
or more of its affiliates may operate autonomously from each other and may take
actions that are adverse to other clients managed by an affiliate. In
some cases, T. Rowe Price or its affiliates will have limited or no ability to
mitigate those actions or address those conflicts, which could adversely
affect T. Rowe Price or its affiliates’ clients. Additional
potential
conflicts may
be inherent in our use of multiple strategies. Regulatory requirements
may prohibit
T. Rowe Price
or its affiliates from investing in certain companies on behalf of
some of their clients,
including
the T. Rowe
Price
funds, while
at
the same time
not prohibiting T. Rowe Price
or its
affiliates from making those same investments on behalf of other clients that
are not subject to
such requirements. T. Rowe
Price or its affiliates’ ability to negotiate
certain
rights, remedies, or take
other actions
on behalf of the T. Rowe Price
funds with respect
to an investment also may be
limited in situations in which an affiliate of the T. Rowe Price funds
(or
certain other
interested
persons) have a direct or indirect interest in the same issuer. When permitted
by applicable law, other clients of T. Rowe Price or its affiliates,
on the one
hand, and one or more T. Rowe Price funds, on the other hand, may invest in or
extend credit to different classes of securities or different parts of the
capital structure of a single issuer. T. Rowe Price or its affiliates may pursue
rights, provide advice or engage in other activities, or refrain from pursuing
rights, providing advice or engaging in other activities, on behalf of
themselves or one or more clients other than the T. Rowe Price funds
with respect
to an issuer in which a T. Rowe Price fund has invested, and such actions (or
refraining from action) may have a material adverse effect on such T. Rowe
Price fund. In addition, as a result of regulatory requirements or
otherwise, in situations
in which T.
Rowe Price
clients
(including the T.
Rowe Price
funds)
hold positions
in multiple parts of the capital structure of an issuer, T. Rowe Price or its
affiliates may not pursue certain actions that may otherwise
be available. T. Rowe Price
and its affiliates address these and other potential conflicts of interest based
on the facts and circumstances of particular
situations. For example,
T. Rowe Price
may determine to rely on one or more information barriers between different
advisers, business
units, or portfolio
management teams, or to rely on
the actions of similarly situated holders of loans or securities rather
than, or in
connection with, taking such
actions itself on behalf of a client. In these situations,
investment
personnel are mindful of potentially conflicting interests of our clients with
investments in
different parts of an issuer’s capital structure and seek to take appropriate
measures to ensure that the interests of all clients are fairly represented.
As a result of the various conflicts and related issues described in this
paragraph, a T. Rowe Price fund could sustain losses during periods in which
T.
Rowe Price or
its affiliates and other clients of T. Rowe Price or its affiliates achieve
profits generally or with respect to particular holdings, or
could achieve
lower profits or higher losses than would have been the case had the conflicts
described above not existed.
Portfolio
manager compensation consists primarily of a base salary, a cash bonus, and an
equity incentive that usually comes in the form of restricted stock grants.
Compensation is variable and is determined based on the following
factors.
Investment
performance over 1-, 3-, 5-, and 10-year periods is the most important input.
The weightings for these time periods are generally balanced and are
applied consistently across similar strategies. T. Rowe Price (and T. Rowe Price
Australia, T.
Rowe Price Hong Kong, T.
Rowe Price Singapore, T. Rowe Price
Japan, T. Rowe Price International, and T. Rowe Price Investment Management, as
appropriate) evaluates performance in absolute, relative, and
risk-adjusted terms. Relative performance and risk-adjusted performance are
typically determined with reference to the broad-based index (e.g., S&P 500
Index) and the Lipper average or index (e.g., Large-Cap Growth Index) set forth
in the total returns table in the fund’s prospectus, although other
benchmarks may be used as well. Investment results are also measured against
comparably managed funds of competitive investment management
firms. The selection of comparable funds is approved by the applicable
investment steering committee and is the
same as the selection presented to
the directors of the T. Rowe Price funds in their regular review of fund
performance. Performance is primarily measured on a pretax basis, although tax
efficiency is considered.
Compensation
is viewed with a long-term time horizon. The more consistent a portfolio
manager’s performance over time, the higher the compensation opportunity.
The increase or decrease in a fund’s assets due to the purchase or sale of fund
shares is not considered a material factor. In reviewing relative
performance for fixed income funds, a fund’s expense ratio is usually taken into
account. Contribution to T. Rowe Price’s overall investment process is an
important consideration as well. Leveraging ideas and investment insights across
applicable investment platforms; working effectively with and
mentoring others; and other contributions to our clients, the firm, or our
culture are important components of T. Rowe Price’s long-term success and
are generally taken into consideration.
All employees
of T. Rowe Price, including portfolio managers, can participate in a 401(k) plan
sponsored by T. Rowe Price Group. In addition, all employees are
eligible to purchase T. Rowe Price common stock through an employee stock
purchase plan that features a limited corporate matching contribution.
Eligibility for and participation in these plans is on the same basis for all
employees. Finally, all vice presidents of T. Rowe Price Group, including all
portfolio managers, are eligible
to participate in a supplemental savings plan sponsored by T. Rowe Price
Group, and certain
vice presidents of
T. Rowe Price
Group receive supplemental medical/hospital reimbursement benefits.
This
compensation structure is used when evaluating the performance of all portfolios
(including the
T. Rowe Price funds) managed by
the portfolio manager.
Wellington
Management Company LLP
(“Wellington
Management”)
Opportunistic
Fixed Income Fund
Real
Estate Securities Fund
Small
Cap Value Fund
The following
table shows the portfolio managers at the subadvisor who are primarily
responsible, or jointly and primarily responsible, for the
day-to-day management of
the stated funds’ portfolios.
|
|
|
Opportunistic
Fixed Income Fund |
Brian
M. Garvey and Brij S. Khurana |
Real
Estate Securities Fund |
|
|
|
Shaun
F. Pedersen, Edmond C. Griffin, CFA, and Danielle S. Williams,
CFA |
The following
table provides information regarding other accounts for which each portfolio
manager listed above has day-to-day management responsibilities.
Accounts are grouped into three categories: (i) other investment companies (and
series thereof); (ii) other pooled investment vehicles; and (iii)
other accounts. To the extent that any of these accounts pay advisory fees
that are based on account performance (“performance-based fees”), information on
those accounts is specifically broken out. In addition, any assets denominated
in foreign currencies have been converted into U.S. dollars
using the exchange rates as of the applicable date. Also shown below the table
is each portfolio manager’s investment in the fund or funds he or she
manages and similarly managed accounts.
The following
table provides information as of August 31, 2024:
|
|
Other
Registered Investment
Companies |
Other
Pooled Investment
Vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Danielle
S. Williams, CFA |
|
|
|
|
|
|
Performance-Based
Fees for Other Accounts Managed.
Of the
accounts listed in the table above, those for which the subadvisor receives a
fee based on
investment performance are listed in the table below.
|
|
Other
Registered Investment
Companies |
Other
Pooled Investment
Vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Danielle
S. Williams, CFA |
|
|
|
|
|
|
Ownership
of the Funds and Similarly Managed Accounts
The following
table shows the dollar range of fund shares and shares of similarly managed
accounts beneficially owned by the portfolio managers listed above as of
August 31, 2024. For purposes
of this table, “similarly managed accounts” include all accounts that are
managed (i) by the same portfolio managers that
are jointly and primarily responsible for the day-to-day management of a fund,
or by the same portfolio manager that is primarily responsible
for the day-to-day management of the fund, as applicable; and (ii) with an
investment style, objective, policies and strategies substantially similar to
those that are used to manage the fund. The portfolio manager’s ownership of
fund shares is stated in the footnote(s) below the table.
|
|
|
Dollar
Range of Shares Owned |
Opportunistic
Fixed Income Fund1 |
|
|
|
|
|
Dollar
Range of Shares Owned |
|
|
|
|
Real
Estate Securities Fund2
|
|
|
|
|
|
|
|
|
|
|
|
|
Danielle
S. Williams, CFA |
|
1
As of August
31, 2024, Brian M.
Garvey and Brij S. Khurana beneficially owned $100,001–$500,000 and
$100,001–$500,000,
respectively, of Opportunistic Fixed Income
Fund.
2
As of August
31, 2024, Bradford D.
Stoesser beneficially owned $100,001–$500,000 of Real Estate Securities
Fund.
3
As of August
31, 2024, Edmond C.
Griffin, CFA, Shaun F. Pedersen, and Danielle S. Williams, CFA beneficially
owned $1–$10,000, over $1,000,000, and $50,001–$100,000,
respectively, of Small Cap Value Fund.
Potential
Conflicts of Interest
Individual
investment professionals at Wellington Management manage multiple accounts for
multiple clients. These accounts may include mutual funds,
separate accounts (assets managed on behalf of institutions such as pension
funds, insurance companies, foundations, or separately managed account
programs sponsored by financial intermediaries), bank common trust accounts, and
hedge funds. Each fund’s managers listed in the prospectus who
are primarily responsible for the day-to-day management of the funds
(“Investment Professionals”) generally manage accounts in several
different investment styles. These accounts may have investment objectives,
strategies, time horizons, tax considerations and risk profiles that
differ from
those of the relevant fund. The Investment Professionals make investment
decisions for each account, including the relevant fund, based on the investment
objectives, policies, practices, benchmarks, cash flows, tax and other relevant
investment considerations applicable to that account. Consequently,
the Investment Professionals may purchase or sell securities, including IPOs,
for one account and not another account, and the performance of
securities purchased for one account may vary from the performance of securities
purchased for other accounts. Alternatively, these accounts may
be managed in a similar fashion to the relevant fund and thus the accounts may
have similar, and in some cases nearly identical, objectives,
strategies and/or holdings to that of the relevant fund.
An Investment
Professional or other investment professionals at Wellington Management may
place transactions on behalf of other accounts that are directly or
indirectly contrary to investment decisions made on behalf of the relevant fund,
or make investment decisions that are similar to those made for the
relevant fund, both of which have the potential to adversely impact the relevant
fund depending on market conditions. For example, an investment
professional may purchase a security in one account while appropriately selling
that same security in another account. Similarly, an Investment
Professional may purchase the same security for the relevant fund and one or
more other accounts at or about the same time. In those instances the
other accounts will have access to their respective holdings prior to the public
disclosure of the relevant fund’s holdings. In addition, some of these
accounts have fee structures, including performance fees, which are or have the
potential to be higher, in some cases significantly higher, than the fees
Wellington Management receives for managing the relevant fund. Messrs. Garvey,
Khurana,
and Stoesser
also manage
accounts that pay performance
allocations to Wellington Management or its affiliates. Because incentive
payments paid by Wellington Management to the Investment Professional
are tied to revenues earned by Wellington Management and, where noted, to the
performance achieved by the manager in each account, the incentives
associated with any given account may be significantly higher or lower than
those associated with other accounts managed by a given Investment
Professional. Therefore, portfolio managers and other investment team members
have an incentive to favor accounts that have the potential to provide
higher incentive compensation for them as individuals. Wellington Management
manages the conflict created by these incentive arrangements
through our policies on the allocation of investment opportunities, including
the allocation of equity IPOs, as well as after-the-fact monitoring and
review of client accounts to assess dispersion among accounts with similar
mandates. Finally, the Investment Professionals may hold shares or
investments in the other pooled investment vehicles and/or other accounts
identified above.
Wellington
Management’s goal is to meet its fiduciary obligation to treat all clients
fairly and provide high quality investment services to all of its clients.
Wellington
Management has adopted and implemented policies and procedures, including
brokerage and trade allocation policies and procedures, which it
believes address the conflicts associated with managing multiple accounts for
multiple clients. In addition, Wellington Management monitors a variety of
areas, including compliance with primary account guidelines, the allocation of
IPOs, and compliance with the firm’s Code of Ethics, and places additional
investment restrictions on investment professionals who manage hedge funds and
certain other accounts. Furthermore, senior investment and business
personnel at Wellington Management periodically review the performance of
Wellington Management’s investment professionals. Although
Wellington Management does not track the time an investment professional spends
on a single account, Wellington Management does periodically
assess whether an investment professional has adequate time and resources to
effectively manage the investment professional’s various client
mandates.
Wellington
Management receives a fee based on the assets under management of the funds as
set forth in an Investment Subadvisory Agreement between
Wellington Management and the Advisor with respect to each fund. Wellington
Management pays its investment professionals out of its total revenues,
including the advisory fees earned with respect to each fund. The following
information relates to the fiscal year ended August 31, 2024.
Wellington
Management’s compensation structure is designed to attract and retain
high-caliber investment professionals necessary to deliver high quality
investment management services to its clients. Wellington Management’s
compensation of each fund’s managers listed in the prospectus who are primarily
responsible for the day-to-day management of the funds (“Investment
Professionals”) includes a base salary and incentive components. The base
salary for each Investment Professional who is a partner (a “Partner”) of
Wellington Management Group LLP, the ultimate holding company of Wellington
Management, is generally a fixed amount that is determined by the managing
partners of Wellington Management Group LLP. The base salary for
each other Investment Professional is determined by the Investment
Professionals’ experience and performance in their role as an Investment
Professional.
Base salaries for Wellington Management’s employees are reviewed annually and
may be adjusted based on the recommendation of an Investment
Professional’s manager, using guidelines established by Wellington Management’s
Compensation Committee, which has final oversight responsibility
for base salaries of employees of the firm. Each Investment Professional's
incentive payment relating to the relevant fund, is linked to the gross pre-tax
performance of the portion of the fund managed by the Investment Professional
compared to the benchmark index or peer group identified
below over one, three, and five year periods, with an emphasis
on five year results. Wellington Management applies similar incentive
compensation
structures (although the benchmarks or peer groups, time periods and rates may
differ) to other accounts managed by these Investment Professionals,
including accounts with performance fees.
Portfolio-based
incentives across all accounts managed by an investment professional can, and
typically do, represent a significant portion of an investment
professional’s overall compensation; incentive compensation varies significantly
by individual and can vary significantly from year to year. The Investment
Professionals may also be eligible for bonus payments based on their overall
contribution to Wellington Management’s business operations.
Senior management at Wellington Management may reward individuals as it deems
appropriate based on other factors. Each Partner is eligible to
participate in a Partner-funded tax qualified retirement plan, the contributions
to which are made pursuant to an actuarial formula. Messrs. Garvey,
Khurana, Pedersen, and Stoesser are Partners.
|
|
Incentive
Benchmark(s) / Peer Groups |
Opportunistic
Fixed Income Fund |
Bloomberg
Global Aggregate (USD Hedged) Index |
Real
Estate Securities Fund |
Dow
Jones US Select REIT Index |
|
|
|
Western
Asset Management Company, LLC
Western
Asset Management Company Limited is Sub-Subadvisor
Portfolio
Managers and Other Accounts Managed
The following
table shows the portfolio managers at the subadvisor who are jointly and
primarily responsible for the day-to-day management of the stated fund’s
portfolio.
|
|
|
|
|
Michael
C. Buchanan, CFA, Walter E. Kilcullen, and Ryan
Kohan |
The following
table provides information regarding other accounts for which each portfolio
manager listed above has day-to-day management responsibilities.
Accounts are grouped into three categories: (i) other investment companies (and
series thereof); (ii) other pooled investment vehicles; and (iii)
other accounts. To the extent that any of these accounts pay advisory fees
that are based on account performance (“performance-based fees”), information on
those accounts is specifically broken out. In addition, any assets denominated
in foreign currencies have been converted into U.S. dollars
using the exchange rates as of the applicable date. Also shown below the table
is each portfolio manager’s investment in the fund and similarly
managed accounts.
The following
table provides information as of August 31, 2024:
|
|
Other
Registered Investment
Companies |
Other
Pooled Investment
Vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance-Based
Fees for Other Accounts Managed.
Of the
accounts listed in the table above, those for which the subadvisor receives a
fee based on
investment performance are listed in the table below.
|
|
Other
Registered Investment
Companies |
Other
Pooled Investment
Vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: The
numbers above reflect the overall number of portfolios managed by WAMCO. Mr.
Kohan is involved
in the management of all the firm’s portfolios,
but is not solely responsible for particular portfolios. WAMCO’s investment
discipline emphasizes a team approach that combines the efforts of groups of
specialists working in different market sectors. The individuals that have been
identified are responsible for overseeing implementation of the firm’s
overall investment ideas and coordinating the work of the various sector teams.
This structure ensures that client portfolios benefit from a consensus that
draws on the expertise of all team members.
Ownership
of the Fund and Similarly Managed Accounts
The following
table shows the dollar range of fund shares and shares of similarly managed
accounts beneficially owned by the portfolio managers listed above as of
August 31, 2024. For purposes
of this table, “similarly managed accounts” include all accounts that are
managed (i) by the same portfolio managers that
are jointly and primarily responsible for the day-to-day management of the fund;
and (ii) with an investment style, objective, policies and strategies
substantially similar to those that are used to manage the fund. Each portfolio
manager’s ownership of fund shares is stated in the footnote(s) below the
table.
|
|
Dollar
Range of Shares Owned1
|
|
|
|
|
|
|
|
|
Dollar
Range of Shares Owned1 |
|
|
|
1
As of August
31, 2024, Michael C.
Buchanan, CFA, Walter E. Kilcullen, and Ryan
Kohan beneficially
owned $0, $0 and $0,
respectively, of the fund.
Potential
Conflicts of Interest
WAMCO has
identified several potential conflicts of interest that could directly impact
client portfolios. For example, potential conflicts of interest may arise in
connection with the management of multiple portfolios (including portfolios
managed in a personal capacity). These could include potential conflicts of
interest related to the knowledge and timing of a portfolio’s trades, investment
opportunities and broker selection. Portfolio managers are privy to the
size, timing, and possible market impact of a portfolio’s trades.
It is possible
that an investment opportunity may be suitable for both a portfolio and other
accounts managed by a portfolio manager, but may not be available in
sufficient quantities for both the portfolio and the other accounts to
participate fully. Similarly, there may be limited opportunity to sell an
investment
held by a portfolio and another account. A conflict may arise where the
portfolio manager may have an incentive to treat an account preferentially
as compared to a portfolio because the account pays a performance-based fee or
the portfolio manager, WAMCO or an affiliate has an interest in
the account. WAMCO has adopted procedures for allocation of portfolio
transactions and investment opportunities across multiple client accounts on a
fair and equitable basis over time. All eligible accounts that can participate
in a trade share the same price on a pro-rata allocation basis to ensure that
no conflict of interest occurs. Trades are allocated among similarly managed
accounts to maintain consistency of portfolio strategy, taking into
account cash availability, investment restrictions and guidelines, and portfolio
composition versus strategy.
With regard to
side-by-side management of funds in which compensation for management of some of
the funds may be tied to performance, Western Asset
maintains specific trade allocation procedures to avoid any conflict of
interest. WAMCO's trade allocation policies do not distinguish between
accounts with
standard and performance-based fees. The Legal & Compliance Department
reviews the activities in accounts with performance fees and the Firm's
trade allocations to ensure WAMCO's investment decisions are consistent with its
fiduciary duties and conducted in a fair and equitable manner
relative to its other accounts with similar investment objectives and
mandates.
With respect
to securities transactions for mutual funds, WAMCO determines which broker or
dealer to use to execute each order, consistent with their duty to seek
best execution of the transaction. However, with respect to certain other
accounts (such as pooled investment vehicles that are not registered
investment companies and other accounts managed for organizations and
individuals), WAMCO may be limited by the client with respect to the selection
of brokers or dealers or may be instructed to direct trades through a particular
broker or dealer. In these cases, trades for a portfolio in a particular
security may be placed separately from, rather than aggregated with, such other
accounts. Having separate transactions with respect to a security may
temporarily affect the market price of the security or the execution of the
transaction, or both, to the possible detriment of a portfolio or the other
account(s) involved. Additionally, the management of multiple portfolios and/or
other accounts may result in a portfolio manager devoting unequal time
and attention to the management of each portfolio and/or other account. WAMCO’s
team approach to portfolio management and block trading works
to limit this potential risk.
WAMCO also
maintains a gift and entertainment policy to address the potential for a
business contact to give gifts or host entertainment events that may influence
the business judgment of an employee. Employees are permitted to retain gifts of
only a nominal value and are required to make reimbursement
for entertainment events above a certain value. All gifts (except those of a de
minimis value) and entertainment events that are given or sponsored by a
business contact are required to be reported in a gift and entertainment log
which is reviewed on a regular basis for possible issues.
Employees of
WAMCO have access to transactions and holdings information regarding client
accounts and WAMCO’s overall trading activities. This information
represents a potential conflict of interest because employees may take advantage
of this information as they trade in their personal accounts.
Accordingly, WAMCO maintains a Code of Ethics that is compliant with Rule 17j-1
and Rule 204A-1 to address personal trading. In addition, the Code of
Ethics seeks to establish broader principles of good conduct and fiduciary
responsibility in all aspects of WAMCO’s business. The Code of Ethics is
administered by the Legal and Compliance Department and monitored through
WAMCO’s compliance monitoring program.
WAMCO may also
face other potential conflicts of interest with respect to managing client
assets, and the description above is not a complete description of
every conflict of interest that could be deemed to exist. WAMCO also maintains a
compliance monitoring program and engages independent
auditors to conduct a SOC 1 - ISAE 3402 audit on an annual basis. These steps
help to ensure that potential conflicts of interest have been addressed.
At WAMCO, one
compensation methodology covers all products and functional areas, including
portfolio managers. WAMCO’s philosophy is to reward its employees
through Total Compensation. Total Compensation is reflective of the external
market value for skills, experience, ability to produce results, and
the performance of one's group and WAMCO as a whole. Standard compensation
includes competitive base salaries, employee benefits, incentive
bonus and a retirement plan which includes an employer match.
Base Salary. A
base salary and total compensation range for each position within WAMCO is
derived from annual market surveys and other relevant compensation-related
data that benchmark each role to their job function and peer universe.
Compensation benchmarks for all employees are reviewed on an annual
basis. The base salary should reflect the fair market value of the employee's
core job responsibilities and is generally without regard to job performance.
Incentive
Compensation. Incentive bonuses make up the variable component of Total
Compensation and is the primary focus of management decisions when
determining Total Compensation, as base salaries are purely targeting to pay a
competitive rate for the role. Incentive compensation awards (cash and deferred
bonus) are 100% discretionary. These are structured to reward sector specialists
for contributions to WAMCO as well as relative performance of
their specific portfolios/product and are determined by the professional’s job
function and performance as measured by a formal review process. The
overall success of the Firm will determine the amount of funds available to
distribute for all incentive bonuses.
For portfolio
managers, the formal review process includes a thorough review of portfolios
they were assigned to lead or with which they were otherwise involved, and
includes not only investment performance, but maintaining a detailed knowledge
of client portfolio objectives and guidelines, monitoring of risks and
performance for adherence to these parameters, execution of asset allocation
consistent with current WAMCO and portfolio strategy, and communication
with clients. In reviewing investment performance, one, three, and five year
annualized returns are measured against appropriate market peer
groups and to each fund's benchmark index.
WAMCO offers
long-term incentives (in the form of deferred cash which can be allocated within
a menu of funds) as part of the discretionary bonus for eligible
employees.
Appendix
C – Proxy Voting Policies and Procedures
The Trust
Procedures and the proxy voting procedures of the Advisor and the subadvisors
are set forth in Appendix C.
05E: Proxy Voting Policies and Procedures for the Adviser
General Compliance Policies for Trust & Adviser Section 5:
Fiduciary Standards & Affiliated Persons Issues Applies to Adviser Risk
Theme Proxy Voting Policy Owner Jim Interrante Effective Date 08-20-2024
Overview
The
SEC adopted Rule 206(4)-6 under the
Advisers Act, which requires investment advisers with voting authority to adopt
and implement written policies and procedures that are reasonably designed to
ensure that the investment adviser votes client securities in the best interest
of clients. The procedures must include how the investment adviser addresses
material conflicts that may arise between the interests of the investment
adviser and those of its clients. The Advisers are registered investment
advisers under the Advisers Act and serve as the investment advisers to the
Funds. The Advisers generally retain one or more sub-advisers to manage the assets of the
Funds, including voting proxies with respect to a Fund’s portfolio securities.
From time to time, however, the Advisers may elect to manage directly the assets
of a Fund, including voting proxies with respect to such Fund’s portfolio
securities, or a Fund’s Board may otherwise delegate to the Advisers authority
to vote such proxies. Rule 206(4)-6
under the Advisers Act requires that a registered investment adviser adopt and
implement written policies and procedures reasonably designed to ensure that it
votes proxies with respect to a client’s securities in the best interest of the
client.
Firms
are required by Advisers Act Rule 204-2(c)(2) to maintain records of their
voting policies and procedures, a copy of each proxy statement that the
investment adviser receives regarding client securities, a record of each vote
cast by the investment adviser on behalf of a client, a copy of any document
created by the investment adviser that was material to making a decision how to
vote proxies on behalf of a client, and a copy of each written client request
for information on how the adviser voted proxies on behalf of the client, as
well as a copy of any written response by the investment adviser to any written
or oral client request for information on how the adviser voted that client’s
proxies.
Investment
companies must disclose information about the policies and procedures used to
vote proxies on the investment company’s portfolio securities and must file the
fund’s entire proxy voting record with the SEC annually on Form N-PX.
Advisers
that are subject to the reporting requirements of Section 13(f) of the
Securities Exchange Act of 1934 (the “Exchange Act”) are required by Exchange
Act Rule 14Ad-1 to file Form N-PX annually to report how they voted
proxies regarding certain executive compensation matters (known as “say-on-pay” matters). However, an
Adviser that has a disclosed policy of not voting proxies, and that did not in
fact vote during the reporting period, must only complete a notice report filing
on Form N-PX marking the appropriate
box on the cover page to confirm these facts.
Pursuant
thereto, the Advisers have adopted and implemented these proxy voting policies
and procedures (the “Proxy Procedures”).
Policy
It
is the Advisers’ policy to comply with Rule 206(4)-6 and Rule 204-2(c)(2) under the Advisers Act and Rule
14Ad-1 under the Exchange Act as
described above. In general, the Advisers delegate proxy voting decisions to the
sub-advisers managing the funds. If an
instance occurs where a conflict of interest arises between the shareholders and
a particular sub-adviser, however, the
Adviser retains the right to influence and/or direct the conflicting proxy
voting decisions.
Filing
of Proxy Voting Record on Form N-PX
The
Advisers will annually file their proxy voting notice report with the SEC on
Form N-PX. The Form N-PX shall be filed for the twelve months
ended June 30 no later than August 31 of that year. The Investment
Standards & Monitoring (ISM) CoE Team, supported by the Legal
Department supporting the Advisers, is responsible for the annual filing.
05E.
Advisers Proxy Voting Policy
Regulatory
Requirement
Rule
206(4)-6 under the Advisers Act and
Rule 14Ad-1 under the Exchange Act
Reporting
Form N-PX:
The ISM CoE Team will file Form N-PX for each twelve-month period ending on
June 30. The filing must be submitted to the SEC on or before August 31 of
each year.
Advisers
will provide the Board with notice and a copy of any amendments or revisions to
the Procedures and will report quarterly to the Board all material changes to
these Proxy Procedures.
The
CCO’s annual written compliance report to the Board will contain a summary of
material changes to the Proxy Procedures during the period covered by the
report.
If
the Advisers or the Designated Person vote any proxies in a manner inconsistent
with either these Proxy Procedures or a Fund’s proxy voting policies and
procedures, the CCO will provide the Board with a report detailing such
exceptions.
Procedure
Fiduciary
Duty
The
Advisers have a fiduciary duty to vote proxies on behalf of a Fund in the best
interest of the Fund and its shareholders.
Voting
of Proxies - Advisers
The
Advisers will vote proxies with respect to a Fund’s portfolio securities when
authorized to do so by the Fund and subject to the Fund’s proxy voting policies
and procedures and any further direction or delegation of authority by the
Fund’s Board. The decision on how to vote a proxy will be made by the person(s)
to whom the Advisers have from time to time delegated such responsibility (the
“Designated Person”). The Designated Person may include the Fund’s portfolio
manager(s) or a Proxy Voting Committee, as described below.
When
voting proxies with respect to a Fund’s portfolio securities, the following
standards will apply:
| |
• |
|
The
Designated Person will vote based on what it believes is in the best
interest of the Fund and its shareholders and in accordance with the
Fund’s investment guidelines. |
| |
• |
|
Each
voting decision will be made independently. To assist with the analysis of
voting issues and/or to carry out the actual voting process the Designated
Person may enlist the services of (1) reputable professionals (who
may include persons employed by or otherwise associated with the Advisers
or any of its affiliated persons) or (2) independent proxy evaluation
services such as Institutional Shareholder Services. However, the ultimate
decision as to how to vote a proxy will remain the responsibility of the
Designated Person. |
| |
• |
|
The
Advisers believe that a good management team of a company will generally
act in the best interests of the company. Therefore, the Designated Person
will take into consideration as a key factor in voting proxies with
respect to securities of a company that are held by the Fund the quality
of the company’s management. In general, the Designated Person will vote
as recommended by company management except in situations where the
Designated Person believes such recommended vote is not in the best
interests of the Fund and its shareholders. |
| |
• |
|
As
a general principle, voting with respect to the same portfolio securities
held by more than one Fund should be consistent among those Funds having
substantially the same investment mandates. |
| |
• |
|
The
Advisers will provide the Fund, from time to time in accordance with the
Fund’s proxy voting policies and procedures and any applicable laws and
regulations, a record of the Advisers’ voting of proxies with respect to
the Fund’s portfolio securities. |
Material
Conflicts of Interest
In
carrying out its proxy voting responsibilities, the Advisers will monitor and
resolve potential material conflicts (“Material Conflicts”) between the
interests of (a) a Fund and (b) the Advisers or any of its affiliated
persons. Affiliates of the Advisers include Manulife Financial Corporation and
its subsidiaries. Material Conflicts may arise, for example, if a proxy vote
relates to matters involving any of these companies or other issuers in which
the Advisers or any of their affiliates has a substantial equity or other
interest.
If
the Advisers or a Designated Person become aware that a proxy voting issue may
present a potential Material Conflict, the issue will be referred to the
Advisers’ Legal Department and/or the Office of the CCO. If the Legal Department
and/or the Office of the CCO, as applicable determines that a potential Material
Conflict does exist, a Proxy Voting Committee will be appointed to consider and
resolve the issue. The Proxy Voting Committee may make any determination that it
considers reasonable and may, if it chooses, request the advice of an
independent, third-party proxy service on how to vote the proxy.
Voting
Proxies of Underlying Funds of a Fund of Funds
The
Advisers or the Designated Person will vote proxies with respect to the shares
of a Fund that are held by another Fund that operates as a Fund of Funds”) in
the manner provided in the proxy voting policies and procedures of the Fund of
Funds (including such policies and procedures relating to material conflicts of
interest) or as otherwise directed by the board of trustees or directors of the
Fund of Funds.
Proxy
Voting Committee(s)
The
Advisers will from time to time, and on such temporary or longer-term basis as
they deem appropriate, establish one or more Proxy Voting Committees. A Proxy
Voting Committee shall include the Advisers’ CCO and may include legal counsel.
The terms of reference and the procedures under which a Proxy Voting Committee
will operate will be reviewed from time to time by the Legal and Compliance
Department. Records of the deliberations and proxy voting recommendations of a
Proxy Voting Committee will be maintained in accordance with applicable law, if
any, and these Proxy Procedures. Requested shareholder proposals or other
Shareholder Advocacy must be submitted for consideration pursuant to the
Shareholder Advocacy Policy and Procedures.
Voting
of Proxies - SubAdvisers
In
the case of proxies voted by a sub-adviser to a Fund pursuant to the Fund’s
proxy voting procedures, the Advisers will request the sub-adviser to certify to the Advisers that
the sub-adviser has voted the Fund’s
proxies as required by the Fund’s proxy voting policies and procedures and that
such proxy votes were executed in a manner consistent with these Proxy
Procedures and to provide the Advisers with a report detailing any instances
where the sub-adviser voted any proxies
in a manner inconsistent with the Fund’s proxy voting policies and procedures.
The CCO of the Advisers will then report to the Board on a quarterly basis
regarding the sub-adviser certification
and report to the Board any instance where the sub-adviser voted any proxies in a manner
inconsistent with the Fund’s proxy voting policies and procedures.
The
Fund Administration Department maintains procedures affecting all administration
functions for the mutual funds. These procedures detail the disclosure and
administration of the Trust’s proxy voting records.
05E.
Advisers Proxy Voting Policy
The
Trust’s Chief Legal Counsel is responsible for including, in the SAI of each
Trust, information about the proxy voting of the Advisers and each sub-adviser.
Reporting
to Fund Boards
The
CCO of the Advisers will provide the Board with a copy of these Proxy
Procedures, accompanied by a certification that represents that the Proxy
Procedures have been adopted by the Advisers in conformance with Rule 206(4)-6 under the Advisers Act. Thereafter,
the Advisers will provide the Board with notice and a copy of any amendments or
revisions to the Procedures and will report quarterly to the Board all material
changes to these Proxy Procedures.
The
CCO’s annual written compliance report to the Board will contain a summary of
material changes to the Proxy Procedures during the period covered by the
report.
If
the Advisers or the Designated Person vote any proxies in a manner inconsistent
with either these Proxy Procedures or a Fund’s proxy voting policies and
procedures, the CCO will provide the Board with a report detailing such
exceptions.
Form
N-PX Preparation and Filing:
The
Advisers will be responsible for oversight and completion of the filing of the
Advisers’ notice reports on Form N-PX
with the SEC. The ISM CoE Team will prepare the EDGAR version of Form N-PX and will submit it to the applicable
Adviser for review and approval prior to filing with the SEC. The ISM CoE Team
will file Form N-PX for each
twelve-month period ending on June 30. The filing must be submitted to the SEC
on or before August 31 of each year.
Key
Contacts
Investment
Compliance
Escalation/Reporting
Violations
All
John Hancock employees are required to report any known or suspected violation
of this policy to the CCO of the Funds.
Related
Policies and Procedures
N/A
Document
Retention Requirements
The
Advisers will retain (or arrange for the retention by a third party of) such
records relating to proxy voting pursuant to these Proxy Procedures as may be
required from time to time by applicable law and regulations, including the
following:
| |
1. |
These
Proxy Procedures and all amendments hereto; |
| |
2. |
All
proxy statements received regarding Fund portfolio securities;
|
| |
3. |
Records
of all votes cast on behalf of a Fund; |
| |
4. |
Records
of all Fund requests for proxy voting information;
|
| |
5. |
Any
documents prepared by the Designated Person or a Proxy Voting Committee
that were material to or memorialized the basis for a voting decision;
|
| |
6. |
All
records relating to communications with the Funds regarding Conflicts; and
|
| |
7. |
All
minutes of meetings of Proxy Voting Committees. |
The
Office of the CCO, and/or the Legal Department are responsible for maintaining
the documents set forth above as needed and deemed appropriate. Such documents
will be maintained in the Office of the CCO, and/or the Legal Department for the
period set forth in the Records Retention Schedule.
|
|
|
|
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|
Version
History |
|
Date |
|
Effective Date |
|
Approving Party |
|
1 |
|
01-01-2012 |
|
|
|
2 |
|
02-01-2015 |
|
|
|
3 |
|
Sept.
2015 |
|
|
|
4 |
|
05-01-2017 |
|
|
|
5 |
|
12-01-2019 |
|
|
|
6 |
|
08-20-2024 |
|
CCO |
07H:
Proxy Voting Procedures
General
Compliance Policies for Trust & Adviser
Section 7:
Disclosures, Filings, and Reporting
|
|
| |
| Applies to |
|
Trust |
| Risk Theme |
|
Proxy Voting |
| Policy Owner |
|
Jim Interrante |
| Effective Date |
|
08-20-2024 |
07H.
Proxy Voting Procedures
Overview
Each
fund of the Trust or any other registered investment company (or series thereof)
(each, a “fund”) is required to disclose its proxy voting policies and
procedures in its registration statement and, pursuant to Rule 30b1-4 under the 1940 Act, file annually with
the Securities and Exchange Commission and make available to shareholders its
actual proxy voting record.
Investment
Company Act
An
investment company is required to disclose in its SAI either (a) a summary
of the policies and procedures that it uses to determine how to vote proxies
relating to portfolio securities or (b) a copy of its proxy voting
policies.
A
fund is also required by Rule 30b1-4 of
the Investment Company Act of 1940 to file Form N-PX annually with the SEC, which contains a
record of how the fund voted proxies relating to portfolio securities. For each
matter relating to a portfolio security considered at any shareholder meeting,
Form N-PX is required to include, among
other information, the name of the issuer of the security, a brief
identification of the matter voted on, whether and how the fund cast its vote,
and whether such vote was for or against management. In addition, a fund is
required to disclose in its SAI and its annual and semi-annual reports to
shareholders that such voting record may be obtained by shareholders, either by
calling a toll-free number , through the fund’s website, or on the Securities
and Exchange Commission’s website at www.sec.gov.
Advisers
Act
Under
Advisers Act Rule 206(4)-6, investment
advisers are required to adopt proxy voting policies and procedures, and
investment companies typically rely on the policies of their advisers or sub-advisers.
Policy
The
Majority of the Independent Board of Trustees (the “Board”) of each registered
investment company of the Trusts, has adopted these proxy voting policies and
procedures (the “Trust Proxy Policy”).
It
is the Advisers’ policy to comply with Rule 206(4)-6 of the Advisers Act and Rule 30b1-4 of the 1940 Act as described above. In
general, Advisers defer proxy voting decisions to the sub-advisers managing the Funds. It is the
policy of the Trusts to delegate the responsibility for voting proxies relating
to portfolio securities held by a Fund to the Fund’s respective Adviser or, if
the Fund’s Adviser has delegated portfolio management responsibilities to one or
more investment sub-adviser(s), to the
fund’s sub-adviser(s), subject to the
Board’s continued oversight. The sub-adviser for each Fund shall vote all
proxies relating to securities held by each Fund and in that connection, and
subject to any further policies and procedures contained herein, shall use proxy
voting policies and procedures adopted by each sub-adviser in conformance with Rule 206(4)-6 under the Advisers Act.
If
an instance occurs where a conflict of interest arises between the shareholders
and the designated sub-adviser,
however, Advisers retain the right to influence and/or direct the conflicting
proxy voting decisions in the best interest of shareholders.
Delegation
of Proxy Voting Responsibilities
It
is the policy of the Trust to delegate the responsibility for voting proxies
relating to portfolio securities held by a fund to the fund’s investment adviser
(“adviser”) or, if the fund’s adviser has delegated portfolio management
responsibilities to one or more investment sub-adviser(s), to the fund’s sub-adviser(s), subject to the Board’s
continued oversight. The sub-adviser
for each fund shall vote all proxies relating to securities held by each fund
and in that connection, and subject to any further policies and procedures
contained herein, shall use proxy voting policies and procedures adopted by each
sub-adviser in conformance with Rule
206(4)-6 under the Investment Advisers
Act of 1940, as amended (the “Advisers Act”).
07H.
Proxy Voting Procedures
Except
as noted below under Material Conflicts of Interest, the Trust Proxy Policy with
respect to a Fund shall incorporate that adopted by the Fund’s sub-adviser with respect to voting proxies
held by its clients (the “Sub-adviser
Proxy Policy”). Each Sub-adviser Policy, as it may be amended from time to time,
is hereby incorporated by reference into the Trust Proxy Policy. Each sub-adviser to a Fund is directed to comply
with these policies and procedures in voting proxies relating to portfolio
securities held by a fund, subject to oversight by the Fund’s adviser and by the
Board. Each Adviser to a Fund retains the responsibility, and is directed, to
oversee each sub-adviser’s compliance
with these policies and procedures, and to adopt and implement such additional
policies and procedures as it deems necessary or appropriate to discharge its
oversight responsibility. Additionally, the Trust’s Chief Compliance Officer
(“CCO”) shall conduct such monitoring and supervisory activities as the CCO or
the Board deems necessary or appropriate in order to appropriately discharge the
CCO’s role in overseeing the sub-advisers’ compliance with these policies
and procedures.
The
delegation by the Board of the authority to vote proxies relating to portfolio
securities of the funds is entirely voluntary and may be revoked by the Board,
in whole or in part, at any time.
Voting
Proxies of Underlying Funds of a Fund of Funds
| A. |
Where the Fund of Funds is not the Sole
Shareholder of the Underlying Fund |
With
respect to voting proxies relating to the shares of an underlying fund (an
“Underlying Fund”) held by a Fund of the Trust operating as a fund of funds (a
“Fund of Funds”) in reliance on Section 12(d)(1)(G) of the 1940 Act where
the Underlying Fund has shareholders other than the Fund of Funds which are not
other Fund of Funds, the Fund of Funds will vote proxies relating to shares of
the Underlying Fund in the same proportion as the vote of all other holders of
such Underlying Fund shares.
| B. |
Where the Fund of Funds is the Sole
Shareholder of the Underlying Fund |
In
the event that one or more Funds of Funds are the sole shareholders of an
Underlying Fund, the Adviser to the Fund of Funds or the Trusts will vote
proxies relating to the shares of the Underlying Fund as set forth below unless
the Board elects to have the Fund of Funds seek voting instructions from the
shareholders of the Funds of Funds in which case the Fund of Funds will vote
proxies relating to shares of the Underlying Fund in the same proportion as the
instructions timely received from such shareholders.
| |
1. |
Where Both the Underlying Fund and the
Fund of Funds are Voting on Substantially Identical Proposals
|
In
the event that the Underlying Fund and the Fund of Funds are voting on
substantially identical proposals (the “Substantially Identical Proposal”), then
the Adviser or the Fund of Funds will vote proxies relating to shares of the
Underlying Fund in the same proportion as the vote of the shareholders of the
Fund of Funds on the Substantially Identical Proposal.
| |
2. |
Where the Underlying Fund is Voting on
a Proposal that is Not Being Voted on by the Fund of Funds
|
| |
(a) |
Where there is No Material Conflict of
Interest Between the Interests of the Shareholders of the Underlying Fund
and the Adviser Relating to the Proposal |
In
the event that the Fund of Funds is voting on a proposal of the Underlying Fund
and the Fund of Funds is not also voting on a substantially identical proposal
and there is no material conflict of interest between the interests of the
shareholders of the Underlying Fund and the Adviser relating to the Proposal,
then the Adviser will vote proxies relating to the shares of the Underlying Fund
pursuant to its Proxy Voting Procedures.
| |
(b) |
Where there is a Material Conflict of
Interest Between the Interests of the Shareholders of the Underlying Fund
and the Adviser Relating to the Proposal |
In
the event that the Fund of Funds is voting on a proposal of the Underlying Fund
and the Fund of Funds is not also voting on a substantially identical proposal
and there is a material conflict of interest between the interests of the
shareholders of the Underlying Fund and the Adviser relating to the Proposal,
then the Fund of Funds will seek voting instructions from the shareholders of
the Fund of Funds on the proposal and will vote proxies relating to shares of
the Underlying Fund in the same proportion as the instructions timely received
from such shareholders. A material conflict is generally defined as a proposal
involving a matter in which the Adviser or one of its affiliates has a material
economic interest.
Material
Conflicts of Interest
If
(1) a sub-adviser to a Fund
becomes aware that a vote presents a material conflict between the interests of
(a) shareholders of the Fund; and (b) the Fund’s Adviser, sub-adviser, principal underwriter, or any of
their affiliated persons, and (2) the sub-adviser does not propose to vote on the
particular issue in the manner prescribed by its Sub-adviser Proxy Policy or the material
conflict of interest procedures set forth in its Sub-adviser Proxy Policy are otherwise
triggered, then the sub-adviser will
follow the material conflict of interest procedures set forth in its Sub-adviser Proxy Policy when voting such
proxies.
If
a Sub-adviser Proxy Policy provides
that in the case of a material conflict of interest between Fund shareholders
and another party, the sub-adviser will
ask the Board to provide voting instructions, the sub-adviser shall vote the proxies, in its
discretion, as recommended by an independent third party, in the manner
prescribed by its Sub-adviser Proxy
Policy or abstain from voting the proxies.
Proxy
Voting Committee(s)
The
Advisers will from time to time, and on such temporary or longer-term basis as
they deem appropriate, establish one or more Proxy Voting Committees. A Proxy
Voting Committee shall include the Advisers’ CCO and may include legal counsel.
The terms of reference and the procedures under which a Proxy Voting Committee
will operate will be reviewed from time to time by the Legal and Compliance
Department. Records of the deliberations and proxy voting recommendations of a
Proxy Voting Committee will be maintained in accordance with applicable law, if
any, and these Proxy Procedures. Requested shareholder proposals or other
Shareholder Advocacy in the name of a Fund must be submitted for consideration
pursuant to the Shareholder Advocacy Policy and Procedures.
Securities
Lending Program
Certain
of the Funds participate in a securities lending program with the Trusts through
an agent lender. When a Fund’s securities are out on loan, they are transferred
into the borrower’s name and are voted by the borrower, in its discretion. Where
a sub-adviser determines, however, that
a proxy vote (or other shareholder action) is materially important to the
client’s account, the sub-adviser
should request that the agent recall the security prior to the record date to
allow the sub-adviser to vote the
securities.
Disclosure
of Proxy Voting Policies and Procedures in the Trust’s Statement of Additional
Information (“SAI”)
The
Trust shall include in its SAI a summary of the Trust Proxy Policy and of the
Sub-adviser Proxy Policy included
therein. (In lieu of including a summary of these policies and procedures, the
Trust may include each full Trust Proxy Policy and Sub-adviser Proxy Policy in the SAI.)
07H.
Proxy Voting Procedures
Disclosure
of Proxy Voting Policies and Procedures in Annual and Semi-Annual Shareholder
Reports
The
Trusts shall disclose in annual and semi-annual shareholder reports that a
description of the Trust Proxy Policy, including the Sub-adviser Proxy Policy, and the Trusts’
proxy voting record for the most recent 12 months ended June 30 are
available on the Securities and Exchange Commission’s (“SEC”) website, and
without charge, upon request, by calling a specified toll-free telephone number.
The Trusts will send these documents within three business days of receipt of a
request, by first-class mail or other means designed to ensure equally prompt
delivery. The Fund Administration Department is responsible for preparing
appropriate disclosure regarding proxy voting for inclusion in shareholder
reports and distributing reports. The Legal Department supporting the Trusts is
responsible for reviewing such disclosure once it is prepared by the Fund
Administration Department.
Filing
of Proxy Voting Record on Form N-PX
The
Trusts will annually file their complete proxy voting record with the SEC on
Form N-PX. The Form N-PX shall be filed for the twelve months
ended June 30 no later than August 31 of that year. The Fund
Administration department, supported by the Legal Department supporting the
Trusts, is responsible for the annual filing.
Regulatory
Requirement
Rule
206(4)-6 of the Advisers Act and Rule
30b1-4 of the 1940 Act
Reporting
Disclosures in SAI: The Trusts shall disclose
in annual and semi-annual shareholder reports that a description of the Trust
Proxy Policy, including the Sub-adviser
Proxy Policy, and the Trusts’ proxy voting record for the most recent 12 months
ended June 30.
Form N-PX: The proxy voting service will
file Form N-PX for each twelve-month
period ending on June 30. The filing must be submitted to the SEC on or before
August 31 of each year.
Procedure
Review
of Sub-advisers’ Proxy Voting
The
Trusts have delegated proxy voting authority with respect to Fund portfolio
securities in accordance with the Trust Policy, as set forth above.
Consistent
with this delegation, each sub-adviser
is responsible for the following:
| |
1. |
Implementing
written policies and procedures, in compliance with Rule 206(4)-6 under the Advisers Act,
reasonably designed to ensure that the sub-adviser votes portfolio securities
in the best interest of shareholders of the Trusts.
|
| |
2. |
Providing
the Advisers with a copy and description of the Sub-adviser Proxy Policy prior to being
approved by the Board as a sub-adviser, accompanied by a
certification that represents that the Sub-adviser Proxy Policy has been
adopted in conformance with Rule 206(4)-6 under the Advisers Act.
Thereafter, providing the Advisers with notice of any amendment or
revision to that Sub-adviser
Proxy Policy or with a description thereof. The Advisers are required to
report all material changes to a Sub-adviser Proxy Policy quarterly to
the Board. The CCO’s annual written compliance report to the Board will
contain a summary of the material changes to each Sub-adviser Proxy Policy during the
period covered by the report. |
| |
3. |
Providing
the Adviser with a quarterly certification indicating that the sub-adviser did vote proxies of the
funds and that the proxy votes were executed in a manner consistent with
the Sub-adviser Proxy Policy. If
the sub-adviser voted any proxies
in a manner inconsistent with the Sub-adviser Proxy Policy, the sub-adviser will provide the Adviser
with a report detailing the exceptions. |
Adviser
Responsibilities
The
Trusts have retained a proxy voting service to coordinate, collect, and maintain
all proxy-related information, and to prepare and file the Trust’s reports on
Form N-PX with the SEC.
The
Advisers, in accordance with their general oversight responsibilities, will
periodically review the voting records maintained by the proxy voting service in
accordance with the following procedures:
| |
1. |
Receive
a file with the proxy voting information directly from each sub-adviser on a quarterly basis.
|
| |
2. |
Select
a sample of proxy votes from the files submitted by the sub-advisers and compare them against
the proxy voting service files for accuracy of the votes.
|
| |
3. |
Deliver
instructions to shareholders on how to access proxy voting information via
the Trust’s semi-annual and annual shareholder reports.
|
The
Fund Administration Department, in conjunction with the Legal Department
supporting the Trusts, is responsible for the foregoing procedures.
Proxy
Voting Service Responsibilities
Proxy
voting services retained by the Trusts are required to undertake the following
procedures:
The
proxy voting service’s proxy disclosure system will collect fund-specific and/or
account-level voting records, including votes cast by multiple sub-advisers or third-party voting services.
The
proxy voting service’s proxy disclosure system will provide the following
reporting features:
| |
1. |
multiple
report export options; |
|
| |
2. |
report
customization by fund-account, portfolio manager, security, etc.; and
|
|
| |
3. |
account
details available for vote auditing. |
|
| |
• |
|
Form
N-PX Preparation and Filing:
|
The
Advisers will be responsible for oversight and completion of the filing of the
Trusts’ reports on Form N-PX with the
SEC. The proxy voting service will prepare the EDGAR version of Form N-PX and will submit it to the adviser for
review and approval prior to filing with the SEC. The proxy voting service will
file Form N-PX for each twelve-month
period ending on June 30. The filing must be submitted to the SEC on or before
August 31 of each year. The Fund Administration Department, in conjunction
with the Legal Department supporting the Trusts, is responsible for the
foregoing procedures.
The
Fund Administration Department in conjunction with the CCO oversees compliance
with this policy.
The
Fund Administration Department maintains operating procedures affecting the
administration and disclosure of the Trusts’ proxy voting records.
The
Trusts’ Chief Legal Counsel is responsible for including in the Trusts’ SAI
information regarding the Advisers’ and each sub-advisers proxy voting policies
as required by applicable rules and form requirements.
Key
Contacts
Investment
Compliance
Escalation/Reporting
Violations
All
John Hancock employees are required to report any known or suspected violation
of this policy to the CCO of the Funds.
07H.
Proxy Voting Procedures
Related
Policies and Procedures
7B
Registration Statements and Prospectuses
Document
Retention Requirements
The
Fund Administration Department and The CCO’s Office is responsible for
maintaining all documentation created in connection with this policy. Documents
will be maintained for the period set forth in the Records Retention Schedule.
See Compliance Policy: Books and Records.
|
|
|
|
| |
|
Version
History |
|
Date |
|
Effective
Date |
|
Approving
Party |
|
1 |
|
01-01-2012 |
|
|
|
2 |
|
02-01-2015 |
|
|
|
3 |
|
09-01-2015 |
|
|
|
4 |
|
12-10-2019 |
|
|
|
5 |
|
08-20-2024 |
|
CCO |
Proxy
Voting Policies and Procedures
EFFECTIVE AS OF
MARCH 2024
Allspring
Global Investments (Allspring) Stewardship
As
fiduciaries, we are committed to effective stewardship of the assets we manage
on behalf of our clients. To us, good stewardship reflects responsible, active
ownership and includes both engaging with investee companies and voting proxies
in a manner that we believe will maximize the long-term value of our
investments.
Scope
of Policies and Procedures
In
conjunction with the Allspring Engagement Policy, these Proxy Voting Policies
and Procedures (“Policies and Procedures”) set out how Allspring complies with
applicable regulatory requirements in respect of how we exercise voting rights
when we invest in shares traded on a regulated market on behalf of a client. Not
all clients delegate proxy voting authority to Allspring. Allspring will not
vote proxies, or provide advice to clients on how to vote proxies in the absence
of specific delegation of authority, a pre-existing contractual agreement, or an
obligation under applicable law (e.g., securities that are held in an investment
advisory account for which Allspring exercises no investment discretion are not
voted by Allspring).
With
respect to the legal entities covered by the Policies and Procedures, client
accounts and investment products (i.e., Trusts and series (funds) thereof,
UCITS, alternative investment funds, private funds, and medium-term note
programmes) of the following are included:
| |
• |
|
Allspring
Global Investments, LLC |
| |
• |
|
Allspring
Funds Management, LLC |
| |
• |
|
Allspring
Global Investments (UK) Limited |
| |
• |
|
Allspring
Global Investments Luxembourg S.A |
| |
• |
|
Allspring
Global Investments (Singapore) Pte. Ltd |
Voting
Philosophy
Allspring
has adopted these Policies and Procedures to ensure that proxies are voted in
the best interests of clients and Investment Product investors, without regard
to any relationship that any affiliated person of Allspring or the Investment
Product (or an affiliated person of such affiliated person) may have with the
issuer. Allspring exercises its voting responsibility as a fiduciary with the
goal of maximizing value to clients consistent with governing laws and the
investment policies of each client. While securities are not purchased to
exercise control or to seek to effect corporate change through share ownership
activism, Allspring supports sound corporate governance practices at companies
in which client assets are invested. Allspring has established an appropriate
strategy determining when and how the voting rights related to the instruments
held in portfolios managed are exercised, so that these rights are exclusively
reserved to the relevant Investment Product and its investors.
Proxy
Administration
Allspring’s
Stewardship Team (“Stewardship”) administers the proxy voting process. The
Stewardship Team is part of the Allspring Sustainability Team. Stewardship is
responsible for administering and overseeing the proxy voting process to ensure
the implementation of the Policies and Procedures, including regular operational
reviews, typically conducted on a weekly basis. Stewardship monitors third party
voting of proxies to ensure it is being done in a timely and responsible manner,
including review of scheduled vendor reports. Stewardship, in conjunction with
the Allspring Proxy Governance Committee, reviews the continuing appropriateness
of the Policies and Procedures set forth herein, and recommends revisions as
necessary.
1
Third
Party Proxy Voting Vendor
Allspring
has retained a third-party proxy voting service, Institutional Shareholder
Services Inc. (“ISS”), to assist in the implementation of certain proxy
voting-related functions including: 1.) Providing research on proxy matters 2.)
Providing technology to facilitate the sharing of research and discussions
related to proxy votes 3.) Vote proxies in accordance with Allspring’s
guidelines 4.) Handle administrative and reporting items 5.) Maintain records of
proxy statements received in connection with proxy votes and provide
copies/analyses upon request. Except in instances where clients have retained
voting authority, Allspring retains the responsibility for proxy voting
decisions.
Proxy
Committee
Allspring
Proxy Governance Committee
The
Allspring Proxy Governance Committee shall be responsible for overseeing the
proxy voting process to ensure its implementation in conformance with these
Policies and Procedures. The Allspring Proxy Governance Committee shall
coordinate with Allspring Compliance to monitor ISS, the proxy voting agent
currently retained by Allspring, to determine that ISS is accurately applying
the Policies and Procedures as set forth herein and operates as an independent
proxy voting agent. Allspring’s ISS Vendor Oversight process includes an
assessment of ISS’ Policy and Procedures (“P&P”), including conflict
controls and monitoring, receipt and review of routine performance-related
reporting by ISS to Allspring and periodic onsite due diligence meetings. Due
diligence meetings typically include: meetings with key staff, P&P related
presentations and discussions, technology-related demonstrations and
assessments, and some sample testing, if appropriate. The Allspring Proxy
Governance Committee shall review the continuing appropriateness of the Policies
and Procedures set forth herein. The Allspring Proxy Governance Committee may delegate certain powers and
responsibilities to proxy voting working groups. The Allspring Proxy Governance
Committee reviews and, in accordance with these Policies and Procedures, votes
on issues that have been escalated from proxy voting working groups. Members of
the Allspring Proxy Governance Committee also oversee the implementation of
Allspring Proxy Governance Committee recommendations for the respective
functional areas in Allspring that they represent.
Proxy
Voting Due Diligence Working Group
Among
other delegated matters, the proxy voting Due Diligence Working Group (‘DDWG’)
in accordance with these Policies and Procedures, reviews and votes on routine
proxy proposals that it considers under these Policies and Procedures in a
timely manner. If necessary, the DDWG escalates issues to the Allspring Proxy Governance Committee that are determined to
be material by the DDWG or otherwise in accordance with these Policies and
Procedures. The DDWG coordinates with Allspring’s Compliance teams to review the
performance and independence of ISS in exercising its proxy voting
responsibilities.
Meetings;
Committee Actions
The
Allspring Proxy Governance Committee shall convene or act through written
consent, including through the use of electronic systems of record, of a
majority of Allspring Proxy Governance Committee members as needed and when
discretionary voting determinations need to be considered. Any working group of
the Allspring Proxy Governance Committee shall have the authority on matters
delegated to it to act by vote or written consent, including through the use of
electronic systems of record, of a majority of the working group members
available at that time. The Allspring Proxy Governance Committee shall also meet
quarterly to review the Policies and Procedures.
Membership
Members
are selected based on subject matter expertise for the specific deliverables the
committee is required to complete. The voting members of the Allspring Proxy
Governance Committee are identified in the Allspring Proxy Charter. Changes to
the membership of the Allspring Proxy Governance Committee will be made only
with approval of the Allspring Proxy Governance Committee. Upon departure from
Allspring Global Investments, a member’s position on the Allspring Proxy
Governance Committee will automatically terminate.
2
Voting
Procedures
Unless
otherwise required by applicable law,1 proxies will be voted in
accordance with the following steps and in the following order of consideration:
| |
1. |
First,
any voting items related to Allspring “Top-of-House” voting principles
(as described below under the heading “Allspring Proxy Voting
Principles/Guidelines”) will generally be voted in accordance with a
custom voting policy with ISS (“Custom Policy”) designed to implement the
Allspring’s Top-of-House voting
principles.2
|
| |
2. |
Second,
any voting items for meetings deemed of “high importance”3 (e.g., proxy contests,
mergers and acquisitions,) where ISS opposes management recommendations
will be referred to the Portfolio Management teams for recommendation or
the DDWG (or escalated to the Allspring Proxy Governance -Committee) for case-by-case review and vote
determination. |
| |
3. |
Third,
with respect to any voting items where ISS Sustainability Voting
Guidelines4 provide
a different recommendation than ISS Standard Voting Guidelines, the
following steps are taken: |
| |
a. |
Stewardship5 evaluates the matter
for materiality and any other relevant considerations.
|
| |
b. |
If
Stewardship recommends further review, the voting item is then referred to
the Portfolio Management teams for recommendation or the DDWG (or
escalated to the Allspring Proxy Governance Committee) for case-by-case review and vote
determination. |
| |
c. |
If
Stewardship does not recommend further review, the matter is voted in
accordance with ISS Standard Voting Guidelines. |
| |
4. |
Fourth,
any remaining proposals are voted in accordance with ISS Standard Voting
Guidelines.6
|
Commitment
to the Principles of Responsible Investment
As
a signatory to the Principles for Responsible Investment, Allspring has
integrated certain environmental, social, and governance factors into its
investment processes, which includes the proxy process. As described under
Voting Procedures above, Allspring considers ISS’s Sustainability Voting
Guidelines as a point of reference in certain cases deemed to be material to a
company’s long-term shareholder value.
Voting
Discretion
In
all cases, the Allspring Proxy Governance Committee (and any working group
thereof) will exercise its voting discretion in accordance with the voting
philosophy of these Policies and Procedures. In cases where a proxy item is
forwarded by ISS to the Allspring Proxy Governance Committee or a working group
thereof, the Allspring Proxy
| 1 |
Where
provisions of the Investment Company Act of 1940 (the “1940 Act”) specify
the manner in which items for any third party registered investment
companies (e.g., mutual funds, exchange-traded funds and closed-end funds) and business
development companies (as defined in Section 2(a)(48) of the 1940
Act) (“Third Party Fund Holding Voting Matters”) held by the Trusts or
series thereof, Allspring shall vote the Third Party Fund Holding Voting
Matter on behalf of the Trusts or series thereof accordingly.
|
| 2 |
The
Allspring Proxy Governance Committee may determine that additional review
of a Top-of-House voting matter is
warranted. For example, voting matters for declassified boards or annual
election of directors of public operating and holding companies that have
certain long-term business commitments (e.g., developing proprietary
technology; or having an important strategic alliance in place) may
warrant referral to the DDWG (or escalation to the Proxy Governance
Committee) for case-by-case review and vote
determination. |
| 3 |
The
term “high importance” is defined as those items designated Proxy
Level 6 or 5 by ISS, which include proxy contests, mergers, and other
reorganizations. |
| 4 |
ISS’s
Sustainability Voting Guidelines seeks to promote support for recognized
global governing bodies encouraging sustainable business practices
advocating for stewardship of environment, fair labor practices, non-discrimination, and the protection
of human rights. |
| 5 |
The
Allspring Stewardship Team is part of the Sustainability Team, led by
Henrietta Pacquement who reports into the Allspring Chief Investment
Officer(s). |
| 6 |
The
voting of proxies for Taft Hartley clients may incorporate the use of
ISS’s Taft Hartley voting guidelines. |
3
Governance
Committee or its working group may be assisted in its voting decision through
receipt of: (i) independent research and voting recommendations provided by
ISS or other independent sources; (ii) input from the investment sub-adviser responsible for purchasing the
security; and (iii) information provided by company management and
shareholder groups.
Portfolio
Manager and Sub-Adviser Input
The
Allspring Proxy Governance Committee (and any working group thereof) may consult
with portfolio management teams and Fund sub-advisers on specific proxy voting issues
as it deems appropriate. In addition, portfolio management teams or Fund sub-advisers may proactively make
recommendations to the Allspring Proxy Governance Committee regarding any proxy
voting issue. In this regard, the process takes into consideration expressed
views of portfolio management teams and Fund sub-advisers given their deep knowledge of
investee companies. For any proxy vote, portfolio management teams and
Investment Product advisers and sub-advisers may make a case to vote against
the ISS or Allspring Proxy Governance Committee’s recommendation (which is
described under Voting Procedures above). Any portfolio management team’s or
Investment Product adviser’s or sub-adviser’s opinion should be documented in
a brief write-up for consideration by
the DDWG who will determine, or escalate to the Allspring Proxy Governance
Committee, the final voting decision.
Consistent
Voting
The
Allspring Proxy Policies and Procedures is consistently applied on the same
matter when securities of an issuer are held by multiple client accounts unless
there are 1) special circumstances such as, for example, proposals concerning
corporate actions such as mergers, tender offers, and acquisitions or as
reasonably necessary to implement specified proxy voting guidelines as
established by a client (e.g. Taft Hartley ISS Guidelines or custom proxy
guidelines) or 2) the expressed views of different portfolio management teams
and Fund sub-advisers is different on
particular proposals. In the latter case, the Proxy Governance Committee will
work with the investment teams to gauge whether alignment can be achieved.
Governance
and Oversight
Allspring
Top-of-House Proxy Voting
Principles/Guidelines.
The
following reflects Allspring’s Top-of-House Voting Principles in
effect as of the date of these Policies and Procedures. Allspring has put in
place a custom voting policy with ISS to implement these voting principles.
We
believe that Boards of Directors of investee companies should have strong,
independent leadership and should adopt structures and practices that enhance
their effectiveness. We recognize that the optimal board size and governance
structure can vary by company size, industry, region of operations, and
circumstances specific to the company.
| |
• |
|
We
generally vote for the election of Directors in uncontested elections. We
reserve the right to vote on a case-by-case basis when
directors fail to meet their duties as a board member, such as failing to
act in the best economic interest of shareholders; failing to maintain
independent audit, compensation, nominating committees; and failing to
attend at least 75% of meetings, etc. |
| |
• |
|
We
generally vote for an independent board that has a majority of outside
directors who are not affiliated with the top executives and have minimal
or no business dealings with the company to avoid potential conflicts of
interests. |
| |
• |
|
Generally
speaking, we believe Directors serving on an excessive number of boards
could result in time constraints and an inability to fulfill their duties.
|
| |
• |
|
We
generally support adopting a declassified board structure for public
operating and holding companies. We reserve the right to vote on a case-by-case basis when
companies have certain long-term business commitments.
|
| |
• |
|
We
generally support annual election of directors of public operating and
holding companies. We reserve the right to vote on a case-by-case basis when
companies have certain long-term business commitments.
|
| |
• |
|
We
believe a well-composed board should embody multiple dimensions of
diversity in order to bring personal and professional experiences to bear
and create a constructive debate of competing |
4
| |
perspectives
and opinions in the boardroom. Diversity should consider factors such as
gender, ethnicity, and age as well as professional factors such as area of
expertise, industry experience and geographic location.
|
We
believe it is the responsibility of the Board of Directors to create, enhance,
and protect shareholder value and that companies should strive to maximize
shareholder rights and representation.
| |
• |
|
We
believe that companies should adopt a one-share, one-vote standard and avoid adopting
share structures that create unequal voting rights among their
shareholders. We will normally support proposals seeking to establish that
shareholders are entitled to voting rights in proportion to their economic
interests |
| |
• |
|
We
believe that directors of public operating and holding companies be
elected by a majority of the shares voted. We reserve the right to vote on
a case-by-case basis when
companies have certain long-term business commitments. This ensures that
directors of public operating and holding companies who are not broadly
supported by shareholders are not elected to serve as their
representatives. We will normally support proposals seeking to introduce
bylaws requiring a majority vote standard for director elections.
|
| |
• |
|
We
believe a simple majority voting standard should be required to pass
proposals. We will normally support proposals seeking to introduce bylaws
requiring a simple majority vote. |
| |
• |
|
We
believe that shareholders who own a meaningful stake in the company and
have owned such stake for a sufficient period of time should have, in the
form of proxy access, the ability to nominate directors to appear on the
management ballot at shareholder meetings. In general, we support
market-standardized proxy access proposals and we will analyze them based
on various criteria such as threshold ownership levels, a minimum holding
period, and the % and/or number of directors that are subject to
nomination. |
| |
• |
|
We
believe that shareholders should have the right to call a special meeting
and not wait for company management to schedule a meeting if there is
sufficiently high shareholder support for doing so on issues of
substantial importance. In general, we support the right to call a special
meeting if there is balance between a reasonable threshold of shareholders
and a hurdle high enough to also avoid the waste of corporate resources
for narrowly supported interests. We will evaluate the issues of
importance on the basis of serving all shareholders well and not
structured for the benefit of a dominant shareholder over others.
|
Practical
Limitations to Proxy Voting
While
Allspring uses its reasonable best efforts to vote proxies, in certain
circumstances, it may be impractical or impossible for Allspring to vote proxies
(e.g., limited value or unjustifiable costs).
Securities
on Loan
As
a general matter, securities on loan will not be recalled to facilitate proxy
voting (in which case the borrower of the security shall be entitled to vote the
proxy). However, as it relates to portfolio holdings of the investment products,
if the Allspring Proxy Governance Committee is aware of an item in time to
recall the security and has determined in good faith that the importance of the
matter to be voted upon outweighs the loss in lending revenue that would result
from recalling the security (e.g., if there is a controversial upcoming merger
or acquisition, or some other significant matter), the security will be recalled
for voting.
Share
Blocking
Proxy
voting in certain countries requires ‘share blocking’. Shareholders wishing to
vote their proxies must deposit their shares with a designated depository before
the date of the meeting. Consequently, the shares may not be sold in the period
preceding the proxy vote. Absent compelling reasons, Allspring believes that the
benefit derived from voting these shares is outweighed by the burden of limited
trading. Therefore, if share blocking is required in certain markets, Allspring
will not participate and will refrain from voting proxies for those clients
impacted by share blocking.
5
Conflicts
of Interest
We
always seek to place the interests of our clients first and to identify and
manage any conflicts of interest, including those that arise from proxy voting
or engagement. Allspring acts as a fiduciary with respect to its asset
management activities and therefore we must act in the best interest of our
clients and address conflicts that arise.
Conflicts
of interest are identified and managed through a strict and objective
application of these Policies and Procedures. Allspring may have a conflict of
interest regarding a proxy to be voted upon if, for example, Allspring or its
affiliates have other relationships with the issuer of the proxy (e.g. the
issuer may be a corporate pension fund client of Allspring). This type of
conflict is generally mitigated by the information barriers between Allspring
and its affiliates and our commitment as a fiduciary to independent judgement.
However, when the Allspring Proxy Governance Committee becomes aware of a
conflict of interest (that gets uncovered through the Allspring Proxy Voting
Policies and Procedures), it takes additional steps to mitigate the conflict, by
using any of the following methods:
| |
1. |
Instructing
ISS to vote in accordance with its recommendation;
|
| |
2. |
Disclosing
the conflict to the relevant Board and obtaining its consent before
voting; |
| |
3. |
Submitting
the matter to the relevant Board to exercise its authority to vote on such
matter; |
| |
4. |
Engaging
an independent fiduciary who will direct the vote on such matter,
|
| |
5. |
Consulting
with Legal and Compliance and, if necessary, outside legal counsel for
guidance on resolving the conflict of interest, |
| |
6. |
Voting
in proportion to other shareholders (“mirror voting”) following
consultation with the relevant Board if the conflict pertains to a matter
involving a portfolio holding of the funds; or |
| |
7. |
Voting
in other ways that are consistent with Allspring’s obligation to vote in
the best interests of its clients. |
Finally,
Allspring is a privately-owned company and one of our owners is GTCR which owns
other companies as well known as Affiliates. The Allspring Regulatory
Compliance team maintains the GTCR Affiliates list and publishes an updated list
quarterly. Since the Affiliates may issue publicly traded stock and hold regular
proxy meetings, Allspring manages this potential conflict of interest by
defaulting all proxy voting in the affiliates to the ISS recommendations.
Allspring has no influence attributed to the decisions or the voting elections.
Vendor Oversight
The
Stewardship Team monitors the ISS proxy process against specific criteria in
order to identify potential issues relating to account reconciliation, unknown
and rejected ballot reviews, upcoming proxy reviews, share reconciliation
oversight, etc. With respect to ISS’s management of its potential conflicts of
interest with corporate issuers, ISS provides institutional clients such as
Allspring with its “Policy and disclosure of Significant ISS Relationships” and
tools to provide transparency of those relationships.
Other
Provisions
Policy
Review and Ad Hoc Meetings
The
Allspring Proxy Governance Committee meets at least annually to review these
Policies and Procedures and consider any appropriate changes. Meetings may be
convened more frequently (for example, to discuss a specific proxy agenda or
proposal) as requested by the Head of Stewardship, any member of the Allspring
Proxy Governance Committee, or Chief Compliance Officer. The Allspring Proxy
Governance Committee includes representation from Portfolio Management,
Stewardship, Investment Analytics, Legal and Compliance.
6
Records
Retention
The
Stewardship Team will maintain the following records relating to the
implementation of the Policies and Procedures:
| |
• |
|
A
copy of these Policies and Procedures; |
| |
• |
|
Proxy
statements received for client securities (which will be satisfied by
relying on ISS); |
| |
• |
|
Records
of votes cast on behalf of investment products and separate account
clients (which ISS maintains on behalf of Allspring);
|
| |
• |
|
Records
of each written client request for proxy voting records and Allspring’s
written response to any client request (written or oral) for such records;
and |
| |
• |
|
Any
documents prepared by Allspring or ISS that were material to making a
proxy voting decision. |
Such
proxy voting books and records shall be maintained at an office of Allspring in
an easily accessible place for a period of six years.
Compliance
with Regional Regulations and Client Delegation Arrangements
U.S.
Regulation
These
Policies and Procedures have been written in compliance with Rule 206(4)-6 of the Investment Advisers Act of
1940 as they relate to Allspring Global Investments, LLC and Allspring Funds
Management, LLC. Proxy voting records with respect to certain shareholder
advisory votes on executive compensation (or say-on-pay votes) will be disclosed on
Form N-PX starting in 2023 by
Allspring’s registered investment advisers, as required by Rule 14Ad-1 under the Securities Exchange Act of
1934. Proxy voting records for Allspring’s mutual funds are disclosed on Form
N-PX annually, as required by
Section 30 and Rule 30b1-4 of the
Investment Company Act of 1940, to the Securities and Exchange Commission
(“SEC”).
E.U.
Regulation
These
Policies and Procedures have been established, implemented and maintained, as
they apply to Allspring Global Investments Luxembourg S.A. (“Allspring
Luxembourg”) and Allspring Global Investments (UK) Limited, in accordance the EU
Shareholder Rights Directive II (EU 2017/828) (SEF II) and the COBS 2.2B SRD
requirements in the UK FCA Handbook. Specific to Allspring Luxembourg, the
Policies and Procedures also comply with Article 23 of CSSF Regulation No. 10-4, and the CSSF Circular
18/698.
Disclosure
of policies and procedures
A
summary of these Policies and Procedures are disclosed on Allspring’s website.
In
addition, Allspring will disclose to its separate clients (i.e. proxy votes for
assets managed on behalf of Allspring’s other clients as per a delegation
arrangement) a summary description of its proxy voting policy and procedures via
mail.
Disclosure
of proxy voting results
Allspring
will provide to clients proxy statements and any records as to how Allspring
voted proxies on behalf of clients, quarterly or upon request. For assistance,
clients may contact their relationship manager, call Allspring at 1-866-259-3305 or e-mail:
[email protected] to request a record of
proxies voted on their behalf.
Allspring
will publish high-level proxy voting statistics in periodic reports. However,
except as otherwise required by law, Allspring has a general policy of not
disclosing to any issuer specific or third party how its separate account client
proxies are voted.
Approved
by the Allspring Proxy Governance Committee: February 28, 2024
7
PROXY
VOTING POLICIES AND GUIDELINES – Effective 08/31/23
| I. |
General
Policies and Potential Conflicts of Interest |
Axiom
Investors, LLC (“Axiom”) has adopted these proxy voting policies and guidelines
(the “Policies”) with respect to securities owned by clients for which Axiom
serves as investment adviser and has the power to vote proxies. Rule 206(4)-6 under the Investment Advisers Act of
1940 (the “Advisers Act”) requires investment advisers that have voting
authority with respect to securities held in their clients’ accounts to exercise
a duty of care by monitoring corporate actions and voting proxies. To satisfy
its duty of loyalty, an adviser must cast proxy votes in the best interests of
its clients and not in a way that advances the adviser’s interests above those
of its clients. In addition to these SEC requirements governing registered
investment advisers, our proxy voting policies reflect the long-standing
fiduciary standards and responsibilities for ERISA accounts set out in
Department of Labor Bulletin 94-2, 29
C.F.R. 2509.94-2 (July 29, 1994), as
well as the 2019 SEC guidance regarding proxy voting.1
The
Policies are designed to reasonably ensure that Axiom votes proxies in the best
interest of clients for which it has voting authority, and describe how Axiom
addresses material conflicts between its interests and those of its clients with
respect to proxy voting. Under the Policies, Axiom will generally vote proxies
by considering those factors that would affect the value of the securities held
in clients’ accounts.
As
a general matter, Axiom considers, but is not required to adhere to, the proxy
voting guidelines established by Institutional Shareholder Services Inc. (“ISS”)
when casting proxy votes on behalf of clients.
ISS
is an independent third party that specializes in providing a variety of
fiduciary-level proxy related services to institutional investment managers. ISS
provides Axiom with in-depth research,
voting recommendations, vote execution and recordkeeping. However, Axiom
recognizes that there are certain types of proposals that may result in
different voting positions being taken with respect to the different issuers.
Some items that otherwise would be acceptable will be voted against the
proponent when it is seeking extremely broad flexibility without offering
adequate justification. In addition, Axiom generally votes consistently on the
same matter when securities of an issuer are held by multiple client accounts.
Axiom reviews proxy issues on a case-by-case basis, and there are
instances when our judgment of the anticipated effect on the best interests of
our clients may warrant exceptions to the policies on specific issues set forth
in Section II.
| 1 |
Commission
Guidance Regarding Proxy Voting Responsibilities of Investment Advisers,
Release Nos. IA-5325; IC-33605 (Aug. 21, 2019); Commission
Interpretation and Guidance Regarding Applicability of the Proxy Rules to
Proxy Voting Advice, Release No. 34-86721 (Aug. 21, 2019).
|
G-1
Axiom
is responsible for identifying potential conflicts of interest in the process of
voting proxies on behalf of its clients. Examples of potential conflicts of
interest include situations where Axiom or personnel of Axiom: (1) provide
services to a company whose management is soliciting proxies; (2) have a
material business relationship with a proponent of a proxy proposal and this
business relationship may influence how the proxy vote is cast; or (3) have
a business or personal relationship with participants in a proxy contest,
corporate directors or candidates for directorships.
Axiom
may address material conflicts between its interests and those of its advisory
clients by using any of the following methods: (1) adopting a policy of
disclosing the conflict to clients and obtaining their consent before voting;
(2) basing the proxy vote on pre-determined voting guidelines if the
application of the guidelines to the matter presented to clients involves
minimal discretion on the part of Axiom; or (3) using the recommendations
of an independent third party.
In
the event that Axiom becomes aware of a conflict of interest between Axiom and
ISS, Axiom will make an independent decision on how to vote, which may or may
not be consistent with ISS guidelines. ISS will then execute the vote as
directed by Axiom.
| II. |
Axiom’s
Policies on Specific Issues |
Axiom
will typically support ISS’s recommendation on management proposals. However, in
the event that Axiom decides to vote a proxy (or a particular proposal within a
proxy) in a manner different from the ISS recommendation, Axiom will document
the reasons supporting the decision.
Axiom
will typically support ISS’s recommendation on shareholder proposals. However,
in the event that Axiom decides to vote a proxy (or a particular proposal within
a proxy) in a manner different from the ISS recommendation, Axiom will document
the reasons supporting the decision.
| |
C. |
Deviation from ISS Guidelines
|
If
ISS is (i) unable to complete or provide its research and analysis
regarding a security on a timely basis, or (ii) Axiom determines that
voting in accordance with ISS guidelines is not in the best interest of the
client, Axiom will not vote in accordance with ISS guidelines. In such cases,
Axiom will make an independent decision on how to vote, which may or may not be
consistent with ISS guidelines. ISS will then execute the vote as directed by
Axiom.
| |
D. |
Foreign Issuers – Share Blocking
|
In
accordance with local law or business practices, many foreign companies prevent
the sales of shares that have been voted for a certain period beginning prior to
the shareholder meeting and ending on the day following the meeting (“share
blocking”). Depending on the country in which a company is domiciled, the
blocking period may begin a stated number of days prior to the meeting (e.g.,
one, three or five days) or on a date established by the company. While
practices
G-2
vary,
in many countries the block period can be continued for a longer period if the
shareholder meeting is adjourned and postponed to a later date. Similarly,
practices vary widely as to the ability of a shareholder to have the “block”
restriction lifted early (e.g., in some countries shares generally can be
“unblocked” up to two days prior to the meeting whereas in other countries the
removal of the block appears to be discretionary with the issuer’s transfer
agent). Due to these restrictions, Axiom must balance the benefits to its
clients of voting proxies against the potentially serious portfolio management
consequences of a reduced flexibility to sell the underlying shares at the most
advantageous time. In many cases, the disadvantage of being unable to sell the
stock regardless of changing conditions outweighs the advantages of voting at
the shareholder meeting for routine items. Accordingly, Axiom generally will not
vote those proxies in the absence of an unusual, highly material vote.
| |
E. |
Foreign Issuers – Beneficial Owner Meeting
Attendance Requirement |
Some
foreign markets require the Beneficial Owner to attend a meeting in order to
cast a vote. Accordingly, Axiom will generally not vote those proxies.
At
times, Axiom and/or ISS may not be able to vote proxies on behalf of clients
when our clients
lend
securities to third parties beyond our control.
| III. |
Procedures
for Reviewing and Voting Proxies |
Whenever
possible proxy solicitations from securities held for client accounts who have
delegated proxy voting responsibility to Axiom are sent directly by the client’s
custodian to Axiom’s proxy voting vendor, ISS, Axiom will use its best judgment
to vote proxies in the best interests of its clients and will typically follow
the recommendations of ISS. In the event that Axiom decides to vote a proxy (or
a particular proposal within a proxy) in a manner different from the ISS
recommendation, Axiom will document the reasons supporting the decision.
Any
proposal where Axiom has decided to vote differently than the ISS recommendation
and it is determined a material
conflict of interest exists between Axiom and its clients as a result of voting
differently on such proposal, that proposal will be directed to the Chief
Compliance Officer for consideration. The Chief Compliance Officer will
recommend to the Chief Investment Officer and Portfolio Manager the appropriate
voting response for such proposal by applying one of the methods identified in
Section I.B. of the Policies. For each proposal for which a material conflict of
interest exists and Axiom votes contrary to
ISS, the Chief Compliance Officer shall prepare a memorandum (a “Material
Conflict Memorandum”), to be kept with the record of the proxy vote, that
identifies the material conflict of interest and the method used for determining
how to vote on the proposal.
G-3
| |
B. |
Amending Axiom’s Policies on Specific
Issues |
Axiom
will periodically review Axiom’s Policies on Specific Issues to ensure that they
contain appropriate guidance for determining how votes will be cast on a variety
of matters and the underlying rationale for such determination.
| |
C. |
Supplemental Information of Issuers
|
In
the event that Axiom becomes aware that an issuer intends to file or has filed
with the SEC supplemental information in response to ISS’ voting recommendation,
whether or not Axiom received or intends to follow such recommendation, the
Chief Compliance Officer will review such supplemental information. If Axiom has
not yet executed the related proxy vote(s) or provided instructions to ISS, the
Chief Compliance Officer will provide the supplemental information to the
relevant Portfolio Manager(s). If Axiom has already executed the related proxy
vote(s) or provided instructions to ISS, the Chief Compliance Officer will
review the supplemental information and, if determined to be material to the
related proxy vote(s), will provide the supplemental information to the relevant
Portfolio Manager(s) in order to permit reconsideration of the related proxy
vote(s). The Portfolio Manager shall communicate to the Chief Compliance Officer
whether or not the previously provided voting instructions should be changed.
| IV. |
Proxy
Voting Audit Procedures and Oversight of Third-Party Proxy Voting
|
When
Axiom is voting in accordance with ISS guidelines, Axiom will review a sampling
of the “pre-populated” votes on the
ISS’ electronic voting platform before ISS executes the vote. In instances of
voting not in accordance with ISS guidelines, Axiom will itself “pre-populate” votes on the ISS’ electronic
voting platform before ISS executes the vote.
Periodically,
a random sample of the proxies voted by ISS will be audited by Axiom to ensure
ISS is voting in accordance with applicable ISS guidelines or consistent with
Axiom’s direction, as applicable, and in order to further evaluate whether
Axiom’s voting determinations were consistent with the Policies and in its
clients’ best interest.
Axiom
will review, no less frequently than annually, ISS, (or any other third-party
proxy voting service, as applicable) its policies and methodologies. This review
will include, among others, the following topics and determinations:
| |
• |
|
whether
ISS has the capacity and competence to adequately analyze proxy issues,
including the adequacy and quality of its staffing, personnel and/or
technology and any material changes in the ISS staffing and technology
since the last review; |
| |
• |
|
whether
ISS has an effective process for seeking timely input from issuers and its
clients with respect to its proxy voting policies, methodologies and peer
group constructions; |
| |
• |
|
whether
ISS engages with issuers, including its process for ensuring that it has
complete and accurate information about the issuer and each particular
matter, and ISS’ process, if any, for investment advisers to access the
issuers’ views about ISS’ voting recommendations; |
G-4
| |
• |
|
whether
Axiom has sufficient information on and understanding of ISS’
methodologies and the factors underlying ISS’ voting recommendations,
including an understanding of how ISS obtains information relevant to its
voting recommendations and how it engages with issuers and third parties;
|
| |
• |
|
whether
ISS is independent and can make recommendations in an impartial manner in
the best interest of Axiom’s clients. This analysis will include a review
of (i) any ISS actual or potential conflicts known to Axiom,
(ii) ISS’ policies and procedures on identifying, disclosing and
addressing conflicts of interest, and (iii) whether ISS is disclosing
its actual or potential conflicts to Axiom in a timely, transparent and
accessible manner; |
| |
• |
|
ISS’
internal controls, including but not limited to a review of ISS’ business
continuity plan, methodologies with respect to implementing Axiom’s voting
instructions, proxy record keeping and internal and independent
third-party audit certifications; |
| |
• |
|
the
extent to which ISS has access to non-public information regarding how
Axiom intends to vote a Client’s securities and would be permitted to
utilize this information in a manner that would not be in the best
interest of Axiom’s Clients (e.g., Axiom may consider the extent to which
ISS would be permitted to share such information (including information on
aggregated voting intentions of ISS’ clients) with third parties);
|
| |
• |
|
any
factual errors, potential incompleteness, or potential methodological
weaknesses in the ISS’ analysis known to Axiom and whether such errors,
incompleteness or weaknesses materially affected ISS’ voting
recommendations. Axiom will also access ISS’ process for disclosure to
Axiom and efforts to correct any such identified errors, incompleteness or
weaknesses. |
In
connection with this oversight function, Axiom will ensue that ISS (or any other
third-party proxy voting service, as applicable), is prepared to provide
additional information to Axiom to assist it with gaining a better understanding
of the services that the proxy advisory firm provides, as well as confirming
that these services align with Axiom’s own fiduciary duties. Further in
connection with this oversight function, Axiom will obtain information about and
possibly consider alternative service providers.
| V. |
Annual
Review of Policies |
Axiom
will review, no less frequently than annually, the adequacy of the Policies and
the effectiveness of the implementation and determination whether the Policies
are reasonably designed to ensure that Axiom casts proxy votes on behalf of its
clients in the best interest of such clients.
G-5
Axiom
will disclose in its Form ADV Part 2A that clients may contact Axiom in order to
obtain information on how Axiom voted such client’s proxies, and to request a
copy of the Policies. If a client requests this information, the Axiom will
prepare a written response to the client that lists, with respect to each voted
proxy that the client has inquired: (i) the name of the issuer,
(ii) the proposal voted upon and (iii) how Axiom voted the client’s
proxy. A summary of the Policies will be included in Axiom’s Form ADV Part 2,
which is delivered to all clients. The summary will be updated whenever the
Policies are updated.
| VII. |
Recordkeeping
and Client Reporting |
In
accordance with Rule 204-2 under
the Advisers Act, Axiom shall retain the following documents for not less than
five years from the end of the year in which the proxies were voted, the first
two years in Axiom’s office:
| |
1. |
The
Policies and any additional procedures created pursuant to the Policies;
|
| |
2. |
a
copy of each proxy statement Axiom receives regarding securities held on
behalf of its clients, including any supplemental information an issuer
files with the SEC that Axiom becomes aware of; |
| |
3. |
a
record of each vote cast by Axiom on behalf of its clients;
|
| |
4. |
a
copy of any document created by Axiom that was material to making its
voting decision or that memorializes the basis for such decision; and
|
| |
5. |
a
copy of each written request from a client, and response to the client,
for information on how Axiom voted the client’s proxies.
|
G-6
PROXY
VOTING
In
Proxy Voting by Investment Advisers, Investment Advisers Act Release
No. 2106 (January 31, 2003), the SEC noted that, “The federal securities
laws do not specifically address how an adviser must exercise its proxy voting
authority for its clients. Under the Advisers Act, however, an adviser is a
fiduciary that owes each of its clients a duty of care and loyalty with respect
to all services undertaken on the client’s behalf, including proxy voting. The
duty of care requires an adviser with proxy voting authority to monitor
corporate events and to vote the proxies.” Rule 206(4)-6 is supplemented by Investment
Advisers Act Release No. 5325 (September 10, 2019) (“Release
No. 5325”), which contains guidance regarding the proxy voting
responsibilities of investment advisers under the Advisers Act. Among other
subjects, Release No. 5325 addresses the oversight of proxy advisory firms
by investment advisers.
Introduction
As
a fiduciary, Bain Capital Credit has a duty to monitor corporate events and to
vote proxies, as well as a duty to cast votes in the best interest of the
Clients1 and not to
subrogate Client interests to its own interests. To meet its fiduciary
obligations, Bain Capital Credit seeks to ensure that Bain Capital Credit votes
proxies in the best interest of the Clients, and addresses how Bain Capital
Credit will resolve any conflict of interest that may arise when voting proxies.
This policy attempts to generalize a complex subject and Bain Capital Credit
may, from time to time, determine that it is in the best interests of the
Clients to depart from specific policies described herein. The Industry Vice
President will document the rationale for any such departure in consultation
with Compliance.
Compliance
is responsible for ensuring that the Clients are provided with (i) a
description of Bain Capital Credit’s proxy voting policies and procedures and
how the Clients may, upon request, obtain a copy of the proxy voting policies
and procedures; and (ii) instructions about how a Client may obtain
information as to how Bain Capital Credit voted the Client’s securities.
Operations is responsible for responding to requests regarding the proxies voted
by Bain Capital Credit. For purposes of this Proxy Voting policy, references to
“Bain Capital Credit” include the controlling entities of the Investment
Vehicles, which vote securities held by the Investment Vehicles.
Procedures
Operations
is responsible for processing all proxy notifications received by Bain Capital
Credit. All proxy voting requests received are forwarded to the Industry Vice
President responsible for the issuer. The Industry Vice President communicates
the proxy voting decision to Operations. The hard-copy documentation is
completed by Operations and sent back to the appropriate party. Operations
maintains a log of all proxy voting documentation received and the status
thereof.
| 1 |
With
respect to Clients that are Regulated Funds for whom Bain Capital Credit
serves as adviser or sub-adviser,
Bain Capital Credit will coordinate with such Regulated Funds’ adviser (if
applicable) and the Regulated Funds to determine the appropriate party for
voting proxies (i.e. whether the Regulated Funds’ policies and procedures
delegate proxy voting responsibility to Bain Capital Credit.
|
Conflicts of Interest
Bain
Capital Credit recognizes that conflicts of interest may arise from time to time
in relation to proxy voting requirements. A conflict between Bain Capital Credit
and any Client can arise in a number of situations. The following non-exclusive examples illustrate conflicts
of interest that could arise.
| |
• |
|
A
failure to vote in favor of a position supported by management may harm
the relationship Bain Capital Credit or a Client has with the company;
|
| |
• |
|
A
failure to vote in favor of a particular proposal may harm the
relationship Bain Capital Credit or a Client has with the proponent of the
proposal; |
| |
• |
|
A
failure to vote for or against a particular proposal may adversely affect
a business or personal relationship, such as when an officer of Bain
Capital Credit has a spouse or other relative who serves as a director of
the company, is employed by the company or otherwise has an economic
interest therein; or |
| |
• |
|
Conflicts
arising from investment positions held by affiliates.
|
BOSTON
PARTNERS GLOBAL INVESTORS, INC.
Proxy
Voting Policies and Procedures
February
2024
Boston
Partners
One
Beacon Street, 30th Floor
Boston,
MA 02108—www.boston-partners.com
PROXY
VOTING POLICIES AND PROCEDURES
Boston
Partners Global Investors, Inc. (“Boston Partners”) is an investment adviser
comprised of two divisions, Boston Partners and Weiss, Peck & Greer
Partners (“WPG”). Boston Partners’ Governance Committee (the “Committee”) is
comprised of representatives from portfolio management, securities analyst,
portfolio research, quantitative research, investor relations, sustainability
and engagement, and legal/compliance teams. The Committee is responsible for
administering and overseeing Boston Partners’ proxy voting process. The
Committee makes decisions on proxy policy, establishes formal Boston Partners’
Proxy Voting Policies (the “Proxy Voting Policies”) and updates the Proxy Voting
Policies as necessary, but no less frequently than annually. In addition, the
Committee, in its sole discretion, delegates certain functions to internal
departments and/or engages third-party vendors to assist in the proxy voting
process. Finally, members of the Committee are responsible for evaluating and
resolving conflicts of interest relating to Boston Partners’ proxy voting
process.
To
assist Boston Partners in carrying out our responsibilities with respect to
proxy activities, Boston Partners has engaged Institutional Shareholder Services
Inc. (“ISS”), a third-party corporate governance research service, which is
registered as an investment adviser. ISS receives all proxy-related materials
for securities held in client accounts and votes the proposals in accordance
with Boston Partners’ Proxy Voting Policies. ISS assists Boston Partners with
voting execution through an electronic vote management system that allows ISS to
pre-populate and automatically submit
votes in accordance with Boston Partners’ Proxy Voting Policies. While Boston
Partners may consider ISS’s recommendations on proxy issues, Boston Partners
bears ultimate responsibility for proxy voting decisions and can change votes
via ISS’ electronic voting platform at any time before a meeting’s cut-off date. ISS also provides recordkeeping
and vote-reporting services.
How Boston Partners Votes
For
those clients who delegate proxy voting authority to Boston Partners, Boston
Partners has full discretion over votes cast on behalf of clients. All proxy
votes on behalf of clients are voted the same way; however, Boston Partners may
refrain from voting proxies for certain clients in certain markets. These
arrangements are outlined in respective client investment management agreements.
Boston Partners may also refrain from voting proxies on behalf of clients when
shares are out on loan; when share blocking is required to vote; where it is not
possible to vote shares; where there are legal or operational difficulties;
where Boston Partners believes the administrative burden and/ or associated cost
exceeds the expected benefit to a client; or where not voting or abstaining
produces the desired outcome.
Boston
Partners meets with ISS at least annually to review ISS policy changes, themes,
methodology, and to review the Proxy Voting Policies. The information is taken
to the Committee to discuss and decide what changes, if any, need to be made to
the Proxy Voting Policies for the upcoming year.
The
Proxy Voting Policies provide standard positions on likely issues for the
upcoming proxy season. In determining how proxies should be voted, including
those proxies the Proxy Voting Policies do not address or where the Proxy Voting
Policies’ application is ambiguous, Boston Partners primarily focuses on
maximizing the economic value of its clients’ investments. This is accomplished
through engagements with Boston Partners’ analysts and issuers, as well as
independent research conducted by Boston Partners’ Sustainability and Engagement
Team. In the case of social and political responsibility issues that, in its
view, do not primarily involve financial considerations, it is Boston Partners’
objective to support shareholder proposals that it believes promote good
corporate citizenship. If Boston Partners believes that any research provided by
ISS or other sources is incorrect, that research is ignored in the proxy voting
decision, which is escalated to the Committee so that all relevant facts can be
discussed, and a final vote determination can be made. Boston Partners is
alerted to proposals that may require more detailed analysis via daily system
generated refer notification emails. These emails prompt the Committee Secretary
to call a Committee meeting to discuss the items in question.
Although
Boston Partners has instructed ISS to vote in accordance with the Proxy Voting
Policies, Boston Partners retains the right to deviate from the Proxy Voting
Policies if, in its estimation, doing so would be in the best interest of
clients.
Conflicts
Boston
Partners believes clients are sufficiently insulated from any actual or
perceived conflicts Boston Partners may encounter between its interests and
those of its clients because Boston Partners votes proxies based on the
predetermined Proxy Voting Policies. However, as noted, Boston Partners may
deviate from the Proxy Voting Policies in certain circumstances, or the Proxy
Voting Policies may not address certain proxy voting proposals. If a member of
Boston Partners’ research or portfolio management team recommends that Boston
Partners vote a particular proxy proposal in a manner inconsistent with the
Proxy Voting Policies or if the Proxy Voting
Policies
do not address a particular proposal, Boston Partners will adhere to certain
procedures designed to ensure that the decision to vote the particular proxy
proposal is based on the best interest of Boston Partners’ clients. These
procedures require the individual requesting a deviation from the Proxy Voting
Policies to complete a Conflicts Questionnaire (the “Questionnaire”) along with
written documentation of the economic rationale supporting the request. The
Questionnaire seeks to identify possible relationships with the parties involved
in the proxy that may not be apparent. Based on the responses to the
Questionnaire, the Committee (or a subset of the Committee) will determine
whether it believes a material conflict of interest is present. If a material
conflict of interest is found to exist, Boston Partners will vote in accordance
with client instructions, seek the recommendation of an independent third-party
or resolve the conflict in such other manner as Boston Partners believes is
appropriate, including by making its own determination that a particular vote
is, notwithstanding the conflict, in the best interest of clients.
Oversight
Meetings
and upcoming votes are reviewed by the Committee Secretary with a focus on votes
against management. Votes on behalf of Boston Partners’ clients are reviewed and
compared against ISS’ recommendations. When auditing vote instructions, which
Boston Partners does at least annually, ballots voted for a specified period are
requested from ISS, and a sample of those meetings are reviewed by Boston
Partners’ Operations Team. The information is then forwarded to compliance/ the
Committee Secretary for review. Any perceived exceptions are reviewed with ISS
and an analysis of what the potential vote impact would have been is conducted.
ISS’ most recent SOC-1 indicates they
have their own control and audit personnel and procedures, and a sample of
ballots are randomly selected on a quarterly basis. ISS compares ballots to
applicable vote instructions recorded in their database. Due diligence meetings
with ISS are conducted periodically.
Disclosures
A
copy of Boston Partners’ Proxy Voting Policies and Procedures, as updated from
time to time, as well as information regarding the voting of securities for a
client account are available upon request from your Boston Partners relationship
manager. A copy of Boston Partners’ Proxy Voting Policies and Procedures are
also available at https://www.boston-partners.com/. For general inquires,
contact (617) 832-8162.
|
|
| |
| Effective
Date: February 22, 2024 |
|
PROPRIETARY |
PROXY
VOTING POLICIES AND PROCEDURES
DIMENSIONAL
FUND ADVISORS LP
DIMENSIONAL
FUND ADVISORS LTD.
DFA
AUSTRALIA LIMITED
DIMENSIONAL
FUND ADVISORS PTE. LTD.
DIMENSIONAL
JAPAN LTD.
DIMENSIONAL
IRELAND LIMITED
Introduction
Dimensional
Fund Advisors LP (“Dimensional”) is an investment adviser registered with the
U.S. Securities and Exchange Commission (“SEC”) pursuant to the Investment
Advisers Act of 1940, as amended (the “Advisers Act”). Dimensional is the parent
or indirect parent company of Dimensional Fund Advisors Ltd. (“Dimensional UK”),
DFA Australia Limited (“Dimensional Australia”), Dimensional Fund Advisors Pte.
Ltd. (“Dimensional Singapore”), Dimensional Japan Ltd. (“Dimensional Japan”) and
Dimensional Ireland Limited (“Dimensional Ireland”) (each, an “Advisor”, and
collectively referred to as the “Advisors”). Dimensional UK and Dimensional
Australia are also registered as investment advisers under the Advisers Act.
The
Advisors provide investment advisory or subadvisory services to various types of
clients, including registered funds, unregistered commingled funds, defined
benefit plans, defined contribution plans (including employee benefit plans
subject to the Employee Retirement Income Security Act of 1974, and the
regulations promulgated thereunder (“ERISA”)), private and public pension funds,
foundations, endowment funds and other types of investors. These clients
frequently give the Advisors the authority and discretion to vote proxies
relating to the underlying securities beneficially held by such clients. Also, a
client may, at times, ask an Advisor to share its proxy voting policies,
procedures, and guidelines without the client delegating full voting discretion
to the Advisor. Depending on the client, an Advisor’s duties may include making
decisions regarding whether and how to vote proxies as part of an investment
manager’s fiduciary duty under ERISA.1 The scope and any
limitations of an Advisor’s proxy voting authority generally will be described
in the written contract between the Advisor and its client or with respect to an
Advisor-sponsored fund, the offering documents of the fund.
The
following Proxy Voting Policies and Procedures (the “Policy”) address the
Advisors’ objectives for voting proxies received by the Advisors on behalf of
client accounts or funds to the extent that relationships with such clients are
subject to the Advisers Act or ERISA or the clients are registered investment
companies under the Investment Company Act of 1940, as amended, including The
DFA Investment Trust Company, DFA Investment Dimensions Group Inc., Dimensional
Investment Group Inc., Dimensional Emerging Markets Value Fund, and Dimensional
ETF Trust (together, the “Dimensional Investment Companies”) and the portfolios,
funds and exchange-traded funds of the Dimensional Investment Companies are each
a “Dimensional Fund” and together, the “Dimensional Funds”). The
| 1 |
If
the client is subject to ERISA, an Advisor’s proxy voting activities are
subject to any applicable provisions under ERISA and/or guidance from the
U.S. Department of Labor. |
1
Advisors
believe that this Policy is reasonably designed to meet their goal of seeking to
vote (or refrain from voting) proxies in a manner consistent with applicable
legal and fiduciary standards and in the best interests of clients, as
understood by the Advisors at the time of the vote.
Exhibit A to this Policy includes a
summary of the Advisors’ current Proxy Voting Guidelines and will change from
time to time (the “Guidelines”) and includes three implementations, one standard
implementation, one for the portfolios and accounts that incorporate social
considerations in their investment guidelines, and one for the portfolios and
accounts that incorporate sustainability considerations in their investment
guidelines. A separate account client may select one of the three
implementations to be used for their account or, in certain circumstances,
individualize their proxy voting guidelines. The Investment Committee of
Dimensional has determined that, in general, voting proxies pursuant to the
Guidelines should be in the best interests of clients and the Advisors
understand the Guidelines to be consistent with applicable legal standards.
Therefore, an Advisor will usually instruct voting of proxies in accordance with
the Guidelines.
The
Guidelines provide a framework for analysis and decision making but do not
address all potential issues. In order to be able to address all the relevant
facts and circumstances related to a proxy vote, the Advisors reserve the right
to instruct votes that deviate from the Guidelines if, after a review of the
matter, an Advisor believes that a client’s best interests would be served by,
or applicable legal and fiduciary standards require, such a vote. In such
circumstance, the analysis will be documented in writing and periodically
presented to the Investment Stewardship Committee for review. To the extent that
the Guidelines do not cover potential voting issues, an Advisor may consider the
spirit of the Guidelines and applicable legal standards and instruct the vote on
such issues in a manner that the Advisor believes would be in the best interests
of the client.
A
client’s investment strategy can impact voting determinations. For example, the
Advisors consider social issues when voting proxies for portfolios and accounts
that incorporate social considerations in their design and consider
sustainability issues when voting proxies for portfolios and accounts that
consider sustainability considerations in their design. The Advisors may also
take social or sustainability issues into account when voting proxies for
portfolios and accounts that do not incorporate social or sustainability
considerations in their design if the Advisors believe that doing so is in the
best interest of the relevant client(s) and otherwise consistent with applicable
laws and the Advisors’ duties, such as where material environmental or social
risks may have economic ramifications for shareholders.
Proxy
Advisory Firms
The
Advisors have retained certain third-party proxy service providers (“Proxy
Advisory Firms”) to provide information on shareholder meeting dates and proxy
materials, translate proxy materials printed in a foreign language, provide
research on proxy proposals, operationally process votes in accordance with the
Guidelines on behalf of the clients for whom the Advisors have proxy voting
responsibility, and provide reports concerning the proxies voted (“Proxy Voting
Services”). Although the Advisors retain third-party service providers for Proxy
Voting Services, the Advisors remain responsible for proxy voting decisions and
making such decisions in accordance with their fiduciary duties. The Advisors
have designed policies and procedures to prudently select, oversee and evaluate
the Proxy Advisory Firms consistent with their fiduciary duties, including with
respect to the matters described below, which Proxy Advisory Firms have been
engaged to provide Proxy Voting Services to support the Advisors’ voting in
accordance with this
2
Policy.
In the event that the Guidelines are not implemented precisely as the Advisors
intend because of the actions or omissions of any Proxy Advisory Firms,
custodians or sub-custodians or other
agents, or any such persons experience any irregularities (e.g., misvotes or
missed votes), then such instances will not necessarily be deemed by the
Advisors as a breach of this Policy.
Prior
to the selection of any new Proxy Advisory Firms and annually thereafter or more
frequently if deemed necessary by Dimensional, the Investment Stewardship
Committee will consider whether the Proxy Advisory Firm: (a) has the
capacity and competency to timely and adequately analyze proxy issues and
provide the Proxy Voting Services the Proxy Advisory Firm has been engaged to
provide and (b) can make its recommendations in an impartial manner, in
consideration of the best interests of the Advisors’ clients, and consistent
with the Advisors’ voting policies and fiduciary duties. In conducting such a
review of a Proxy Advisory Firm, Dimensional may consider the following,
depending on the Proxy Voting Services the Proxy Advisory Firm has been engaged
to provide:
| |
(i) |
periodic
sampling of certain votes pre-populated by the Proxy Advisory
Firm’s systems as well as votes cast by the Proxy Advisory Firm to review
that the Guidelines adopted by the Advisors are being followed;
|
| |
(ii) |
onsite
visits to the Proxy Advisory Firm office and/or discussions with the Proxy
Advisory Firm to determine whether the Proxy Advisory Firm continues to
have the capacity and competency to carry out its proxy obligations to the
Advisors; |
| |
(iii) |
a
review of those aspects of the Proxy Advisory Firm’s policies, procedures,
and methodologies for formulating voting recommendations that the Advisors
consider material to the Proxy Voting Services provided to the Advisors,
including: (a) those relating to the Proxy Advisory Firm’s efforts to
identify, address, mitigate and disclose actual or potential conflicts of
interest, (b) the Proxy Advisory Firm’s efforts to obtain current,
accurate, and complete information in creating recommendations and
research, and (c) the Proxy Advisory Firm’s ability to provide
services consistent with ERISA; |
| |
(iv) |
a
requirement that the Proxy Advisory Firm notify the Advisors if there is a
substantive change in the Proxy Advisory Firm’s policies and procedures
described in (iii) above or otherwise to its business practices;
|
| |
(v) |
a
review of how and when the Proxy Advisory Firm engages with, and receives
and incorporates input from, portfolio companies, the Proxy Advisory
Firm’s clients and other third-party information sources as well as how
and when the Proxy Advisory Firm makes available from portfolio companies,
or other sources, additional information about a matter to be voted;
|
| |
(vi) |
an
assessment of how the Proxy Advisory Firm considers factors unique to a
specific issuer or proposal when evaluating a matter subject to a
shareholder vote; |
| |
(vii) |
in
case of an error made by the Proxy Advisory Firm, a discussion of the
error with the Proxy Advisory Firm and determination of whether
(a) the error affected the Proxy Advisory Firm’s Proxy Voting
Services and (b) appropriate corrective and preventive action is
being taken; and |
| |
(viii) |
an
assessment of whether the Proxy Advisory Firm appropriately updates its
methodologies, guidelines, and voting recommendations, including to
address any deficiencies, on an ongoing basis and incorporates input from
issuers and Proxy Advisory Firm clients in the update process.
|
3
In
evaluating Proxy Advisory Firms, the Advisors may also consider the adequacy and
quality of the Proxy Advisory Firm’s staffing, personnel, and/or technology and
other factors in its discretion.
Procedures
for Voting Proxies
The
Investment Committee at Dimensional is generally responsible for overseeing each
Advisor’s proxy voting process. The Investment Committee has formed the
Investment Stewardship Committee composed of certain officers, directors and
other personnel of the Advisors and has delegated to its members authority to
(i) oversee the voting of proxies and the Proxy Advisory Firms,
(ii) make determinations as to how to instruct the vote on certain specific
proxies, (iii) verify ongoing compliance with this Policy,
(iv) receive reports on the review of the Proxy Advisory Firms as described
above, and (v) review this Policy from time to time and recommend changes
to the Investment Committee. The Investment Stewardship Committee may designate
one or more of its members to oversee specific, ongoing compliance with respect
to this Policy and may designate personnel of each Advisor to instruct the vote
on proxies on behalf of an Advisor’s clients, such as authorized traders of the
Advisors (collectively, “Authorized Persons”). The Investment Stewardship
Committee will review this policy no less frequently than annually and may
recommend changes to this Policy to seek to act in a manner consistent with the
best interests of the clients.
Generally,
the Advisors analyze relevant proxy materials on behalf of their clients and
seek to instruct the vote (or refrain from voting) proxies in accordance with
this Policy and the Guidelines. A client may direct an Advisor to vote for such
client’s account differently than what would occur in applying the Policy and
the Guidelines. An Advisor may also agree to follow a client’s individualized
proxy voting guidelines or otherwise agree with a client on particular voting
considerations.
Each
Advisor seeks to vote (or refrain from voting) proxies for its clients in a
manner that the Advisor determines is in the best interests of its clients and
which seeks to maximize the value of the client’s investments, subject to the
standards of legal and regulatory regimes, applicable to the Advisor or the
client, and any particular investment or voting guidelines of specific funds or
accounts. When voting (or electing to refrain from voting) proxies for clients
subject to ERISA, each Advisor shall seek to consider those factors that may
affect the economic value of the ERISA client’s investment and not subordinate
the interests of the client’s participants and beneficiaries on their retirement
income or financial benefits under the plan to any other objectives. In some
cases, the Advisor may determine that it is in the best interests of clients to
refrain from exercising the clients’ proxy voting rights. The Advisor may
determine that voting is not in the best interests of a client and refrain from
voting if the costs, including the opportunity costs, of voting would, in the
view of the Advisor, exceed the expected benefits of voting to the client.2 For securities on loan and
when the Advisor or an affiliate of the Advisor has agreed to monitor the
securities lending program of the client account, the Advisor will balance the
revenue-producing value of loans against the difficult-to-assess value of casting
votes. It is generally the Advisors’ belief that the expected value of casting a
vote generally will be less than the securities lending income, either because
the votes will not have significant economic consequences or because the outcome
of the vote would not be affected by an Advisor recalling loaned securities for
voting. In certain countries, such as the United States, the specific terms of
the proposals to be voted on by shareholders will generally not be known until
after the record
| 2 |
If
a client does not share with its Advisor information regarding the cost of
voting proxies so that the Advisor can perform a cost-benefit analysis,
the Advisor will decide whether to vote proxies considering only the
information on difficulties and costs that it has available.
|
4
date,
which determines the shares eligible to be voted. In this situation, the Advisor
may not be aware of the subject of a proxy in time to make a decision as to
whether the materiality of the voting proposals warrants recalling a security on
loan to vote. In addition, because specific record dates may not be known, if
the Advisor were to seek to recall securities on loan, the Advisor would need to
estimate the record date which would result in the securities being recalled for
a longer period of time than otherwise required and may create a greater
potential loss of income. Each Advisor does intend to recall securities on loan
if, based upon information in the Advisor’s possession, it determines that
voting the securities is likely to materially affect the value of a client’s
investment and that it is in the client’s best interests to do so.
In
cases where an Advisor does not receive a solicitation or enough information
within a sufficient time (as reasonably determined by the Advisor) prior to the
proxy-voting deadline, the Advisor or its service provider may be unable to
vote. As part of the vote execution services provided to the Advisors, a Proxy
Advisory Firm pre-populates votes in
accordance with the Policy and Guidelines. Such votes are automatically
submitted unless modified by an Authorized Person prior to submission. The
Advisors conduct sampling of select pre-populated votes prior to the final vote
submission. For votes on certain issues, the Advisors conduct additional reviews
as part of the voting process. If an Advisor becomes aware that a portfolio
company or shareholder proponent of a proposal has filed or intends to file
additional soliciting material after a Proxy Advisory Firm has pre-populated votes, and the company or
proponent makes this material available within a sufficient time (as reasonably
determined by the Advisor) prior to the proxy-voting deadline, the Advisor will
assess whether the material could reasonably be expected to impact the Advisor’s
vote determination and will seek to review and consider any impactful material
prior to the proxy-voting deadline.
The
Advisors from time to time discuss governance matters with portfolio companies
to represent client interests; however, regardless of such conversations, the
Advisors acquire securities on behalf of their clients solely for the purpose of
investment and not with the purpose or intended effect of changing or
influencing the control of any portfolio company. The Advisors do not intend to
engage in shareholder activism with respect to a pending vote or matter that an
Advisor reasonably expects to be the subject of a shareholder vote in the
foreseeable future. If an issuer’s management, shareholders or proxy solicitors
contact an Advisor with respect to a pending vote, a member of the Investment
Stewardship Committee (or its delegee) may listen to such party and discuss this
Policy with such party.
International
Proxy Voting
While
the Advisors utilize the Policy and Guidelines for both their international and
domestic portfolios and clients, there are some significant differences between
voting U.S. company proxies and voting non-U.S. company proxies. For U.S. companies,
it is usually relatively easy to vote proxies, as the proxies are typically
received automatically and may be voted by mail or electronically. In most
cases, the officers of a U.S. company soliciting a proxy act as proxies for the
company’s shareholders.
With
respect to non-U.S. companies, however,
it may be both difficult and costly to vote proxies due to local regulations,
customs or other requirements or restrictions, and such circumstances and
expected costs may outweigh any anticipated economic benefit of voting. The
major difficulties and costs may include: (i) appointing a proxy;
(ii) obtaining reliable information about the time and location of a
meeting; (iii) obtaining relevant information about voting procedures for
foreign shareholders; (iv) restrictions on trading securities that are
subject to proxy votes (share-blocking periods); (v) arranging for a proxy to
vote
5
locally
in person; (vi) fees charged by custody banks for providing certain
services with regard to voting proxies; and (vii) foregone income from
securities lending programs. The Advisors do not intend to vote proxies of non-U.S. companies if they determine that the
expected costs of voting outweigh any anticipated economic benefit to the client
of voting. The Advisors intend to make their determination on whether to vote
proxies of non-U.S. companies on a
client by client basis. In doing so, the Advisors evaluate market requirements
and impediments for voting proxies of companies in each country. The Advisors
periodically review voting logistics, including costs and other voting
difficulties, on a client by client and country by country basis, in order to
determine if there have been any material changes that would affect the
Advisors’ determinations and procedures.3 In the event an Advisor is
made aware of and believes that an issue to be voted is likely to materially
affect the economic value of a portfolio, that its client’s vote is reasonably
likely to be determinative of the outcome of the contest, and that the expected
benefits to the client of voting the proxies exceed the expected costs, the
Advisor will seek to make reasonable efforts to vote such proxies.
Fixed
Income Securities
Holders
of fixed income securities are generally not entitled to an annual vote and
therefore do not have such a mechanism to influence an issuer’s governance. From
time-to-time holders of fixed income
securities can receive proxy ballots or corporate action-consents at the
discretion of the issuer/custodian. When processed as proxy ballots, Proxy
Advisory Firms generally do not provide a voting recommendation on such matters
and the service provider’s role is limited to election processing and
recordkeeping. In such circumstances the Advisor’s fixed income portfolio
management team is generally responsible for providing recommendations on how to
vote proxy ballots and corporation action-consents and they may consult with
members of the Investment Stewardship Group, with the aim of applying the same
general principles as are set out in the Guidelines.
Conflicts
of Interest
Occasions
may arise where an Authorized Person, one or more members of the Investment
Stewardship Committee, an Advisor, or an affiliated person of an Advisor has a
potential conflict of interest in connection with the proxy voting process. A
conflict of interest may exist, for example, if an Advisor is actively
soliciting investment advisory business from the company soliciting the proxy.
Proxies that the Advisors receive on behalf of their clients generally will be
voted in accordance with predetermined guidelines or procedures (or a client’s
predetermined custom guidelines or procedures), and when proxies are voted
consistently with such guidelines or procedures, the Advisors consider such
votes not to be affected by any conflicts of interest.
In
the limited instances where (i) an Authorized Person is considering voting
a proxy contrary to predetermined guidelines or procedures (or in cases for
which the guidelines or procedures do not prescribe a particular vote and the
proposed vote is contrary to the recommendation of the Proxy Advisory Firm
primarily used by the Advisors to provide voting recommendations), and
(ii) the Authorized Person or any member of the Investment Stewardship
Committee believes a potential conflict of interest exists, the Authorized
Person will disclose the potential conflict to a member of the Investment
Stewardship
| 3 |
If
a client does not share with its Advisor information regarding the cost of
voting proxies for certain non-U.S. companies or in certain
countries so that the Advisor can perform a cost-benefit analysis, the
Advisor will decide whether to vote proxies considering only the
information on difficulties and costs that it has available.
|
6
Committee
or, in the case of a member of the Investment Stewardship Committee who believes
a potential conflict of interest exists, the member will disclose the conflict
to the Investment Stewardship Committee. Such disclosure will describe the
proposal to be voted upon and disclose any potential conflict of interest
including but not limited to any potential personal conflict of interest (e.g.,
familial relationship with company management) the Authorized Person may have
relating to the proxy vote, in which case the Authorized Person will remove
himself or herself from the proxy voting process.
If
the Investment Stewardship Committee member has actual knowledge of a conflict
of interest and recommends a vote contrary to predetermined guidelines or
procedures (or in the case where the guidelines or procedures do not prescribe a
particular vote and the proposed vote is contrary to the recommendation of the
Proxy Advisory Firm), the Investment Stewardship Committee member will bring the
vote to the Investment Stewardship Committee, which will (a) determine how
the vote should be cast, keeping in mind the principle of preserving shareholder
value or (b) determine to abstain from voting, unless abstaining would be
materially adverse to the client’s interest. To the extent the Investment
Stewardship Committee makes a determination regarding how to vote or to abstain
for a proxy on behalf of a Dimensional Investment Company in the circumstances
described in this paragraph, Dimensional will report annually on such
determinations to the respective Board of Directors/Trustees of the Dimensional
Investment Company. The Advisors will also consider, where appropriate, other
disclosure to clients regarding potential conflicts of interest, dependent upon
the agreement with the client.
Voting
by Dimensional Funds that hold shares of other Dimensional Funds. To avoid
certain potential conflicts of interest, Dimensional generally will employ
mirror voting, if possible, when a Dimensional Fund invests in another
Dimensional Fund in reliance on any one of Sections 12(d)(1)(E), 12(d)(1)(F) or
12(d)(1)(G) of the Investment Company Act of 1940, as amended, (“1940 Act”),
related rules thereunder (including Rule 12d1-1 or Rule 12d1-4 under the 1940 Act), or pursuant to an
SEC exemptive order thereunder, unless otherwise required by applicable law or
regulation. Mirror voting means that Dimensional will vote the shares in the
same proportion as the vote of all of the other holders of the Dimensional
Fund’s shares. With respect to instances when a Dimensional Fund invests in an
underlying Dimensional Fund in reliance on Section 12(d)(1)(G) of the 1940
Act, related rules thereunder (including Rule 12d1-1 or Rule 12d1-4), or pursuant to an SEC exemptive
order thereunder, and there are no other unaffiliated shareholders also invested
in the underlying Dimensional Fund, Dimensional will vote in accordance with the
recommendation of such Dimensional Investment Company’s board of trustees or
directors, unless otherwise required by applicable law or regulation. With
respect to instances when a Dimensional Fund invests in an underlying
Dimensional Fund in reliance on Sections 12(d)(1)(E) or 12(d)(1)(F) of the 1940
Act and there are no other unaffiliated shareholders also invested in the
underlying Dimensional Fund, Dimensional will employ pass-through voting, unless
otherwise required by applicable law or regulation. In “pass-through voting,”
the investing Dimensional Fund will solicit voting instructions from its
shareholders as to how to vote on the underlying Dimensional Fund’s proposals.
Availability
of Proxy Voting Information and Recordkeeping
Each
Advisor will inform those clients for which it has voting authority how to
obtain information from the Advisor about how it voted with respect to client
securities. The Advisor will provide those clients with a summary of its proxy
voting guidelines, process and policies and will inform the clients how they can
obtain a copy of the complete Policy upon request. If an Advisor is registered
under the Advisers Act, the Advisor will also: (i) include such information
described in the preceding two sentences in Part 2A of
7
its
Form ADV and (ii) if and as required, seek to file on Form N-PX its proxy voting record in respect of
certain votes no later than August 31 of each year, for the twelve-month
period ending June 30 of the current year.
Recordkeeping
The
Advisors will also keep records of the following items: (i) their proxy
voting guidelines, policies and procedures and documentation of their annual
reviews of such guidelines, policies and procedures; (ii) proxy statements
received regarding client securities (unless such statements are available on
the SEC’s Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system);
(iii) records of votes they cast on behalf of clients, which may be maintained
by a Proxy Advisory Firm if it undertakes to provide copies of those records
promptly upon request; (iv) records of written client requests for proxy
voting information and an Advisor’s responses (whether a client’s request was
oral or in writing); (v) any documents prepared by an Advisor that were material
to making a decision how to vote, or that memorialized the basis for the
decision; (vi) a record of any testing conducted on any Proxy Advisory
Firm’s votes; and (vii) a copy of each version of the Proxy Advisory Firm’s
policies and procedures provided to the Advisors. The Advisors will maintain
these records in an easily accessible place for at least six years from the end of the fiscal year
during which the last entry was made on such records. For the first two years,
each Advisor will store such records at one of its principal offices.
Disclosure
by the Dimensional Investment Companies
Dimensional
shall disclose in the statements of additional information of the Dimensional
Investment Companies a summary of procedures which Dimensional uses to determine
how to vote proxies relating to portfolio securities of the Dimensional
Investment Companies. The disclosure will include a description of the
procedures used when a vote presents a conflict of interest between shareholders
and Dimensional, DFA Securities LLC (“DFAS”) or an affiliate of Dimensional or
DFAS.
The
semi-annual reports of the Dimensional Investment Companies shall indicate that
a description of the policies and procedures that the Dimensional Investment
Companies use in voting proxies of portfolio securities is available:
(i) without charge, upon request, by calling Dimensional collect; or
(ii) on the SEC’s website. Any requested description must be sent within
three business days by a prompt method of delivery.
Dimensional,
on behalf of each Dimensional Investment Company it advises, each applicable
Advisor, and as otherwise as required, shall file its proxy voting record with
the SEC on Form N-PX no later than
August 31 of each year, for the twelve-month period ending June 30 of
the current year. Such filings shall contain all information required to be
disclosed on Form N-PX by each
Dimensional Investment Company and each Advisor, as applicable.
8
Exhibit A
Summary of Proxy Voting Guidelines
General
Approach to Corporate Governance and Proxy Voting
When
voting (or refraining from voting) proxies, Dimensional4 seeks to act in the best
interests of the funds and accounts Dimensional manages and consistent with
applicable legal and fiduciary standards. Dimensional seeks to maximize
shareholder value subject to the standards of legal and regulatory regimes
(applicable to the Advisor or the client), listing requirements, corporate
governance and stewardship codes, and the investment or voting guidelines of the
fund or account. 5
Dimensional
expects the members of a portfolio company’s board to act in the interests of
their shareholders. Each portfolio company’s board should implement policies and
adopt practices that align the interests of the board and management with those
of its shareholders. Since a board’s main responsibility is to oversee
management and to manage and mitigate risk, it is important that board members
have the experience and skills to carry out that responsibility.
This
summary outlines Dimensional’s global approach to key proxy voting issues and
highlights particular considerations in specific markets.
Global
Evaluation Framework
Dimensional’s
Global Evaluation Framework sets out Dimensional’s general expectations for all
portfolio companies. When implementing the principles contained in Dimensional’s
Global Evaluation Framework in a given market, in addition to the relevant legal
and regulatory requirements, Dimensional will consider local market practices.
Additionally, for portfolio companies in the United States, Europe, the Middle
East, Africa, Japan, Australia and other select Asia markets, Dimensional will
apply the market-specific considerations contained in the relevant subsection in
these Guidelines.
Uncontested Director Elections
Dimensional
may vote against individual directors, committee members, or the full board of a
portfolio company, such as in the following situations:
1.
There are problematic audit-related practices;
2.
There are problematic compensation practices or persistent pay for performance
misalignment;
3.
There are problematic anti-takeover provisions;
4.
There have been material failures of governance, risk oversight, or fiduciary
responsibilities;
5.
The board has failed to adequately respond to shareholder concerns;
6.
The board has demonstrated a lack of accountability to shareholders;
7.
There is an ineffective board refreshment process6;
If
a director is a member of multiple boards of various portfolio companies, and
one of those boards has one of the issues listed in 1-7 above, Dimensional may vote against that
director with respect to the board of the portfolio company with the issue as
well as any other portfolio company boards.
| 4 |
“Dimensional”
refers to any of Dimensional Fund Advisors LP, Dimensional Fund Advisors
Ltd., DFA Australia Limited, Dimensional Ireland Limited, Dimensional Fund
Advisors Pte. Ltd. or Dimensional Japan Ltd. |
| 5 |
For
considerations in connection with ERISA-covered clients, see the Policy
and its references to requirements under ERISA. |
| 6 |
As
used in these guidelines “board refreshment process” means the method for
reviewing and establishing the composition of the board of the portfolio
company (e.g., assessments or self-evaluation, succession planning,
approach for searches for board members, criteria for qualification of
board members). |
A-1
Dimensional
also considers the following when voting on directors of portfolio companies:
1.
Board and committee independence;
2.
Director attendance: Dimensional generally expects directors to attend at least
75% of board and committee meetings;
3.
Director capacity to serve;
4.
Board composition.
Board Refreshment
An
effective board refreshment process for a portfolio company can include the
alignment of directors’ skills with business needs, assessment of individual
director performance and feedback, and a search process for new directors that
appropriately incorporates qualification criteria. Dimensional believes
information about a portfolio company’s assessment and refreshment process
should be disclosed and should generally include:
| |
• |
|
The
processes and procedures by which the portfolio company identifies the key
competencies that directors should possess in order to ensure the board is
able to appropriately oversee the risks and opportunities associated with
the portfolio company’s strategy and operations; |
| |
• |
|
How
the performance of individual directors and the board as a whole is
assessed; |
| |
• |
|
The
alignment between the skills and expertise of each board member and the
key competencies identified in the board assessment process;
|
| |
• |
|
Board
refreshment mechanisms; |
| |
• |
|
Director
recruitment policies and procedures; and |
| |
• |
|
The
extent to which diversity considerations are incorporated into board
assessment and refreshment practices and director recruitment policies.
|
In
evaluating a portfolio company’s refreshment process, Dimensional may consider,
among other information:
| |
• |
|
Whether
the portfolio company’s board assessment process meets market best
practices in terms of objectiveness, rigor, disclosure, and other
criteria; |
| |
• |
|
Whether
the portfolio company has any mechanisms to encourage board refreshment;
and |
| |
• |
|
Whether
the portfolio company has board entrenchment devices, such as a classified
board or plurality vote standard. |
An
additional consideration that may lead Dimensional to scrutinize the
effectiveness of a portfolio company’s board refreshment process is a lack of
gender, racial, or ethnic diversity on the board. In jurisdictions where gender,
racial, or ethnic representation on a board is not mandated by law, Dimensional
may consider whether a portfolio company seeks to follow market best practices
as the portfolio company nominates new directors and assesses the performance of
existing directors who have the diversity of backgrounds, experiences, and
skill-sets needed to effectively oversee management and manage risk.
If
Dimensional believes that a portfolio company’s board assessment and refreshment
process is not sufficiently rigorous, or if the portfolio company fails to
disclose adequate information for Dimensional to assess the rigor of the
process, Dimensional may vote against members of the Nominating Committee, or
other relevant directors.
Bundled/Slate Director Elections
Dimensional
generally opposes bundled director elections at portfolio companies; however, in
markets where individual director elections are not an established practice,
bundled elections are acceptable as long as the full list of candidates is
disclosed in a timely manner.
A-2
Contested Director Elections
In
the case of contested board elections at portfolio companies, Dimensional takes
a case-by-case approach. With the goal
of maximizing shareholder value, Dimensional considers the qualifications of the
nominees, the likelihood that each side can accomplish their stated plans, the
portfolio company’s corporate governance practices, and the incumbent board’s
history of responsiveness to shareholders.
Board Size
Dimensional
believes that portfolio company boards are responsible for determining an
appropriate size of the board of directors within the confines of relevant
corporate governance codes and best practice standards. However, Dimensional
will generally oppose proposals to alter board structure or size in the context
of a fight for control of the portfolio company or the board.
Auditors
Dimensional
will typically support the ratification of auditors unless there are concerns
with the auditor’s independence, the accuracy of the auditor’s report, the level
of non-audit fees, or if lack of
disclosure makes it difficult for us to assess these factors.
In
addition to voting against the ratification of the auditors, Dimensional may
also vote against or withhold votes from audit committee members at portfolio
companies in instances of fraud, material weakness, or significant financial
restatements.
Anti-Takeover Provisions
Dimensional
believes that the market for corporate control, which often results in
acquisitions which increase shareholder value, should be able to function
without undue restrictions. Takeover defenses such as shareholder rights plans
(poison pills) can lead to entrenchment of management and reduced accountability
at the board level. Dimensional will generally vote against the adoption of
anti-takeover provisions. Dimensional may vote against directors at portfolio
companies that adopt or maintain anti-takeover provisions without shareholder
approval post-initial public offering (“IPO”) or adopted such structures prior
to, or in connection with, an IPO. Dimensional may vote against such directors
not just at the portfolio company that adopted the anti-takeover provision, but
at all other portfolio company boards they serve on.
Related-Party Transactions
Related-party
transactions have played a significant role in several high-profile corporate
scandals and failures. Dimensional believes related-party transactions should be
minimized. When such transactions are determined to be fair to the portfolio
company and its shareholders in accordance with the portfolio company’s policies
and governing law, they should be thoroughly disclosed in public filings.
Amendments to Articles of
Association/Incorporation
Dimensional
expects the details of proposed amendments to articles of association or
incorporation, or similar portfolio company documents, to be clearly disclosed.
Dimensional will typically support such amendments that are routine in nature or
are required or prompted by regulatory changes. Dimensional may vote against
amendments that negatively impact shareholder rights or diminish board
oversight.
Equity Based Remuneration
Dimensional
supports the adoption of equity plans that align the interests of the portfolio
company board, management, and portfolio company employees with those of
shareholders.
Dimensional
will evaluate equity plans on a case-by-case basis, taking into
account the potential dilution to shareholders, the portfolio company’s
historical use of equity, and the particular plan features.
A-3
Executive Remuneration
Dimensional
supports remuneration for executives that is clearly linked to the portfolio
company’s performance. Remuneration should be designed to attract, retain and
appropriately motivate and serve as a means to align the interests of executives
with those of shareholders.
Dimensional
expects portfolio companies to structure executive compensation in a manner that
does not insulate management from the consequences of failures of risk oversight
and management. Dimensional typically supports clawback provisions in executive
compensation plans as a way to mitigate risk of excessive risk taking by
executives at portfolio companies.
Dimensional
supports remuneration plan metrics that are quantifiable and clearly tied to
company strategy and the creation of shareholder value. The use of standard
financial metrics, for example, metrics based on generally accepted accounting
principles (“GAAP”) or international financial reporting standards, when
determining executive pay is generally considered by Dimensional to be
preferable. The use of non-standard
metrics, including those involving large non-GAAP adjustments, result in less
transparency for investors and may lead to artificially high executive pay. In
evaluating a portfolio company’s executive compensation, Dimensional considers
whether the portfolio company is disclosing what each metric is intended to
capture, how performance is measured, what targets have been set, and
performance against those targets. While environmental and social (E&S)
issues may be material for shareholder value, Dimensional believes linking
E&S metrics to executive pay in a quantifiable and transparent manner can
present particular challenges. Dimensional will seek to focus on the rigor of
E&S metrics and will seek to scrutinize payouts made under these metrics,
particularly when there has been underperformance against other metrics tied to
financial performance or shareholder value.
To
the extent that remuneration is clearly excessive and not aligned with the
portfolio company’s performance or other factors, Dimensional would not support
such remuneration. Additionally, Dimensional expects portfolio companies to
strive to follow local market practices with regards to the specific elements of
remuneration and the overall structure of the remuneration plan.
Therefore,
Dimensional reviews proposals seeking approval of a portfolio company’s
executive remuneration plan closely, taking into account the quantum of pay,
portfolio company performance, and the structure of the plan.
Director Remuneration
Dimensional
will generally support director remuneration at portfolio companies that is
reasonable in both size and composition relative to industry and market norms.
Mergers & Acquisitions (M&A)
Dimensional’s
primary consideration in evaluating mergers and acquisitions is maximizing
shareholder value. Given that Dimensional believes market prices reflect future
expected cash flows, an important consideration is the price reaction to the
announcement, and the extent to which the deal represents a premium to the pre-announcement price. Dimensional will also
consider the strategic rationale, potential conflicts of interest, and the
possibility of competing offers.
Dimensional
may vote against deals where there are concerns with the acquisition process or
where there appear to be significant conflicts of interest.
Capitalization
Dimensional
will vote case-by-case on proposals related to
portfolio company share issuances, taking into account the purpose for which the
shares will be used, the risk to shareholders of not approving the request, and
the dilution to existing shareholders.
Unequal Voting Rights
Dimensional
opposes the creation of share structures that provide for unequal voting rights,
including dual class stock with unequal voting rights or mechanisms such as
loyalty shares that may skew economic ownership and voting rights within the
same class of shares, and will generally vote against proposals to create or
continue such structures. On a case-by-case basis, Dimensional may
also vote against directors at portfolio companies that adopt or maintain such
structures without shareholder approval post-IPO or adopted such structures prior to,
or in connection with, an IPO.
A-4
Say on Climate
Dimensional
will generally vote against management and shareholder proposals to introduce
say on climate votes, which propose that companies’ climate-risk management
plans are put to a recurring advisory shareholder vote. Dimensional believes
that strategic planning, including mitigation of climate-related risks and
oversight of opportunities presented by potential climate change is the
responsibility of the portfolio company board and should not be delegated or
transferred to shareholders. If a portfolio company’s climate-risk management
plan is put to a shareholder vote then Dimensional will generally vote against
the plan, regardless of the level of detail contained in the plan, to indicate
our opposition to the delegation of oversight implied by such votes If
Dimensional observes that a portfolio company board is failing to adequately
guard shareholder value through strategic planning, Dimensional may vote against
directors.
Shareholder Proposals
Dimensional’s
goal when voting on portfolio company shareholder proposals is to support those
proposals that protect or enhance shareholder value through improved board
accountability, improved policies and procedures, or improved disclosure.
When
evaluating environmental or social shareholder proposals, Dimensional will use
research to consider whether the proposal addresses a material issue to the
portfolio company, the portfolio company’s current handling of the issue (both
on an absolute basis and relative to market practices), the portfolio company’s
compliance with regulatory requirements, and the potential cost to the portfolio
company of implementing the proposal.
Virtual Meetings
Dimensional
does not oppose the use of virtual-only meetings if shareholders are provided
with the same rights and opportunities as available during a physical meeting,
including:
| |
• |
|
The
ability to see and hear portfolio company representatives;
|
| |
• |
|
The
ability to ask questions of portfolio company representatives; and
|
| |
• |
|
The
ability to see or hear questions submitted to portfolio company
representatives by other shareholders, including those questions not
answered by portfolio company representatives. |
Disclosure of Vote Results
Dimensional
expects detailed disclosure of voting results. In cases where vote results have
not been disclosed within a reasonable time frame, Dimensional may vote against
individual directors, committee members, or the full board of a portfolio
company.
Voting
Guidelines for Environmental and Social Matters
Dimensional
believes that portfolio company boards are responsible for addressing material
environmental and social risks within their duties. If a portfolio company is
unresponsive to environmental or social risks that may have material economic
ramifications for shareholders, Dimensional may vote against directors
individually, committee members, or the entire board. Dimensional may
communicate with portfolio companies to better understand the alignment of the
interests of boards and management with those of shareholders on these topics.
Dimensional
evaluates shareholder proposals on environmental or social issues by paying
particular attention to the portfolio company’s current handling of the issue,
current disclosures, the financial materiality of the issue, market practices,
and regulatory requirements. Dimensional may vote for proposals requesting
disclosure of specific environmental and social data, such as information about
board oversight, risk management policies and procedures, or performance against
a specific metric, if Dimensional believes that the portfolio company’s current
disclosure is inadequate to allow shareholders to effectively assess the
portfolio company’s handling of a material issue.
A-5
Evaluating
Disclosure of Material Environmental or Social Risks
Dimensional
generally believes that information about the oversight and mitigation of
material environmental or social risks should be disclosed by portfolio
companies. Dimensional generally expects the disclosure regarding oversight and
mitigation to include:
| |
• |
|
A
description of material risks. |
| |
• |
|
A
description of the process for identifying and prioritizing such risks and
how frequently it occurs. |
| |
• |
|
The
policies and procedures governing the handling of each material risk.
|
| |
• |
|
A
description of the management-level roles/groups involved in oversight and
mitigation of each material risk. |
| |
• |
|
A
description of the metrics used to assess the effectiveness of mitigating
each material risk, and the frequency at which performance against these
metrics is assessed. |
| |
• |
|
A
description of how the board is informed of material risks and the
progress against relevant metrics. |
In
certain instances where Dimensional determines that disclosure by a portfolio
company is insufficient for a shareholder to be able to adequately assess the
relevant risks facing a portfolio company, Dimensional may, on a case-by-case basis, vote against
individual directors, committee members, or the entire board, or may vote in
favor of related shareholder proposals consistent with Dimensional’s general
approach to such proposals.
Political and Lobbying Activities
Dimensional
expects boards of portfolio companies to exercise oversight of political and
lobbying-related expenditures and ensure that such spending is in line with
shareholder interests.
In
evaluating a portfolio company’s policies related to political and lobbying
expenditure, Dimensional expects the following practices:
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• |
|
The
board to adopt policies and procedures to oversee political and lobbying
expenditures; |
| |
• |
|
The
details of the board oversight, including the policies and procedures
governing such expenditures, to be disclosed publicly; and
|
| |
• |
|
That
board oversight of political and lobbying activities, such as spending,
should include ensuring that the portfolio company’s publicly stated
positions are in alignment with its related activities and spending.
|
Human Capital Management
Dimensional
expects boards of portfolio companies to exercise oversight of human capital
management issues. Dimensional expects portfolio companies to disclose
sufficient information for shareholders to understand the policies, procedures,
and personnel a portfolio company has in place to address issues related to
human capital management. This disclosure should include the portfolio company’s
human capital management goals in key areas, such as compensation, employee
health and wellness, employee training and development, and workforce
composition, as well as the metrics by which the portfolio company assesses
performance against these goals.
Climate-Related Risks
Dimensional
expects boards of portfolio companies to exercise oversight of climate-related
risks that may have a material impact on the portfolio company. Climate-related
risks may include physical risks from changing weather patterns and/or
transitional risks from changes in regulation or consumer preferences.
Dimensional expects portfolio companies to disclose information on their
handling of these risks, to the extent those risks may have a material impact on
the portfolio company. Disclosure should include:
| |
• |
|
The
specific risks identified. |
| |
• |
|
The
potential impact these risks could have on the portfolio company’s
business, operations, or strategy. |
A-6
| |
• |
|
Whether
the risks are overseen by a specific committee or the full board.
|
| |
• |
|
The
frequency with which the board or responsible board committee receives
updates on the risks and the types of information reviewed.
|
| |
• |
|
The
management-level roles/groups responsible for managing these risks.
|
| |
• |
|
The
metrics used to assess the handling of these risks, how they are
calculated, and the reason for their selection, particularly when the
metrics recommended by a recognized third-party framework, such as Task
Force for Climate-related Financial Disclosures (TCFD) or Sustainability
Accounting Standards Board (SASB), are not being used.
|
| |
• |
|
Targets
used by the portfolio company to manage climate-related risks and
performance against those targets. |
Human Rights
Dimensional
expects portfolio company boards to exercise oversight of human rights issues
that could pose a material risk to the business, including forced labor, child
labor, privacy, freedom of expression, and land and water rights. Dimensional
expects portfolio companies to disclose information on their handling of these
risks, to the extent those risks may have a material impact on the portfolio
company. Disclosure should include:
| |
• |
|
The
specific risks identified |
| |
• |
|
The
potential impact these risks could have on the portfolio company’s
business, operations, or strategy |
| |
• |
|
Whether
the risks are overseen by a specific committee or the full board
|
| |
• |
|
The
frequency with which the board or responsible board committee receives
updates on the risks and the types of information reviewed
|
| |
• |
|
Details
on how the portfolio company monitors human rights throughout the
organization and supply chain, including the scope and frequency of audits
and how instances of non-compliance are resolved
|
| |
• |
|
The
policies governing human rights throughout the organization and supply
chain and the extent to which the policy aligns with recognized global
frameworks such as the UN’s Guiding Principles on Human Rights and the
OECD’s Guidelines for Multinational Enterprises |
| |
• |
|
Details
of violations of the policy and corrective action taken
|
Cybersecurity
Dimensional
expects portfolio company boards to exercise oversight of cybersecurity issues
that could pose a material risk to the business. Dimensional expects portfolio
companies to disclose information on their handling of these risks, to the
extent those risks may have a material impact on the portfolio company.
Disclosure should include:
| |
• |
|
Policies
and procedures to manage cybersecurity risk and identify cybersecurity
incidents |
| |
• |
|
The
role of management in implementing cybersecurity policies and procedures
|
| |
• |
|
The
role of the board in overseeing cybersecurity risk and the process by
which the board is informed of incidents. |
| |
• |
|
Material
cybersecurity incidents and remedial actions taken.
|
Evaluation
Framework for U.S. Listed Companies
Director Elections:
Uncontested Director Elections
Shareholders
elect the board of a portfolio company to represent their interests and oversee
management and expect boards to adopt policies and practices that align the
interests of the board and management with those of shareholders and limit the
potential for conflicts of interest.
A-7
One
of the most important measures aimed at ensuring that portfolio company
shareholders’ interests are represented is an independent board of directors,
made up of individuals with the diversity of backgrounds, experiences, and
skill-sets needed to effectively oversee management and manage risk. Dimensional
expects portfolio company boards to be majority independent and key committees
to be fully independent.
Dimensional
believes shareholders should have a say in who represents their interests and
portfolio companies should be responsive to shareholder concerns. Dimensional
may vote against or withhold votes from individual directors, committee members,
or the full board, and may also vote against such directors when they serve on
other portfolio company boards, in the following situations:
| |
• |
|
The
continued service of directors who failed to receive the support of a
majority of shareholders (regardless of whether the portfolio company uses
a majority or plurality vote standard). |
| |
• |
|
Failure
to adequately respond to majority-supported shareholder proposals.
|
Contested Director Elections
In
the case of contested board elections at portfolio companies, Dimensional takes
a case-by-case approach. With the goal
of maximizing shareholder value, Dimensional considers the qualifications of the
nominees, the likelihood that each side can accomplish their stated plans, the
portfolio company’s corporate governance practices, the incumbent board’s
history of responsiveness to shareholders, and the market’s reaction to the
contest.
Board Structure and Composition:
Age and Term Limits
Dimensional
believes it is the responsibility of a portfolio company’s nominating committee
to ensure that the portfolio company’s board of directors is composed of
individuals with the skills needed to effectively oversee management and will
generally oppose proposals seeking to impose age or term limits for directors.
That
said, portfolio companies should clearly disclose their director evaluation and
board refreshment policies in their proxy. Lack of healthy turnover on the board
of a portfolio company or lack of observable diversity on a portfolio company
board may lead Dimensional to scrutinize the rigor of a portfolio company’s
board refreshment process.
CEO/Chair
Dimensional
believes that the portfolio company boards are responsible for determining
whether the separation of roles is appropriate and adequately protects the
interests of shareholders.
At
portfolio companies with a combined CEO/Chair, Dimensional expects the board to
appoint a lead independent director with specific responsibilities, including
the setting of meeting agendas, to seek to ensure the board is able to act
independently.
Recent
environmental, social, and governance controversies resulting from inadequate
board oversight may be taken into account when voting on shareholder proposals
seeking the separation of the roles of CEO and Chair at a portfolio company.
Governance Practices:
Classified Boards
Dimensional
believes director votes are an important mechanism to increase board
accountability to shareholders. Dimensional therefore advocates for boards at
portfolio companies to give shareholders the right to vote on the entire slate
of directors on an annual basis.
A-8
Dimensional
will generally support proposals to declassify existing boards at portfolio
companies and will generally oppose efforts by portfolio companies to adopt
classified board structures, in which only part of the board is elected each
year.
Dimensional
will generally vote against or withhold votes from incumbent directors at
portfolio companies that adopt a classified board without shareholder approval.
Dimensional may also vote against or withhold votes from directors at portfolio
companies that adopt classified boards prior to or in connection with an IPO,
unless accompanied by a reasonable sunset provision.
Dual Classes of Stock
Dual
class share structures are generally seen as detrimental to shareholder rights,
as they are accompanied by unequal voting rights. Dimensional believes in the
principle of one share, one vote.
Dimensional
opposes the creation of dual-class share structures with unequal voting rights
at portfolio companies and will generally vote against proposals to create or
continue dual-class capital structures.
Dimensional
will generally vote against or withhold votes from directors at portfolio
companies that adopt a dual-class structure without shareholder approval after
the portfolio company’s IPO. Dimensional will generally vote against or withhold
votes from directors for implementation of a dual-class structure prior to or in
connection with an IPO, unless accompanied by a reasonable sunset provision.
Supermajority Vote Requirements
Dimensional
believes that the affirmative vote of a majority of shareholders of a portfolio
company should be sufficient to approve items such as bylaw amendments and
mergers. Dimensional will generally vote against proposals seeking to implement
a supermajority vote requirement and for shareholder proposals seeking the
adoption of a majority vote standard.
Dimensional
will generally vote against or withhold votes from incumbent directors at
portfolio companies that adopt a supermajority vote requirement without
shareholder approval. Dimensional may also vote against or withhold votes from
directors at portfolio companies that adopt supermajority vote requirements
prior to or in connection with an IPO, unless accompanied by a reasonable sunset
provision.
Shareholder Rights Plans (Poison Pills)
Dimensional
generally opposes poison pills. As a result, Dimensional may vote against the
adoption of a pill and all directors at a portfolio company that put a pill in
place without first obtaining shareholder approval. Votes against (or withheld
votes from) directors may extend beyond the portfolio company that adopted the
pill, to all boards the directors serve on. In considering a poison pill for
approval, Dimensional may take into account the existence of ‘qualified offer’
and other shareholder-friendly provisions.
For
pills designed to protect net operating losses, Dimensional may take into
consideration a variety of factors, including but not limited to the size of the
available operating losses and the likelihood that they will be utilized to
offset gains.
Cumulative Voting
Under
cumulative voting, each shareholder is entitled to the number of his or her
shares multiplied by the number of directors to be elected. Shareholders have
the flexibility to allocate their votes among directors in the proportion they
see fit, including casting all their votes for one director. This is
particularly impactful in the election of dissident candidates to the board in
the event of a proxy contest.
Dimensional
will typically support proposals that provide for cumulative voting and against
proposals to eliminate cumulative voting unless the portfolio company has
demonstrated that there are adequate safeguards in place, such as proxy access
and majority voting.
A-9
Majority Voting
For
the election of directors, portfolio companies may adopt either a majority or
plurality vote standard. In a plurality vote standard, the directors with the
most votes are elected. If the number of directors up for election is equal to
the number of board seats, each director only needs to receive one vote in order
to be elected. In a majority vote standard, in order to be elected, a director
must receive the support of a majority of shares voted or present at the
meeting.
Dimensional
supports a majority (rather than plurality) voting standard for uncontested
director elections at portfolio companies. The majority vote standard should be
accompanied by a director resignation policy to address failed elections.
To
account for contested director elections, portfolio companies with a majority
vote standard should include a carve-out for plurality voting in situations
where there are more nominees than seats.
Right to Call Meetings and Act by Written
Consent
Dimensional
will generally support the right of shareholders to call special meetings of a
portfolio company board (if they own 25% of shares outstanding) and take action
by written consent.
Proxy Access
Dimensional
will typically support management and shareholder proposals for proxy access
that allow a shareholder (or group of shareholders) holding three percent of
voting power for three years to nominate up to 25 percent of a portfolio
company board. Dimensional will typically vote against proposals that are more
restrictive than these guidelines.
Amend Bylaws/Charters
Dimensional
believes that shareholders should have the right to amend a portfolio company’s
bylaws. Dimensional will generally vote against or withhold votes from incumbent
directors at portfolio companies that place substantial restrictions on
shareholders’ ability to amend bylaws through excessive ownership requirements
for submitting proposals or restrictions on the types of issues that can be
amended.
Exclusive Forum
Dimensional
is generally supportive of management proposals at portfolio companies to adopt
an exclusive forum for shareholder litigation.
Indemnification and Exculpation of Directors
and Officers
Dimensional
intends to evaluate proposals seeking to enact or expand indemnification or
exculpation provisions on a case-by-case basis considering board
rationale and specific provisions being proposed.
Advance Notice Provisions
Portfolio
company bylaw amendments known as “advance notice provisions” set out the steps
shareholders must follow when submitting an item for inclusion on the agenda of
a shareholder meeting. These provisions may serve as an entrenchment device that
can result in reduced accountability at the board level in cases where they
impose onerous requirements on shareholders wishing to submit a nominee for the
board of directors. When evaluating advanced notice provisions, whether for the
submission of a shareholder candidate or the submission of other permissible
proposals, Dimensional generally does not support provisions that:
| |
• |
|
Require
shareholder-nominated candidates to disclose information that is not
required for new board-nominated candidates |
| |
• |
|
Impose
unduly burdensome disclosure requirements on shareholder proponents
|
| |
• |
|
Significantly
limit the time period shareholders have to submit proposals or nominees
|
Dimensional
may vote against or withhold votes from directors who adopt such provisions
without shareholder approval.
A-10
Executive and Director Compensation:
Equity-Based Compensation
Dimensional
supports the adoption of equity plans that align the interests of portfolio
company board, management, and portfolio company employees with those of
shareholders.
Dimensional
will evaluate equity plans on a case-by-case basis, taking into
account the potential dilution to shareholders, the portfolio company’s
historical use of equity, and the particular plan features.
Dimensional
will typically vote against plans that have features that have a negative impact
on shareholders of portfolio companies. Such features include single-trigger or
discretionary vesting, an overly broad definition of change in control, a lack
of minimum vesting periods for grants, evergreen provisions, and the ability to
reprice shares without shareholder approval.
Dimensional
may also vote against equity plans if problematic equity grant practices have
contributed to a pay for performance misalignment at the portfolio company.
Employee Stock Purchase Plans
Dimensional
will generally support qualified employee stock purchase plans (as defined by
Section 423 of the Internal Revenue Code), provided that the purchase price
is no less than 85 percent of market value, the number of shares reserved
for the plan is no more than ten percent of outstanding shares, and the offering
period is no more than 27 months.
Advisory Votes on Executive Compensation (Say
on Pay)
Dimensional
supports reasonable compensation for executives that is clearly linked to the
portfolio company’s performance. Compensation should serve as a means to align
the interests of executives with those of shareholders. To the extent that
compensation is excessive, it represents a transfer to management of shareholder
wealth. Therefore, Dimensional reviews proposals seeking approval of a portfolio
company’s executive compensation plan closely, taking into account the quantum
of pay, portfolio company performance, and the structure of the plan.
Certain
practices, such as:
| |
• |
|
multi-year
guaranteed bonuses |
| |
• |
|
excessive
severance agreements (particularly those that vest without involuntary job
loss or diminution of duties or those with excise-tax gross-ups) |
| |
• |
|
single,
or the same, metrics used for both short-term and long-term executive
compensation plans |
may
encourage excessive risk-taking by executives at portfolio companies and are
generally opposed by Dimensional.
At
portfolio companies that have a history of problematic pay practices or
excessive compensation, Dimensional will consider the portfolio company’s
responsiveness to shareholders’ concerns and may vote against or withhold votes
from members of the compensation committee if these concerns have not been
addressed.
Frequency of Say on Pay
Executive
compensation in the United States is typically composed of three parts: 1) base
salary; 2) cash bonuses based on annual performance (short-term incentive
awards); 3) and equity awards based on performance over a multi-year period
(long-term incentive awards).
Dimensional
supports triennial say on pay because it allows for a longer-term assessment of
whether compensation was adequately linked to portfolio company performance.
This is particularly important in situations where a portfolio company makes
significant changes to their long-term incentive awards, as the effectiveness of
such changes in aligning pay and performance cannot be determined in a single
year.
If
there are serious concerns about a portfolio company’s compensation plan in a
year where the plan is not on the ballot, Dimensional may vote against or
withhold votes from members of the Compensation Committee.
A-11
Executive Severance Agreements (Golden
Parachutes)
Dimensional
analyzes golden parachute proposals on a case-by-case basis.
Dimensional
expects payments to be reasonable on both an absolute basis and relative to the
value of the transaction. Dimensional will typically vote against agreements
with cash severance of more than 3x salary and bonus.
Dimensional
expects vesting of equity to be contingent on both a change in control and a
subsequent involuntary termination of the employee (“double-trigger change in
control”).
Corporate Actions:
Reincorporation
Dimensional
will evaluate reincorporation proposals on a case-by-case basis.
Dimensional
may vote against reincorporations if the move would result in a substantial
diminution of shareholder rights at the portfolio company.
Capitalization:
Increase Authorized Shares
Dimensional
will vote case-by-case on proposals seeking to
increase common or preferred stock of a portfolio company, taking into account
the purpose for which the shares will be used and the risk to shareholders of
not approving the request.
Dimensional
will typically vote against requests for common or preferred stock issuances
that are excessively dilutive relative to common market practice.
Dimensional
will typically vote against proposals at portfolio companies with multiple share
classes to increase the number of shares of the class with superior voting
rights.
Blank Check Preferred Stock
Blank
check preferred stock is stock that can be issued at the discretion of the
board, with the voting, conversion, distribution, and other rights determined by
the board at the time of issue. Therefore, blank check preferred stock can
potentially serve as means to entrench management and prevent takeovers at
portfolio companies.
To
mitigate concerns regarding what Dimensional believes is the inappropriate use
of blank check preferred stock, Dimensional expects portfolio companies seeking
approval for blank preferred stock to clearly state that the shares will not be
used for anti-takeover purposes.
Share Repurchases
Dimensional
will generally support open-market share repurchase plans that allow all
shareholders to participate on equal terms. Portfolio companies that use metrics
such as earnings per share (EPS) in their executive compensation plans should
ensure that the impact of such repurchases are taken into account when
determining payouts.
Shareholder Proposals:
Dimensional’s
goal when voting on portfolio company shareholder proposals is to support those
proposals that protect or enhance shareholder value through improved board
accountability, improved policies and procedures, or improved disclosure.
A-12
When
evaluating environmental or social shareholder proposals, Dimensional will use
research to consider whether the proposal addresses a material issue to the
portfolio company, the portfolio company’s current handling of the issue (both
on an absolute basis and relative to market practices), the portfolio company’s
compliance with regulatory requirements, and the potential cost to the portfolio
company of implementing the proposal.
In
instances where a shareholder proposal is excluded from the meeting agenda but
the SEC has declined to state a view on whether such proposal can be excluded,
Dimensional expects the portfolio company to provide shareholders with
substantive disclosure concerning this exclusion. If substantive disclosure is
lacking, Dimensional may vote against or withhold votes from certain directors
on a case-by-case basis.
Evaluation
Framework for Europe, the Middle East, and Africa (EMEA) Listed Companies
Continental Europe:
Director Election Guidelines
| |
• |
|
Portfolio
company boards should be majority independent (excluding shareholder or
employee representatives as provided by law); however, lower
levels of board independence may be acceptable in
controlled companies and in those markets where local best
practice indicates that at least one-third of the board be
independent. |
| |
• |
|
A
majority of audit and remuneration committee members (excluding
shareholder or employee representatives as provided by law) should be
independent; the committees overall should be at least one-third
independent. |
| |
• |
|
Executives
should generally not serve on audit and remuneration committees.
|
| |
• |
|
The
CEO and board chair roles should generally be separate.
|
Remuneration Guidelines
Dimensional
expects annual remuneration reports published by portfolio companies pursuant to
the Shareholder Rights Directive II to disclose, at a minimum:
| |
• |
|
The
amount paid to executives; |
| |
• |
|
Alignment
between pay and performance; |
| |
• |
|
The
targets used for variable incentive plans and the ex-post levels achieved; and
|
| |
• |
|
The
rationale for any discretion applied. |
Other Market Specific Guidelines for
Continental Europe
| |
• |
|
In Austria,
Germany, and the Netherlands, Dimensional will generally vote against the
appointment of a former CEO as chairman of the board of directors or
supervisory board of a portfolio company. |
United Kingdom & Ireland:
Dimensional
expects portfolio companies to follow the requirements of the UK Corporate
Governance Code with regards to board and committee composition. When evaluating
portfolio company boards Dimensional will also consider the recommendations of
the FTSE Women Leaders and Parker Reviews with regards to female and minority
representation on the board.
Dimensional
also expects companies to align their remuneration with the requirements of the
UK Corporate Governance Code and to consider best practices such as those set
forth in the Investment Association Principles of Remuneration.
A-13
South Africa:
Dimensional
expects portfolio companies to follow the recommendations of the King Report on
Corporate Governance (King Code IV) with regards to board and committee
composition.
Turkey:
Dimensional
expects the board of directors of a portfolio company to be at least one-third independent; at minimum two
directors should be independent.
Dimensional
expects the board of a portfolio company to establish an independent audit
committee.
Dimensional
expects the board of a portfolio company to establish a board committee with
responsibility for compensation and nominating matters. This committee should be
chaired by an independent director.
Framework
for Evaluating Australia-Listed Companies
Uncontested Director Elections
Shareholders
elect the board of a portfolio company to represent their interests and oversee
management and expect portfolio company boards to adopt policies and practices
that align the interests of the board and management with those of shareholders
and limit the potential for conflicts of interest.
One
of the most important measures aimed at ensuring that portfolio company
shareholders’ interests are represented is an independent board of directors,
made up of individuals with the diversity of backgrounds, experiences, and
skill-sets needed to effectively oversee management and manage risk. Dimensional
expects portfolio company boards to be majority independent.
Dimensional
believes that key audit and remuneration committees should be composed of
independent directors. Dimensional will generally vote against executive
directors of the portfolio company who serve on the audit committee or who serve
on the remuneration committee if the remuneration committee is not majority
independent.
Dimensional
will consider the ASX Corporate Governance Council Principles and
Recommendations (the “ASX Principles and Recommendations”) with regards to
female representation on the board when voting on directors.
CEO/Chair
Dimensional
expects portfolio companies to follow the ASX Corporate Governance Council
Principles and Recommendations and generally separate the CEO and board chair
roles, with the board chair being an independent director.
Auditors
Australian
law does not require the annual ratification of auditors; therefore, concerns
with a portfolio company’s audit practices will be reflected in votes against
members of the audit committee.
Dimensional
may vote against audit committee members at a portfolio company if there are
concerns with the auditor’s independence, the accuracy of the auditor’s report,
the level of non-audit fees, or if lack
of disclosure makes it difficult to assess these factors.
Dimensional
may also vote against audit committee members in instances of fraud or material
failures in oversight of audit functions.
Share Issuances
Dimensional
will evaluate requests for share issuances on a case-by-case basis, taking into
account factors such as the impact on current shareholders and the rationale for
the request.
When
voting on approval of prior share distributions, Dimensional will generally
support prior issuances that conform to the dilution guidelines set out in ASX
Listing Rule 7.1.
A-14
Share Repurchase
Dimensional
will evaluate requests for share repurchases on a case-by-case basis, taking into
account factors such as the impact on current shareholders, the rationale for
the request, and the portfolio company’s history of repurchases. Dimensional
expects repurchases to be made in arms-length transactions using independent
third parties.
Dimensional
may vote against portfolio company plans that do not include limitations on the
portfolio company’s ability to use the plan to repurchase shares from third
parties at a premium and limitations on the use of share purchases as an
anti-takeover device.
Constitution Amendments
Dimensional
will evaluate requests for amendments to a portfolio company’s constitution on a
case-by-case basis. The primary
consideration will be the impact on the rights of shareholders.
Non-Executive Director Remuneration
Dimensional
will support non-executive director
remuneration at portfolio companies that is reasonable in both size and
composition relative to industry and market norms.
Dimensional
will generally vote against components of non-executive director remuneration that are
likely to impair a director’s independence, such as options or performance-based
remuneration.
Equity-Based Remuneration
Dimensional
supports the adoption of equity plans that align the interests of the portfolio
company board, management, and portfolio company employees with those of
shareholders.
Companies
should clearly disclose components of the plan, including vesting periods and
performance hurdles.
Dimensional
may vote against plans that are exceedingly dilutive to existing shareholders.
Plans that permit retesting or repricing will generally be viewed unfavorably.
Framework
for Evaluating Japan-Listed Securities
Uncontested Director Elections
Shareholders
elect the board of a portfolio company to represent their interests and oversee
management and expect portfolio company boards to adopt policies and practices
that align the interests of the board and management with those of shareholders
and limit the potential for conflicts of interest.
One
of the most important measures aimed at ensuring that portfolio company
shareholders’ interests are represented is an independent board of directors,
made up of individuals with the diversity of backgrounds, experiences, and skill
sets needed to effectively oversee management and manage risk. With respect to
gender diversity, Dimensional may consider local market practice, including
requirements under the Japan Corporate Governance Code, and may vote against
directors if the board does not meet established market norms.
At
portfolio companies with a three-committee structure, Dimensional expects at
least one-third of the board to be
outsiders. Ideally, the board should be majority independent. At portfolio
companies with a three-committee structure that have a controlling shareholder,
at least two directors and at least one-third of the board should be independent
outsiders.
At
portfolio companies with an audit committee structure, Dimensional expects at
least one-third of the board to be
outsiders. Ideally, the audit committee should be entirely independent; at
minimum, any outside directors who serve on the committee should be independent.
At portfolio companies with an audit committee structure that have a controlling
shareholder, at least two directors and at least one-third of the board should be independent
outsiders.
A-15
At
portfolio companies with a statutory auditor structure, Dimensional expects at
least two directors and at least one-third of the board to be outsiders. At
portfolio companies with a statutory auditor structure that have a controlling
shareholder, at least two directors and at least one-third of the board should be independent
outsiders.
Statutory Auditors
Statutory
auditors are responsible for effectively overseeing management and ensuring that
decisions made are in the best interest of shareholders. Dimensional may vote
against statutory auditors who are remiss in their responsibilities.
When
voting on outside statutory auditors, Dimensional expects nominees to be
independent and to have the capacity to fulfill the requirements of their role
as evidenced by attendance at meetings of the board of directors or board of
statutory auditors.
Director and Statutory Auditor Compensation
Dimensional
will support compensation for portfolio company directors and statutory auditors
that is reasonable in both size and composition relative to industry and market
norms.
When
requesting an increase to the level of director fees, Dimensional expects
portfolio companies to provide a specific reason for the increase. Dimensional
will generally support an increase of director fees if it is in conjunction with
the introduction of performance-based compensation, or where the ceiling for
performance-based compensation is being increased. Dimensional will generally
not support an increase in director fees if there is evidence that the directors
have been remiss in effectively overseeing management or ensuring that decisions
made are in the best interest of shareholders.
Dimensional
will typically support an increase to the statutory auditor compensation ceiling
unless there is evidence that the statutory auditors have been remiss in
effectively overseeing management or ensuring that decisions made are in the
best interest of shareholders.
Dimensional
will generally support the granting of annual bonuses to portfolio company
directors and statutory auditors unless there is evidence the board or the
statutory auditors have been remiss in effectively overseeing management or
ensuring that decisions made are in the best interest of shareholders.
Dimensional
generally supports the granting of retirement benefits to portfolio company
insiders, so long as the individual payments, and aggregate amount of such
payments, is disclosed.
Dimensional
will generally vote against the granting of retirement bonuses if there is
evidence the portfolio company board or statutory auditors have been remiss in
effectively overseeing management or ensuring that decisions made are in the
best interest of shareholders.
Equity Based Compensation
Dimensional
supports the adoption of equity plans that align the interests of the portfolio
company board, management, and portfolio company employees with those of
shareholders.
Dimensional
will typically support stock option plans to portfolio company executives and
employees if total dilution from the proposed plans and previous plans does not
exceed 5 percent for mature companies or 10 percent for growth
companies.
Dimensional
will generally vote against stock plans if upper limit of options that can be
issued per year is not disclosed.
For
deep-discounted stock option plans, Dimensional typically expects portfolio
companies to disclose specific performance hurdles.
A-16
Capital Allocation
Dimensional
will typically support well-justified dividend payouts that do not negatively
impact the portfolio company’s overall financial health.
Share Repurchase
Dimensional
is typically supportive of portfolio company boards having discretion over share
repurchases absent concerns with the portfolio company’s balance sheet
management, capital efficiency, buyback and dividend payout history, board
composition, or shareholding structure.
Dimensional
will typically support proposed repurchases that do not have a negative impact
on shareholder value.
For
repurchases of more than 10 percent of issue share capital, Dimensional
expects the portfolio company to provide a robust explanation for the request.
Cross-Shareholding
Dimensional
generally believes that portfolio companies should not allocate significant
portions of their net assets to investments in companies for non-investment purposes. For example, in
order to strengthen relationships with customers, suppliers, or borrowers. Such
cross-shareholding, whether unilateral or reciprocal, can compromise director
independence, entrench management, and reduce director accountability to
uninterested shareholders. Dimensional may vote against certain directors at
companies with excessive cross-shareholdings.
Shareholder Rights Plans (Poison Pills)
Dimensional
believes the market for corporate control, which can result in acquisitions that
are accretive to shareholders, should be able to function without undue
restrictions. Takeover defenses such as poison pills can lead to entrenchment
and reduced accountability at the board level.
Indemnification and Limitations on Liability
Dimensional
generally supports limitations on liability for directors and statutory auditors
in ordinary circumstances.
Limit Legal Liability of External Auditors
Dimensional
generally opposes limitations on the liability of external auditors.
Increase in Authorized Capital
Dimensional
will typically support requests for increases of less than 100 percent of
currently authorized capital, so long as the increase does not leave the
portfolio company with less than 30 percent of the proposed authorized
capital outstanding.
For
increases that exceed these guidelines, Dimensional expects portfolio companies
to provide a robust explanation for the increase.
Dimensional
will generally not support requests for increases that will be used as an
anti-takeover device.
Expansion of Business Activities
For
well performing portfolio companies seeking to expand their business into
enterprises related to their core business, Dimensional will typically support
management requests to amend the portfolio company’s articles to expand the
portfolio company’s business activities.
A-17
Framework
for Evaluating Securities in Other Select Asian Markets
Uncontested Director Elections
Dimensional
expects portfolio companies to disclose biographical information about director
candidates sufficient for shareholders to assess the candidate’s independence
and suitability for board service.
Dimensional
expects that portfolio companies will at a minimum meet mandated regulatory or
listing standards levels for board independence but should work towards meeting
the applicable requirements of the relevant Corporate Governance code.
Dimensional
maintains the following expectations for board independence at portfolio
companies. The calculation of the level of independence will generally exclude
shareholder or employee representatives as provided by law.
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All
boards of directors of Malaysian portfolio companies should be at least
33% independent. Boards of directors of Malaysian “Large Companies” as
defined by the Securities Commission Malaysia should be majority
independent. |
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Boards
of directors of Indian and Singaporean portfolio companies should be at
least 50% independent if the board chair is not independent. If the board
chair is independent, the board of directors should be at least 33%
independent. |
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Boards
of directors of Thai, Filipino, Hong Kong and mainland Chinese portfolio
companies should be at least 33% independent. |
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Boards
of directors of Taiwanese portfolio companies should have no fewer than
two independent directors and no less than 20% independence.
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Boards
of Commissioners of Indonesian portfolio companies should be at least 30%
independent, except for banks, insurance companies, and financial
institutions which should be 50% independent. |
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Boards
of directors of South Korean portfolio companies should be at least 25%
independent. The board of directors of Large Companies, as defined by the
Commercial Act of South Korea, should be majority independent.
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Director Remuneration
In
most Asian markets, director remuneration generally consists of both fees and
bonuses.
Dimensional
will generally support the payment of fees for serving as a director, fees for
attending meetings, and other market-permitted remuneration if the size of such
fees and other director remuneration is reasonable relative to industry and
market norms.
In
the absence of specific proposals to approve director remuneration (including
fees and bonuses), Dimensional may vote against the directors who receive such
remuneration if concerns are identified.
Equity Based Remuneration
In
most Asian markets, equity plans are developed and presented for shareholder
approval as part of employee remuneration. Equity plans may consist of stock
options, restricted shares, or performance shares.
When
voting on stock-option plans, restricted share plans, and performance share
plans, Dimensional will consider the extent to which the plan is performance
based, the length of performance and vesting periods, and the treatment of
equity upon a change in control.
For
stock-option plans, if the plan provides for a discount to the market price,
Dimensional will consider the reasonableness and rationale for such a discount
in light of local market standards.
In
instances where Dimensional has identified concerns with a portfolio company’s
equity plan or equity granting practices, Dimensional will generally oppose the
extension of the plan to subsidiary or associate companies.
A-18
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December 2023 |
INTRODUCTION
As
a U.S. registered investment adviser with the Securities and Exchange Commission
and a fiduciary to its clients, GW&K Investment Management, LLC (“GW&K”
or “Firm”) has implemented this Proxy Voting Policy to establish and maintain
internal controls and procedures governing the Firm’s voting of proxies on
behalf of client accounts. To assist in the process, GW&K leverages
recognized third-party service providers to facilitate the Firm’s proxy voting
process.
I.
Proxy Guidelines, Voting Advice and
Agent
GW&K
utilizes proxy voting guidelines developed by Glass Lewis & Co. (“Glass
Lewis”), an independent third-party proxy voting advisory firm, which provides
GW&K recommendations on ballot items for securities held in client accounts.
Proxies are voted on behalf of those GW&K clients, who have delegated proxy
voting authority to GW&K. GW&K generally adopts Glass Lewis’ “Investment
Manager Policy” guidelines for client accounts but also may, depending on the
circumstances of a client account, apply other Glass Lewis proxy voting thematic
voting guidelines; including, Glass Lewis’ ESG Policy guidelines, Taft Hartley
Policy guidelines, and Catholic Policy guidelines. GW&K reserves the right
to cast votes contrary to Glass Lewis guidelines if the Firm believes it to be
in the best interest of its clients.
GW&K
has also contracted with Broadridge Investor Communication Solutions, Inc.
(“Broadridge”), an independent third-party proxy voting agent, to act as proxy
voting agent and to provide certain proxy voting services to GW&K and its
clients. Together, Glass Lewis and Broadridge assist GW&K with various proxy
related process components including:
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In-depth proxy research;
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Process
and vote proxies in connection with securities held by GW&K clients;
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Maintain
appropriate records of proxy statements, research, and recommendations;
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Maintain
appropriate records of proxy votes cast on behalf of GW&K clients;
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Proxy
related administrative functions. |
II.
Responsibility and Oversight
GW&K
is responsible for maintaining and administering these policies and procedures.
GW&K will:
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Annually
review the adequacy of these policies and procedures as well as the
effectiveness of its proxy voting agent; |
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Annually
review Glass Lewis’s proxy voting guidelines to ensure they are
appropriately designed to meet the best interests of GW&K clients;
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Provide
clients, upon written request, these proxy voting policy and procedures,
and information about how proxies were voted on their behalf;
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Conduct
regular reconciliations with client’s custodian banks to confirm the
appropriate number of votes cast on behalf of clients when GW&K has
been delegated proxy voting authority, with the understanding that an
exact reconciliation of proxy votes for every share may not be feasible
through the various custodians, third party investment platforms and other
third parties involved in this process; |
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Conduct
a periodic review, no less often than annually, of proxy voting records to
ensure that proxies are voted in accordance with adopted guidelines; and
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Annually
review proxy voting records to ensure that records of proxy statements,
research, recommendations, and proxy votes are properly maintained by its
proxy voting agent. |
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December 2023 |
III.
Conflicts of Interest
In
adopting Glass Lewis’s proxy voting guidelines, GW&K seeks to remove
potential conflicts of interest that could otherwise potentially influence the
proxy voting process. In situations where Broadridge and/or Glass Lewis has a
potential conflict of interest with respect to a proxy it is overseeing on
behalf of GW&K’s clients, Broadridge and/or Glass Lewis is obligated to
fully or partially abstain from voting the ballot as applicable and notify
GW&K. GW&K’s Proxy Committee will convene and provide the voting
recommendation after discussion with applicable GW&K investment
professionals and a review of the measures involved. Similarly, in instances
where GW&K becomes aware of a potential conflict of interest pertaining to a
proxy vote for a security held in the client’s account, or where a client
otherwise makes a request pertaining a specific proxy vote, GW&K’s
investment management professionals will provide the voting recommendation after
reviewing relevant facts and circumstances.
In
regard to ERISA plans invested in certain GW&K commingled vehicles (e.g.,
GW&K’s private funds, collective investment trusts), GW&K has a
responsibility to vote proxies in accordance with GW&K’s Proxy Voting Policy
and in a manner that does not conflict with an ERISA plan’s Investment Policy
Statement. To avoid such conflicts, GW&K makes its Proxy Voting Policy
available to its ERISA plan clients, as applicable, to provide the Plan
fiduciaries the ability to assess potential conflicts of interest with
GW&K’s Proxy Voting Policy and the ERISA plan. In the event a conflict is
identified to GW&K by an ERISA plan fiduciary, GW&K will work with the
plan to mitigate the identified conflict(s).
Voting of Measures Outside of or Contrary to Glass
Lewis & Co. Recommendations
In
instances when a proxy ballot item does not fall within the Glass Lewis
guidelines or where GW&K determines that voting in accordance with the Glass
Lewis recommendation is not advisable or consistent with GW&K’s fiduciary
duty, GW&K’s portfolio managers, with the support of GW&K’s
Legal & Compliance department and other personnel, will review the
relevant facts and circumstances and determine how to vote the particular proxy
ballot item. A record of any vote that deviates from Glass Lewis’ guidelines
along with the rationale will be maintained and reviewed by the Legal &
Compliance department.
IV.
Disclosure
Clients
may obtain Glass Lewis’s proxy voting guidelines or information about how
GW&K voted proxies for securities held in their account by submitting a
written request to:
Proxy
Policy Administrator
GW&K
Investment Management, LLC
222
Berkeley Street, 15th Floor
Boston,
Massachusetts 02116
Effective
July 1, 2024, Form 13F filers, such as GW&K, will be required to
annually report how they voted proxies for certain executive compensation
matters on the SEC’s Form N-PX. These
reports will be covering the period July 1, 2023 to June 30, 2024.
Clients may obtain GW&K’s Form N-PX
on the SEC’s website. For more information, please refer to GW&K’s
Disclosure and Regulatory Reporting Policy.
V.
Recordkeeping
GW&K
will maintain the following records in accordance with regulatory requirements:
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These
policies and procedures (including any applicable amendments) which shall
be made available to clients upon request; |
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December 2023 |
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Proxy
statements, research, recommendations, and records of each vote;
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Client
written requests for proxy voting information and applicable responses by
GW&K. |
VI.
Oversight and Documentation
Proxy Committee
GW&K
has established a Proxy Voting Committee to oversee the firm’s proxy voting
process, including the firm’s Proxy Voting Policy, the firm’s service providers
and the proxy voting guidelines. In addition, the Committee would address any
potential conflicts of interest that are identified by GW&K with respect to
voting any specific proxy ballot item. The Committee is comprised of GW&K’s
Chief Compliance Officer, General Counsel, managers of GW&K’s Investment,
Operations and Client Services departments, members of the Legal &
Compliance department, as well as certain GW&K investment professionals. The
Committee meets annually, and more frequently as needed. GW&K’s
Legal & Compliance department is responsible for periodically assessing
firm compliance with this policy and the effectiveness of its implementation.
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I.
Policy
Jennison
(or the “Company”) has adopted the following policy and related procedures to
guide the voting of proxies in a manner that is consistent with Jennison’s
fiduciary duties and the requirements of Rule 206(4)-6 under the Advisers Act.
In
the absence of any written delegation or when proxy voting authority has been
delegated in writing to Jennison by clients, Jennison will exercise this voting
authority in each client’s best interests. The Company will not consider its own
interests, or those of any affiliates, when voting proxies.
Unless
otherwise specified by a client, “best interest” means the client’s best
economic interest over the long term, as determined by Jennison’s portfolio
managers and analysts (“Investment Professionals”) covering the issuer. We
recognize that the nature of ballot issues, including environmental and social
issues (“ESG”), can vary widely depending on the company, industry practices,
the company’s operations and geographic footprint, to name a few, and will
consider relevant issues, including ESG issues, in a manner consistent with our
fiduciary duties and the goal of maximizing shareholder value.
Jennison’s
proxy voting policy and procedures and proxy voting records are publicly
available on our website. Clients may obtain a copy of our guidelines, as well
as the proxy voting records for that client’s securities, by contacting the
client service representative responsible for the client’s account.
II.
Procedures
Proxy
Voting Guidelines
Jennison
has adopted proxy voting guidelines (“Guidelines”) with respect to certain
recurring issues. When Jennison is responsible for voting proxies, Jennison
considers these guidelines except, where appropriate, when Jennison accepts
custom guidelines.
The
Guidelines are reviewed annually and as necessary by the Proxy Team. Proposed
revisions to the Guidelines are reviewed and approved by the Company’s Proxy
Voting Committee and Investment Professionals when a change is appropriate. The
Proxy Team maintains the Guidelines and distributes copies to the Investment
Professionals following confirmation of any change. The Guidelines are meant to
convey Jennison’s general approach to voting decisions on certain issues.
Nevertheless, Investment Professionals are responsible for reviewing all
proposals related to fundamental strategies individually and making final
decisions based on the merits of each voting opportunity.
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and Procedures |
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If
an Investment Professional believes that Jennison should vote in a way that is
different from the Guidelines, the Proxy Team is notified. In certain
circumstances, an Investment Professional may conclude that different clients
should vote in different ways, or that it is in the best interests of some or
all clients to abstain from voting. The Proxy Team will notify each Investment
Professional’s supervisor of any Guideline overrides authorized by that
Investment Professional.
The
Proxy Team is responsible for maintaining Investment Professionals’ reasons for
deviating from the Guidelines.
Client
Directed and Jennison Custom Voting Guidelines
Any
client’s specific voting instructions must be communicated or confirmed by the
client in writing, either through a provision in the investment advisory
contract or through other written correspondence. Such instructions may call for
Jennison to vote the client’s securities according to the client’s own voting
guidelines (“Client Directed Custom Guidelines”) or may indicate that the
Company is not responsible for voting the client’s proxies. We try to
accommodate such requests where appropriate.
The
Proxy Team reviews Client Directed Custom Guidelines and approves operational
implementation, and certain instructions may only be implemented on a best
efforts basis. The Proxy Team is responsible for communicating such instructions
to the third party vendor.
Additionally,
for certain investment products or vehicles that are developed and managed by
the Company that seek to follow certain religious values (“Jennison Investment
Products”), Jennison has adopted custom guidelines from a third party proxy
voting vendor that are aligned with the particular Jennison Investment Product
(“Jennison Custom Guidelines”). Prior to the adoption of Jennison Custom
Guidelines, the Proxy Committee will review the custom guidelines provided by
the third party proxy vendor. The Proxy Team will review the proxy voting
records of the Jennison Investment Products that utilize the Jennison Custom
Guidelines on a quarterly basis and provide reporting to the Proxy Committee.
Use
of a Third Party Voting Service
Jennison
has engaged an independent third party proxy voting vendor that provides
research and analytical services, operational implementation and recordkeeping
and reporting services. The proxy voting vendor will cast votes in accordance
with the Company’s Guidelines; however, notwithstanding the Guidelines,
Investment Professionals for fundamental strategies are responsible for
reviewing the facts and circumstances related to each proposal in order to make
all final voting decisions.
The
third party proxy voting vendor is responsible for operational implementation of
Client Directed Custom Guidelines and Jennison Custom Guidelines (“Client
Directed Custom Guidelines and Jennison Custom Guidelines are collectively
Custom Guidelines”). The ballots received for clients/accounts with Custom
Guidelines will be automatically voted in accordance with the Custom Guideline
recommendations by the third party proxy voting vendor. Jennison also subscribes
to additional proxy voting research from another third party on proxy proposals
relating to environmental and social topics.
Identifying
and Addressing Potential Material Conflicts of Interest
There
may be instances where Jennison’s interests conflict materially, or appear to
conflict materially, with the interests of clients in connection with a proxy
vote (a “Material Conflict”). Examples of potential Material Conflicts include,
but are not limited to:
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Jennison
managing the pension plan of the issuer |
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Jennison
or its affiliates have a material business relationship with the issuer
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Jennison
investment professionals who are related to a person who is senior
management or a director at a public company |
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and Procedures |
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Jennison
has a material investment in a security that the investment professional
who is responsible for voting that security’s proxy also holds the same
security personally |
If
an Investment Professional or any other employee perceives a Material Conflict,
he or she must promptly report the matter to the Chief Compliance Officer.
If
the Proxy Voting Committee determines that a Material Conflict is present and if
the Investment Professional is recommending a vote that deviates from the
Guidelines or there is no specific recommended Guideline vote and decisions are
made on a case-by-case basis, then the voting
decision must be reviewed and approved by the Investment Professional’s
supervisor and the Proxy Committee prior to casting the vote.
Jennison
will not abstain from voting a proxy for the purpose of avoiding a Material
Conflict.
Quantitatively
Derived Holdings and the Jennison Managed Accounts
In
voting proxies for non-fundamental
strategies such as quantitatively derived holdings and Jennison Managed Accounts
(i.e. “wrap”) where the securities are not held elsewhere in the firm, proxies
will be voted utilizing the Guidelines. Additionally, in those circumstances
where no specific Guidelines exist, the Company will consider the
recommendations of the proxy voting vendor.
International
Holdings
Jennison
will exercise opportunities to vote on international holdings on a best efforts
basis. Such votes will be cast based on the same principles that govern domestic
holdings.
In
some countries casting a proxy vote can adversely affect a client, such as
countries that restrict stock sales around the time of the proxy vote by
requiring “share blocking” as part of the voting process. The Investment
Professional covering the issuer will weigh the expected benefits of voting
proxies on international holdings against any anticipated costs or limitations,
such as those associated with share blocking. Jennison may abstain from voting
if it anticipates that the costs or limitations associated with voting outweigh
the benefits.
Securities
Lending
Jennison
may be unable to vote proxies when the underlying securities have been lent out
pursuant to a client’s securities lending program. The Company does not know
when securities are on loan and are therefore not available to be voted. In rare
circumstances, Investment Professionals may ask the Proxy Team to work with the
client’s custodian to recall the shares so that Jennison can vote. Efforts to
recall loaned securities are not always effective since such requests must be
submitted prior to the record date for the upcoming proxy vote; therefore voting
shares on loan is on a best efforts basis. In determining whether to call back
securities that are out on loan, the Investment Professional will consider
whether the benefit to the client in voting the matter outweighs the benefit to
the client in keeping the security out on loan.
Disclosure
to Advisory Clients
Jennison
will provide a copy of these Policies and Procedures and the Guidelines to any
client upon request. The Company will also provide any client with information
about how Jennison has voted that client’s proxies upon request. Any such
requests should be directed to the client service representative responsible for
the client’s account who will coordinate with the Proxy Team.
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Compliance
Reporting for Investment Companies
Upon
request, the Proxy Team will provide to each investment company for which
Jennison acts as sub- adviser reporting needed to satisfy their regulatory and
board requirements, including, but not limited to, information required for Form
NP-X.
Pre-Solicitation Contact
From
time to time, portfolio companies (or proxy solicitors acting on their behalf)
may contact Investment Professionals or others in advance of the publication of
proxy solicitation materials to solicit support for certain contemplated
proposals.
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A
pre-solicitation contact is any
communication, written or oral, formal or informal, with the company or a
representative of the company regarding proxy proposals prior to
publication of the official proxy solicitation materials
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A
pre-solicitation contact could result
in the recipient receiving material non-public information.
In
a situation when an employee is contacted in advance of publication of proxy
solicitation materials or when the employee believes that the information shared
could be considered material and non-public, the employee should immediately
contact Compliance.
Under
certain circumstances, it may be appropriate to share our general approach to
certain issues. However, employees are prohibited from disclosing how we voted
or promising to vote in a particular manner under any circumstance during these
pre-solicitation meetings or contacts.
Jennison
is a fiduciary and exercises opportunities to vote proxies solely in the best
interest of our clients.
III.
Internal Controls
Supervisory
Notification
The
Proxy Team will notify each Investment Professional’s supervisor of any
Guideline overrides authorized by that Investment Professional. The supervisor
reviews the overrides ensuring that they were made based on clients’ best
interests, and that they were not influenced by any Material Conflict or other
considerations.
The
Proxy Voting Committee
The
Proxy Voting Committee consists of representatives from Operations, Operational
Risk, Legal, and Compliance. It meets at least quarterly, and has the following
responsibilities:
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Review
potential Material Conflicts and decide whether a material conflict is
present, and needs to be addressed according to these policies and
procedures |
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• |
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Review
proposed amendments to the Guidelines in consultation with the Investment
Professionals and make revisions as appropriate |
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• |
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Review
these Policies and Procedures annually for accuracy and effectiveness, and
recommend and adopt any necessary changes |
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• |
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Review
all Guideline overrides |
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| Conflicts of Interest Policy
and Procedures |
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5 |
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Review
quarterly voting metrics and analysis published by the Proxy Team
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Review
accuracy of the application of Custom Guidelines |
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• |
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Review
the performance of the proxy voting vendor and determine whether Jennison
should continue to retain their services. The Committee will consider the
following factors while conducting their review: |
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Accuracy
and completeness of research reports, engagement with issuers, potential
conflicts of interest and overall administration of Jennison’s proxy
voting recommendations. |
IV.
Escalating Concerns
Any
concerns about aspects of the policy that lack specific escalation guidance may
be reported to the reporting employee’s supervisor, the Chief Compliance
Officer, Chief Legal Officer, Chief Risk Officer, Chief Ethics Officer, Chief
Operating Officer or Chief Executive Officer. Alternatively, Jennison has an
Ethics Reporting Hotline phone number and email address that enable employees to
raise concerns anonymously. Information about the Ethics Reporting Hotline phone
number and email address can be found on the Jennison intranet’s “Ethics” web
page.
V.
Discipline and Sanctions
All
Jennison employees are responsible for understanding and complying with the
policies and procedures outlined in this policy. The procedures described in
this policy are intended to ensure that Jennison and its employees act in full
compliance with the law. Violations of this policy and related procedures will
be communicated to your supervisor and to senior management through Jennison’s
Compliance Council, and may lead to disciplinary action.
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| Manulife Investment Management global proxy
voting policy and procedures |
|
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Global
Proxy Voting Policy and Procedures
Applicable Business Unit: Manulife Investment
Management Public Markets
Applicable Legal Entity(ies): Refer to Appendix
A
Committee Approval: Manulife IM Public Markets
Operating Committee
Business Owner: Manulife IM Public Markets
Policy Sponsor: Chief Compliance Officer,
Manulife IM Public Markets
Policy Last Updated/Reviewed: April 2021
Policy Next Review Date: April 2024
Policy Original Issue Date: February 2011
Review Cycle: Three (3) years
Company
policy documents are for internal use only and may not be shared outside the
Company, in whole or part, without prior approval from the Global Chief
Compliance Officer (or local Chief Compliance Officer if policy is only
entity-applicable) who will consult, as appropriate with, the Policy Sponsor and
legal counsel when deciding whether to approve and the conditions attached to
any approval.
Manulife
Investment Management global proxy voting policy and procedures
Executive
summary
Each
investment team at Manulife Investment Management (Manulife IM)1 is responsible
for investing in line with its investment philosophy and clients’ objectives.
Manulife IM’s approach to proxy voting aligns with its organizational structure
and encourages best practices in governance and management of environmental and
social risks and opportunities. Manulife IM has adopted and implemented proxy
voting policies and procedures to ensure that proxies are voted in the best
interests of its clients for whom it has proxy voting authority.
This
global proxy voting policy and procedures (policy) applies to each of the
Manulife IM advisory affiliates listed in Appendix A. In seeking to adhere to
local regulatory requirements of the jurisdiction in which an advisory affiliate
operates, additional procedures specific to that affiliate may be implemented to
ensure compliance, where applicable. The policy is not intended to cover every
possible situation that may arise in the course of business, but rather to act
as a decision-making guide. It is therefore subject to change and interpretation
from time to time as facts and circumstances dictate.
Statement
of policy
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The
right to vote is a basic component of share ownership and is an important
control mechanism to ensure that a company is managed in the best
interests of its shareholders. Where clients delegate proxy voting
authority to Manulife IM, Manulife IM has a fiduciary duty to exercise
voting rights responsibly. |
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Where
Manulife IM is granted and accepts responsibility for voting proxies for
client accounts, it will seek to ensure proxies are received and voted in
the best interests of the client with a view to maximize the economic
value of their equity securities unless it determines that it is in the
best interests of the client to refrain from voting a given proxy.
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If
there is any potential material proxy-related conflict of interest between
Manulife IM and its clients, identification and resolution processes are
in place to provide for determination in the best interests of the client.
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Manulife
IM will disclose information about its proxy voting policies and
procedures to its clients. |
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Manulife
IM will maintain certain records relating to proxy voting.
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| 1 |
Manulife
Investment Management is the unified global brand for Manulife’s global
wealth and asset management business, which serves individual investors
and institutional clients in three businesses: retirement, retail, and
institutional asset management (Public markets and private markets).
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2021 2 |
Manulife
Investment Management global proxy voting policy and procedures
Philosophy
on sustainable investing
Manulife
IM’s commitment to sustainable investment 2 is focused on protecting and
enhancing the value of our clients’ investments and, as active owners in the
companies in which we invest, we believe that voting at shareholder meetings can
contribute to the long-term sustainability of our investee companies. Manulife
IM will seek to exercise the rights and responsibilities associated with equity
ownership, on behalf of its clients, with a focus on maximizing long-term
shareholder returns, as well as enhancing and improving the operating strength
of the companies to create sustainable value for shareholders.
Manulife
IM invests in a wide range of securities across the globe, ranging from large
multinationals to smaller early-stage companies, and from well-developed markets
to emerging and frontier markets. Expectations of those companies vary by market
to reflect local standards, regulations, and laws. Manulife IM believes,
however, that successful companies across regions are generally better
positioned over the long term if they have:
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Robust
oversight, including a strong and effective board with independent and
objective leaders working on behalf of shareholders;
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Mechanisms
to mitigate risk such as effective internal controls, board expertise
covering a firm’s unique risk profile, and routine use of key performance
indicators to measure and assess long-term risks; |
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A
management team aligned with shareholders through remuneration structures
that incentivize long- term performance through the judicious and
sustainable stewardship of company resources; |
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Transparent
and thorough reporting of the components of the business that are most
significant to shareholders and stakeholders with focus on the firm’s
long-term success; and |
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Management
focused on all forms of capital, including environmental, social, and
human capital. |
The
Manulife Investment Management voting principles (voting principles) outlined in
Appendix B provide guidance for our voting decisions. An active decision to
invest in a firm reflects a positive conviction in the investee company and we
generally expect to be supportive of management for that reason. Manulife IM may
seek to challenge management’s recommendations, however, if they contravene
these voting principles or Manulife IM otherwise determines that doing so is in
the best interest of its clients.
| 2 |
Further
information on Sustainable Investing at Manulife IM can be found at
manulifeim.com/institutional. |
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April
2021 3 |
Manulife
Investment Management global proxy voting policy and procedures
Manulife
IM also regularly engages with boards and management on environmental, social,
or corporate governance issues consistent with the principles stipulated in our
sustainable investing statement and our ESG engagement policy. Manulife IM may,
through these engagements, request certain changes of the portfolio company to
mitigate risks or maximize opportunities. In the context of preparing for a
shareholder meeting, Manulife IM will review progress on requested changes for
those companies engaged. In an instance where Manulife IM determines that the
issuer has not made sufficient improvements on an issue, then we may take voting
action to demonstrate our concerns.
In
rare circumstances, Manulife IM may consider filing, or co-filing, a shareholder resolution at an
investee company. This may occur where our team has engaged with management
regarding a material sustainability risk or opportunity, and where we determine
that the company has not made satisfactory progress on the matter within a
reasonable time period. Any such decision will be in the sole discretion of
Manulife IM and acted on where we believe filing, or co-filing, a proposal is in the best
interests of our clients.
Manulife
IM may also divest of holdings in a company where portfolio managers are
dissatisfied with company financial performance, strategic direction, and/or
management of material sustainability risks or opportunities.
Procedures
Receipt
of ballots and proxy materials
Proxies
received are reconciled against the client’s holdings, and the custodian bank
will be notified if proxies have not been forwarded to the proxy service
provider when due.
Voting
proxies
Manulife
IM has adopted the voting principles contained in Appendix B of this policy.
Manulife
IM has deployed the services of a proxy voting services provider to ensure the
timely casting of votes, and to provide relevant and timely proxy voting
research to inform our voting decisions. Through this process, the proxy voting
services provider populates initial recommended voting decisions that are
aligned with the Manulife IM voting principles outlined in Appendix B. These
voting recommendations are then submitted, processed, and ultimately tabulated.
Manulife IM retains the authority and operational functionality to submit
different voting instructions after these initial recommendations from the proxy
voting services provider have been submitted, based on Manulife IM’s assessment
of each situation. As Manulife IM reviews voting recommendations and decisions,
as articulated below, Manulife IM will often change voting instructions based on
those reviews. Manulife IM periodically reviews the detailed policies created by
the proxy voting service provider to ensure consistency with our voting
principles, to the extent this is possible.
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April
2021 4 |
Manulife
Investment Management global proxy voting policy and procedures
Manulife
IM also has procedures in place to review additional materials submitted by
issuers often in response to voting recommendations made by proxy voting service
providers. Manulife IM will review additional materials related to proxy voting
decisions in those situations where Manulife IM becomes aware of those
additional materials, is considering voting contrary to management, and where
Manulife IM owns 2% or more of the subject issuer as aggregated across the
funds.
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April
2021 5 |
Manulife
Investment Management global proxy voting policy and procedures
Portfolio
managers actively review voting options and make voting decisions for their
holdings. Where Manulife IM holds a significant ownership position in an issuer,
the rationale for a portfolio manager’s voting decision is specifically
recorded, including whether the vote cast aligns with the recommendations of the
proxy voting services provider or has been voted differently. A significant
ownership position in an investment is defined as those cases where Manulife IM
holds at least 2% of a company’s issued share capital in aggregate across all
Manulife IM client accounts.
The
Manulife IM ESG research and integration team (ESG team) is an important
resource for portfolio management teams on proxy matters. This team provides
advice on specific proxy votes for individual issuers if needed. ESG team advice
is supplemental to the research and recommendations provided by our proxy voting
services provider. In particular, ESG analysts actively review voting
resolutions for companies in which:
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• |
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Manulife
IM’s aggregated holdings across all client accounts represent 2% or
greater of issued capital; |
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• |
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A
meeting agenda includes shareholder resolutions related to environmental
and social risk management issues, or where the subject of a shareholder
resolution is deemed to be material to our investment decision; or
|
Manulife
IM may also review voting resolutions for issuers where an investment team
engaged with the firm within the previous two years to seek a change in
behavior.
After
review, the ESG team may provide research and advice to investment staff in line
with the voting principles.
Manulife
IM also has an internal proxy voting working group (working group) comprising
senior managers from across Manulife IM including the equity investment team,
legal, compliance, and the ESG team. The working Group operates under the
auspices of the Manulife IM Public Markets Sustainable Investing Committee. The
Working group regularly meets to review and discuss voting decisions on
shareholder proposals or instances where a portfolio manager recommends a vote
different than the recommendation of the proxy voting services provider.
Manulife
IM clients retain the authority and may choose to lend shareholdings. Manulife
IM, however, generally retains the ability to restrict shares from being lent
and to recall shares on loan in order to preserve proxy voting rights. Manulife
IM is focused in particular on preserving voting rights for issuers where funds
hold 2% or more of an issuer as aggregated across funds. Manulife IM has a
process in place to systematically restrict and recall shares on a best efforts
basis for those issuers where we own an aggregate of 2% or more.
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April
2021 6 |
Manulife
Investment Management global proxy voting policy and procedures
Manulife
IM may refrain from voting a proxy where we have agreed with a client in advance
to limit the situations in which we will execute votes. Manulife IM may also
refrain from voting due to logistical considerations that may have a detrimental
effect on our ability to vote. These issues may include, but are not limited to:
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Costs
associated with voting the proxy exceed the expected benefits to clients;
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April
2021 7 |
Manulife
Investment Management global proxy voting policy and procedures
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• |
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Underlying
securities have been lent out pursuant to a client’s securities lending
program and have not been subject to recall; |
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Short
notice of a shareholder meeting; |
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Requirements
to vote proxies in person; |
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Restrictions
on a nonnational’s ability to exercise votes, determined by local market
regulation; |
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Restrictions
on the sale of securities in proximity to the shareholder meeting (i.e.,
share blocking); |
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Requirements
to disclose commercially sensitive information that may be made public
(i.e., reregistration); |
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Requirements
to provide local agents with power of attorney to facilitate the voting
instructions (such proxies are voted on a best-efforts basis); or
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The
inability of a client’s custodian to forward and process proxies
electronically. |
If
a Manulife IM portfolio manager believes it is in the best interest of a client
to vote proxies in a manner inconsistent with the policy, the portfolio manager
will submit new voting instructions to a member of the ESG team with rationale
for the new instructions. The ESG team will then support the portfolio manager
in developing voting decision rationale that aligns with this policy and the
voting principles. The ESG team will then submit the vote change to the working
group. The working group will review the change and ensure that the rationale is
sound, and the decision will promote the long-term success of the issuer.
On
occasion, there may be proxy votes that are not within the research and
recommendation coverage universe of the proxy voting service provider. Portfolio
managers responsible for the proxy votes will provide voting recommendations to
the ESG team, and those items may be escalated to the working group for review
to ensure that the voting decision rationale is sound, and the decision will
promote the long-term success of the issuer. the Manulife IM proxy operations
team will be notified of the voting decisions and execute the votes accordingly.
Manulife
IM does not engage in the practice of “empty voting” (a term embracing a variety
of factual circumstances that result in a partial, or total, separation of the
right to vote at a shareholders meeting from beneficial ownership of the shares
on the meeting date). Manulife IM prohibits investment managers from creating
large hedge positions solely to gain the vote while avoiding economic exposure
to the market. Manulife IM will not knowingly vote borrowed shares (for example,
shares borrowed for short sales and hedging transactions).
Engagement
of the proxy voting service provider
Manulife
IM has contracted with a third-party proxy service provider to assist with the
proxy voting process. Except in instances where a client retains voting
authority, Manulife IM will instruct custodians of client accounts to forward
all proxy statements and materials received in respect of client accounts to the
proxy service provider.
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April
2021 8 |
Manulife
Investment Management global proxy voting policy and procedures
Manulife
IM has engaged its proxy voting service provider to:
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Research
and make voting recommendations; |
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Ensure
proxies are voted and submitted in a timely manner;
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Provide
alerts when issuers file additional materials related to proxy voting
matters; |
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April
2021 9 |
Manulife
Investment Management global proxy voting policy and procedures
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Perform
other administrative functions of proxy voting; |
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Maintain
records of proxy statements and provide copies of such proxy statements
promptly upon request; |
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Maintain
records of votes cast; and |
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Provide
recommendations with respect to proxy voting matters in general.
|
Scope
of proxy voting authority
Manulife
IM and our clients shape the proxy voting relationship by agreement provided
there is full and fair disclosure and informed consent. Manulife IM may agree
with clients to other proxy voting arrangements in which Manulife IM does not
assume proxy voting responsibility or will only vote in limited
circumstances.3
While
the application of our fiduciary duty in the context of proxy voting will vary
with the scope of the voting authority we assume, we acknowledge the
relationship in all cases remains that of a fiduciary to the client. Beyond the
general discretion retained by Manulife IM to withhold from voting as outlined
above, Manulife IM may enter a specific agreement with a client not to exercise
voting authority on certain matters where the cost of voting would be high or
the benefit to the client would be low.
Disclosure
of proxy votes
Manulife
IM may inform company management of our voting intentions ahead of casting the
vote. This is in line with Manulife IM’s objective to provide the opportunity
for companies to better understand our investment process, policies, and
objectives.
We
will not intentionally disclose to anyone else, including other investors, our
voting intention prior to casting the vote.
Manulife
IM keeps records of proxy voting available for inspection by clients, regulatory
authorities, or government agencies.
| 3 |
We
acknowledge SEC guidance on this issue from August 2019, which lists
several nonexhaustive examples of possible voting arrangements between the
client and investment advisor, including (i) an agreement with the
client to exercise voting authority pursuant to specific parameters
designed to serve the client’s best interest; (ii) an agreement with
the client to vote in favor of all proposals made by particular
shareholder proponents; or (iii) an agreement with the client to vote
in accordance with the voting recommendations of management of the issuer.
All such arrangements could be subject to conditions depending on
instruction from the client. |
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April
2021 10 |
Manulife
Investment Management global proxy voting policy and procedures
Manulife
IM quarterly discloses voting records aggregated across funds. 4
Conflicts
of interest
Manulife
IM has an established infrastructure designed to identify conflicts of interest
throughout all aspects of the business. Proxy voting proposals may raise
conflicts between the interests of Manulife IM’s clients and the interests of
Manulife IM, its affiliates, or employees. Apparent conflicts are reviewed by
the working group to determine whether there is a conflict of interest and, if
so, whether the conflict is material. Manulife IM shall consider any of the
following circumstances a potential material conflict of interest:
| 4 |
Manulife
IM aggregated voting records are available through this site
manulifeim.com/institutional/us/en/sustainability |
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April
2021 11 |
Manulife
Investment Management global proxy voting policy and procedures
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Manulife
IM has a business relationship or potential relationship with the issuer;
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Manulife
IM has a business relationship with the proponent of the proxy proposal;
or |
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Manulife
IM members, employees, or consultants have a personal or other business
relationship with managers of the business such as top-level executives, corporate
directors, or director candidates. |
In
addressing any such potential material conflict, Manulife IM will seek to ensure
proxy votes are cast in the advisory client’s best interests and are not
affected by Manulife IM’s potential conflict. In the event a potential material
conflict of interest exists, the working group or its designee will either
(i) review the proxy voting decisions to ensure robust rationale, that the
voting decision will protect or enhance shareholder value over the long term,
and is in line with the best interest of the client; (ii) vote such proxy
according to the specific recommendation of the proxy voting services provider;
(iii) abstain; or (iv) request the client vote such proxy. The basis
for the voting decision, including the process for the determination of the
decision that is in the best interests of the client, is recorded.
Voting
shares of Manulife Financial Corporation
Manulife
Financial Corporation (MFC) is the publicly listed parent company of Manulife
IM. Generally, legislation restricts the ability of a public company (and its
subsidiaries) to hold shares in itself within its own accounts. Accordingly, the
MFC share investment policy outlines the limited circumstances in which MFC or
its subsidiaries may, or may not, invest or hold shares in MFC on behalf of MFC
or its subsidiaries. 5
The
MFC share investment policy does not apply to investments made on behalf of
unaffiliated third parties, which remain assets of the client. 6 Such investing may be
restricted, however, by specific client guidelines, other Manulife policies, or
other applicable laws.
Where
Manulife IM is charged with voting MFC shares, we will execute votes in
proportion with all other shareholders (i.e., proportional or echo vote). This
is intended to neutralize the effect of our vote on the meeting outcome.
Policy
responsibility and oversight
The
working group oversees and monitors the policy and Manulife IM’s proxy voting
function. The working group is responsible for reviewing regular reports,
potential conflicts of interest, vote changes, and nonroutine proxy voting
items. The working group also oversees the third-party proxy voting service
provider. The working group will meet at least monthly and report to the
Manulife IM public markets sustainable investing committee and, where requested,
the Manulife IM operating committee.
| 5 |
This
includes general funds, affiliated segregated funds or separate accounts,
and affiliated mutual / pooled funds. |
| 6 |
This
includes assets managed or advised for unaffiliated third parties, such as
unaffiliated mutual/pooled funds and unaffiliated institutional advisory
portfolios. |
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April
2021 12 |
Manulife
Investment Management global proxy voting policy and procedures
Manulife
IM’s proxy operations team is responsible for the daily administration of the
proxy voting process for all Manulife IM operations that have contracted with a
third-party proxy voting services provider. Significant proxy voting issues
identified by Manulife IM’s proxy operations team are escalated to the chief
compliance officer or its designee, and the working group.
The
working group is responsible for the proper oversight of any service providers
hired by Manulife IM to assist it in the proxy voting process. This oversight
includes:
Annual due diligence: Manulife IM conducts an
annual due diligence review of the proxy voting research service provider. This
oversight includes an evaluation of the service provider’s industry reputation,
points of risk, compliance with laws and regulations, and technology
infrastructure. Manulife IM also reviews the provider’s capabilities to meet
Manulife IM’s requirements, including reporting competencies; the adequacy and
quality of the proxy advisory firm’s staffing and personnel; the quality and
accuracy of sources of data and information; the strength of policies and
procedures that enable it to make proxy voting recommendations based on current
and accurate information; and the strength of policies and procedures to address
conflicts of interest of the service provider related to its voting
recommendations.
Regular Updates: Manulife also requests that
the proxy voting research service provider deliver updates regarding any
business changes that alter that firm’s ability to provide independent proxy
voting advice and services aligned with our policies.
Additional oversight in process: Manulife IM
has additional control mechanisms built into the proxy voting process to act as
checks on the service provider and ensure that decisions are made in the best
interest of our clients. These mechanisms include:
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• |
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Sampling prepopulated votes: Where we use
a third-party research provider for either voting recommendations or
voting execution (or both), we may assess prepopulated votes shown on the
vendor’s electronic voting platform before such votes are cast to ensure
alignment with the voting principles. |
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• |
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Decision scrutiny from the working group:
Where our voting policies and procedures do not address how to vote
on a particular matter, or where the matter is highly contested or
controversial (e.g., major acquisitions involving takeovers or contested
director elections where a shareholder has proposed its own slate of
directors), review by the working group may be necessary or appropriate to
ensure votes cast on behalf of its client are cast in the client’s best
interest. |
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April
2021 13 |
Manulife
Investment Management global proxy voting policy and procedures
Recordkeeping
and reporting
Manulife
IM provides clients with a copy of the voting policy on request and it is also
available on our website at manulifeim.com/institutional. Manulife IM describes
its proxy voting procedures to its clients in the relevant or required
disclosure document and discloses to its clients the process to obtain
information on how Manulife IM voted that client’s proxies.
Manulife
IM keeps records of proxy voting activities and those records include proxy
voting policies and procedures, records of votes cast on behalf of clients,
records of client requests for proxy voting information; and any documents
generated in making a vote decision. These documents are available for
inspection by clients, regulatory authorities, or government agencies.
Manulife
IM discloses voting records on its website and those records are updated on a
quarterly basis. The voting records generally reflect the voting decisions made
for retail, institutional and other client funds in the aggregate.
Policy
amendments and exceptions
This
policy is subject to periodic review by the proxy voting working group. The
working group may suggest amendments to this policy and any such amendments must
be approved by the Manulife IM public markets sustainable investing committee
and the Manulife IM operating committee.
Any
deviation from this policy will only be permitted with the prior approval of the
chief investment officer or chief administrative officer (or their designee),
with the counsel of the chief compliance officer/general counsel.
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April
2021 14 |
Manulife
Investment Management global proxy voting policy and procedures
Appendix
A. Manulife IM advisory affiliates in scope of policy and investment management
business only.
Manulife
Investment Management Limited
Manulife
Investment Management (North America) Limited
Manulife
Investment Management (Hong Kong) Limited
PT
Manulife Aset Manajemen Indonesia*
Manulife
Investment Management (Japan) Limited Manulife
Investment
Management (Malaysia) Bhd. Manulife Investment
Management
and Trust Corporation
Manulife
Investment Management (Singapore) Pte. Ltd.
Manulife
IM (Switzerland) LLC
Manulife
Investment Management (Taiwan) Co., Ltd.*
Manulife
Investment Management (Europe) Limited
Manulife
Investment Management (US) LLC
Manulife
Investment Fund Management (Vietnam) Company Limited*
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April
2021 15 |
Manulife
Investment Management global proxy voting policy and procedures
| * |
By
reason of certain local regulations and laws with respect to voting, for
example, manual/physical voting processes or the absence of a third-party
proxy voting service provider for those jurisdictions, Manulife Investment
Fund Management (Vietnam) Company Limited, and PT Manulife Aset Manajemen
Indonesia do not engage a third-party service provider to assist in their
proxy voting processes. Manulife Investment Management (Taiwan) Co., Ltd.
Uses the third-party proxy voting service provider to execute votes for
non-Taiwanese entities only.
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April
2021 16 |
Manulife
Investment Management global proxy voting policy and procedures
Appendix
B. Manulife IM voting principles
Manulife
IM believes that strong management of all forms of corporate capital, whether
financial, social, or environmental will mitigate risks, create opportunities,
and drive value over the long term. Manulife IM reviews and considers
environmental, social, and corporate governance risks and opportunities in our
investment decisions. Once invested, Manulife IM continues our oversight through
active ownership, which includes portfolio company engagement and proxy voting
of underlying shares. We believe proxy voting is a vital component of this
continued oversight as it provides a voice for minority shareholders regarding
management actions.
Manulife
IM has developed some key principles that generally drive our proxy voting
decisions and engagements. We believe these principles preserve value and
generally lead to outcomes that drive positive firm performance. These
principles dictate our voting on issues ranging from director elections and
executive compensation to the preservation of shareholder rights and stewardship
of environmental and social capital. Manulife IM also adopts positions on
certain sustainability topics and these voting principles should be read in
conjunction with those position statements. Currently, we have a climate change
statement and an executive compensation statement that also help guide proxy
voting decisions on those matters. The facts and circumstances of each issuer
are unique, and Manulife IM may deviate from these principles where we believe
doing so will preserve or create value over the long term. These principles also
do not address the specific content of all proposals voted around the globe, but
provide a general lens of value preservation, value creation, risk management,
and protection of shareholder rights through which Manulife IM analyzes all
voting matters.
| I. |
Boards and directors: Manulife IM
generally use the following principles to review proposals covering
director elections and board structure in the belief that they encourage
engaged and accountable leadership of a firm. |
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a. |
Board independence: The most effective
boards are composed of directors with a diverse skill set that can provide
an objective view of the business, oversee management, and make decisions
in the best interest of the shareholder body at large. To create and
preserve this voice, boards should have a significant number of
nonexecutive, independent directors. The actual number of independent
directors can vary by market and Manulife IM accounts for these
differences when reviewing the independence of the board. Ideally,
however, there is an independent majority among directors at a given firm.
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b. |
Committee independence: Manulife IM also
prefers that key board committees are composed of independent directors.
Specifically, the audit, nomination, and compensation committees should
generally be entirely or majority composed of independent directors.
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c. |
Attendance: A core part of a director’s
duties is to remain an engaged and productive participant at board and
committee meetings. Directors should, therefore, attend at least 75% of
board and committee meetings in the aggregate over the course of a
calendar year. |
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d. |
Diversity: In line with the principles
expressed in relation to board of independence above, Manulife IM believes
boards with strong gender representation are better equipped to manage
risks and oversee business resilience over the long term compared to firms
with low gender balance. Manulife IM generally expects boards to have at
least one woman on the board and encourages companies to aspire to a
higher balance of gender representation. Manulife IM also may hold boards
in certain markets to a higher standard as market requirements and
expectations change. In Canada, Europe, the United Kingdom, and Ireland,
for example, we encourage boards to achieve at least one-third female representation. We
generally encourage boards to achieve racial and ethnic diversity among
their members. We may, in the future, hold nomination committee chairs
accountable where the board does not appear to have racial or ethnically
diverse members. |
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e. |
Classified/staggered boards: Manulife IM
prefers that directors be subject to election and reelection on an annual
basis. Annual elections operate to hold directors accountable for their
actions in a given year in a timely manner. Shareholders should have the
ability to voice concerns through a director vote and to potentially
remove problematic directors if necessary. Manulife IM generally opposes
the creation of classified or staggered director election cycles designed
to extend director terms beyond one year. Manulife IM also generally
supports proposals to eliminate these structures. |
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f. |
Overboarding: Manulife IM believes
directors should limit their outside board seats in order to ensure that
they have the time and attention to provide their director role at a firm
in question. Generally, this means directors should not sit on more than
five public company boards. The role of CEO requires an individual’s
significant time and attention. Directors holding the role of CEO at any
public firm, therefore, generally should not sit on more than three public
company boards inclusive of the firm at which they hold the CEO role.
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g. |
Independent chair/CEO: Governance
failures can occur where a manager has firm control over a board through
the combination of the chair/CEO roles. Manulife IM generally supports the
separation of the chair/CEO roles as a means to prevent board capture by
management. We may evaluate proposals to separate the chair/CEO roles on a
case-by-case basis, for example,
however, considering such factors as the establishment of a strong lead
independent director role or the temporary need for the combination of the
CEO/chair roles to help the firm through a leadership transition.
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h. |
Vote standard: Manulife IM generally
supports a vote standard that allows resolutions to pass, or fail, based
on a majority voting standard. Manulife IM generally expects companies to
adopt a majority vote standard for director elections and supports the
elimination of a plurality vote standard except in the case of contested
elections. |
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i. |
Contested elections: Where there is a
proxy contest or a director’s election is otherwise contested, Manulife IM
evaluates the proposals on a case-by-case basis.
Consideration is given to firm performance, whether there have been
significant failures of oversight and whether the proponent for change
makes a compelling case that board turnover will drive firm value.
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j. |
Significant and problematic actions or
omissions: Manulife IM believes boards should be held accountable
to shareholders in instances where there is a significant failure of
oversight that has led to a loss of firm value, transparency failure or
otherwise curtailed shareholder rights. Manulife IM generally considers
withholding from, or voting against, certain directors in these
situations. Some examples of actions that might warrant a vote against
directors include, but are not limited to, the following:
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Failure of oversight: Manulife IM may take
action against directors where there has been a significant negative event
leading to a loss of shareholder value and stakeholder confidence. A failure may
manifest itself in multiple ways, including adverse auditor opinions, material
misstatements, failures of leadership and governance, failure to manage ESG
risks, environmental or human rights violations, and poor sustainability
reporting.
Adoption of anti-takeover mechanism: Boards
should generally review takeover offers independently and objectively in
consideration of the potential value created or lost for shareholders. Manulife
IM generally holds boards accountable when they create or prolong certain
mechanisms, bylaws or article amendments that act to frustrate genuine offers
that may lead to value creation for shareholders. These can include poison
pills; classes of shares with differential voting rights; classified, or
staggered, board structures; and unilateral bylaw amendments and supermajority
voting provisions.
Problematic executive compensation practices:
Manulife IM encourages companies to adopt best practices for executive
compensation in the markets in which they operate. Generally, this means that
pay should be aligned with performance. Manulife IM may hold directors
accountable where this alignment is not robust. We may also hold boards
accountable where they have not adequately responded to shareholder votes
against a previous proposal on remuneration or have adopted problematic
agreements or practices (e.g., golden parachutes, repricing of options).
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Manulife
Investment Management global proxy voting policy and procedures
Bylaw/article adoption and amendments:
Shareholders should have the ability to vote on any change to company
articles or bylaws that will materially change their rights as shareholders. Any
amendments should require only a majority of votes to pass. Manulife IM will
generally hold directors accountable where a board has amended or adopted bylaw
and/or article provisions that significantly curtail shareholder rights.
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Manulife
Investment Management global proxy voting policy and procedures
Engagement responsiveness: Manulife IM
regularly engages with issuers to discuss ESG risks and opportunities and may
request changes from firms during these discussions. Manulife IM may vote
against certain directors where we have engaged with an issuer and requested
certain changes, but the firm has not made sufficient progress on those matters.
| II. |
Environmental and social proposals:
Manulife IM expects its portfolio companies to manage material
environmental and social issues affecting their businesses, whether risks
or opportunities, with a view towards long-term value preservation and
creation.7 Manulife
IM expects firms to identify material environmental and social risks and
opportunities specific to their businesses, to develop strategies to
manage those matters, and to provide meaningful, substantive reporting
while demonstrating progress year over year against their management
plans. Proposals touching on management of risks and opportunities related
to environmental and social issues are often put forth as shareholder
proposals but can be proposed by management as well. Manulife IM generally
supports shareholder proposals that request greater transparency or
adherence to internationally recognized standards and principles regarding
material environmental and social risks and opportunities.
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a. |
The magnitude of the risk/opportunity:
Manulife IM evaluates the level of materiality of a certain
environmental or social issue identified in a proposal as it pertains to
the firm’s ability to generate value over the long term. This review
includes deliberation of the effect an issue will have on the financial
statements and/or the cost of capital. |
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b. |
The firm’s current management of the
risk/opportunity: Manulife IM analyzes a firm’s current approach to
an issue to determine whether the firm has robust plans, infrastructure,
and reporting to mitigate the risk or embrace the opportunity. Recent
controversies, litigation, or penalties related to a given risk are also
considered. |
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c. |
The firm’s current disclosure framework:
Manulife IM expects firms to disclose enough information for
shareholders to assess the company’s management of environmental and
social risks and opportunities material to the business. Manulife IM may
support proposals calling for enhanced firm disclosure regarding
environmental and social issues where additional information would help
our evaluation of a company’s exposure, and response, to those factors.
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| 7 |
For
more information on issues generally of interest to our firm, please see
the Manulife Investment Management engagement policy, the Manulife
Investment Management sustainable investing and sustainability risk
statement, and the Manulife Investment Management climate change
statement. |
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Investment Management global proxy voting policy and procedures
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d. |
Legislative or regulatory action of a
risk/opportunity: When reviewing proposals on environmental or
social factors, Manulife IM considers whether a given risk or opportunity
is currently addressed by local regulation or law in the markets in which
a firm operates and whether those rules are designed to adequately manage
an issue. Manulife IM also considers whether a firm should proactively
address a matter in anticipation of future legislation or regulation.
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e. |
Cost to, or disruption of, the business:
When reviewing environmental and social proposals, Manulife IM assesses
the potential cost of the requested action against the benefit provided to
the firm and its shareholders. Particular attention is paid to proposals
that request actions that are overly prescriptive on management or that
request a firm exit markets or operations that are essential to its
business. |
| III. |
Shareholder rights: Manulife IM generally
supports management or shareholder proposals that protect, or improve,
shareholder rights and opposes proposals that remove, or curtail, existing
rights. |
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a. |
Shareholder rights plans (poison pills):
Manulife IM generally opposes mechanisms intended to frustrate
genuine takeover offers. Manulife IM may, however, support shareholder
rights plans where the plan has a trigger of 20% ownership or more and
will expire in three years or less. In conjunction with these
requirements, Manulife IM evaluates the company’s strategic rationale for
adopting the poison pill. |
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b. |
Supermajority voting: Shareholders should
have the ability to direct change at a firm based on a majority vote.
Manulife IM generally opposes the creation, or continuation, of any bylaw,
charter, or article provisions that require approval of more than a
majority of shareholders for amendment of those documents. Manulife IM may
consider supporting such a standard where the supermajority requirement is
intended to protect minority shareholders. |
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c. |
Proxy access: Manulife IM believes that
shareholders have a right to appoint representatives to the board that
best protect their interests. The power to propose nominees without
holding a proxy contest is a way to protect that right and is potentially
less costly to management and shareholders. Accordingly, Manulife IM
generally supports creation of a proxy access right (or similar power at
non-U.S. firms) provided there
are reasonable thresholds of ownership and a reasonable number of
shareholders can aggregate ownership to meet those thresholds.
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d. |
Written consent: Written consent provides
shareholders the power to formally demand board action outside of the
context of an annual general meeting. Shareholders can use written consent
as a nimble method of holding boards accountable. Manulife IM generally
supports the right of written consent so long as that right is reasonably
tailored to reflect the will of a majority of shareholders. Manulife IM
may not support such a right, however, where there is a holder with a
significant, or controlling, stake. Manulife IM evaluates the substance of
any written actual consent proposal in line with these principles.
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Manulife
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e. |
Right to call a special meeting: Manulife
IM is generally supportive of the shareholder right to call a special
meeting. This right allows shareholders to quickly respond to events that
can significantly affect firm value. Manulife IM believes that a 10%
ownership threshold to call a special meeting reasonably protects this
shareholder right while reducing the possibility of undue distraction for
management. |
| IV. |
Executive compensation: Manulife IM
encourages companies to align executive incentives with shareholder
interests when designing executive compensation plans. Companies should
provide shareholders with transparent, comprehensive, and substantive
disclosure regarding executive compensation that aids shareholder
assessment of the alignment between executive pay and firm performance.
Companies should also have the flexibility to design remuneration programs
that fit a firm’s business model, business sector and industry, and
overall corporate strategy. No one template of executive remuneration can
fit all companies. |
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a. |
Advisory votes on executive compensation:
While acknowledging that there is no singular model for executive
compensation, Manulife IM closely scrutinizes companies that have certain
concerning practices which may include: |
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i. |
Misalignment between pay and company
performance: Pay should generally move in tandem with corporate
performance. Firms where CEO pay remains flat, or increases, though
corporate performance remains down relative to peers, are particularly
concerning. |
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ii. |
One-time grants: A firm’s one-time grant to an executive, outside
of the normal salary, bonus, and long-term award structure, may be
indicative of an overall failure of the board to design an effective
remuneration plan. A company should have a robust justification for making
grants outside of the normal remuneration framework.
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iii. |
Significant quantity of nonperformance-based
pay: Executive pay should generally be weighted more heavily toward
performance-based remuneration to create the alignment between pay and
performance. Companies should provide a robust explanation for any
significant awards made that vest solely based on time or are not
otherwise tied to performance. |
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iv. |
Lack of rigor in performance targets:
Performance targets should challenge managers to improve corporate
performance and outperform peers. Targets should, where applicable,
generally align with, or even outpace, guidance; incentivize
outperformance against a peer group; and otherwise remain challenging.
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v. |
Lack of disclosure: Transparency is
essential to shareholder analysis and understanding of executive
remuneration at a company. Manulife IM expects firms to clearly disclose
all major components of remuneration. This includes disclosure of amounts,
performance metrics and targets, vesting terms, and pay outcomes.
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vi. |
Repricing of options: Resetting the
exercise price of outstanding options significantly undermines the
incentive nature of the initial option grant. Though a firm may have a
strong justification for repricing options, Manulife IM believes that
firms should put such decisions to a shareholder vote. Manulife IM may
generally oppose an advisory vote on executive compensation where a
company has repriced outstanding options for executives without that
shareholder approval. |
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vii. |
Adoption of problematic severance agreements
(golden parachutes): Manulife IM believes managers should be
incentivized to pursue and complete transactions that may benefit
shareholders. Severance agreements, if structured appropriately, can
provide such inducements. At the same time, however, the significant
payment associated with severance agreements could potentially drive
managers to pursue transactions at the expense of shareholder value.
Manulife IM may generally oppose an executive remuneration proposal where
a firm has adopted, or amended, an agreement with an executive that
contains an excise tax gross-up
provision, permits accelerated vesting of equity upon a change-in-control, allows an
executive to unilaterally trigger the severance payment, or pays out in an
amount greater than 300% of salary and bonus combined.
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| V. |
Capital structure: Manulife IM believes
firms should balance the need to raise capital and encourage investment
with the rights and interests of the existing shareholder body. Evaluation
of proposals to issue shares, repurchase shares, conduct stock splits, or
otherwise restructure capital, is conducted on a case- by-case basis with some specific
requests covered here: |
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a. |
Common stock authorization: Requests to
increase the pool of shares authorized for issuance are evaluated on a
case-by-case basis with
consideration given to the size of the current pool, recent use of
authorized shares by management, and the company rationale for the
proposed increase. Manulife IM also generally supports these increases
where the company intends to execute a split of shares or pay a stock
dividend. |
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b. |
Reverse stock splits: Manulife IM
generally supports proposals for a reverse stock split if the company
plans to proportionately reduce the number of shares authorized for issue
in order to mitigate against the risk of excessive dilution to our
holdings. We may also support these proposals in instances where the firm
needs to quickly raise capital in order to continue operations.
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c. |
Dual class voting structure: Voting power
should align with economic interest at a given firm. Manulife IM generally
opposes the creation of new classes of stock with differential voting
rights and supports the elimination of these structures.
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| VI. |
Corporate transactions and restructurings:
Manulife IM reviews mergers, acquisitions, restructurings, and
reincorporations on a case-by-case basis through the
lens of whether the transaction will create shareholder value.
Considerations include fairness of the terms, valuation of the event,
changes to management and leadership, realization of synergies and
efficiencies, and whether the rationale for a strategic shift is
compelling. |
| VII. |
Cross shareholding: Cross shareholding is
a practice where firms purchase equity shares of business partners,
customers, or suppliers in support of those relationships. Manulife IM
generally discourages this practice as it locks up firm capital that could
be allotted to income-generating investments or otherwise returned to
shareholders. Manulife IM will review cross shareholding practices at
issuers and we encourage issuers to keep cross shareholdings below 20% of
net assets. |
| VIII. |
Audit-related issues: Manulife IM
believes that an effective auditor will remain independent and objective
in its review of company reporting. Firms should be transparent regarding
auditor fees and other services provided by an auditor that may create a
conflict of interest. Manulife IM uses the below principles to guide
voting decisions related to auditors. |
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a. |
Auditor ratification: Manulife IM
generally approves the reappointment of the auditor absent evidence that
they have either failed in their duties or appear to have a conflict that
may not allow independent and objective oversite of a firm.
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b. |
Auditor rotation: If Manulife IM believes
that the independence and objectivity of an auditor may be impaired at a
firm, we may support a proposal requesting a rotation of auditor. Reasons
to support the rotation of the auditor can include a significant failure
in the audit function and excessive tenure of the auditor at the firm.
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T.
ROWE PRICE ASSOCIATES, INC. AND CERTAIN OF ITS INVESTMENT ADVISER AFFILIATES
PROXY
VOTING POLICIES AND PROCEDURES
RESPONSIBILITY
TO VOTE PROXIES
T.
Rowe Price Associates, Inc. and certain of its investment adviser affiliates1 (collectively, “T. Rowe Price”) have adopted these Proxy
Voting Policies and Procedures (“Policies and
Procedures”) for the purpose of establishing formal policies and
procedures for performing and documenting their fiduciary duty with regard to
the voting of client proxies. This document is reviewed at least annually and
updated as necessary.
T.
Rowe Price recognizes and adheres to the principle that one of the privileges of
owning stock in a company is the right to vote in the election of the company’s
directors and on matters affecting certain important aspects of the company’s
structure and operations that are submitted to shareholder vote. The
U.S.-registered investment companies which T. Rowe Price sponsors and serves as
investment adviser (the “Price Funds”) as
well as other investment advisory clients have delegated to T. Rowe Price
certain proxy voting powers. As an investment adviser, T. Rowe Price has a
fiduciary responsibility to such clients when exercising its voting authority
with respect to securities held in their portfolios. T. Rowe Price reserves the
right to decline to vote proxies in accordance with client-specific voting
guidelines.
Fiduciary Considerations. It is the policy of
T. Rowe Price that decisions with respect to proxy issues will be made in light
of the anticipated impact of the issue on the desirability of investing in the
portfolio company from the viewpoint of the particular advisory client or Price
Fund. Proxies are voted solely in the interests of the client, Price Fund
shareholders or, where employee benefit plan assets are involved, in the
interests of plan participants and beneficiaries. Our intent has always been to
vote proxies, where possible to do so, in a manner consistent with our fiduciary
obligations and responsibilities.
One
of the primary factors T. Rowe Price considers when determining the desirability
of investing in a particular company is the quality and depth of its management.
We recognize that a company’s management is entrusted with the day-to-day operations of the company,
as well as its long-term direction and strategic planning, subject to the
oversight of the company’s board of directors. Accordingly, our proxy voting
guidelines are not intended to substitute our judgment for management’s with
respect to the company’s day-to-day operations. Rather, our
proxy voting guidelines are designed to promote accountability of a company’s
management and board of directors to its shareholders; to align the interests of
management with those of shareholders; and to encourage companies to adopt best
practices in terms of their corporate governance and
| 1 |
This
document is not applicable to T. Rowe Price Investment Management, Inc.
(“TRPIM”). TRPIM votes proxies independently from the other T. Rowe
Price-related investment advisers and has adopted its own proxy voting
policy. |
TRPA
2024 Proxy Voting Policies and Procedures.doc
Updated:
February 2024
disclosure.
In addition to our proxy voting guidelines, we rely on a company’s public
filings, its board recommendations, its track record, country-specific best
practices codes, our research providers and – most importantly – our investment
professionals’ views in making voting decisions. T. Rowe Price investment
personnel do not coordinate with investment personnel of its affiliated
investment adviser, TRPIM, with respect to proxy voting decisions.
T.
Rowe Price seeks to vote all of its clients’ proxies. In certain circumstances,
T. Rowe Price may determine that refraining from voting a proxy is in a client’s
best interest, such as when the cost of voting outweighs the expected benefit to
the client. For example, the practicalities and costs involved with
international investing may make it impossible at times, and at other times
disadvantageous, to vote proxies in every instance.
ADMINISTRATION
OF POLICIES AND PROCEDURES
Environmental, Social and Governance Investing
Committee. T. Rowe Price’s Environmental, Social and Governance Investing
Committee (“TRPA ESG Investing Committee”
or the “Committee”) is responsible
for establishing positions with respect to corporate governance and other proxy
issues. Certain delegated members of the Committee also review questions and
respond to inquiries from clients and mutual fund shareholders pertaining to
proxy issues. While the Committee sets voting guidelines and serves as a
resource for T. Rowe Price portfolio management, it does not have proxy voting
authority for any Price Fund or advisory client. Rather, voting authority and
responsibility is held by the Chairperson of the Price Fund’s Investment
Advisory Committee or the advisory client’s portfolio manager. The Committee is
also responsible for the oversight of third-party proxy services firms that T.
Rowe Price engages to facilitate the proxy voting process.
Global Proxy Operations Team. The Global Proxy
Operations team is responsible for administering the proxy voting process as set
forth in the Policies and Procedures.
Governance Team. Our Governance team is
responsible for reviewing the proxy agendas for all upcoming meetings and making
company-specific recommendations to our global industry analysts and portfolio
managers with regard to the voting decisions in their portfolios.
Responsible Investment Team. Our Responsible
Investment team oversees the integration of environmental and social factors
into our investment processes across asset classes. In formulating vote
recommendations for matters of an environmental or social nature, the Governance
team frequently consults with the appropriate sector analyst from the
Responsible Investment team.
HOW
PROXIES ARE REVIEWED, PROCESSED AND VOTED
In
order to facilitate the proxy voting process, T. Rowe Price has retained
Institutional Shareholder Services (“ISS”) as an expert in the proxy voting and
corporate governance area. ISS specializes in providing a variety of
fiduciary-level proxy advisory and voting services. These
TRPA
2024 Proxy Voting Policies and Procedures.doc
Updated:
February 2024
services
include custom vote recommendations, research, vote execution, and reporting.
Services provided by ISS do not include automated processing of votes on our
behalf using the ISS Benchmark Policy recommendations. Instead, in order to
reflect T. Rowe Price’s issue-by-issue voting guidelines as
approved each year by the TRPA ESG Investing Committee, ISS maintains and
implements custom voting policies for the Price Funds and other advisory client
accounts.
Meeting
Notification
T.
Rowe Price utilizes ISS’ voting agent services to notify us of upcoming
shareholder meetings for portfolio companies held in client accounts and to
transmit votes to the various custodian banks of our clients. ISS tracks and
reconciles our clients’ holdings against incoming proxy ballots. If ballots do
not arrive on time, ISS procures them from the appropriate custodian or proxy
distribution agent. Meeting and record date information is updated daily and
transmitted to T. Rowe Price through ProxyExchange, an ISS application.
Vote
Determination
Each
day, ISS delivers into T. Rowe Price’s customized ProxyExchange environment a
comprehensive summary of upcoming meetings, proxy proposals, publications
discussing key proxy voting issues, and custom vote recommendations to assist us
with proxy research and processing. For meetings with complex ballot items in
certain international markets, research may be consulted from local domestic
proxy research providers. The final authority and responsibility for proxy
voting decisions remains with T. Rowe Price. Decisions with respect to proxy
matters are made primarily in light of the anticipated impact of the issue on
the desirability of investing in the company from the perspective of our
clients.
Portfolio
managers execute their responsibility to vote proxies in different ways. Some
have decided to vote their proxies generally in line with the guidelines as set
by the TRPA ESG Investing Committee. Others review the customized vote
recommendations and approve them before the votes are cast. Portfolio managers
have access to current reports summarizing all proxy votes in their client
accounts. Portfolio managers who vote their proxies inconsistent with T. Rowe
Price guidelines are required to document the rationale for their votes. The
Global Proxy Operations team is responsible for maintaining this documentation
and assuring that it adequately reflects the basis for any vote which is
contrary to our proxy voting guidelines.
T.
Rowe Price Voting Guidelines
Specific
proxy voting guidelines have been adopted by the TRPA ESG Investing Committee
for all regularly occurring categories of management and shareholder proposals.
The guidelines include regional voting guidelines as well as the guidelines for
investment strategies with objectives other than purely financial returns, such
as Impact and Net Zero. A detailed set of proxy voting guidelines is available
on the T. Rowe Price website, www.troweprice.com/esg.
TRPA
2024 Proxy Voting Policies and Procedures.doc
Updated:
February 2024
Global
Portfolio Companies
The
TRPA ESG Investing Committee has developed custom international proxy voting
guidelines based on our proxy advisor’s general global policies, regional codes
of corporate governance, and our own views as investors in these
markets. We apply a two-tier
approach to determining and applying global proxy voting policies. The first
tier establishes baseline policy guidelines for the most fundamental issues,
which span the corporate governance spectrum without regard to a company’s
domicile. The second tier takes into account various idiosyncrasies of different
countries, making allowances for standard market practices, as long as they do
not violate the fundamental goals of good corporate governance. The goal is to
enhance shareholder value through effective use of the shareholder franchise,
recognizing that application of a single set of policies is not appropriate for
all markets.
Fixed
Income and Passively Managed Strategies
Proxy
voting for our fixed income and indexed portfolios is administered by the Global
Proxy Operations team using T. Rowe Price’s guidelines as set by the TRPA
ESG Investing Committee. Indexed strategies generally vote in line with the T.
Rowe Price guidelines. Fixed income strategies generally follow the proxy vote
determinations on security holdings held by our equity accounts unless the
matter is specific to a particular fixed income security such as consents,
restructurings, or reorganization proposals.
Shareblocking
Shareblocking
is the practice in certain countries of “freezing” shares for trading purposes
in order to vote proxies relating to those shares. In markets where
shareblocking applies, the custodian or sub-custodian automatically freezes shares
prior to a shareholder meeting once a proxy has been voted. T. Rowe Price’s
policy is generally to refrain from voting shares in shareblocking countries
unless the matter has compelling economic consequences that outweigh the
temporary loss of liquidity in the blocked shares.
Securities
on Loan
The
Price Funds and our institutional clients may participate in securities lending
programs to generate income for their portfolios. Generally, the voting rights
pass with the securities on loan; however, lending agreements give the lender
the right to terminate the loan and pull back the loaned shares provided
sufficient notice is given to the custodian bank in advance of the applicable
deadline. T. Rowe Price’s policy is generally not to vote securities on loan
unless we determine there is a material voting event that could affect the value
of the loaned securities. In this event, we have the discretion to pull back the
loaned securities for the Price Funds in order to cast a vote at an upcoming
shareholder meeting. A monthly monitoring process is in place to review
securities on loan for the Price Funds and how they may affect proxy voting.
TRPA
2024 Proxy Voting Policies and Procedures.doc
Updated:
February 2024
Monitoring
and Resolving Conflicts of Interest
The
TRPA ESG Investing Committee is also responsible for monitoring and resolving
potential material conflicts between the interests of T. Rowe Price and those of
its clients with respect to proxy voting. We have adopted safeguards to ensure
that our proxy voting is not influenced by interests other than those of our
fund shareholders and other investment advisory clients. While membership on the
Committee is diverse, it does not include individuals whose primary duties
relate to client relationship management, marketing, or sales. Since T. Rowe
Price’s voting guidelines are predetermined by the Committee, application of the
guidelines by portfolio managers to vote client proxies should in most instances
adequately address any potential conflicts of interest. However, consistent with
the terms of the Policies and Procedures, which allow portfolio managers to vote
proxies opposite our general voting guidelines, the Committee regularly reviews
all such proxy votes that are inconsistent with the proxy voting guidelines to
determine whether the portfolio manager’s voting rationale appears reasonable.
The Committee also assesses whether any business or other material relationships
between T. Rowe Price and a portfolio company (unrelated to the ownership of the
portfolio company’s securities) could have influenced an inconsistent vote on
that company’s proxy. Issues raising potential conflicts of interest are
referred to designated members of the Committee for immediate resolution prior
to the time T. Rowe Price casts its vote.
With
respect to personal conflicts of interest, T. Rowe Price’s Global Code of
Conduct requires all employees to avoid placing themselves in a “compromising
position” in which their interests may conflict with those of our clients and
restrict their ability to engage in certain outside business activities.
Portfolio managers or Committee members with a personal conflict of interest
regarding a particular proxy vote must recuse themselves and not participate in
the voting decisions with respect to that proxy.
Specific Conflict of Interest Situations
Voting
of T. Rowe Price Group, Inc. common stock (sym: TROW) by certain T. Rowe Price
Index Funds will be done in all instances in accordance with T. Rowe Price
voting guidelines and votes inconsistent with the guidelines will not be
permitted. In the event that there is no previously established guideline for a
specific voting issue appearing on the T. Rowe Price Group proxy, the Price
Funds will abstain on that voting item.
In
addition, T. Rowe Price has voting authority for proxies of the holdings of
certain Price Funds that invest in other Price Funds. Shares of the Price Funds
that are held by other Price Funds will generally be voted in the same
proportion as shares for which voting instructions from other shareholders are
timely received. If voting instructions from other shareholders are not
received, or if a T. Rowe Price Fund is only held by other T. Rowe Price Funds
or other accounts for which T. Rowe Price has proxy voting authority, the fund
will vote in accordance with its Board’s instruction.
TRPA
2024 Proxy Voting Policies and Procedures.doc
Updated:
February 2024
For
shares of the Price Funds that are series of T. Rowe Price Equity Series, Inc.,
T. Rowe Price Fixed Income Series, Inc., and T. Rowe Price International Series,
Inc. (collectively, the “Variable Insurance Portfolios”) held by insurance
company separate accounts for which the insurance company has not received
timely voting instructions, as well as shares the insurance company owns, those
shares shall be voted in the same proportion as shares for which voting
instructions from contract holders are timely received.
Limitations
on Voting Proxies of Banks
T.
Rowe Price has obtained relief from the U.S. Federal Reserve Board (the “FRB Relief”) which permits, subject to a
number of conditions, T. Rowe Price to acquire in the aggregate on behalf of its
clients, 10% or more of the total voting stock of a bank, bank holding company,
savings and loan holding company or savings association (each a “Bank”), not to exceed a 15% aggregate
beneficial ownership maximum in such Bank. One such condition affects the manner
in which T. Rowe Price will vote its clients’ shares of a Bank in excess of 10%
of the Bank’s total voting stock (“Excess
Shares”). The FRB Relief requires that T. Rowe Price use its best efforts
to vote the Excess Shares in the same proportion as all other shares voted, a
practice generally referred to as “mirror voting,” or in the event that such
efforts to mirror vote are unsuccessful, Excess Shares will not be voted. With
respect to a shareholder vote for a Bank of which T. Rowe Price has aggregate
beneficial ownership of greater than 10% on behalf of its clients, T. Rowe Price
will determine which of its clients’ shares are Excess Shares on a pro rata
basis across all of its clients’ portfolios for which T. Rowe Price has the
power to vote proxies.2
REPORTING,
RECORD RETENTION AND OVERSIGHT
The
TRPA ESG Investing Committee, and certain personnel under the direction of the
Committee, perform the following oversight and assurance functions, among
others, over T. Rowe Price’s proxy voting: (1) periodically samples
proxy votes to ensure that they were cast in compliance with T. Rowe
Price’s proxy voting guidelines; (2) reviews, no less frequently than
annually, the adequacy of the Policies and Procedures to make sure that they
have been implemented effectively, including whether they continue to be
reasonably designed to ensure that proxies are voted in the best interests of
our clients; (3) performs due diligence on whether a retained proxy
advisory firm has the capacity and competency to adequately analyze proxy
issues, including the adequacy and quality of the proxy advisory firm’s staffing
and personnel and its policies; and (4) oversees any retained proxy
advisory firms and their procedures regarding their capabilities to
(i) produce proxy research that is based on current and accurate
information and (ii) identify and address any conflicts of interest and any
other considerations that we believe would be appropriate in considering the
nature and quality of the services provided by the proxy advisory firm.
| 2 |
The
FRB Relief and the process for voting of Excess Shares described herein
apply to the aggregate beneficial ownership of T. Rowe Price and TRPIM.
|
TRPA
2024 Proxy Voting Policies and Procedures.doc
Updated:
February 2024
T.
Rowe Price will furnish Vote Summary Reports, upon request, to its institutional
clients that have delegated proxy voting authority. The report specifies the
portfolio companies, meeting dates, proxy proposals, and votes which have been
cast for the client during the period and the position taken with respect to
each issue. Reports normally cover quarterly or annual periods and are provided
to such clients upon request.
T.
Rowe Price retains proxy solicitation materials, memoranda regarding votes cast
in opposition to the position of a company’s management, and documentation on
shares voted differently. In addition, any document which is material to a proxy
voting decision such as the T. Rowe Price proxy voting guidelines,
Committee meeting materials, and other internal research relating to voting
decisions are maintained in accordance with applicable requirements.
TRPA
2024 Proxy Voting Policies and Procedures.doc
Updated:
February 2024
|
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| |
| WELLINGTON
MANAGEMENT COMPANY |
|
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|
Wellington
Management
2023
Global Proxy Voting Guidelines |
WELLINGTON’S
PHILOSOPHY
Wellington
Management are long-term stewards of clients’ assets and aim to vote proxies for
which we have voting authority in the best interest of clients.
These
guidelines are based on Wellington Management’s fiduciary obligation to act in
the best interest of its clients as shareholders and while written to apply
globally, we consider differences in local practice, cultures, and law to make
informed decisions.
It
should be noted that the following are guidelines, and not rigid rules, and
Wellington Management reserves the right in all cases to deviate from the
general direction set out below where doing so is judged to represent the best
interest of its clients.
OUR
APPROACH TO STEWARDSHIP
The
goal of our stewardship activities is to support decisions that we believe will
deliver sustainable, competitive investment returns for our clients.
The
mechanisms we use to implement our stewardship activities vary by asset class.
Engagement applies to all our investments across equity and credit, in both
private and public markets. Proxy voting applies mostly to public equities.
Stewardship
extends to any area that may affect the long-term sustainability of an
investment, including the considerations of environmental, social, and
governance (ESG) issues. Stewardship can be accomplished through research and
constructive dialogue with company management and boards, by monitoring company
behavior through informed active ownership, and by emphasizing management
accountability for important issues via our proxy votes, which have long been
part of Wellington’s investment ethos. Please refer to our Engagement Policy for
more information on how engagement is conducted at Wellington.
OUR
APPROACH TO VOTING
We
vote proxies in what we consider to be the best interests of our clients. Our
approach to voting is investment-led
and serves as an influential component of our engagement and escalation
strategy. The Investment Stewardship Committee, a cross-functional group of
experienced professionals, oversees Wellington Management’s stewardship
activities with regards to proxy voting and engagement practices.
Generally,
issues which can be addressed by the proxy voting guidance below are voted by
means of standing instructions communicated to our primary voting agent. Some
votes warrant analysis of specific facts and circumstances and therefore are
reviewed individually. We examine such proxy proposals on their merits and take
voting action in a manner that best serves the interests of our clients. While
manual votes are often resolved by ESG analysts, grounded in their sector and
company research, each portfolio manager is empowered to make a final decision
for their relevant client portfolio(s), absent a material conflict of interest.
Proactive portfolio manager input is sought under certain circumstances, which
may include consideration of position size and proposal subject matter and
nature. Where portfolio manager input is proactively sought, deliberation across
the firm may occur. This collaboration does not prioritize consensus across the
firm above all other interests but rather seeks to inform portfolio managers’
decisions by allowing them to consider multiple perspectives. Consistent with
our community-of- boutiques model,
portfolio managers may occasionally arrive at different voting conclusions for
their clients, resulting in different decisions for the same vote. Robust voting
procedures and the deliberation that occurs before a vote decision are aligned
with our role as active owners and fiduciaries for our clients.
1
2023
Global Proxy Voting Guidelines
When
voting on shareholder proposals, we consider the spirit of the proposal, not
just the letter, and generally support proposals addressing material issues even
when management has been responsive to our engagement on the issue. In this way,
we seek to align our voting with our engagement activities. If our views differ
from any specific suggestions in the proposals, we may provide clarification via
direct engagement.
Please
refer to our Global Proxy Policy and Procedures for further background on the
process and governance of our voting approach.
Detailed
below are the principles which we consider when deciding how to vote.
VOTING
GUIDELINES
BOARD
COMPOSITION AND ROLE OF DIRECTORS
Effective
boards should act in shareholders’ best economic interests and possess the
relevant skills to implement the company’s strategy.
We
consider shareholders’ ability to elect directors annually an important right
and accordingly, generally support proposals to enable annual director elections
and declassify boards.
We
may withhold votes from directors for being unresponsive to shareholders or for
failing to make progress on material issues. We may also withhold votes from
directors who fail to implement shareholder proposals that have received
majority support or have implemented poison pills without shareholder approval.
Time
commitments
We
expect directors to have the time and energy to fully commit to their
board-related responsibilities and not be over-stretched with multiple external
directorships. We reserve the right to vote against directors when serving on
five or more public company boards; and public company executives when serving
on three or more public company boards, including their own.
We
consider the roles of board chair and chair of the audit committee as equivalent
to an additional board seat when evaluating the overboarding matrix for non-executives. We may take into
consideration that certain directorships, such as Special Purpose Acquisition
Companies (SPACs) and investment companies, are usually less demanding.
Directors
should also attend at least 75% of scheduled board meetings and we may vote
against their re-election unless they
disclose a valid reason.
Succession
planning and board refreshment
We
do not have specific voting policies relating to director age or tenure. We
prefer to take a holistic view, evaluating whether the company is balancing the
perspectives of new directors with the institutional knowledge of longer-serving
board members. Succession planning is a key topic during many of our board
engagements.
We
expect companies to refresh their board membership every five years and may vote
against the chair of the nominating committee for failure to implement. We
believe a degree of director turnover allows companies to strengthen board
diversity and add new skillsets to the board to enhance their oversight and
adapt to evolving strategies.
Boards
should offer transparency around their process to evaluate director performance
and independence, conducting a rigorous regular evaluation of the board, key
committees as well as individual directors, which is responsive to shareholder
input. We believe externally facilitated board evaluations may contribute to
companies retaining an appropriate mix of skills, experience and diversity on
their boards over time.
2023
Global Proxy Voting Guidelines
In
certain markets companies are governed by multi-tiered boards, with each tier
having different responsibilities. We hold supervisory board members to similar
standards, subject to prevailing local governance best practices.
Board
independence
In
our view, boards perform best when composed of an appropriate combination of
executive and non-executive (in
particular independent non-executive)
directors to challenge and counsel management.
To
determine appropriate minimum levels of board independence, we look to
prevailing market best practices; two-
thirds in the US, for example, and majority in the UK and France. In Japan, we
will consider voting against the board chair (or most senior executive on the
ballot) in cases where the board is less than one-third independent.
In
addition to the overall independence at the board level, we also consider the
independence of audit, compensation, and nominating committees. Where
independence falls short of our expectations, we may withhold approval for non- independent directors or those
responsible for the board composition. We typically vote in support of
shareholder proposals calling for improved independence.
We
believe that having an independent chair is the preferred structure for board
leadership. Having an independent chair avoids the inherent conflict of
self-oversight and helps ensure robust debate and diversity of thought in the
boardroom. We will generally support proposals to separate the chair and CEO or
establish a lead director but may support the involvement of an outgoing CEO as
executive chair for a limited period to ensure a smooth transition to new
management.
Board
diversity
We
believe boards which reflect a wide range of perspectives are best positioned to
create shareholder value. Appointing boards that thoughtfully debate company
strategy and direction is not possible unless boards elect highly qualified and
diverse directors. By setting a leadership example, diverse boardrooms encourage
an organizational culture that promotes diverse thinkers, enabling better
strategic decisions and the navigation of increasingly complex issues facing
companies today.
We
think it is not in shareholders’ best interests for the full board to be
comprised of directors from the same industry, gender, race, nationality, or
ethnic group. We expect for our portfolio companies to be thoughtful and
intentional in considering the widest possible pool of skilled candidates who
bring diverse perspectives into the boardroom. We encourage companies to
disclose the composition of their board and to communicate their ambitions and
strategies for creating and fostering a diverse board.
We
reserve the right to vote against the re-election of the Nominating/Governance
Committee Chair when the board is not meeting local market standards from a
diversity perspective or when the gender-diverse representation is below 20% at
companies in major indices. Outside of these major indices and absent a
market-defined standard, we may vote against the reelection of the
Nominating/Governance Committee Chair where no gender-diverse directors are
represented on a board.
We
reserve the right to vote against the reelection of the Nominating/Governance
Committee Chair at US large cap and FTSE 100 companies that failed to appoint at
least one director from a minority ethnic group and provide clear and compelling
reason why it has been unable to do so. We will continue to engage on ethnic
diversity of the board in other markets and may vote against the re-election of directors where we fail to see
improvements.
2023
Global Proxy Voting Guidelines
Majority
vote on election of directors
Because
we believe the election of directors by a majority of votes cast is the
appropriate standard, we will generally support proposals that seek to adopt
such a standard. Our support will typically extend to situations where the
relevant company has an existing resignation policy for directors that receive a
majority of ‘‘withhold’’ votes. We believe majority voting should be defined in
the company’s charter and not simply in its corporate governance policy.
Generally,
we oppose proposals that fail to provide for the exceptional use of a plurality
standard in the case of contested elections. Further, we will not support
proposals that seek to adopt a standard of majority of votes outstanding (total
votes eligible as opposed to votes cast). We likely will support shareholder and
management proposals to remove existing supermajority vote requirements.
We
generally support proposals to remove existing supermajority vote requirements.
Contested
director elections
We
approach contested director elections on a case-by-case basis, considering the
specific circumstances of each situation to determine what we believe to be in
the best interest of our clients. In each case, we welcome the opportunity to
engage with both the company and the proponent to ensure that we understand both
perspectives and are making an informed decision on our clients’ behalf.
COMPENSATION
Executive
compensation plans establish the incentive structure that plays a role in
strategy-setting, decision-making, and risk management. While design and
structure vary widely, we believe the most effective compensation plans attract
and retain high-caliber executives, foster a culture of performance and
accountability, and align management’s interests with those of long-term
shareholders.
Due
to each company’s unique circumstances and wide range of plan structures,
Wellington determines support for a compensation plan on a case-by-case basis. We support plans
that we believe lead to long-term value creation for our clients and the right
to vote on compensation plans annually.
In
evaluating compensation plans, we consider the following attributes in the
context of the company’s business, size, industry, and geographic location:
Alignment — We believe in pay-for-performance and encourage plan
structures that align executive compensation with shareholder experience. We
compare total compensation to performance metrics on an absolute and relative
basis over various timeframes, and we look for a strong positive correlation. To
ensure shareholder alignment, executives should maintain meaningful equity
ownership in the company while they are employed, and for a period thereafter.
Transparency — We expect compensation
committees to articulate the decision-making process and rationale behind the
plan structure, and to provide adequate disclosure so shareholders can evaluate
actual compensation relative to the committee’s intentions. Disclosure should
include how metrics, targets, and timeframes are chosen, and detail desired
outcomes. We also seek to understand how the compensation committee determines
the target level of compensation and constructs the peer group for benchmarking
purposes.
Structure — The plan should be clear
and comprehensible. We look for a mix of cash versus equity, fixed versus
variable, and short-versus long-term pay that incentivizes appropriate
risk-taking and aligns with industry practice. Performance targets should be
achievable but rigorous, and equity awards should be subject to performance
and/or vesting periods of at least three years, to discourage executives from
managing the business with a near-term focus. Unless otherwise specified by
local market regulators, performance-based compensation should be based
primarily
2023
Global Proxy Voting Guidelines
on
quantitative financial and non-financial criteria such as ESG-related criteria. There is scope,
however, for qualitative criteria related to strategic, individual, or ESG
goals, that are critical to the business. Qualitative goals may be acceptable if
a compensation committee has demonstrated a fair and consistent approach to
evaluating qualitative performance and applying discretion over time.
Accountability — Compensation
committees should be able to use discretion, positive and negative, to ensure
compensation aligns with performance and provide a cogent explanation to
shareholders. We generally oppose one-
time awards aimed at retention or achieving a pre-determined goal. Barring an extenuating
circumstance, we view retesting provisions unfavorably.
Approving
equity incentive plans
A
well-designed equity incentive plan facilitates the alignment of interests of
long-term shareholders, management, employees, and directors. We evaluate
equity-based compensation plans on a case-by-case basis, considering
projected plan costs, plan features, and grant practices. We will reconsider our
support for a plan if we believe these factors, on balance, are not in the best
interest of shareholders. Specific items of concern may include excessive cost
or dilution, unfavorable change-in-control features,
insufficient performance conditions, holding/vesting periods, or stock ownership
requirements, repricing stock options/stock appreciation rights (SARs) without
prior shareholder approval, or automatic share replenishment (an ‘‘evergreen’’
feature).
Employee
stock purchase plans
We
generally support employee stock purchase plans, as they may align employees’
interests with those of shareholders. That said, we typically vote against plans
that do not offer shares to a broad group of employees (e.g., if only executives
can participate) or plans that offer shares at a significant discount.
Non-executive director compensation
We
expect companies to disclose non-executive director compensation and we
prefer the use of an annual retainer or fee, delivered as cash, equity, or a
combination. We do not believe non-executive directors should receive
performance-based compensation, as this creates a potential conflict of
interest. Non-executive directors
oversee executive compensation plans; their objectivity is compromised if they
design a plan that they also participate in.
Severance
arrangements
We
are mindful of the board’s need for flexibility in recruitment and retention but
will oppose excessively generous arrangements unless agreements encourage
management to negotiate in shareholders’ best interest. We generally support
proposals calling for shareholder ratification of severance arrangements.
Retirement
bonuses (Japan)
Misaligned
compensation which is based on tenure and seniority may compromise director
independence. We generally vote against directors and statutory auditors if
retirement bonuses are given to outgoing directors.
Claw-back
policies
We
believe companies should be able to recoup incentive compensation from members
of management who received awards based on fraudulent activities, accounting
misstatements, or breaches in standards of conduct that lead to corporate
reputational damage. We generally support shareholder proposals requesting that
a company establish a robust claw-back provision if existing policies do not
cover these circumstances. We also support proposals seeking greater
transparency about the application of claw back policies.
2023
Global Proxy Voting Guidelines
Audit
quality and oversight
Scrutiny
of auditors, particularly audit quality and oversight, has been increasing. When
we assess financial statement reporting and audit quality, we will generally
support management’s choice of auditors, unless the auditors have demonstrated
failure to act in shareholders’ best economic interest. We also pay close
attention to the non-audit services
provided by auditors and consider the potential for the revenue from those
services to create conflicts of interest that could compromise the integrity of
financial statement audits.
SHAREHOLDER
RIGHTS
Shareholder
rights plans
Also
known as poison pills, these plans can enable boards of directors to negotiate
higher takeover prices on behalf of shareholders. Such plans also may be
misused, however, as a means of entrenching management. Consequently, we may
support plans that include a shareholder approval requirement, a sunset
provision, or a permitted bid feature (e.g., bids that are made for all shares
and demonstrate evidence of financing must be submitted to a shareholder vote).
Because
boards generally have the authority to adopt shareholder rights plans without
shareholder approval, we are equally vigilant in our assessment of requests for
authorization of blank-check preferred shares.
Multiple
voting rights
We
generally support one share, one vote structures. The growing practice of going
public with a dual-class share structure can raise governance and performance
concerns. In our view, dual-class shares can create misalignment between
shareholders’ economic stake and their voting power and can grant control to a
small number of insiders who may make decisions that are not in the interests of
all shareholders.
We
generally prefer that companies dispense with dual-class share structures but we
recognize that newly listed companies may benefit from a premium by building in
some protection for founders for a limited time after their IPO. The Council of
Institutional Investors, a nonprofit association of pension funds, endowments,
and foundations, recommends that newly public companies that adopt structures
with unequal voting rights do away with the structure within seven years of
going public. We believe such sunset clauses are a reasonable compromise between
founders seeking to defend against takeover attempts in pivotal early years, and
shareholders demanding a mechanism for holding management accountable,
especially in the event of leadership changes.
Similarly,
we generally do not support the introduction of loyalty shares, which grant
increased voting rights to investors who hold shares over multiple years.
Proxy
access
We
believe shareholders should have the right to nominate director candidates on
the management’s proxy card. We will generally support shareholder proposals
seeking proxy access unless the existing policy is already in-line with market norms.
Special
meeting rights
We
believe the right to call a special meeting is a shareholder right, and we will
generally support such proposals to establish this right at companies that lack
this facility. We will generally support proposals lowering thresholds where the
current level exceeds 15% and the shareholder proposals calls for a 10%+
threshold, taking into consideration the make-up of the existing shareholder base and
the company’s general responsiveness to shareholders. If shareholders are
granted the right to call special meetings, we generally do not support written
consent.
2023
Global Proxy Voting Guidelines
CAPITAL
STRUCTURE AND CAPITAL ALLOCATION
Mergers
and acquisitions
We
approach votes to approve mergers and acquisitions on a case-by-case basis, considering the
specific circumstances of each proposal to determine what we believe to be in
the best interest of our clients.
Increases
in authorized common stock
We
generally support requests for increases up to 100% of the shares with
preemption rights. Exceptions will be made when the company has clearly
articulated a reasonable need for a greater increase. Conversely, at companies
trading in less liquid markets, we may impose a lower threshold. When companies
seek to issue shares without preemptive rights, we consider potential dilution
and generally support requests when dilution is below 20%. For issuance with
preemptive rights, we review on a case-by-case basis, considering the
size of issuance relative to peers.
Capital
allocation (Japan)
We
hold board chairs accountable for persistently low returns on equity (ROE) in
Japan, using a five-year average ROE of below 5% as a guide. Our assessment of a
company’s capital stewardship complements our assessment of board effectiveness
without dictating specific capital allocation decisions. We may make exceptions
where ROE is improving, where a long-cycle business warrants a different
standard, or where new management is in place, and we feel they should not be
punished for the past CEO/Chair’s record.
Cross-shareholdings
(Japan)
Cross-shareholdings
reduce management accountability by creating a cushion of cross-over investor
support. We may vote against the highest-ranking director up for re-election for companies where management
has allocated a significant portion (20% or more) of net assets to
cross-shareholdings. When considering this issue, we will take into account a
company’s trajectory in reducing cross-shareholdings over time as well as
legitimate business reasons given to retain specific shareholdings.
ENVIRONMENTAL
TOPICS
We
assess portfolio companies’ performance on environmental issues we deem to be
material to long-term financial performance and communicate our expectations for
best practice.
Climate
change
As
an asset manager entrusted with investing on our clients’ behalf, we aim to
assess, monitor, and manage the potential effects of climate change on our
investment processes and portfolios, as well as on our business operations.
Proxy voting is a key tool we use for managing climate risks, as part of our
stewardship escalation process.
We
expect companies facing material climate risks to have credible transition plans
communicated using the recommendations of the Task Force on Climate-Related
Financial Disclosures (TCFD). Appropriate reporting on climate readiness will
help stakeholders understand companies’ willingness and ability to adapt to or
mitigate climate- related risks. In addition to the voting policies specifically
mentioned, we may also vote against directors at companies where climate plans
and disclosures meaningfully lag our expectations for those companies.
Emissions disclosure
We
encourage all companies to disclose Scope 1, 2, and 3 emissions. While we
recognize the challenges associated with collecting Scope 3 emissions data, this
disclosure is necessary for us to fully understand the transition risks
applicable to an issuer. Disclosure of both overall categories of Scope 3
emissions —- upstream and downstream —- with context and granularity from
companies about the most significant Scope 3 sources, enhances our ability to
evaluate investment risks and opportunities. We encourage companies to adopt
emerging global standards for measurement and disclosure of emissions such as
those being developed by the International Sustainability Standards Board (ISSB)
and believe companies will benefit from acting now and consequently evolving
their approach in line with emerging global standards.
2023
Global Proxy Voting Guidelines
We
view disclosure of Scope 1 and 2 emissions as a minimum expectation where
measurement practices are well- defined and attainable. We will generally vote
against the re-election of the Chair of
MSCI World companies, Climate Action 100+ companies, as well as companies
assessed by the Transition Pathway Initiative (TPI) which do not disclose Scope
1 and 2 emissions, have not made a commitment to do so in the next year and
where emissions intensity is material. We will expand this expectation to large
cap companies in Emerging Markets in 2024.
Net-zero
targets
As
an outcome of enterprise risk management and strategic planning to reduce the
potential financial impacts of climate change, we encourage companies to set a
credible, science-based decarbonization glidepath, with an interim and long-
term target, that comprises all categories of material emissions and is
consistent with the ambition to achieve net zero emissions by 2050 or sooner.
For Climate Action 100+ companies we reserve the right to vote against the
company chair where quantitative emission reduction targets have not been
defined. We consider it to be best practice for companies to pursue validation
from the Science Based Targets initiative (SBTi).
We
generally support shareholder proposals asking for improved disclosure on
climate risk management and we generally support those that request alignment of
business strategies with the Paris Agreement or similar language. We also
generally support proposals asking for board oversight of political
contributions and lobbying activities or those asking for improved disclosures
where material inconsistencies in reporting and strategy may exist, especially
as it relates to climate strategy.
Other
environmental shareholder proposals
For
other environmental proposals covering themes including biodiversity, natural
capital, deforestation, water usage, (plastic) packaging as well as palm oil, we
take a case-by-case approach and will
generally support proposals calling for companies to provide disclosure where
this is additive to the company’s existing efforts, the proposed information
pertains to a material impact and in our view is of benefit to investors. When
voting on any shareholder proposals, we consider the spirit of the proposal, not
just the letter, and generally support proposals addressing material issues even
when management has been responsive to our engagement on the issue.
SOCIAL
TOPICS
Corporate
culture, human capital, and diversity, equity, & inclusion
Through
engagement we emphasize to management the importance of how they invest in and
cultivate their human capital to perpetuate a strong culture. We assess culture
holistically from an alignment of management incentives, responsiveness to
employee feedback, evidence of an equitable and sound talent management strategy
and commitment to diversity, equity, and inclusion. We value transparency and
use of key performance indicators.
A
well-articulated culture statement and talent attraction, retention and
development strategy suggest that a company appreciates culture and talent as
competitive advantages that can drive long-term value creation. It also sends a
strong message when management compensation is linked, when appropriate, to
employee satisfaction. If the company conducts regular employee engagement
surveys, we look for leadership to disclose the results
both positive and negative
so we can monitor patterns and assess whether they are implementing changes
based on the feedback they receive. We consider workplace locations and how a
company balances attracting talent with the costs of operating in desirable
cities.
We
maintain that a deliberate human capital management strategy should foster a
collaborative, productive workplace in which all talent can thrive. One ongoing
engagement issue that pertains to human capital management is diversity, equity,
and inclusion. We seek to better understand how and to what extent a company’s
approach to diversity is integrated with talent management at all levels. A
sound long-term plan holds more weight than a company’s current demographics, so
we look for a demonstrable diversity, equity, and inclusion (DEI) strategy that
2023
Global Proxy Voting Guidelines
seeks
to improve metrics over time and align management incentives accordingly. We
expect companies in the US to publicly disclose their EEO-1 reporting and their strategy to create
an inclusive, diverse, and equitable workplace. We see DEI practices as a
material input to long-term performance, so as our clients’ fiduciaries, we seek
to better understand how and to what extent a company’s approach to diversity is
integrated with talent management at all levels. This is only possible when
there is consistent, robust disclosure in place.
Gender
and racial pay equity are important parts of our assessment of a company’s
diversity efforts. Pay equity can impact shareholder value by exposing a company
to challenges with recruiting & retaining talent, job dissatisfaction,
workforce turnover, and costly lawsuits. Consequently, we may support proposals
asking for improved transparency on a company’s gender and/or racial pay gap if
existing disclosures are lagging best practice and if the company has not
articulated its efforts to eliminate disparities and promote equal opportunities
for women and minorities to advance to senior roles.
We
believe diversity among directors, leaders, and employees contributes positively
to shareholder value by imbuing a company with myriad perspectives that help it
better navigate complex challenges. A strong culture of diversity and inclusion
begins in the boardroom. See the Board Diversity section above for more on our
approach.
Stakeholders
and risk management
In
recent years, discourse on opioids, firearms, and sexual harassment has brought
the potential for social externalities — the negative effects that companies can
have on society through their products, cultures, or policies — into sharp
focus. These nuanced, often misunderstood issues can affect the value of
corporate securities.
In
our engagement with companies facing these risks, we encourage companies to
disclose risk management strategies that acknowledge their societal impacts.
When a company faces litigation or negative press, we inquire about lessons
learned and request evidence of substantive changes that aim to prevent
recurrence and mitigate downside risk. In these cases, we may also support
proposals requesting enhanced disclosure on actions taken by management,
including racial equity audits.
Human
rights
Following
the 2015 passage of the UK’s Modern Slavery Act, a handful of countries have
passed laws requiring companies to report on how they are addressing risks
related to human rights abuses in their global supply chains. While human rights
have been a part of our research and engagement in this context, we seek to
assess companies’ exposures to these risks, determine the sectors for which this
risk is most material (highest possibility of supply-chain exposure), enhance
our own engagement questions, and potentially work with external data providers
to gain insights on specific companies or industries. To help us assess company
practices and drive more substantive engagement with companies on this issue, we
will generally support proposals requesting enhanced disclosure on companies’
approach to mitigating the risk of human rights violations in their business.
Cybersecurity
Robust
cybersecurity practices are imperative for maintaining customer trust,
preserving brand strength, and mitigating regulatory risk. Companies that fail
to strengthen their cybersecurity platforms may end up bearing large costs.
Through engagement, we aim to compare companies’ approaches to cyber threats,
regardless of region or sector, to distinguish businesses that lag from those
that are better prepared.
Political
contributions and lobbying
We
generally support proposals asking for board oversight of a company’s political
contributions and lobbying activities or those asking for improved disclosures
where material inconsistencies in reporting and strategy may exist. In assessing
shareholder proposals focused on lobbying, we also focus on the level of
transparency of existing disclosures and whether companies clearly explain how
they will respond if policy engagement of trade association membership to which
they belong do not align with company policy.
2023
Global Proxy Voting Guidelines
Important
Information
Wellington
Management Company LLP (WMC) is an independently owned investment adviser
registered with the US Securities and Exchange Commission (SEC). WMC is also
registered with the US Commodity Futures Trading Commission (CFTC) as a
commodity trading advisor (CTA) and serves as a CTA to certain clients including
commodity pools operated by registered commodity pool operators. WMC provides
commodity trading advice to all other clients in reliance on exemptions from CTA
registration. WMC, along with its affiliates (collectively, Wellington
Management), provides investment management and investment advisory services to
institutions around the world. Located in Boston, Massachusetts, Wellington
Management also has offices in Chicago, Illinois; Radnor, Pennsylvania; San
Francisco, California; Frankfurt; Hong Kong; London; Luxembourg; Madrid, Milan;
Shanghai; Singapore; Sydney; Tokyo; Toronto; and Zurich.
This
material is prepared for, and authorized for internal use by, designated
institutional and professional investors and their consultants or for such other
use as may be authorized by Wellington Management. This material and/or its
contents are current at the time of writing and may not be reproduced or
distributed in whole or in part, for any purpose, without the express written
consent of Wellington Management. This material is not intended to constitute
investment advice or an offer to sell, or the solicitation of an offer to
purchase shares or other securities. Investors should always obtain and read an
up-to-date investment services
description or prospectus before deciding whether to appoint an investment
manager or to invest in a fund. Any views expressed herein are those of the
author(s), are based on available information, and are subject to change without
notice. Individual portfolio management teams may hold different views and may
make different investment decisions for different clients.
©2022 Wellington Management
Company LLP. All rights reserved.
Proxy
Voting
Background
An
investment adviser is required to adopt and implement policies and procedures
that we believe are reasonably designed to ensure that proxies are voted in the
best interest of clients, in accordance with fiduciary duties and Rule 206(4)-6 under the Investment Advisers Act of
1940 (“Advisers Act”). The authority to vote the proxies of our clients is
established through investment management agreements or comparable documents. In
addition to SEC requirements governing advisers, long-standing fiduciary
standards and responsibilities have been established for ERISA accounts. Unless
a manager of ERISA assets has been expressly precluded from voting proxies, the
Department of Labor has determined that the responsibility for these votes lies
with the investment manager.
Policy
As
a fixed income only manager, the occasion to vote proxies is very rare, for
instance, when fixed income securities are converted into equity by their terms
or in connection with a bankruptcy or corporate workout. However, the Firm has
adopted and implemented policies and procedures that we believe are reasonably
designed to ensure that proxies are voted in the best interest of clients, in
accordance with our fiduciary duties and Rule 206(4)-6 under the Advisers Act. In addition
to SEC requirements governing advisers, our proxy voting policies reflect the
long-standing fiduciary standards and responsibilities for ERISA accounts.
Unless a manager of ERISA assets has been expressly precluded from voting
proxies, the Department of Labor has determined that the responsibility for
these votes lies with the investment manager.
While
the guidelines included in the procedures are intended to provide a benchmark
for voting standards, each vote is ultimately cast on a case-by-case basis, taking into
consideration the Firm’s contractual obligations to our clients and all other
relevant facts and circumstances at the time of the vote (such that these
guidelines may be overridden to the extent the Firm deems appropriate).
In
exercising its voting authority, Western Asset will not consult or enter into
agreements with officers, directors or employees of Franklin Resources (Franklin
Resources includes Franklin Resources, Inc. and organizations operating as
Franklin Resources) or any of its affiliates (other than Western Asset
affiliated companies) regarding the voting of any securities owned by its
clients.
Procedures
Responsibility
and Oversight
The
Legal & Compliance Group is responsible for administering and
overseeing the proxy voting process. The gathering of proxies is coordinated
through the Corporate Actions team of the Investment Operations Group
(“Corporate Actions”). Research analysts and portfolio managers are responsible
for determining appropriate voting positions on each proxy utilizing any
applicable guidelines contained in these procedures.
Client
Authority
The
Investment Management Agreement for each client is reviewed at account start-up for proxy voting instructions. If an
agreement is silent on proxy voting, but contains an overall delegation of
discretionary authority or if the account represents assets of an ERISA plan,
Western Asset will assume responsibility for proxy voting. The Portfolio
Compliance Group maintains a matrix of proxy voting authority.
Proxy
Gathering
Registered
owners of record, client custodians, client banks and trustees (“Proxy
Recipients”) that receive proxy materials on behalf of clients should forward
them to Corporate Actions. Proxy Recipients for new clients (or, if Western
Asset becomes aware that the applicable Proxy Recipient for an existing client
has changed, the Proxy Recipient for the existing client) are notified at start-up of appropriate routing to Corporate
Actions of proxy materials received and reminded of their responsibility to
forward all proxy materials on a timely basis. If Western Asset personnel other
than Corporate Actions receive proxy materials, they should promptly forward the
materials to Corporate Actions.
Proxy
Voting
Once
proxy materials are received by Corporate Actions, they are forwarded to the
Portfolio Compliance Group for coordination and the following actions:
| |
a. |
Proxies
are reviewed to determine accounts impacted. |
| |
b. |
Impacted
accounts are checked to confirm Western Asset voting authority.
|
| |
c. |
Where
appropriate, the Regulatory Affairs Group reviews the issues presented to
determine any material conflicts of interest. (see Conflicts of Interest
section of these procedures for further information on determining
material conflicts of interest.) |
| |
d. |
If
a material conflict of interest exists, (i) to the extent reasonably
practicable and permitted by applicable law, the client is promptly
notified, the conflict is disclosed and Western Asset obtains the client’s
proxy voting instructions, and (ii) to the extent that it is not
reasonably practicable or permitted by applicable law to notify the client
and obtain such instructions (e.g., the client is a mutual fund or
other commingled vehicle or is an ERISA plan client), Western Asset seeks
voting instructions from an independent third party
|
Proxy
Voting
| |
e. |
The
Portfolio Compliance Group provides proxy material to the appropriate
research analyst or portfolio manager to obtain their recommended vote.
Research analysts and portfolio managers determine votes on a case-by-case basis taking into
account the voting guidelines contained in these procedures. For avoidance
of doubt, depending on the best interest of each individual client,
Western Asset may vote the same proxy differently for different clients.
The analyst’s or portfolio manager’s basis for their decision is
documented and maintained by the Portfolio Compliance Group.
|
| |
f. |
Portfolio
Compliance Group votes the proxy pursuant to the instructions received in
(d) or (e) and returns the voted proxy as indicated in the proxy
materials. |
Timing
Western
Asset’s Legal and Compliance Department personnel act in such a manner to ensure
that, absent special circumstances, the proxy gathering and proxy voting steps
noted above can be completed before the applicable deadline for returning proxy
votes.
Recordkeeping
Western
Asset maintains records of proxies voted pursuant to Rule 204-2 of the Advisers Act and ERISA DOL
Bulletin 94-2. These records include:
| |
a. |
A
copy of Western Asset’s proxy voting policies and procedures.
|
| |
b. |
Copies
of proxy statements received with respect to securities in client
accounts. |
| |
c. |
A
copy of any document created by Western Asset that was material to making
a decision how to vote proxies. |
| |
d. |
Each
written client request for proxy voting records and Western Asset’s
written response to both verbal and written client requests.
|
| |
e. |
A
proxy log including: |
| |
2. |
Exchange
ticker symbol of the issuer’s shares to be voted; |
| |
3. |
Committee
on Uniform Securities Identification Procedures (“CUSIP”) number for the
shares to be voted; |
| |
4. |
A
brief identification of the matter voted on; |
| |
5. |
Whether
the matter was proposed by the issuer or by a shareholder of the issuer;
|
| |
6. |
Whether
a vote was cast on the matter; |
| |
7. |
A
record of how the vote was cast; |
| |
8. |
Whether
the vote was cast for or against the recommendation of the issuer’s
management team; |
| |
9. |
Funds
are required to categorize their votes so that investors can focus on the
topics they find important. Categories include, for example, votes related
to director elections, extraordinary transactions, say-on-pay, shareholder rights
and defenses, and the environment or climate, among others; and
|
| |
10. |
Funds
are required to disclose the number of shares voted or instructed to be
cast, as well as the number of shares loaned but not recalled and,
therefore, not voted by the fund. |
Records
are maintained in an easily accessible place for a period of not less than five
(5) years with the first two (2) years in Western Asset’s offices.
Disclosure
Western
Asset’s proxy policies and procedures are described in the Firm’s Form ADV Part
2A. Clients are provided with a copy of these policies and procedures upon
request. In addition, clients may receive reports on how their proxies have been
voted, upon request.
Conflicts
of Interest
All
proxies that potentially present conflicts of interest are reviewed by the
Regulatory Affairs Group for a materiality assessment. Issues to be reviewed
include, but are not limited to:
| |
a. |
Whether
Western Asset (or, to the extent required to be considered by applicable
law, its affiliates) manages assets for the company or an employee group
of the company or otherwise has an interest in the company;
|
Proxy
Voting
| |
b. |
Whether
Western Asset or an officer or director of Western Asset or the applicable
portfolio manager or analyst responsible for recommending the proxy vote
(together, “Voting Persons”) is a close relative of or has a personal or
business relationship with an executive, director or person who is a
candidate for director of the company or is a participant in a proxy
contest; and |
| |
c. |
Whether
there is any other business or personal relationship where a Voting Person
has a personal interest in the outcome of the matter before shareholders.
|
Voting
Guidelines
Western
Asset’s substantive voting decisions are based on the particular facts and
circumstances of each proxy vote and are evaluated by the designated research
analyst or portfolio manager. The examples outlined below are meant as
guidelines to aid in the decision-making process.
Situations
can arise in which more than one Western Asset client invests in instruments of
the same issuer or in which a single client may invest in instruments of the
same issuer but in multiple accounts or strategies. Multiple clients or the same
client in multiple accounts or strategies may have different investment
objectives, investment styles, or investment professionals involved in making
decisions. While there may be differences, votes are always cast in the best
interests of the client and the investment objectives agreed with Western Asset.
As a result, there may be circumstances where Western Asset casts different
votes on behalf of different clients or on behalf of the same client with
multiple accounts or strategies.
Guidelines
are grouped according to the types of proposals generally presented to
shareholders. Part I deals with proposals which have been approved and are
recommended by a company’s board of directors; Part II deals with proposals
submitted by shareholders for inclusion in proxy statements; Part III addresses
issues relating to voting shares of investment companies; and Part IV addresses
unique considerations pertaining to foreign issuers.
| |
I. |
Board
Approved Proposals |
The
vast majority of matters presented to shareholders for a vote involve proposals
made by a company itself that have been approved and recommended by its board of
directors. In view of the enhanced corporate governance practices currently
being implemented in public companies, Western Asset generally votes in support
of decisions reached by independent boards of directors. More specific
guidelines related to certain board-approved proposals are as follows:
| |
1. |
Matters
relating to the Board of Directors |
Western
Asset votes proxies for the election of the company’s nominees for directors and
for board-approved proposals on other matters relating to the board of directors
with the following exceptions:
| |
a. |
Votes
are withheld for the entire board of directors if the board does not have
a majority of independent directors or the board does not have nominating,
audit and compensation committees composed solely of independent
directors. |
| |
b. |
Votes
are withheld for any nominee for director who is considered an independent
director by the company and who has received compensation from the company
other than for service as a director. |
| |
c. |
Votes
are withheld for any nominee for director who attends less than 75% of
board and committee meetings without valid reasons for absences.
|
| |
d. |
Votes
are cast on a case-by-case basis in contested
elections of directors. |
| |
2. |
Matters
relating to Executive Compensation |
Western
Asset generally favors compensation programs that relate executive compensation
to a company’s long-term performance. Votes are cast on a case-by-case basis on board-approved
proposals relating to executive compensation, except as follows:
| |
a. |
Except
where the firm is otherwise withholding votes for the entire board of
directors, Western Asset votes for stock option plans that will result in
a minimal annual dilution. |
| |
b. |
Western
Asset votes against stock option plans or proposals that permit replacing
or repricing of underwater options. |
| |
c. |
Western
Asset votes against stock option plans that permit issuance of options
with an exercise price below the stock’s current market price.
|
| |
d. |
Except
where the firm is otherwise withholding votes for the entire board of
directors, Western Asset votes for employee stock purchase plans that
limit the discount for shares purchased under the plan to no more than 15%
of their market value, have an offering period of 27 months or less and
result in dilution of 10% or less. |
Proxy
Voting
| |
3. |
Matters
relating to Capitalization |
The
Management of a company’s capital structure involves a number of important
issues, including cash flows, financing needs and market conditions that are
unique to the circumstances of each company. As a result, Western Asset votes on
a case-by-case basis on board-approved
proposals involving changes to a company’s capitalization except where Western
Asset is otherwise withholding votes for the entire board of directors.
| |
a. |
Western
Asset votes for proposals relating to the authorization of additional
common stock. |
| |
b. |
Western
Asset votes for proposals to effect stock splits (excluding reverse stock
splits). |
| |
c. |
Western
Asset votes for proposals authorizing share repurchase programs.
|
| |
4. |
Matters
relating to Acquisitions, Mergers, Reorganizations and Other Transactions
|
Western
Asset votes these issues on a case-by-case basis on board-approved
transactions.
| |
5. |
Matters
relating to Anti-Takeover Measures |
Western
Asset votes against board-approved proposals to adopt anti-takeover measures
except as follows:
| |
a. |
Western
Asset votes on a case-by-case basis on proposals
to ratify or approve shareholder rights plans. |
| |
b. |
Western
Asset votes on a case-by-case basis on proposals
to adopt fair price provisions. |
| |
6. |
Other
Business Matters |
Western
Asset for board-approved proposals approving such routine business matters such
as changing the company’s name, ratifying the appointment of auditors and
procedural matters relating to the shareholder meeting.
| |
a. |
Western
Asset votes on a case-by-case basis on proposals
to amend a company’s charter or bylaws. |
| |
b. |
Western
Asset votes against authorization to transact other unidentified,
substantive business at the meeting. |
| |
7. |
Reporting
of Financially Material Information |
Western
Asset generally believes issuers should disclose information that is material to
their business. What qualifies as “material” can vary, so votes are cast on a
case-by-case basis but consistent with
the overarching principle.
| |
II. |
Shareholder
Proposals |
SEC
regulations permit shareholders to submit proposals for inclusion in a company’s
proxy statement. These proposals generally seek to change some aspect of a
company’s corporate governance structure or to change some aspect of its
business operations. Western Asset votes in accordance with the recommendation
of the company’s board of directors on all shareholder proposals, except as
follows:
| |
1. |
Western
Asset votes for shareholder proposals to require shareholder approval of
shareholder rights plans. |
| |
2. |
Western
Asset votes for shareholder proposals that are consistent with Western
Asset’s proxy voting guidelines for board-approved proposals.
|
| |
3. |
Western
Asset votes on a case-by-case basis on other
shareholder proposals where the firm is otherwise withholding votes for
the entire board of directors. |
Environmental
or social issues that are the subject of a proxy vote will be considered on a
case-by-case basis. Constructive
proposals that seek to advance the health of the issuer and the prospect for
risk-adjusted returns to Western Assets clients are viewed more favorably than
proposals that advance a single issue or limit the ability of management to meet
its operating objectives.
| |
III. |
Voting
Shares of Investment Companies |
Western
Asset may utilize shares of open or closed-end investment companies to implement
its investment strategies. Shareholder votes for investment companies that fall
within the categories listed in Parts I and II above are voted in accordance
with those guidelines.
| |
1. |
Western
Asset votes on a case-by-case basis on proposals
relating to changes in the investment objectives of an investment company
taking into account the original intent of the fund and the role the fund
plays in the clients’ portfolios. |
| |
2. |
Western
Asset votes on a case-by-case basis all proposals
that would result in increases in expenses (e.g., proposals to adopt 12b-1 plans, alter investment advisory
arrangements or approve fund mergers) taking into account comparable
expenses for similar funds and the services to be provided.
|
Proxy
Voting
| |
IV. |
Voting
Shares of Foreign Issuers |
In
the event Western Asset is required to vote on securities held in non-U.S. issuers – i.e. issuers that are incorporated under the
laws of a foreign jurisdiction and that are not listed on a U.S. securities
exchange or the NASDAQ stock market, the following guidelines are used, which
are premised on the existence of a sound corporate governance and disclosure
framework. These guidelines, however, may not be appropriate under some
circumstances for foreign issuers and therefore apply only where applicable.
1.
Western Asset votes for shareholder proposals calling for a majority of the
directors to be independent of management.
2.
Western Asset votes for shareholder proposals seeking to increase the
independence of board nominating, audit and compensation committees.
3.
Western Asset votes for shareholder proposals that implement corporate
governance standards similar to those established under U.S. federal law and the
listing requirements of U.S. stock exchanges, and that do not otherwise violate
the laws of the jurisdiction under which the company is incorporated.
4.
Western Asset votes on a case-by-case basis on proposals
relating to (1) the issuance of common stock in excess of 20% of a
company’s outstanding common stock where shareholders do not have preemptive
rights, or (2) the issuance of common stock in excess of 100% of a
company’s outstanding common stock where shareholders have preemptive rights.
| |
V. |
Environmental,
Social and Governance (“ESG”) Matters |
Western
Asset incorporates ESG considerations, among other relevant risks, as part of
the overall process where appropriate. The Firm seeks to identify and consider
material risks to the investment thesis, including material risks presented by
ESG factors. While Western Asset is primarily a fixed income manager,
opportunities to vote proxies are considered on the investment merits of the
instruments and strategies involved.
As
a general proposition, Western Asset votes to encourage disclosure of
information material to their business. This principle extends to ESG matters.
What qualifies as “material” can vary, so votes are cast on a case-by-case basis but consistent with
the overarching principle. Western Asset recognizes that objective standards and
criteria may not be available or universally agreed and that there may be
different views and subjective analysis regarding factors and their
significance.
Targeted
environmental or social issues that are the subject of a proxy vote will be
considered on a case-by-case basis. Constructive
proposals that seek to advance the health of the issuer and the prospect for
risk-adjusted returns to Western Assets clients are viewed more favorably than
proposals that advance a single issue or limit the ability of management to meet
its operating objectives.
Retirement
Accounts
For
accounts subject to ERISA, as well as other retirement accounts, Western Asset
is presumed to have the responsibility to vote proxies for the client. The
Department of Labor has issued a bulletin that states that investment managers
have the responsibility to vote proxies on behalf of Retirement Accounts unless
the authority to vote proxies has been specifically reserved to another named
fiduciary. Furthermore, unless Western Asset is expressly precluded from voting
the proxies, the Department of Labor has determined that the responsibility
remains with the investment manager.
In
order to comply with the Department of Labor’s position, Western Asset will be
presumed to have the obligation to vote proxies for its retirement accounts
unless Western Asset has obtained a specific written instruction indicating
that: (a) the right to vote proxies has been reserved to a named fiduciary
of the client, and (b) Western Asset is precluded from voting proxies on
behalf of the client. If Western Asset does not receive such an instruction,
Western Asset will be responsible for voting proxies in the best interests of
the retirement account client and in accordance with any proxy voting guidelines
provided by the client.
Disclosure
© Western Asset Management
Company, LLC 2023. This publication is the property of Western Asset and is
intended for the sole use of its clients, consultants, and other intended
recipients. It should not be forwarded to any other person. Contents herein
should be treated as confidential and proprietary information. This material may
not be reproduced or used in any form or medium without express written
permission.
