2022-12-19ClassicValueFund_ACIR2R5R6_StatPro_3123
Statement
of Additional Information
John
Hancock Capital Series
John
Hancock Investment Trust
John
Hancock Investment Trust II
March 1,
2023
|
|
|
|
|
|
|
| |
|
A |
C |
I |
R2 |
R4 |
R5 |
R6 |
NAV |
John
Hancock Capital Series |
|
|
|
|
|
|
|
|
John
Hancock Classic Value Fund |
PZFVX |
JCVCX |
JCVIX |
JCVSX |
— |
JCVVX |
JCVWX |
N/A |
John
Hancock U.S. Global Leaders Growth Fund |
USGLX |
USLCX |
USLIX |
USLYX |
N/A |
N/A |
UGLSX |
N/A |
John
Hancock Investment Trust |
|
|
|
|
|
|
|
|
John
Hancock Balanced Fund |
SVBAX |
SVBCX |
SVBIX |
JBATX |
JBAFX |
JBAVX |
JBAWX |
N/A |
John
Hancock Disciplined Value International Fund |
JDIBX |
JDICX |
JDVIX |
JDISX |
JDITX |
— |
JDIUX |
JDIVX |
John
Hancock Diversified Macro Fund |
JDJAX |
JDJCX |
JDJIX |
N/A |
N/A |
N/A |
JDJRX |
— |
John
Hancock Emerging Markets Equity Fund |
JEMQX |
JEMZX |
JEMMX |
JEMKX |
JEMNX |
N/A |
JEMGX |
— |
John
Hancock ESG International Equity Fund |
JTQAX |
— |
JTQIX |
— |
— |
N/A |
JTQRX |
— |
John
Hancock ESG Large Cap Core Fund |
JHJAX |
JHJCX |
JHJIX |
— |
— |
N/A |
JHJRX |
— |
John
Hancock Fundamental Large Cap Core Fund |
TAGRX |
JHLVX |
JLVIX |
JLCYX |
JLCFX |
JLCVX |
JLCWX |
JLCNX |
John
Hancock Global Environmental Opportunities Fund |
JABZX |
JABYX |
JABVX |
N/A |
N/A |
N/A |
JACDX |
— |
John
Hancock Global Thematic Opportunities Fund |
JTKAX |
JTKCX |
JTKIX |
N/A |
N/A |
N/A |
JTKRX |
JTKNX |
John
Hancock Infrastructure Fund |
JEEBX |
JEEFX |
JEEIX |
N/A |
N/A |
N/A |
JEEDX |
— |
John
Hancock International Dynamic Growth Fund |
JIJAX |
JIJCX |
JIJIX |
N/A |
N/A |
N/A |
JIJRX |
— |
John
Hancock Seaport Long/Short Fund |
JSFBX |
JSFTX |
JSFDX |
N/A |
N/A |
N/A |
JSFRX |
— |
John
Hancock Small Cap Core Fund |
JCCAX |
N/A |
JCCIX |
N/A |
N/A |
N/A |
JORSX |
— |
John
Hancock Investment Trust II |
|
|
|
|
|
|
|
|
John
Hancock Financial Industries Fund |
FIDAX |
FIDCX |
JFIFX |
N/A |
N/A |
N/A |
JFDRX |
— |
John
Hancock Regional Bank Fund |
FRBAX |
FRBCX |
JRBFX |
N/A |
N/A |
N/A |
JRGRX |
N/A |
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 March
1, 2023, 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 October 31, 2022, as well
as the related opinion of the fund's independent registered public accounting
firm, as included in the fund's
most recent annual report to shareholders (each an "Annual Report"). The
financial statements of each fund for the fiscal period ended October 31,
2022 are
available through the link(s) in the following table:
| |
Form
N-CSR filed December 23, 2022 for: John
Hancock Capital Series |
|
Form
N-CSR filed December 23, 2022 for: John
Hancock Investment Trust |
|
Form
N-CSR filed December 23, 2022 for: John
Hancock Investment Trust II |
|
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.
|
JH1031SAI |
A copy of a
Prospectus or 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
Table of
contents
| |
|
2 |
|
5 |
|
6 |
|
25 |
|
46 |
|
46 |
|
56 |
|
66 |
|
66 |
|
76 |
|
105 |
|
111 |
|
115 |
|
119 |
|
120 |
|
123 |
|
127 |
|
128 |
|
129 |
|
130 |
|
131 |
|
133 |
|
139 |
|
143 |
|
144 |
|
144 |
|
144 |
|
144 |
|
144 |
|
145 |
|
151 |
|
174 |
GLOSSARY
| |
Term |
Definition |
"1933
Act" |
the
Securities Act of 1933, as amended |
"1940
Act" |
the
Investment Company Act of 1940, as amended |
"Advisers
Act" |
the
Investment Advisers Act of 1940, as amended |
"Advisor" |
John
Hancock Investment Management LLC (formerly, John Hancock
Advisers,
LLC), 200 Berkeley Street, Boston, Massachusetts 02116 |
"Advisory
Agreement" |
an
investment advisory agreement or investment management contract
between
the Trust and the Advisor |
"Affiliated
Subadvisors" |
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 |
"BDCs" |
business
development companies |
"Board" |
Board
of Trustees of the Trust |
"Bond
Connect" |
Mutual
Bond Market Access between Mainland China and Hong Kong |
"Brown
Brothers Harriman" |
Brown
Brothers Harriman & Co. |
"CATS" |
Certificates
of Accrual on Treasury Securities |
"CBOs" |
Collateralized
Bond Obligations |
"CCO" |
Chief
Compliance Officer |
"CDSC" |
Contingent
Deferred Sales Charge |
"CEA" |
the
Commodity Exchange Act, as amended |
"China
A-Shares" |
Chinese
stock exchanges |
"CIBM" |
China
interbank bond market |
"CLOs" |
Collateralized
Loan Obligations |
"CMOs" |
Collateralized
Mortgage Obligations |
"Code" |
the
Internal Revenue Code of 1986, as amended |
"COFI
floaters" |
Cost
of Funds Index |
"CPI" |
Consumer
Price Index |
"CPI-U" |
Consumer
Price Index for Urban Consumers |
"CPO" |
Commodity
Pool Operator |
"CFTC" |
Commodity
Futures Trading Commission |
"Citibank" |
Citibank,
N.A., 388 Greenwich Street, New York, NY 10013 |
"Distributor" |
John
Hancock Investment Management Distributors LLC (formerly, John Hancock
Funds, LLC), 200 Berkeley Street, Boston, Massachusetts 02116 |
"EMU" |
Economic
and Monetary Union |
"ETFs" |
Exchange-Traded
Funds |
"ETNs" |
Exchange-Traded
Notes |
"EU" |
European
Union |
"Fannie
Mae" |
Federal
National Mortgage Association |
"FHFA" |
Federal
Housing Finance Agency |
"FHLBs" |
Federal
Home Loan Banks |
"FICBs" |
Federal
Intermediate Credit Banks |
"Fitch" |
Fitch
Ratings |
"Freddie
Mac" |
Federal
Home Loan Mortgage Corporation |
"funds"
or "series" |
The
John Hancock funds within this SAI as noted on the front cover and as
the
context may require |
| |
Term |
Definition |
"funds
of funds" |
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 |
"GNMA" |
Government
National Mortgage Association |
"HKSCC" |
Hong
Kong Securities Clearing Company |
"IOs" |
Interest-Only |
"IRA" |
Individual
Retirement Account |
"IRS" |
Internal
Revenue Service |
"JHCT" |
John
Hancock Collateral Trust |
"JH
Distributors" |
John
Hancock Distributors, LLC |
"JHLICO
New York" |
John
Hancock Life Insurance Company of New York |
"JHLICO
U.S.A." |
John
Hancock Life Insurance Company (U.S.A.) |
"LOI" |
Letter
of Intention |
"LIBOR" |
London
Interbank Offered Rate |
"MAAP" |
Monthly
Automatic Accumulation Program |
"Manulife
Financial" or "MFC" |
Manulife
Financial, a publicly traded company based in Toronto,
Canada |
"Manulife
IM (NA)" |
Manulife
Investment Management (North America) Limited (formerly, John Hancock
Asset Management a Division of Manulife Asset Management (North
America) Limited) |
"Manulife
IM (US)" |
Manulife
Investment Management (US) LLC (formerly, John Hancock Asset Management
a Division of Manulife Asset Management (US) LLC) |
"MiFID
II" |
Markets
in Financial Instruments Directive |
"Moody's" |
Moody's
Investors Service, Inc |
"NAV" |
Net
Asset Value |
"NRSRO" |
Nationally
Recognized Statistical Rating Organization |
"NYSE" |
New
York Stock Exchange |
"OID" |
Original
Issue Discount |
"OTC" |
Over-The-Counter |
"PAC" |
Planned
Amortization Class |
"PFS" |
Personal
Financial Services |
"POs" |
Principal-Only |
"PRC" |
People's
Republic of China |
"REITs" |
Real
Estate Investment Trusts |
"RIC" |
Regulated
Investment Company |
"RPS" |
John
Hancock Retirement Plan Services |
"SARSEP" |
Salary
Reduction Simplified Employee Pension Plan |
"SEC" |
Securities
and Exchange Commission |
"SEP" |
Simplified
Employee Pension |
"SIMPLE" |
Savings
Incentive Match Plan for Employees |
"S&P" |
S&P Global
Ratings |
"SLMA" |
Student
Loan Marketing Association |
"SPACs" |
Special
Purpose Acquisition Companies |
"State
Street" |
State
Street Bank and Trust Company,
State Street Financial Center, One Lincoln
Street, Boston, Massachusetts 02111 |
"Stock
Connect" |
Hong
Kong Stock Connect Program |
"subadvisor" |
Any
subadvisors employed by John Hancock within this SAI as noted in
Appendix
B and as the context may require |
| |
Term |
Definition |
"TAC" |
Target
Amortization Class |
"TIGRs" |
Treasury
Receipts, Treasury Investors Growth Receipts |
"Trust" |
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 |
"TSA" |
Tax-Sheltered
Annuity |
"unaffiliated
underlying funds" |
underlying
funds that are advised by an entity other than John Hancock's investment
advisor or its affiliates |
"underlying
funds" |
funds
in which the funds of funds invest |
"UK" |
United
Kingdom |
ORGANIZATION
OF THE TRUSTS
Each 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 fund
is a diversified series of its respective Trust, as that term is used in
the 1940 Act, and as
interpreted or modified by regulatory authority having jurisdiction, from time
to time. The
following table sets forth the date each Trust was organized:
| |
Trust |
Date
of Organization |
John
Hancock Capital Series |
October
5, 1984 |
John
Hancock Investment Trust |
December
21, 1984 |
John
Hancock Investment Trust II |
March
30, 1984 |
Diversified
Macro Fund (the "Parent" fund) presently has a single wholly-owned subsidiary,
John Hancock Diversified Macro Offshore Subsidiary Fund, Ltd. (the
"Subsidiary"). The Subsidiary is organized under the laws of the Cayman Islands
as an "exempt company," which is a corporation that is exempt from
taxation in the Cayman Islands but may not trade in the Cayman Islands with any
person, firm or corporation except in furtherance of business
carried on outside the Cayman Islands. Diversified Macro Fund is the sole owner
of its Subsidiary.
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:
| |
Fund |
Commencement
of Operations |
Balanced
Fund |
October
5, 1992 |
Classic
Value Fund |
June
24, 1996 |
Disciplined
Value International Fund |
December
30, 2011 (predecessor fund inception date; became a series of Investment
Trust on September 29, 2014) |
Diversified
Macro Fund |
July
29, 2019 |
Emerging
Markets Equity Fund |
June
16, 2015 |
ESG
Large Cap Core Fund |
June
6, 2016 |
ESG
International Equity Fund |
December
14, 2016 |
Financial
Industries Fund |
March
14, 1996 |
Fundamental
Large Cap Core Fund |
September
30, 1984 |
Global
Environmental Opportunities Fund |
July
21, 2021 |
Global
Thematic Opportunities Fund |
December
14, 2018 |
Infrastructure
Fund |
December
20, 2013 |
International
Dynamic Growth Fund |
April
17, 2019 |
Regional
Bank Fund |
October
4, 1985 |
Seaport
Long/Short Fund |
December
20, 2013 |
Small
Cap Core Fund |
December
20, 2013 |
U.S.
Global Leaders Growth Fund |
September
29, 1995 |
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 the funds 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.
Asset-Backed
Securities
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. Seaport Long/Short Fund
may, from time to time, invest in lower-rated asset-backed securities.
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:
• |
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.
Brady
Bonds
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. |
Discount
bonds issued to date under the framework of the Brady Plan have generally borne
interest computed semiannually at a rate equal to 13/16th of one
percent above current six-month LIBOR. 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.
Certificates
of deposit and bankers' acceptances acquired by Classic Value Fund and U.S.
Global Leaders Growth Fund will be dollar-denominated obligations
of domestic banks, savings and loan associations or financial institutions
which, at the time of purchase, have capital, surplus and undivided
profits in excess of $100 million (including assets of both domestic and foreign
branches), based on latest published reports, or less than $100
million if the principal amount of such bank obligations are fully insured by
the U.S. government.
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.
Fundamental
Large Cap Core Fund may invest in commercial paper rated at least "P-1" by
Moody's or "A-1" by S&P. Classic Value Fund and U.S. Global
Leaders Growth Fund may invest in commercial paper consisting of issues rated at
the time of purchase "A-2" or higher by S&P, "P-1" or "P-2" by Moody's,
or similarly rated by another NRSRO or, if unrated, will be determined by the
subadvisor to be of comparable quality. These ratings symbols are
described in Appendix A.
Variable
Amount Master Demand Notes (Each
fund other than Balanced Fund, Classic Value Fund, Financial Industries Fund,
Fundamental
Large Cap Core Fund, Regional Bank Fund, and U.S. Global Leaders Growth
Fund).
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.
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
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
Corporate
obligations are bonds and notes issued by corporations to finance long-term
credit needs.
Depositary
Receipts
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.
Each fund
may invest in ADRs, each fund other than U.S. Global Leaders Growth Fund may
invest in EDRs, and each fund other than Classic Value Fund and U.S.
Global Leaders Growth Fund may invest in GDRs, IDRs, and NVDRs, in each case as
described in its investment policies. U.S. Global Leaders Growth Fund
treats ADRs as interests in the underlying securities for purposes of its
investment policies.
Exchange-Traded
Notes
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.
Fixed-Income
Securities
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
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.
Commodity-Linked
Notes. Certain
structured products may provide exposure to the commodities markets. These are
derivative securities with one or more
commodity-linked components that have payment features similar to commodity
futures contracts, commodity options, or similar instruments. Commodity-linked
structured products may be either equity or debt securities, leveraged or
unleveraged, and have both security and commodity-like characteristics.
A portion of the value of these instruments may be derived from the value of a
commodity, futures contract, index or other economic variable.
Illiquid
Securities
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.
Each 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.
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 exchange-traded fund 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.
Indexed
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.
Inflation-Indexed
Bonds
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.
Interfund
Lending
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. Balanced
Fund, Disciplined Value International Fund, Diversified Macro Fund, Emerging
Markets Equity Fund, ESG International Equity Fund, ESG Large Cap
Core Fund, Fundamental Large Cap Core Fund, Global Environmental Opportunities
Fund, Global Thematic Opportunities Fund, Infrastructure
Fund, International Dynamic Growth Fund, Seaport Long/Short Fund, Small Cap Core
Fund, and U.S. Global Leaders Growth Fund are authorized
to participate fully in this program. Classic Value Fund and Financial
Industries Fund are subject to a fundamental investment restriction that
prohibits lending through the program. Regional Bank Fund is subject to
fundamental investment restrictions that prohibit borrowing or lending
through the
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.
In October
2020, the SEC adopted Rule 12d1-4, which became effective on January 19, 2021,
and permits a fund to invest in other investment companies
beyond the statutory limits, subject to certain conditions. Compliance with Rule
12d1-4 is required as of January 19, 2022.
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.
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.
Lending
of Securities
Each fund
other than Regional Bank Fund may
lend its securities so long as such loans do not represent more than
331/3% 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."
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.
Certain of
the Trusts, on behalf
of certain of their funds,
have entered
into an agency agreement for securities lending transactions ("Securities
Lending
Agreement") with Citibank and, separately, with Brown Brothers Harriman
and
National Financial Services LLC ("Fidelity Agency Lending")(each, a
"Securities Lending Agent"). Pursuant to each Securities Lending Agreement,
Citibank, Brown
Brothers Harriman, or
Fidelity Agency Lending acts as
securities lending agent for the funds and administers each fund's securities
lending program. During the fiscal year, each Securities Lending
Agent performed various services for the 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, Citibank, Brown
Brothers Harriman, or Fidelity
Agency Lending, as
applicable, 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 Citibank, Brown
Brothers Harriman, or Fidelity
Agency Lending, as
applicable, 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 October 31, 2022, 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 October 31, 2022.
|
|
| |
Fund
Name |
Balanced
Fund |
Disciplined
Value International
Fund |
Financial
Industries
Fund |
Gross
Income from securities lending activities ($) |
497,680 |
473,420 |
2,249 |
Fees
and/or compensation for securities lending activities and related
services |
|
|
|
Fees
paid to securities lending agent from a revenue split ($)
|
20,802 |
46,553 |
198 |
Fees
paid for any cash collateral management service (including fees deducted
from
a pooled cash collateral reinvestment vehicle) that are not included in
the revenue
split ($) |
26,326 |
14,330 |
244 |
Administrative
fees not included in revenue split |
|
|
|
Indemnification
fee not included in revenue split |
|
|
|
Rebate
(paid to borrower) ($) |
305,214 |
82,635 |
20 |
Other
fees not included in revenue split (specify) |
|
|
|
Aggregate
fees/compensation for securities lending activities
($) |
352,342 |
143,518 |
462 |
|
|
| |
Fund
Name |
Balanced
Fund |
Disciplined
Value International
Fund |
Financial
Industries
Fund |
Net
Income from securities lending activities ($) |
145,338 |
329,902 |
1,787 |
|
|
|
| |
Fund
Name |
Global
Thematic Opportunities
Fund |
Infrastructure
Fund |
International
Dynamic
Growth Fund |
Seaport
Long/Short
Fund |
Gross
Income from securities lending activities ($) |
19,262 |
175,707 |
10,969 |
87,711 |
Fees
and/or compensation for securities lending activities and
related services |
|
|
|
|
Fees
paid to securities lending agent from a revenue split ($)
|
1,046 |
17,737 |
800 |
10,521 |
Fees
paid for any cash collateral management service (including
fees deducted from a pooled cash collateral reinvestment
vehicle) that are not included in the revenue split
($) |
993 |
6,785 |
1,174 |
1,566 |
Administrative
fees not included in revenue split |
|
|
|
|
Indemnification
fee not included in revenue split |
|
|
|
|
Rebate
(paid to borrower) ($) |
7,801 |
26,980 |
1,616 |
2,697 |
Other
fees not included in revenue split (specify) |
|
|
|
|
Aggregate
fees/compensation for securities lending
activities ($) |
9,840 |
51,502 |
3,590 |
14,784 |
Net
Income from securities lending activities ($) |
9,422 |
124,205 |
7,379 |
72,927 |
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.
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), LIBOR, 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.
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, momentum, 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 with
respect to other eligible companies when making investment
decisions and may exclude a small capitalization company when the manager
determines it to be appropriate. In assessing a company's investment
characteristics, a subadvisor may consider ratios such as recent changes in
assets divided by total assets. Under normal circumstances, a fund will
seek to limit such exclusion to no more than 5% of the eligible small
capitalization company universe in each country that the fund invests.
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
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.
Mortgage
Dollar Rolls
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. A fund may only enter into "covered
rolls." 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.
As further
outlined in the "Government Regulation of Derivatives"
section, the SEC adopted Rule 18f-4 (the "Derivatives Rule") on October 28,
2020, and in doing so announced it would rescind SEC releases,
guidance and no-action letters related to funds' coverage and asset segregation
practices. Funds were required to comply with the Derivatives
Rule requirements by August 19, 2022. Covered rolls will be entered into in
accordance with the regulatory requirements described in "Government
Regulation of Derivatives" section. 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.
Mortgage
Securities
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 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 collateralized mortgage obligations, 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.
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 original issue
discount, 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."
Municipal
Obligations
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 costs
associated with combating the coronavirus (COVID-19) pandemic and the negative
impact on tax revenues has adversely affected the financial
condition of many states and their political subdivisions. The effects of this
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. The spread of COVID-19 and the
related governmental and public responses have had, and may
continue to have an adverse effect on Puerto Rico's economy.
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. The coronavirus (COVID-19) pandemic, 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.
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.
Organization
and Management of Subsidiary
The
Subsidiary invests in commodity-linked swap agreements and other
commodity-linked derivative instruments, but may also invest in the securities
and other
instruments in which its Parent fund is permitted to invest. The Subsidiary is
an exempted company organized under the laws of the Cayman Islands,
whose registered office is located at the offices of Maples Corporate Services
Limited, PO Box 309, Ugland House, Grand Cayman, KY1-
1104,
Cayman Islands. The Subsidiary's custodian is Citibank. The Subsidiary's affairs
are overseen by a board currently consisting of three Directors: Andrew G.
Arnott, Philip J. Fontana, and Charles A. Rizzo. Each of the Directors is an
employee of the Advisor.
The
Subsidiary has entered into a separate contract with the Advisor whereby the
Advisor provides investment advisory services to the Subsidiary (the
"Subsidiary
Advisory Agreement"). In turn, the Advisor has entered into a separate contract
with the fund's subadvisor whereby the subadvisor provides
day-to-day management of the Subsidiary's investments, subject to the
supervision of the Advisor (the "Subsidiary Subadvisory Agreement").
The
Subsidiary Advisory Agreement continues in effect for so long as its Parent
fund's advisory agreement is effective, and will terminate automatically
upon the
termination of the fund's advisory agreement or in the event that the Advisor no
longer serves as investment advisor to the fund. Similarly, the Subsidiary
Subadvisory Agreement continues in effect for so long as its Parent fund's
subadvisory agreement is effective, and will terminate automatically
upon the termination of the fund's subadvisory agreement or in the event that
the Subadvisor no longer serves as investment subadvisor to the
fund. The Directors of the Subsidiary may terminate either Agreement at any
time, without the payment of any penalty. Either Subsidiary Advisory
Agreement or Subsidiary Subadvisory Agreement will automatically terminate,
without payment of any penalty, in the event of its "assignment"
(as defined in the 1940 Act). The Advisor and Subadvisor to the Subsidiary
comply with provisions of the 1940 Act relating to investment
advisory contracts (Section 15) as an investment adviser to a fund under Section
2(a)(20) of the 1940 Act.
The
Subsidiary will bear the fees and expenses incurred in connection with the
custody, transfer agency, and audit services that it receives. The fund
expects
that the expenses borne by the Subsidiary will not be material in relation to
the value of its assets.
The
Subsidiary has adopted compliance policies and procedures that are substantially
similar to the policies and procedures adopted by the fund. The Subsidiary
is operated in accordance with the 1940 Act investment restrictions that apply
to the fund (including provisions related to affiliated transactions
and custody), but is not subject to provisions of the Code, although, pursuant
to the Subsidiary Subadvisory Agreement, the fund's subadvisor
agrees to work collaboratively with the Advisor to cause the fund to comply with
the requirements of Subchapter M of the Code for qualification
as a RIC. The fund will comply with provisions of the 1940 Act governing
investment policies and capital structure and leverage on an aggregate
basis with its Subsidiary. The Trust's Chief Compliance Officer oversees
implementation of the Subsidiary's policies and procedures, and makes
periodic reports to the Board regarding the Subsidiary's compliance with its
policies and procedures. In testing compliance of the fund and its Subsidiary
with applicable investment restrictions, the assets of the fund are aggregated
with those of its Subsidiary, except with respect to borrowings.
Participation
Interests
Participation
interests, that may take the form of interests in, or assignments of certain
loans, are acquired from banks that have made these loans or are members
of a lending syndicate. The fund's investments in participation interests are
subject to its 15% limitation on investments in illiquid securities.
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. |
Disciplined
Value International Fund, Diversified Macro Fund, Emerging Markets Equity Fund,
Global Environmental Opportunities Fund, Global Thematic
Opportunities Fund, Infrastructure Fund, International Dynamic Growth Fund,
Seaport Long/Short Fund, and Small Cap Core Fund also may
participate
in repurchase agreement transactions utilizing the settlement services of
clearing firms that meet the subadvisor's 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.
Fund-Specific
Policies Regarding Reverse Repurchase Agreements (Balanced Fund, Classic Value
Fund, Financial Industries Fund, Fundamental
Large Cap Core Fund, Regional Bank Fund, and U.S. Global Leaders Growth
Fund). A fund may
enter into reverse repurchase agreements
that involve the sale of government securities held in its portfolio to a bank.
Balanced Fund and Fundamental Large Cap Core Fund also may enter
into reverse repurchase agreements that involve the sale of such securities to a
securities firm. Each of Balanced Fund and Fundamental Large Cap
Core Fund will not enter into reverse repurchase agreements and other borrowings
exceeding in the aggregate 33⅓% of the market value of its
total assets. Each of Classic Value Fund, Financial Industries Fund, Regional
Bank Fund, and U.S. Global Leaders Growth Fund will not enter into reverse
repurchase agreements and other borrowings except from banks as a temporary
measure for extraordinary emergency purposes in amounts not to
exceed 33⅓% of its total assets (including the amount borrowed) taken at market
value.
Each of
Financial Industries Fund and Regional Bank Fund may not purchase securities
while outstanding borrowings (other than reverse repurchase agreements)
exceed 5% of its total assets. Classic Value Fund, Financial Industries Fund,
Regional Bank Fund, and U.S. Global Leaders Growth Fund will not
use leverage to attempt to increase total return.
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.
Short
Sales
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.
Each fund
other than Regional Bank Fund and Seaport/Long Short Fund
can engage in short sales against the box.
In
addition, each of Balanced Fund, Disciplined Value International Fund,
Diversified Macro Fund, Emerging Markets Equity Fund, ESG International
Equity
Fund, ESG Large Cap Core Fund, Financial Industries Fund, Fundamental Large Cap
Core Fund, Global Environmental Opportunities Fund, Global
Thematic Opportunities Fund, International Dynamic Growth Fund, and Seaport
Long/Short Fund may make short sales of securities that the fund 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. Until a fund
replaces a borrowed security, the fund
will adhere to requirements outlined in
the "Government Regulation of Derivatives" section. The SEC adopted the
Derivatives Rule on October 28, 2020, and in doing so announced
it would rescind SEC releases, guidance and no-action letters related to funds'
coverage and asset segregation practices. Funds were required to
comply with the Derivatives Rule requirements by August 19, 2022. Except
for short sales against-the-box, the amount of a fund's net assets that
may be committed to short sales is limited and the securities in which short
sales are made must be listed on a national securities exchange.
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.
Fund-Specific
Policies Regarding Short Sales. Each of
Balanced Fund and Fundamental Large Cap Core Fund does not intend to enter into
short sales
(other than those against-the-box) if, immediately after such sale, the
aggregate value of all the securities sold short exceeds the value of 15% of
the Fund's
net assets. Regional Bank Fund may not engage in short sales or short sales
against the box. Seaport Long/Short Fund may not engage in short sales
against the box. Classic Value Fund, Global Leaders Growth Fund, Infrastructure
Fund and Small Cap Core Fund may engage in short sales against the
box but not short sales.
Synthetic
Short Exposures
Seaport
Long/Short Fund will gain synthetic short exposure through a forward commitment
through a swap agreement. If the price of the reference security
has increased during this time, then the fund will incur a loss equal to the
increase in price from the time that the short exposure was entered into plus
any transaction costs (i.e., premiums and interest) paid to the broker-dealer to
borrow securities. Therefore, synthetic short exposures involve the
risk that losses may be exaggerated, potentially losing more money than the
actual cost of the investment. Seaport Long/Short Fund is subject to
a non-fundamental investment restriction that prohibits it from physically
shorting securities, e.g., via prime brokerage agreements.
Short-Term
Trading
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.
Structured
or Hybrid Notes
The
distinguishing feature of a "structured" or "hybrid note" is that the amount of
interest and/or principal payable on the note is based on the performance
of a benchmark asset or market other than fixed income securities or interest
rates. Examples of these benchmarks include stock prices, currency
exchange rates and physical commodity prices. Investing in a structured note
allows a fund to gain exposure to the benchmark market while fixing the
maximum loss that a fund may experience in the event that the market does
not perform as expected. Depending on the terms of the note, a fund may
forgo all or part of the interest and principal that would be payable on a
comparable conventional note; the funds' loss cannot exceed this
forgone
interest and/or principal. An investment in structured or hybrid notes involves
risks similar to those associated with a direct investment in the benchmark
asset.
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
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
Balanced
Fund, Classic Value Fund, Financial Industries Fund, Fundamental Large Cap Core
Fund, Regional Bank Fund, and U.S. Global Leaders Growth fund
may purchase securities on a "when-issued" or "forward-commitment" basis. Each
other fund may purchase or sell debt or equity 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.
As further
outlined in the "Government Regulation of Derivatives" section, the SEC adopted
the Derivatives Rule on October 28, 2020, and in doing so announced
it would rescind SEC releases, guidance and no-action letters related to funds'
coverage and asset segregation practices. Funds were required to
comply with the Derivatives Rule requirements by August 19, 2022. 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.
Yield
Curve Notes
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
Each fund
other than Fundamental Large Cap Core Fund and U.S. Global Leaders Growth Fund
may invest in zero coupon securities. Each fund other than
Classic Value Fund, Fundamental Large Cap Core Fund, and U.S. Global Leaders
Growth Fund may invest in 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. |
RISK
FACTORS
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.
Cash
Holdings Risk
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.
Commodity-Linked
Instruments
The value
of commodities investments will generally be affected by overall market
movements and factors specific to a particular industry or commodity,
which may include weather, embargoes, tariffs, and health, political,
international and regulatory developments. Economic and other events
(whether real or perceived) can reduce the demand for commodities, which may
reduce market prices and cause the value of shares of the fund to fall.
The frequency and magnitude of such changes cannot be predicted. Exposure to
commodities and commodities markets may subject a fund to greater
volatility than investments in traditional securities. No active trading market
may exist for certain commodities investments, which may impair the ability
of a fund to sell or to realize the full value of such investments in the event
of the need to liquidate such investments. In addition, adverse market
conditions may impair the liquidity of actively traded commodities investments.
Certain types of commodities instruments (such as total return swaps and
commodity-linked notes) are subject to the risk that the counterparty to the
instrument will not perform or will be unable to perform in accordance
with the terms of the instrument. To the extent commodity-related investments
are held through the Subsidiary, the Subsidiary is not subject to
U.S. laws (including securities laws) and their protections. The Subsidiary is
subject to the laws of the Cayman Islands, a foreign jurisdiction, and can be
affected by developments in that jurisdiction.
Certain
commodities are subject to limited pricing flexibility because of supply and
demand factors. Others are subject to broad price fluctuations as a result of
the volatility of the prices for certain raw materials and the instability of
supplies of other materials. These additional variables may create additional
investment risks and result in greater volatility than investments in
traditional securities. The commodities that underlie commodity futures
contracts
and commodity swaps may be subject to additional economic and non-economic
variables, such as drought, floods, weather, livestock disease,
embargoes, tariffs, and international economic, political and regulatory
developments. Unlike the financial futures markets, in the commodity
futures
markets there are costs of physical storage associated with purchasing the
underlying commodity. The price of the commodity futures contract
will reflect the storage costs of purchasing the physical commodity, including
the time value of money invested in the physical commodity. To the extent
that the storage costs for an underlying commodity change while the fund is
invested in futures contracts on that commodity, the value of the futures
contract may change proportionately.
In the
commodity futures markets, producers of the underlying commodity may decide to
hedge the price risk of selling the commodity by selling futures
contracts today to lock in the price of the commodity at delivery tomorrow. In
order to induce speculators to purchase the other side of the same
futures contract, the commodity producer generally must sell the futures
contract at a lower price than the expected future spot price. Conversely,
if most hedgers in the futures market are purchasing futures contracts to hedge
against a rise in prices, then speculators will only sell the other side
of the futures contract at a higher futures price than the expected future spot
price of the commodity. The changing nature of the hedgers and
speculators in the commodity markets will influence whether futures prices are
above or below the expected future spot price, which can have significant
implications for a fund. If the nature of hedgers and speculators in futures
markets has shifted when it is time for a fund to reinvest the proceeds of
a maturing contract in a new futures contract, the fund might reinvest at higher
or lower futures prices, or choose to pursue other investments.
Commodities
markets generally, and the energy sector specifically, had been adversely
impacted by the reduced demand for oil and other commodities
as a result of the slowdown in economic activity resulting from the spread of
the coronavirus (COVID-19) pandemic in 2020. Global oil prices
declined significantly at the beginning of the coronavirus (COVID-19) pandemic
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 had 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.
Equity
Securities
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.
ESG
Integration Risk
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.
European
Risk
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," and the UK ceased to be a member of the EU.
Following a
transition period during which the EU and the UK Government engaged in a series
of negotiations regarding the terms of the UK's future relationship
with the EU, the EU and the UK Government signed an agreement regarding
the economic relationship between the UK and the EU. 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. The uncertainty resulting from the transition period
may affect other countries in the EU and elsewhere, cause volatility
within the EU, or trigger prolonged economic downturns in certain countries
within the EU. 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. In addition,
Brexit may create additional and substantial economic stresses for the UK,
including a contraction of the UK economy and price volatility in UK stocks,
decreased trade, capital outflows, devaluation of the British pound,
wider
corporate bond spreads due to uncertainty and declines in business and consumer
spending as well as foreign direct investment. Brexit may also
adversely affect UK-based financial firms that have counterparties in the EU or
participate in market infrastructure (trading venues, clearing houses,
settlement facilities) based in the EU. Additionally,
the spread of the coronavirus (COVID-19) pandemic is likely to continue to
stretch the resources
and deficits of many countries in the EU and throughout the world, increasing
the possibility that countries may be unable to make payments on
their sovereign debt. These
events and the resulting market volatility may have an adverse effect on the
performance of the fund.
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
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. Recent and potential future changes in government monetary policy may
affect interest rates.
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).
Beginning
in March 2022, the U.S. Federal Reserve (the "Fed") began increasing interest
rates and has signaled the potential for further increases. It is
difficult to accurately predict the pace at which the Fed will increase interest
rates any further, or the timing, frequency or magnitude of any such
increases,
and the evaluation of macro-economic and other conditions could cause a change
in approach in the future. Any 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.
The
fixed-income securities market has been and may continue to be negatively
affected by the coronavirus (COVID-19) pandemic. As with other serious
economic disruptions, governmental authorities and regulators responded with
significant fiscal and monetary policy changes, including considerably
lowering 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.
Foreign
Securities
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 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. |
|
For
example, the coronavirus (COVID-19) pandemic led to materially reduced
consumer demand in certain sectors, a disruption in supply chains
and
an increase in market closures and retail company bankruptcies. The
coronavirus (COVID-19) pandemic may affect certain countries, industries,
economic sectors, and companies more than others, may continue to
exacerbate existing economic, political, or social tensions and may
continue
to increase the probability of an economic recession or depression. The
impact on the consumer discretionary market may last for an extended
period of time. |
|
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. |
|
Companies
in the energy sector were adversely affected by reduced demand for oil and
other energy commodities as a result of the slowdown in economic
activity resulting from the spread of the coronavirus (COVID-19) pandemic
and by price competition among key oil producing countries. Global
oil prices declined significantly at the beginning of the coronavirus
(COVID-19) pandemic 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. 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. |
|
The
natural resources sector was adversely impacted by the reduced demand for
oil and other natural resources as a result of the slowdown in
economic
activity resulting from the spread of the coronavirus (COVID-19) pandemic.
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
during the beginning of
the coronavirus (COVID-19) pandemic, 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.
Investment
Companies
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.
Investments
in the Subsidiary
The
Subsidiary is organized under the laws of the Cayman Islands, and is overseen by
three Directors affiliated with the Advisor. The Parent fund is the sole
shareholder of its Subsidiary, and it is not currently expected that shares of
the Subsidiary will be sold or offered to other investors. The Subsidiary
expects to invest primarily in commodity-linked derivative instruments,
including swap agreements, commodity options, futures and options on
futures, backed by a portfolio of inflation-indexed securities and other
fixed-income securities and is also permitted to invest in any other
investments
permitted by its Parent fund. To the extent that the fund invests in its
Subsidiary, the fund will be subject to the risks associated with those
derivative
instruments and other securities, which are discussed elsewhere in the
Prospectus and this SAI.
While the
Subsidiary may be operated similarly to its Parent fund, it is not registered
under the 1940 Act and, unless otherwise noted in the Prospectus
and this SAI, is not subject to the investor protections of the 1940 Act and
other U.S. regulations. Changes in the laws of the U.S. and/or the Cayman
Islands could result in the inability of the fund and/or its Subsidiary to
operate as described in the Prospectus and this SAI and could negatively
affect the Parent
fund and
its shareholders.
LIBOR
Discontinuation Risk
Certain
debt securities, derivatives and other financial instruments may utilize LIBOR
as the reference or benchmark rate for interest rate calculations. However,
following allegations of manipulation and concerns regarding liquidity, in July
2017 the U.K. Financial Conduct Authority, which regulates LIBOR,
announced that it would cease its active encouragement of banks to provide the
quotations needed to sustain LIBOR. The ICE Benchmark Administration
Limited, the administrator of LIBOR, ceased publishing certain LIBOR maturities,
including some U.S. LIBOR maturities, on December 31, 2021,
and is expected to cease publishing the remaining and most liquid U.S. LIBOR
maturities on June 30, 2023. It is expected that market participants
have or will transition to the use of alternative reference or benchmark rates
prior to the applicable LIBOR publication cessation date. Additionally,
although regulators have encouraged the development and adoption of alternative
rates such as the Secured Overnight Financing Rate ("SOFR"),
the future utilization of LIBOR or of any particular replacement rate remains
uncertain.
Although
the transition process away from LIBOR has become increasingly well-defined in
advance of the anticipated discontinuation dates, the impact on certain
debt securities, derivatives and other financial instruments
remains uncertain. It is expected that market participants will adopt
alternative rates such
as SOFR or otherwise amend financial instruments referencing LIBOR to include
fallback provisions and other measures that contemplate 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. Further, uncertainty and risk remain regarding the willingness and
ability of issuers and lenders to include alternative rates and revised
provisions in new and existing contracts or instruments. 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 proposed 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, and
changes in the applicable spread for financial instruments transitioning away
from LIBOR will need to be made to accommodate the differences.
Furthermore, the risks associated with the expected discontinuation of LIBOR and
transition to replacement rates may be exacerbated if an orderly
transition to an alternative reference rate is not completed in a timely
manner.
As market
participants transition away from LIBOR, LIBOR's usefulness may deteriorate and
these effects could be experienced until the permanent cessation
of the majority of U.S. LIBOR rates in 2023. The transition process may lead to
increased volatility and illiquidity in markets that currently rely on
LIBOR to determine interest rates. LIBOR's deterioration may adversely affect
the liquidity and/or market value of securities that use LIBOR as a benchmark
interest rate, including securities and other financial instruments held by the
fund. Further, 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.
Market
Events
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; 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 U.S. Federal Reserve (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.
Beginning
in March 2022, the Fed began increasing interest rates and has signaled the
potential for further increases. As a result, risks associated with rising
interest rates are currently heightened. It is difficult to accurately predict
the pace at which the Fed will increase interest rates any further, or the
timing, frequency or magnitude of any such increases, and the evaluation of
macro-economic and other conditions could cause a change in approach in
the future. Any 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," and the UK ceased to be a member of the EU.
Following a
transition period during which the EU and the UK Government engaged in a series
of negotiations regarding the terms of the UK's future relationship
with the EU, the EU and the UK Government signed an agreement regarding
the economic relationship between the UK and the EU. 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. This uncertainty may affect other countries in the EU
and elsewhere, and may cause volatility within the EU, triggering
prolonged economic downturns in certain countries within the EU. Despite the
influence of the lockdowns, and the economic bounce back, Brexit has
had a material impact on the UK's economy. Additionally, trade between the UK
and the EU did not benefit from the global rebound in trade in 2021,
and remained at the very low levels experienced at the start of the coronavirus
(COVID-19) pandemic in 2020, highlighting Brexit's potential long-term
effects on the UK economy.
In
addition, Brexit may create additional and substantial economic stresses for the
UK, including a contraction of the UK economy and price volatility in UK
stocks, decreased trade, capital outflows, devaluation of the British pound,
wider corporate bond spreads due to uncertainty and declines in business
and consumer spending as well as foreign direct investment. Brexit may also
adversely affect UK-based financial firms that have counterparties
in the EU or participate in market infrastructure (trading venues, clearing
houses, settlement facilities) based in the EU. Additionally, the spread
of the coronavirus (COVID-19) pandemic is likely to continue to stretch the
resources and deficits of many countries in the EU and throughout
the world, increasing the possibility that countries may be unable to make
timely payments on their sovereign debt. These events and the resulting
market volatility may have an adverse effect on the performance of the
fund.
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. 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.
The United
States responded to the coronavirus (COVID-19) pandemic and resulting economic
distress with fiscal and monetary stimulus packages. In late March
2020, the government passed the Coronavirus Aid, Relief, and Economic Security
Act, a stimulus package providing for over $2.2 trillion in resources
to small businesses, state and local governments, and individuals adversely
impacted by the coronavirus (COVID-19) pandemic. In late December
2020, the government also passed a spending bill that included $900 billion in
stimulus relief for the coronavirus (COVID-19) pandemic. Further, in
March 2021, the government passed the American Rescue Plan Act of 2021, a $1.9
trillion stimulus bill to accelerate the United States' recovery
from the economic and health effects of the coronavirus (COVID-19) pandemic. In
addition, in mid-March 2020 the Fed cut interest rates to historically
low levels and promised unlimited and open-ended quantitative easing, including
purchases of corporate and municipal government bonds. The Fed
also enacted various programs to support liquidity operations and funding in the
financial markets, including expanding its reverse repurchase
agreement operations, adding $1.5 trillion of liquidity to the banking system,
establishing swap lines with other major central banks to provide
dollar funding, establishing a program to support money market funds, easing
various bank capital buffers, providing funding backstops for businesses
to provide bridging loans for up to four years, and providing funding to help
credit flow in asset-backed securities markets. The Fed also extended
credit to small- and medium-sized businesses.
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.
Reduced
demand for oil and other energy commodities as a result of the slowdown in
economic activity resulting from the spread of the coronavirus (COVID-19)
pandemic adversely impacted MLPs. Global oil prices declined significantly at
the beginning of the coronavirus (COVID-19) pandemic 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.
The
mortgage-backed securities market has been and may continue to be negatively
affected by the coronavirus (COVID-19) pandemic. The U.S. government,
its agencies or its instrumentalities may implement initiatives in response to
the economic impacts of the coronavirus (COVID-19) pandemic
applicable to federally backed mortgage loans. These initiatives could involve
forbearance of mortgage payments or suspension or restrictions
of foreclosures and evictions. The fund cannot predict with certainty the extent
to which such initiatives or the economic effects of the pandemic
generally may affect rates of prepayment or default or adversely impact the
value of the fund's investments in securities in the mortgage industry as
a whole.
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.
Negative
Interest Rates
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.
Non-Diversification
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 (such as the coronavirus (COVID-19)
pandemic),
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.
Restricted
Securities
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.
Russian
Securities Risk
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 the coronavirus (COVID-19) 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
over-the-counter market or on an exchange, may be considered illiquid,
more difficult to value, and/or be subject to restrictions on
resale.
Stripped
Securities
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 Diversified Macro
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
Diversified Macro 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 Diversified Macro 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 Diversified
Macro 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 Diversified Macro 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 Diversified Macro 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. U.S. Global
Leaders Growth Fund does not
engage in hedging or other strategic transactions as described in this section,
except that it may engage in currency transactions for certain non-speculative
purposes. 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
Trusts' 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.
Disciplined
Value International Fund will not sell put options if, as a result,
more than 50% of the fund's assets would be required to be segregated to cover
its potential obligations under put options other than those with
respect to 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.
Fund-Specific
Policies Regarding Futures Contracts and Options on Futures Contracts (Balanced
Fund, Classic Value Fund, Financial Industries
Fund, Fundamental Large Cap Core Fund, Regional Bank Fund, and U.S. Global
Leaders Growth Fund). Futures
contracts may be based on
various securities, securities indices and other financial instruments and
indices. For Balanced Fund, Financial Industries Fund, Fundamental
Large Cap Core Fund, Regional Bank Fund, and U.S. Global Leaders Growth Fund,
futures contracts also may be based on foreign currencies.
All futures contracts entered into by Balanced Fund, Financial Industries Fund,
Fundamental Large Cap Core Fund, Regional Bank Fund, and U.S.
Global Leaders Growth Fund are traded on U.S. or foreign exchanges or boards of
trade, and all futures contracts entered into by Classic Value Fund
are traded on U.S. exchanges or boards of trade, that are licensed, regulated or
approved by the CFTC.
If and to
the extent that a fund is using futures and related options for hedging
purposes, futures contracts will be sold to protect against a decline in
the price
of securities (or the currency in which they are quoted or denominated) that the
fund owns or futures contracts will be purchased to protect the fund
against an increase in the price of securities (or the currency in which they
are quoted or denominated) it intends to purchase. Prior to any such
purchase, a fund will determine that the price fluctuations in any futures
contracts and options on futures used for hedging purposes are substantially
related to price fluctuations in securities held by the fund or securities or
instruments that it expects to purchase. As evidence of its hedging
intent, each fund expects that on 75% or more of the occasions on which it takes
a long futures or option position (involving the purchase of futures
contracts), the fund will have purchased, or will be in the process of
purchasing, equivalent amounts of related securities (or assets of the fund
denominated
in the related currency) in the cash market at the time when the futures or
option position is closed out. However, in particular cases, when it is
economically advantageous for a fund to do so, a long futures position may be
terminated or an option may expire without the corresponding purchase of
securities or other assets. Although under some circumstances prices of
securities in a fund's portfolio may be more or less volatile than prices of
such futures contracts, the subadvisor will attempt to estimate the extent of
this volatility difference based on historical patterns and compensate
for any differential by having the fund enter into a greater or lesser number of
futures contracts or by attempting to achieve only a partial hedge
against price changes affecting the fund's portfolio securities.
If and to
the extent that a fund engages in nonhedging transactions in futures contracts
and options on futures, the aggregate initial margin and premiums
required to establish these nonhedging positions will not exceed 5% of the net
asset value of the fund's portfolio after taking into account unrealized
profits and losses on any such positions and excluding the amount by which such
options were in-the-money at the time of purchase.
Stock
Index Futures
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.
Fund-Specific
Policies Regarding Options on Financial Indices (Balanced Fund, Classic Value
Fund, Financial Industries Fund, Fundamental
Large Cap Core Fund, and Regional Bank Fund). Options on
financial indices may be listed on national domestic securities exchanges
or foreign securities exchanges or traded in the OTC market. Balanced Fund,
Financial Industries Fund, Fundamental Large Cap Core Fund and
Regional Bank Fund may write covered put and call options and purchase put and
call options to enhance total return, as a substitute for the
purchase or
sale of securities or currency, or to protect against declines in the value of
portfolio securities and against increases in the cost of securities
to be acquired. Classic Value Fund may write covered put and call options and
purchase put and call options to enhance total return, as a substitute
for the purchase or sale of securities or to protect against declines in the
value of portfolio securities and against increases in the cost of securities
to be acquired.
Yield
Curve Options
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.
Currency
Transactions
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 (not
including Classic Value Fund, Regional Bank Fund, or U.S. Global Leaders
Growth
Fund); |
• |
exchange-listed
and OTC options on currencies (not
including Classic Value Fund or U.S. Global Leaders Growth
Fund); |
• |
currency
swaps (not
including Classic Value Fund, Financial Industries Fund, Fundamental Large
Cap Core Fund, Regional Bank Fund, or U.S. Global Leaders
Growth Fund);
and |
• |
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. Classic Value
Fund and U.S. Global Leaders Growth Fund will not engage in speculative
forward foreign currency exchange transactions.
Each fund
other than Balanced Fund, Classic Value Fund, Financial Industries Fund,
Fundamental Large Cap Core Fund, Regional Bank Fund, and U.S. Global
Leaders Growth 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.
Combined
Transactions
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, 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 are being implemented primarily
through rules and regulations adopted by the SEC and/or the
CFTC. There is a prescribed phase-in period during which most of the mandated
rulemaking and regulations are being implemented, and temporary
exemptions from certain rules and regulations have been granted so that current
trading practices will not be unduly disrupted during the transition
period.
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 until the majority of the
swaps market is ultimately subject to central clearing. 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. Until the mandated rulemaking and regulations
are implemented completely, it will not be possible to determine the complete
impact of the Dodd-Frank Act and related regulations on the funds. Swap
dealers, major 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
generally
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 requirements are now effective and the
initial margin requirements are being phased-in through 2022 based
on average daily aggregate notional amount of covered swaps between swap
dealers, and swap entities.
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.
Eurodollar
Instruments
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 LIBOR. 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 LIBOR, 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 over-the-counter 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,
effective August 19, 2022 (the "Compliance Date"), Rule 18f-4 under the 1940 Act
(the "Derivatives Rule") replaced the asset segregation regime of
Investment Company Act Release No. 10666 ("Release 10666") with a new framework
for the use of derivatives by registered funds. As of the
Compliance Date, the SEC rescinded Release 10666 and withdrew no-action letters
and similar guidance addressing a fund's use of derivatives and began
requiring funds to satisfy the requirements of the Derivatives Rule. As a
result, on or after the Compliance Date, the funds will no longer engage in
"segregation" or "coverage" techniques with respect to derivatives transactions
and will instead comply with the applicable requirements of the
Derivatives Rule.
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.
Other
Limitations
Subject to
the limitations outlined in the "Government Regulation of Derivatives," a fund
will not maintain open short positions in futures contracts, call options
written on futures contracts, and call options written on securities indices if,
in the aggregate, the current market value of the open positions exceeds the
current market value of that portion of its securities being hedged by those
futures and options, plus or minus the unrealized gain or loss on those
open positions.
For
purposes of this limitation, to the extent that a fund has written call options
on specific securities in that portion of its portfolio, the value of those
securities
will be deducted from the current market value of that portion of the securities
portfolio. If this limitation should be exceeded at any time, the fund
will take prompt action to close out the appropriate number of open short
positions to bring its open futures and options positions within this
limitation.
INVESTMENT
RESTRICTIONS
A fund's
investment restrictions are subject to, and may be impacted and limited by, the
federal securities laws, rules and regulations, including the Investment
Company Act of 1940 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.
Balanced
Fund and Fundamental Large Cap Core Fund
Fundamental Investment
Restrictions
1.
Senior
Securities
Balanced
Fund
|
(1)
The 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. |
Fundamental
Large Cap Core Fund
|
(2)
The 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. |
|
(For
purposes of this fundamental restriction, purchasing securities on a
when-issued, forward commitment or delayed delivery basis and engaging
in
hedging and other strategic transactions will not be deemed to constitute
the issuance of a senior security.) |
2.
Borrowing
Balanced
Fund
|
(3)
The fund may not borrow money in amounts exceeding 33% of the fund's total
assets (including the amount borrowed) taken at market value. Interest
paid on borrowings will reduce income available to
shareholders. |
Fundamental
Large Cap Core Fund
|
(4)
The 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. |
3.
Underwriting
Balanced
Fund and Fundamental Large Cap Core Fund
|
(5)
A fund may not engage in the business of underwriting securities issued by
others, except to the extent that each such fund may be deemed to
be an
underwriter in connection with the disposition of portfolio
securities. |
4.
Real
Estate
Balanced
Fund and Fundamental Large Cap Core Fund
|
(6)
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 such fund
reserves freedom of action to hold and to sell real estate acquired
as a result of the fund's ownership of
securities. |
5.
Loans
Balanced
Fund and Fundamental Large Cap Core Fund
|
(7)
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. |
6.
Commodities
Balanced
Fund
|
(8)
The fund may not buy or sell commodities, commodity contracts, puts, calls
or combinations thereof, except futures contracts and options on
securities,
securities indices, currency and other financial instruments, options on
such futures contracts, forward foreign currency exchange contracts,
forward commitments, interest rate or currency swaps, securities index put
or call warrants and repurchase agreements entered into in accordance
with the fund's investment policies. |
Fundamental
Large Cap Core Fund
|
(9)
The 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.
Industry
Concentration
Balanced
Fund and Fundamental Large Cap Core Fund
|
(10)
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. |
8.
Diversification
Balanced
Fund and Fundamental Large Cap Core Fund
|
(11)
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. |
Non-Fundamental Investment
Restrictions
Balanced
Fund
The fund
may not:
|
(a)
Participate on a joint or joint-and-several basis in any securities
trading account. The "bunching" of orders for the sale or purchase of
marketable portfolio
securities with other accounts under the management of the Advisor to save
commissions or to average prices among them is not deemed to
result in a joint securities trading
account. |
|
(b)
Purchase securities on margin (except that it may obtain such short-term
credits as may be necessary for the clearance of transactions in
securities
and forward foreign currency exchange contracts and may make margin
payments in connection with transactions in futures contracts and
options on futures) or make short sales of securities unless by virtue of
its ownership of other securities, the fund has the right to obtain,
without the
payment of any additional consideration, securities equivalent in kind and
amount to the securities sold and, if the right is conditional, the sale
is made
upon the same conditions. |
|
(c)
Invest for the purpose of exercising control over or management of any
company. |
|
(d)
Invest more than 15% of its net assets in illiquid
securities. |
If allowed
by the fund's other investment policies and restrictions, the fund may invest up
to 5% of its total assets in Russian equity securities and up to 10% of its
total assets in Russian fixed-income securities. All Russian securities must be:
(1) denominated in U.S. dollars, Canadian dollars, euros, sterling,
or yen; (2) traded on a major exchange; and (3) held physically outside of
Russia.
Fundamental
Large Cap Core Fund
The fund
will not:
|
(a)
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. |
|
(b)
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. |
|
(c)
Pledge, hypothecate, mortgage or transfer (except as provided in the
fundamental investment restriction regarding senior securities) 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 the fundamental restriction regarding borrowing
and the non-fundamental restriction regarding investment in securities
that are not readily marketable. 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. For purposes of the
non-fundamental restriction regarding short sales, "other strategic
transactions" can include short sales and derivative transactions intended
for non-hedging purposes. |
Classic
Value Fund
Fundamental Investment
Restrictions
Classic
Value Fund may not:
1 |
Issue
senior securities, except as permitted by the fund's fundamental
investment restrictions on borrowing, lending and investing in commodities
and
as otherwise permitted under the 1940 Act. For purposes of this
restriction, the issuance of shares of beneficial interest in multiple
classes or series,
the deferral of trustees' fees, the purchase or sale of options, futures
contracts and options on futures contracts, forward commitments,
forward
foreign exchange contracts and repurchase agreements entered into in
accordance with the fund's investment policies are not deemed to
be
senior securities. |
2 |
Borrow
money, except: (i) for temporary or short-term purposes or for the
clearance of transactions in amounts not to exceed 33⅓% of the value of
the
fund's total assets (including the amount borrowed) taken at market value;
(ii) in connection with the redemption of fund shares or to finance
failed
settlements of portfolio trades without immediately liquidating portfolio
securities or other assets; (iii) in order to fulfill commitments or plans
to
purchase additional securities pending the anticipated sale of other
portfolio securities or assets; (iv) in connection with entering into
reverse repurchase
agreements and dollar rolls, but only if after each such borrowing there
is asset coverage of at least 300% as defined in the 1940 Act;
and
(v) as otherwise permitted under the 1940 Act. For purposes of this
investment restriction, the deferral of trustees' fees and transactions in
short
sales, futures contracts, options on futures contracts, securities or
indices and forward commitment transactions shall not constitute
borrowing. |
3 |
Act
as an underwriter, except to the extent that in connection with the
disposition of portfolio securities, the fund may be deemed to be an
underwriter
for purposes of the Securities Act of 1933. |
4 |
Purchase,
sell or invest in real estate, but subject to its other investment
policies and restrictions may invest in securities of companies that deal
in real
estate or are engaged in the real estate business. These companies include
real estate investment trusts and securities secured by real estate
or
interests in real estate. The fund may hold and sell real estate acquired
through default, liquidation or other distributions of an interest in real
estate
as a result of the fund's ownership of
securities. |
5 |
Invest
in commodities or commodity futures contracts, other than financial
derivative contracts. Financial derivatives include forward currency
contracts;
financial futures contracts and options on financial futures contracts;
options and warrants on securities, currencies and financial indices;
swaps, caps, floors, collars and swaptions; and repurchase agreements
entered into in accordance with the fund's investment
policies. |
6 |
Make
loans, except that the fund may (i) lend portfolio securities in
accordance with the fund's investment policies up to 33⅓% of the fund's
total assets
taken at market value, (ii) enter into repurchase agreements, and (iii)
purchase all or a portion of an issue of publicly distributed debt
securities,
bank loan participation interests, bank certificates of deposit, bankers'
acceptances, debentures or other securities, whether or not the
purchase
is made upon the original issuance of the
securities. |
7 |
Purchase
the securities of issuers conducting their principal activity in the same
industry if, immediately after such purchase, the value of its
investments
in such industry would exceed 25% of its total assets taken at market
value at the time of such investment. This limitation does not
apply
to investments in obligations of the U.S. Government or any of its
agencies, instrumentalities or authorities. |
8 |
With
respect to 75% of the fund's total assets, invest more than 5% of the
fund's total assets in the securities of any single issuer or own more
than 10%
of the outstanding voting securities of any one issuer, in each case other
than (i) securities issued or guaranteed by the U.S. Government, its
agencies
or its instrumentalities or (ii) securities of other investment
companies. |
Non-Fundamental Investment
Restrictions
Classic
Value Fund may not:
1 |
Invest
in the securities of an issuer for the purpose of exercising control or
management. |
2 |
Purchase
securities on margin, except that the fund may obtain such short-term
credits as may be necessary for the clearance of securities transactions. |
3 |
Invest
more than 15% of its net assets in securities which are
illiquid. |
If allowed
by Classic Value Fund's other investment policies and restrictions, the fund may
invest up to 5% of its total assets in Russian equity securities
and up to 10% of its total assets in Russian fixed-income securities. All
Russian securities must be: (1) denominated in U.S. dollars, Canadian
dollars, euros, sterling, or yen; (2) traded on a major exchange; and (3) held
physically outside of Russia.
U.S.
Global Leaders Growth Fund
Fundamental Investment
Restrictions
1 |
Concentration. The
fund may not concentrate its investments in a particular industry, as that
term is used in the 1940 Act, and as interpreted or modified
by regulatory authority having jurisdiction, from time to
time. |
2 |
Borrowing. The
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. |
3 |
Underwriting. The
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. |
4 |
Real
Estate. The
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
the Fund reserves freedom of action to hold and to sell real estate
acquired
as a result of the fund's ownership of
securities. |
5 |
Commodities. The
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. |
6 |
Loans. The
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. |
7 |
Senior
Securities. The
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. (For purposes
of this fundamental restriction, purchasing securities on a when-issued,
forward
commitment or delayed delivery basis and engaging in hedging and other
strategic transactions will not be deemed to constitute the issuance
of a senior security.) |
8 |
Diversification. The
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. |
Non-Fundamental Investment
Restrictions
U.S. Global
Leaders Growth Fund may 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. |
|
11.
Pledge, hypothecate, mortgage or transfer (except as provided in the
fundamental restriction regarding Senior Securities) 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 the fundamental restriction regarding borrowing
and the non-fundamental restriction regarding short sales. 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. For purposes of this restriction, "other strategic transactions"
can include short sales and derivative transactions intended for
non-hedging
purposes. |
Disciplined
Value International Fund, Emerging Markets Equity Fund, ESG International Equity
Fund, ESG Large Cap Core Fund, Seaport Long/Short
Fund, and Small Cap Core Fund
Fundamental Investment
Restrictions
(1)
Concentration. A fund
will 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.
(2)
Borrowing. A fund
will 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.
(3)
Underwriting. A fund
will 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.
(4)
Real
Estate. A fund
will 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 the fund
reserves freedom of action to hold and to sell real estate acquired as
a result of the fund's ownership of securities.
(5)
Commodities. A fund
will 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.
(6)
Loans. A fund
will 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.
(7)
Senior
Securities. A fund
will 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.
For
purposes of fundamental restriction No. 7, purchasing securities on a
when-issued, forward commitment or delayed delivery basis and engaging in
hedging and
other strategic transactions will not be deemed to constitute the issuance of a
senior security.
Non-Fundamental Investment
Restrictions
Disciplined
Value International Fund, Emerging Markets Equity Fund, ESG International Equity
Fund, ESG Large Cap Core Fund, and Seaport Long/Short
Fund
A fund will
not:
|
(8)
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. |
|
(9)
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. |
|
(10)
Pledge, hypothecate, mortgage or transfer (except as provided in
restriction (7)) 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 (2)
and
(9). 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. |
|
(11)
With respect to Seaport Long/Short Fund, physically short securities,
e.g., via prime brokerage agreements. |
|
For
purposes of restriction (10), "other strategic transactions" can include
short sales and derivative transactions intended for non-hedging
purposes. |
Small
Cap Core Fund
Small Cap
Core Fund will not:
|
(8)
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. |
|
(9)
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. |
|
(10)
Pledge, hypothecate, mortgage or transfer (except as provided in
restriction (7)) 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 (2)
|
|
and
(9). 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. |
|
(11)
Make investments in business development companies
("BDCs"). |
|
For
purposes of restriction (10), "other strategic transactions" can include
short sales and derivative transactions intended for non-hedging
purposes. |
Infrastructure
Fund
Fundamental Investment
Restrictions
(1)
Concentration. The fund
will invest over 25% of its net assets in industries represented by
infrastructure companies. The fund will not invest more than
25% of its net assets in the securities of issuers in any other single industry
or group of industries. This limitation does not apply to investments
in obligations of the U.S. government or any of its agencies, instrumentalities
or authorities.
(2)
Borrowing. The
fund will 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.
(3)
Underwriting. The
fund will 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.
(4)
Real
Estate. The
fund will 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 the fund
reserves freedom of action to hold and to sell real estate acquired as
a result of the fund's ownership of securities.
(5)
Commodities. The
fund will 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.
(6)
Loans. The
fund will 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.
(7)
Senior
Securities. The
fund will 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.
For
purposes of fundamental restriction (7), purchasing securities on a when-issued,
forward commitment or delayed delivery basis and engaging in hedging and
other strategic transactions will not be deemed to constitute the issuance of a
senior security.
Non-Fundamental Investment
Restrictions
The fund
will not:
|
(8)
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. |
|
(9)
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. |
|
(10)
Pledge, hypothecate, mortgage or transfer (except as provided in
restriction (7)) 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 (2)
and
(9). 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. |
|
For
purposes of restriction (10), "other strategic transactions" can include
short sales and derivative transactions intended for non-hedging
purposes. |
Diversified
Macro Fund, Global Thematic Opportunities Fund, and International Dynamic Growth
Fund
Fundamental Investment
Restrictions
(1)
Concentration. A fund
will not concentrate its investments in a particular industry or group of
industries, as used in the 1940 Act, as amended, and as
interpreted or modified by regulatory authority having jurisdiction, from time
to time.
(2)
Borrowing. A fund
will 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.
(3)
Underwriting. A fund
will 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.
(4)
Real
Estate. A fund
will 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 the fund
reserves freedom of action to hold and to sell real estate acquired as
a result of the Fund's ownership of securities.
(5)
Commodities. A fund
will 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.
(6)
Loans. A fund
will 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.
(7)
Senior
Securities. A fund
will 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.
(8)
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.
For
purposes of fundamental restriction (7), purchasing securities on a when-issued,
forward commitment or delayed delivery basis and engaging in hedging and
other strategic transactions will not be deemed to constitute the issuance of a
senior security.
Non-Fundamental Investment
Restrictions
A fund will
not:
|
(8)
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. |
|
(9)
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. |
|
(10)
Pledge, hypothecate, mortgage or transfer (except as provided in
restriction (7)) 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 (2)
and
(9). 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. |
|
For
purposes of restriction (10), "other strategic transactions" can include
short sales and derivative transactions intended for non-hedging
purposes |
Global
Environmental Opportunities Fund
Fundamental Investment
Restrictions
(1)
Concentration. The fund
will 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.
(2)
Diversification. The 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.
(3)
Borrowing. The fund
will 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. The fund
will 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. The fund
will 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 the 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. The fund
will 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
will 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
will 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.
For
purposes of Fundamental Restriction No. 8, purchasing securities on a
when-issued, forward commitment or delayed delivery basis and engaging
in hedging
and other strategic transactions will not be deemed to constitute the issuance
of a senior security.
Non-Fundamental Investment
Restrictions
The 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. |
|
(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 33¹/3 %* of the value of the
fund's total assets and then only to secure borrowings permitted by
restrictions (2)
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. |
|
For
purposes of this restriction (11), "other strategic transactions" can
include short sales and derivative transactions intended for non-hedging
purposes,
collateral arrangements with respect to hedging and other strategic
transactions will not be deemed to involve a pledge of
assets. |
Financial
Industries Fund and Regional Bank Fund
Fundamental Investment
Restrictions
1.
Senior
Securities
Financial
Industries Fund
|
The
fund may not issue senior securities, except as permitted by the fund's
restrictions on borrowing money, investing in commodities, and making
loans,
and as otherwise permitted by the 1940 Act. For purposes of this
restriction, the issuance of shares of beneficial interest in multiple
classes or
series, the deferral of trustees' fees, the purchase or sale of options,
futures contracts and options on futures contracts, forward commitments,
forward
foreign exchange contracts and repurchase agreements entered into in
accordance with the fund's investment policies are not deemed to
be
senior securities. |
Regional
Bank Fund
|
The
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. |
2.
Borrowing
Money
Financial
Industries Fund
|
The
fund may not borrow money, except: (i) for temporary or short-term
purposes or for the clearance of transactions in amounts not to exceed
33⅓%
of the value of the fund's total assets (including the amount borrowed)
taken at market value; (ii) in connection with the redemption of fund
shares
or to finance failed settlements of portfolio trades without immediately
liquidating portfolio securities or other assets; (iii) in order to
fulfill commitments
or plans to purchase additional securities pending the anticipated sale of
other portfolio securities or assets; (iv) in connection with entering
into reverse repurchase agreements and dollar rolls, but only if after
each such borrowing there is asset coverage of at least 300% as
defined
in the 1940 Act; and (v) as otherwise permitted under the 1940
Act. |
|
For
purposes of this investment restriction, the deferral of trustees' fees
and transactions in short sales, futures contracts, options on futures
contracts,
securities or indices and forward commitment transactions shall not
constitute borrowing. |
Regional
Bank Fund
|
The
fund may not borrow money, except from banks temporarily for extraordinary
or emergency purposes (not for leveraging or investment) and then
in an aggregate amount not in excess of 5% of the value of the fund's net
assets at the time of such borrowing. |
3.
Underwriting
Financial
Industries Fund
|
The
fund may not act as an underwriter of securities of other issuers except
to the extent that in selling portfolio securities it may be deemed to be
an
underwriter for purposes of the 1933 Act. |
Regional
Bank Fund
|
The
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. |
4.
Real
Estate
Financial
Industries Fund
|
The
fund may not purchase, sell or invest in real estate, but subject to its
other investment policies and restrictions may invest in securities of
companies
that deal in real estate or are engaged in the real estate business. These
companies include real estate investment trusts and securities
secured
by real estate or interests in real estate. The fund may hold and sell
real estate acquired through default, liquidation or other distributions
of an
interest in real estate as a result of the Fund's ownership of
securities. |
Regional
Bank Fund
|
The
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 the Fund reserves
freedom of action to hold and to sell real estate acquired as a
result
of the Fund's ownership of securities. |
5.
Commodities
Financial
Industries Fund
|
The
fund may not invest in commodities or commodity futures contracts, other
than financial derivative contracts. Financial derivative include
forward
foreign currency contracts; financial futures contracts and options on
financial futures contracts; options and warrants on securities,
currencies
and financial indices; swaps, caps, floors, collars and swaptions; and
repurchase agreements entered into in accordance with the fund's
investment
policies. |
Regional
Bank Fund
|
The
fund may not purchase or sell commodities or commodity futures contracts
including forward foreign currency contracts, futures contracts and
options
thereon or interests in oil, gas or other mineral exploration or
development programs. |
6.
Loans
Financial
Industries Fund
|
The
fund may not make loans, except that the fund: (1) may lend portfolio
securities in accordance with the fund's investment policies up to 33⅓%
of
the fund's total assets taken at market value,; (2) enter into repurchase
agreements, and (3) purchase all or a portion of an issue of debt
securities,
bank loan participation interests, bank certificates of deposit, bankers'
acceptances, debentures or other securities, whether or not the
purchase
is made upon the original issuance of the
securities. |
Regional
Bank Fund
|
The
fund may not make loans, except that the fund may purchase or hold debt
instruments and may enter into repurchase agreements in accordance
with its investment objective and
policies. |
7.
Concentration
Financial
Industries Fund
|
The
fund may not purchase the securities of issuers conducting their principal
activity in the same industry if, immediately after such purchase, the
value
of its investments in such industry would exceed 25% of its total assets
taken at market value at the time of such investment; except that the
fund
will ordinarily invest more than 25% of its assets in the financial
services sector. This limitation does not apply to investments in
obligations of the
U.S. government or any of its agencies, instrumentalities or
authorities. |
Regional
Bank Fund
|
The
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. The fund
will normally invest more than 25% of assets in the "banking industry"
as defined in the Fund's prospectus. |
8.
Diversification
Financial
Industries Fund
|
With
respect to 75% of its total assets, the fund may not purchase securities
of an issuer (other than the U.S. Government, its agencies, instrumentalities
or authorities), if: (a) such purchase would cause more than 5% of the
fund's total assets taken at market value to be invested in the
securities of such issuer; or (b) such purchase would at the time result
in more than 10% of the outstanding voting securities of such issuer
being
held by the fund. |
Regional
Bank Fund
|
The
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. |
9.
Margin;
Short Selling (Regional Bank Fund only)
|
The
fund may not purchase securities on margin or sell short, except that the
fund may obtain such short term credits as are necessary for the
clearance
of securities transactions. The deposit or payment by the Fund of initial
or maintenance margin in connection with futures contracts or related
options transactions is not considered the purchase of a security on
margin |
10.
Warrants
(Regional Bank Fund only)
|
Regional
Bank Fund may not invest more than 5% of the value of the fund's net
assets in marketable warrants to purchase common stock. Warrants
acquired
in units or attached to securities are not included in this
restriction. |
Non-Fundamental Investment
Restrictions
Financial
Industries Fund
Financial
Industries Fund may not:
|
(1)
Purchase securities on margin, except that the fund may obtain such
short-term credits as may be necessary for the clearance of securities
transactions. |
|
(2)
Participate on a joint-and-several basis in any securities trading
account. The "bunching" of orders for the sale or purchase of marketable
portfolio
securities with other accounts under the management of the Advisor to save
commissions or to average prices among them is not deemed to
result in a joint securities trading
account. |
|
(3)
Invest more than 15% of its net assets in illiquid
securities. |
|
(4)
Purchase securities while outstanding borrowings (other than
reverse repurchase agreements) exceed 5% of the fund's total
assets. |
|
(5)
Invest for the purpose of exercising control over or management of
any company. |
If allowed
by Financial Industries Fund's other investment policies and restrictions, the
fund may invest up to 5% of its total assets in Russian equity securities
and up to 10% of its total assets in Russian fixed-income securities. All
Russian securities must be: (1) denominated in U.S. or Canadian dollars,
euros, sterling, or yen; (2) traded on a major exchange; and (3) held physically
outside of Russia.
Regional
Bank Fund
Regional
Bank Fund may not:
|
1.
Options Transactions. Write, purchase, or sell puts, calls or
combinations thereof except that the fund may write, purchase or sell puts
and calls on
securities. |
|
2.
Invest more than 15% of its net assets in illiquid
securities. |
|
3.
Acquisition for Control Purposes. Purchase securities of any issuer
for the purpose of exercising control or management, except in connection
with
a merger, consolidation, acquisition or
reorganization. |
|
4.
Joint Trading Accounts. Participate on a joint or joint and several
basis in any trading account in securities (except for a joint account
with other funds
managed by the Advisor for repurchase agreements permitted by the
Securities and Exchange Commission pursuant to an exemptive
order). |
If allowed
by Regional Bank Fund's other investment policies and restrictions, the fund may
invest up to 5% of its total assets in Russian equity securities
and up to 10% of its total assets in Russian fixed-income securities. All
Russian securities must be: (1) denominated in U.S. dollars, Canadian
dollars, euros, sterling, or yen; (2) traded on a major exchange; and (3) held
physically outside of Russia.
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's fundamental restriction regarding concentration, the
fund will take into account the concentration policies of the underlying
funds in which the fund 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 a 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 a fund (not including borrowings for temporary purposes in an
amount not exceeding 5% of the value of a 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."
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
the subadvisor's assessment of the security), or change in the percentage of
portfolio 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 the fund's total assets will
not require the fund to dispose of an investment until the 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, the 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' Notice to
Shareholders
In order to
comply with Rule 35d-1 under the 1940 Act, the 80% investment policy for each of
Emerging Markets Equity Fund, ESG International Equity
Fund, ESG Large Cap Core Fund, Financial Industries Fund, Fundamental Large Cap
Core Fund, Infrastructure Fund, Regional Bank Fund, Small Cap Core
Fund, and U.S. Global Leaders Growth Fund is subject to change only upon 60
days' prior notice to shareholders. Refer to the applicable Prospectus
for each fund's "Principal investment strategies."
PORTFOLIO
TURNOVER
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 October 31,
2022 and
October 31, 2021 were as
follows:
|
| |
Fund |
2022 (%) |
2021 (%) |
Balanced
Fund |
61 |
65 |
Classic
Value Fund |
18 |
25 |
Disciplined
Value International Fund |
70 |
76 |
Diversified
Macro Fund |
01
|
01
|
Emerging
Markets Equity Fund |
27 |
46 |
ESG
International Equity Fund |
27 |
28 |
ESG
Large Cap Core Fund |
16 |
142
|
Financial
Industries Fund |
45 |
64 |
Fundamental
Large Cap Core Fund |
26 |
16 |
Global
Environmental Opportunities Fund |
38 |
73
|
Global
Thematic Opportunities Fund |
48 |
43 |
Infrastructure
Fund |
33 |
27 |
International
Dynamic Growth Fund |
94 |
133 |
Regional
Bank Fund |
11 |
10 |
Seaport
Long/Short Fund |
214 |
259 |
Small
Cap Core Fund |
64 |
64 |
U.S.
Global Leaders Growth Fund |
31 |
32 |
1 |
The
calculation of portfolio turnover excludes amounts from securities whose
maturities or expiration dates at the time of acquisition were one year or
less, which represents
a significant amount of the investments held by the fund. As a result, the
portfolio turnover is 0%. |
2 |
Excludes
merger activity. |
3 |
Period
from July 21, 2021 (commencement of operations) to October 31,
2021. |
THOSE
RESPONSIBLE FOR MANAGEMENT
The
business of the Trusts, each 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 Trusts
(the "Independent Trustees"). The Trustees elect officers who are responsible
for the day-to-day operations of the funds or the Trusts and who
execute policies formulated by the Trustees. Several of the Trustees and
officers of
the Trusts 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
Trusts, 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 Trusts (each a "Non-Independent Trustee") and
the Independent Trustees. As of October 31, 2022, the
"John Hancock
Fund Complex" consisted of
186 funds
(including separate series of series mutual funds). Each
Trustee has been elected to serve on the
Board.
Each
of William
H. Cunningham, Grace K. Fey, Deborah C. Jackson, Hassell H. McClellan, Steven R.
Pruchansky, and Gregory A. Russo 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, Marianne Harrison, Patricia Lizarraga, 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
address of each Trustee and officer of the Trusts is 200 Berkeley Street,
Boston, Massachusetts
02116.
|
|
| |
Name (Birth
Year) |
Current
Position(s) with
the Trusts1
|
Principal
Occupation(s) and Other Directorships During
the Past 5 Years |
Number
of Funds in
John Hancock Fund
Complex Overseen
by Trustee |
Non-Independent
Trustees |
|
|
Andrew
G. Arnott2
(1971) |
Trustee,
each Trust (since
2017); President
(since 2014) |
Global
Head of Retail for Manulife (since 2022); Head of Wealth and Asset
Management,
United States and Europe, for John Hancock and Manulife (since
2018); Director and Executive Vice President, John Hancock Investment
Management LLC (since 2005, including prior positions); Director
and Executive Vice President, John Hancock Variable Trust Advisers
LLC
(since 2006, including prior positions); President, John Hancock
Investment
Management Distributors LLC (since 2004, 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). |
184 |
Marianne
Harrison2 (1963) |
Trustee,
each Trust (since
2018) |
President
and CEO, John Hancock (since 2017); President and CEO, Manulife
Canadian Division (2013–2017); Member, Board of Directors, Boston
Medical Center (since 2021); Member, Board of Directors, CAE Inc.
(since
2019); Member, Board of Directors, MA Competitive Partnership Board
(since 2018); Member, Board of Directors, American Council of Life
Insurers
(ACLI) (since 2018); Member, Board of Directors, Communitech, an
industry-led
innovation center that fosters technology companies in Canada (2017–2019);
Member, Board of Directors, Manulife Assurance Canada (2015–2017);
Board Member, St. Mary's General Hospital Foundation (2014–2017);
Member, Board of Directors, Manulife Bank of Canada (2013–2017);
Member, Standing Committee of the Canadian Life & Health Assurance
Association (2013–2017); Member, Board of Directors, John Hancock
USA, John Hancock Life & Health, John Hancock New York
(2012–2013
and since 2017).
Trustee
of various trusts within the John Hancock Fund Complex (since 2018). |
183 |
Paul
Lorentz2 (1968) |
Trustee,
each Trust (since
2022) |
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). |
183 |
1 |
Because
each 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. |
|
|
| |
Name (Birth
Year) |
Current
Position(s) with
the Trusts1
|
Principal
Occupation(s) and Other Directorships During
the Past 5 Years |
Number
of Funds in
John Hancock Fund
Complex Overseen
by Trustee |
Independent
Trustees |
|
|
James
R. Boyle (1959) |
Trustee, each
Trust (2005–2010,
2012–2014, 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). |
183 |
William
H. Cunningham (1944) |
Trustee,
Capital Series
and Investment
Trust II (since
2005); Trustee,
Investment Trust
(since 1986) |
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). |
184 |
Noni
L. Ellison (1971) |
Trustee,
each Trust (since
2022) |
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–present).
Trustee
of various trusts within the John Hancock Fund Complex (since 2022). |
183 |
Grace
K. Fey (1946) |
Trustee,
each Trust (since
2012) |
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). |
186 |
Dean
C. Garfield (1968) |
Trustee,
each Trust (since
2022) |
Vice
President, Netflix, Inc. (since 2019); 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).
Trustee
of various trusts within the John Hancock Fund Complex (since 2022). |
183 |
|
|
| |
Name (Birth
Year) |
Current
Position(s) with
the Trusts1 |
Principal
Occupation(s) and Other Directorships During
the Past 5 Years |
Number
of Funds in
John Hancock Fund
Complex Overseen
by Trustee |
Independent
Trustees |
|
|
Deborah
C. Jackson (1952) |
Trustee,
each Trust (since
2008) |
President,
Cambridge College, Cambridge, Massachusetts (since 2011); 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
of various trusts within the John Hancock Fund Complex (since 2008). |
185 |
Patricia
Lizarraga (1966) |
Trustee,
each Trust (since
2022) |
Founder,
Chief Executive Officer, Hypatia Capital Group (advisory and asset
management
company) (since 2007); Independent Director, Audit Committee
Chair, and Risk Committee Member, Credicorp, Ltd. (since 2017);
Independent Director, Audit Committee Chair, Banco De Credito Del
Peru
(since 2017); Trustee, Museum of Art of Lima (since 2009).
Trustee
of various trusts within the John Hancock Fund Complex (since 2022). |
183 |
Hassell
H. McClellan (1945) |
Trustee,
each Trust (since
2012) and
Chairperson of the
Board, each Trust (since
2017) |
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. |
186 |
Steven
R. Pruchansky (1944) |
Trustee,
Capital Series
and Investment
Trust II (since
2005); Trustee,
Investment Trust
(since 1994); Vice
Chairperson of the
Board, each Trust (since
2012) |
Managing
Director, Pru Realty (since 2017); Chairman and Chief Executive
Officer,
Greenscapes of Southwest Florida, Inc. (2014–2020); Director and
President,
Greenscapes of Southwest Florida, Inc. (until 2000); Member, Board
of Advisors, First American Bank (until 2010); Managing Director, Jon
James,
LLC (real estate) (since 2000); Partner, Right Funding, LLC
(2014–2017);
Director, First Signature Bank & Trust Company (until 1991);
Director,
Mast Realty Trust (until 1994); President, Maxwell Building Corp.
(until
1991).
Trustee
(since 1992), Chairperson of the Board (2011–2012), and Vice Chairperson
of the Board (since 2012) of various trusts within the John Hancock
Fund Complex. |
183 |
Frances
G. Rathke (1960) |
Trustee,
each Trust (since
2020) |
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). |
183 |
|
|
| |
Name (Birth
Year) |
Current
Position(s) with
the Trusts1 |
Principal
Occupation(s) and Other Directorships During
the Past 5 Years |
Number
of Funds in
John Hancock Fund
Complex Overseen
by Trustee |
Independent
Trustees |
|
|
Gregory
A. Russo (1949) |
Trustee,
each Trust (since
2009) |
Director
and Audit Committee Chairman (2012–2020), and Member, Audit Committee
and Finance Committee (2011–2020), NCH Healthcare System, Inc.
(holding company for multi-entity healthcare system); Director and
Member
(2012–2018), and Finance Committee Chairman (2014–2018), The
Moorings, Inc. (nonprofit continuing care community); Global Vice
Chairman,
Risk & Regulatory Matters, KPMG LLP (KPMG) (2002–2006); Vice
Chairman, Industrial Markets, KPMG (1998–2002).
Trustee
of various trusts within the John Hancock Fund Complex (since 2008). |
183 |
1 |
Because
each 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 Trusts 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.
|
| |
Name
(Birth Year) |
Current
Position(s) with
the Trusts1
|
Principal
Occupation(s) During the Past 5 Years |
Charles
A. Rizzo (1957) |
Chief
Financial Officer (since
2007) |
Vice
President, John Hancock Financial Services (since 2008); Senior Vice
President, John Hancock Investment
Management LLC and John Hancock Variable Trust Advisers LLC (since 2008);
Chief Financial
Officer of various trusts within the John Hancock Fund Complex (since
2007). |
Salvatore
Schiavone (1965) |
Treasurer (since
2010) |
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). |
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). |
Trevor
Swanberg (1979) |
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 each 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 Trusts 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.
Independent
Trustees
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,
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.
Patricia
Lizarraga – Through
her current positions as an independent board director, audit committee chair,
and chief executive officer of an investment
advisory firm, Ms. Lizarraga has expertise in financial services and investment
matters, and operational and risk oversight. As former governance
committee chair, Ms. Lizarraga has a strong understanding of corporate
governance and the regulatory frameworks of the investment management
industry.
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 Trusts.
Steven
R. Pruchansky – Mr.
Pruchansky has entrepreneurial, executive and financial experience as a senior
officer and chief executive of business in the retail,
service and distribution companies and a current and former director of real
estate and banking companies.
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.
Gregory
A. Russo – As a
retired Certified Public Accountant, Mr. Russo served as a partner and Global
Vice Chairman in a major independent registered
public accounting firm, as well as a member of its geographic boards of
directors and International Executive Team. As a result of Mr. Russo's
diverse global responsibilities, he possesses accounting, finance and executive
operating experience.
Non-Independent
Trustees
Andrew
G. Arnott – Through
his positions as Executive Vice President of John Hancock Financial
Services; Director and Executive Vice President of John
Hancock Investment Management LLC and
John Hancock Variable Trust Advisers LLC; President of John Hancock
Investment Management Distributors
LLC; and President 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.
Marianne
Harrison – Through
her position as President and CEO, John Hancock, and previous experience
as President and CEO, Manulife Canadian Division,
President and General Manager for John Hancock Long-Term Care Insurance,
and Executive Vice President and Controller for Manulife, Ms. Harrison
has experience as a strategic business builder expanding product offerings and
distribution, enabling her 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
Each Trust
is organized as a Massachusetts business trust. Under each 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 Trusts. The Board met 5 times
during the fiscal year ended October 31, 2022.
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 in this SAI or pursuant to a 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 Ms. Harrison and Messrs. Arnott,
Boyle,
and Lorentz
as current
or former senior executives of the Advisor and the Distributor (or of their
parent company, MFC), 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 each
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 a Trust.
Board
Committees
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
(Mr.
Cunningham and Mses. Lizarraga and Rathke).
Ms.
Rathke serves as
Chairperson of this Committee. This Committee reviews the internal and external
accounting and auditing procedures
of the Trusts and, among other things, considers the selection of an independent
registered public accounting firm for each 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. Ms. Rathke
has been designated by the Board as an "audit committee financial expert," as
defined in SEC rules. This
Committee met 4 times during the fiscal year ended October 31, 2022.
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
Trusts. This Committee met 4 times during the fiscal year ended October
31, 2022.
Contracts,
Legal & Risk Committee. The Board
also has a standing Contracts, Legal & Risk Committee (Mr. Boyle,
Ms.
Ellison, and Messrs. Pruchansky
and Russo).
Mr. Russo 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 4 times during the
fiscal year ended October 31, 2022.
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 5 times during the fiscal year ended
October 31, 2022.
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"). Ms. Jackson and Messrs. Boyle, Cunningham,
and Pruchansky 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 5 times during the fiscal year ended October 31,
2022.
Annually,
the Board evaluates its performance and that of its Committees, including the
effectiveness of the Board's Committee structure.
Risk
Oversight
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.
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.
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.
Compensation
of Trustees
Trustees
are reimbursed for travel and other out-of-pocket expenses. Each Independent
Trustee receives in the aggregate from the Trusts and the other
open-end funds in the John Hancock Fund Complex an annual retainer of
$265,000, a fee of $22,000 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 $180,000. 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 $20,000 retainer.
The
following table provides information regarding the compensation paid
by each Trust and the other investment companies in the John Hancock
Fund
Complex to the Independent Trustees for their services during the fiscal year
ended October 31, 2022.
|
|
|
| |
Compensation
Table1
|
|
|
|
|
Name
of Trustee |
Total
Compensation from Capital
Series ($) |
Total
Compensation from Investment
Trust ($) |
Total
Compensation from Investment
Trust II ($) |
Total
Compensation from
the Trusts and the
John Hancock Fund
Complex ($)2
|
Independent
Trustees |
|
|
|
|
Charles
L. Bardelis3
|
442 |
1,805 |
161 |
22,000 |
James
R. Boyle |
7,918 |
32,641 |
2,996 |
450,000 |
Peter
S. Burgess4
|
7,549 |
30,984 |
2,852 |
430,000 |
William
H. Cunningham |
7,918 |
32,641 |
2,996 |
525,000 |
Noni
L. Ellison5
|
2,932 |
13,358 |
1,154 |
179,500 |
Grace
K. Fey |
8,309 |
34,231 |
3,143 |
597,500 |
Dean
C. Garfield5
|
2,932 |
13,358 |
1,154 |
179,500 |
Deborah
C. Jackson |
7,918 |
32,641 |
2,996 |
502,500 |
Patricia
Lizarraga5
|
2,932 |
13,358 |
1,154 |
179,500 |
Hassell
H. McClellan |
10,635 |
43,501 |
4,013 |
745,500 |
Steven
R. Pruchansky |
7,734 |
31,811 |
2,925 |
440,000 |
Frances
G. Rathke |
7,920 |
32,639 |
2,997 |
450,000 |
Gregory
A. Russo |
8,125 |
33,402 |
3,072 |
460,000 |
Non-Independent
Trustees |
|
|
|
|
Andrew
G. Arnott |
$0 |
$0 |
$0 |
$0 |
Marianne
Harrison |
$0 |
$0 |
$0 |
$0 |
Paul
Lorentz5
|
$0 |
$0 |
$0 |
$0 |
1 |
The
Trust does not have a pension or retirement plan for any of its Trustees
or officers. |
2 |
There
were approximately
186 series
in the John Hancock Fund Complex as of October 31, 2022. |
3 |
Mr.
Bardelis retired as Trustee effective as of December 31,
2021. |
4 |
Mr.
Burgess
retired as Trustee effective as of December
31, 2022. |
5 |
Elected
to serve as Trustee effective as of September 9,
2022. |
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, 2022. 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.
|
|
|
| |
Name
of Trustees |
Balanced
Fund |
Classic
Value Fund |
Disciplined
Value International
Fund |
Diversified
Macro Fund |
Independent
Trustees |
|
|
|
|
James
R. Boyle |
None |
over
$100,000 |
over
$100,000 |
None |
William
H. Cunningham |
None |
None |
None |
None |
Noni
L. Ellison |
None |
None |
None |
None |
Grace
K. Fey |
None |
None |
None |
None |
Dean
C. Garfield |
None |
None |
None |
None |
Deborah
C. Jackson |
$10,001
- $50,000 |
$10,001
- $50,000 |
None |
None |
Patricia
Lizarraga |
None |
None |
None |
None |
|
|
|
| |
Name
of Trustees |
Balanced
Fund |
Classic
Value Fund |
Disciplined
Value International
Fund |
Diversified
Macro Fund |
Hassell
H. McClellan |
None |
None |
None |
None |
Steven
R. Pruchansky |
$10,001
- $50,000 |
$10,001
- $50,000 |
None |
None |
Frances
G. Rathke |
None |
None |
None |
None |
Gregory
A. Russo |
None |
None |
None |
None |
Non-Independent
Trustees |
|
|
|
|
Andrew
G. Arnott |
None |
None |
None |
None |
Marianne
Harrison |
None |
None |
None |
None |
Paul
Lorentz |
None |
None |
None |
None |
|
|
|
| |
Name
of Trustees |
Emerging
Markets Equity
Fund |
ESG
International Equity
Fund |
ESG
Large Cap Core Fund |
Financial
Industries Fund |
Independent
Trustees |
|
|
|
|
James
R. Boyle |
None |
None |
None |
None |
William
H. Cunningham |
None |
None |
None |
Over
$100,000 |
Noni
L. Ellison |
None |
None |
None |
None |
Grace
K. Fey |
None |
None |
None |
None |
Dean
C. Garfield |
None |
None |
None |
None |
Deborah
C. Jackson |
None |
None |
None |
None |
Patricia
Lizarraga |
None |
None |
None |
None |
Hassell
H. McClellan |
None |
None |
None |
None |
Steven
R. Pruchansky |
None |
None |
None |
$10,001
- $50,000 |
Frances
G. Rathke |
None |
None |
None |
None |
Gregory
A. Russo |
None |
None |
None |
None |
Non-Independent
Trustees |
|
|
|
|
Andrew
G. Arnott |
None |
None |
None |
None |
Marianne
Harrison |
None |
None |
None |
None |
Paul
Lorentz |
None |
None |
None |
None |
|
|
|
|
| |
Name
of Trustees |
Fundamental
Large Cap
Core Fund |
Global
Environmental
Opportunities
Fund |
Global
Thematic Opportunities
Fund |
Infrastructure
Fund |
International
Dynamic
Growth Fund |
Independent
Trustees |
|
|
|
|
|
James
R. Boyle |
None |
None |
None |
None |
None |
William
H. Cunningham |
None |
None |
None |
None |
None |
Noni
L. Ellison |
None |
None |
None |
None |
None |
Grace
K. Fey |
None |
None |
None |
None |
None |
Dean
C. Garfield |
None |
None |
None |
None |
None |
Deborah
C. Jackson |
$10,001
- $50,000 |
None |
None |
None |
None |
Patricia
Lizarraga |
None |
None |
None |
None |
None |
Hassell
H. McClellan |
None |
None |
None |
None |
None |
Steven
R. Pruchansky |
$50,001–
$100,000 |
None |
None |
None |
None |
Frances
G. Rathke |
None |
None |
None |
None |
None |
Gregory
A. Russo |
None |
None |
None |
None |
None |
Non-Independent
Trustees |
|
|
|
|
|
|
|
|
|
| |
Name
of Trustees |
Fundamental
Large Cap
Core Fund |
Global
Environmental
Opportunities
Fund |
Global
Thematic Opportunities
Fund |
Infrastructure
Fund |
International
Dynamic
Growth Fund |
Andrew
G. Arnott |
$1 -
$10,000 |
None |
None |
None |
None |
Marianne
Harrison |
None |
None |
None |
None |
None |
Paul
Lorentz |
None |
None |
None |
None |
None |
|
|
|
|
| |
Name
of Trustees |
Regional
Bank Fund |
Seaport
Long/Short Fund |
Small
Cap Core Fund |
U.S.
Global Leaders Growth
Fund |
Total
– John Hancock
Fund Complex |
Independent
Trustees |
|
|
|
|
|
James
R. Boyle |
None |
None |
None |
None |
Over
$100,000 |
William
H. Cunningham |
Over
$100,000 |
None |
None |
None |
Over
$100,000 |
Noni
L. Ellison |
None |
None |
None |
None |
None |
Grace
K. Fey |
None |
None |
None |
None |
Over
$100,000 |
Dean
C. Garfield |
None |
None |
None |
None |
None |
Deborah
C. Jackson |
None |
None |
None |
None |
Over
$100,000 |
Patricia
Lizarraga |
None |
None |
None |
None |
None |
Hassell
H. McClellan |
None |
None |
None |
None |
Over
$100,000 |
Steven
R. Pruchansky |
None |
None |
$10,001
- $50,000 |
$10,001
- $50,000 |
Over
$100,000 |
Frances
G. Rathke |
None |
None |
None |
None |
Over
$100,000 |
Gregory
A. Russo |
None |
None |
None |
$50,001–
$100,000 |
Over
$100,000 |
Non-Independent
Trustees |
|
|
|
|
|
Andrew
G. Arnott |
None |
None |
None |
None |
Over
$100,000 |
Marianne
Harrison |
None |
None |
None |
None |
Over
$100,000 |
Paul
Lorentz |
None |
None |
None |
None |
None |
SHAREHOLDERS
OF THE FUNDS
To the best
knowledge of the Trusts, as of February 1, 2023, the
Trustees and officers of each 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 Trusts, as of February 1, 2023, 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.
As of
February 1, 2023, Manulife
Reinsurance (Bermuda) Ltd ("Manulife (Bermuda)") owned 60% of the
voting securities of Global Environmental Opportunities
Fund and 47% of
the voting securities of ESG International Equity Fund. Manulife
(Bermuda) is organized under the laws of Bermuda. Its principal
address is Victoria
Place, 5th Floor, 31 Victoria Street,
Hamilton HM
10,
Bermuda. Manulife
(Bermuda) 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.
|
|
|
| |
Fund
Name |
Share
Class |
Name
and Address |
Percentage
Owned |
Type
of Ownership |
BALANCED
FUND |
A |
EDWARD
D JONES & CO FOR
THE BENEFIT OF CUSTOMERS 12555
MANCHESTER ROAD SAINT
LOUIS MO 63131-3710 |
64.17% |
Record |
BALANCED
FUND |
A |
AMERICAN
ENTERPRISE INVESTMENT SVC 707
2ND AVE S MINNEAPOLIS
MN 55402-2405 |
7.35% |
Record |
|
|
|
| |
Fund
Name |
Share
Class |
Name
and Address |
Percentage
Owned |
Type
of Ownership |
BALANCED
FUND |
C |
WELLS
FARGO CLEARING SERVICES, LLC SPECIAL
CUSTODY ACCT FOR THE EXCLUSIVE
BENEFIT OF CUSTOMER 2801
MARKET ST SAINT
LOUIS MO 63103-2523 |
13.80% |
Record |
BALANCED
FUND |
C |
PERSHING
LLC 1
PERSHING PLZ JERSEY
CITY NJ 07399-0001 |
10.52% |
Record |
BALANCED
FUND |
C |
EDWARD
D JONES & CO FOR
THE BENEFIT OF CUSTOMERS 12555
MANCHESTER ROAD SAINT
LOUIS MO 63131-3710 |
10.06% |
Record |
BALANCED
FUND |
C |
RAYMOND
JAMES OMNIBUS
FOR MUTUAL FUNDS HOUSE
ACCT FIRM 880
CARILLON PKWY ST
PETERSBURG FL 33716-1100 |
9.87% |
Record |
BALANCED
FUND |
C |
LPL
FINANCIAL OMNIBUS
CUSTOMER ACCOUNT ATTN:
MUTUAL FUND TRADING 4707
EXECUTIVE DRIVE SAN
DIEGO CA 92121-3091 |
7.29% |
Record |
BALANCED
FUND |
C |
NATIONAL
FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL
FUNDS 200
LIBERTY ST # 1WFC NEW
YORK NY 10281-1015 |
6.24% |
Record |
BALANCED
FUND |
C |
AMERICAN
ENTERPRISE INVESTMENT SVC 707
2ND AVE S MINNEAPOLIS
MN 55402-2405 |
20.90% |
Record |
BALANCED
FUND |
I |
AMERICAN
ENTERPRISE INVESTMENT SVC 707
2ND AVE S MINNEAPOLIS
MN 55402-2405 |
18.23% |
Record |
BALANCED
FUND |
I |
NATIONAL
FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL
FUNDS 200
LIBERTY ST # 1WFC NEW
YORK NY 10281-1015 |
15.12% |
Record |
BALANCED
FUND |
I |
LPL
FINANCIAL OMNIBUS
CUSTOMER ACCOUNT ATTN:
MUTUAL FUND TRADING 4707
EXECUTIVE DRIVE SAN
DIEGO CA 92121-3091 |
11.76% |
Record |
BALANCED
FUND |
I |
PERSHING
LLC 1
PERSHING PLZ JERSEY
CITY NJ 07399-0001 |
9.80% |
Record |
BALANCED
FUND |
I |
MLPF&
S FOR THE SOLE
BENEFIT OF ITS CUSTOMERS ATTN
FUND ADMINISTRATION 4800
DEER LAKE DRIVE EAST 2ND FL JACKSONVILLE
FL 32246-6484 |
8.77% |
Record |
|
|
|
| |
Fund
Name |
Share
Class |
Name
and Address |
Percentage
Owned |
Type
of Ownership |
BALANCED
FUND |
I |
MORGAN
STANLEY SMITH BARNEY LLC FOR
EXCLUSIVE BENEFIT OF CUSTOMERS 1 NEW
YORK PLAZA FL. 12 NEW
YORK NY 10004-1965 |
6.83% |
Record |
BALANCED
FUND |
I |
RAYMOND
JAMES OMNIBUS
FOR MUTUAL FUNDS HOUSE
ACCT FIRM 880
CARILLON PKWY ST
PETERSBURG FL 33716-1100 |
6.76% |
Record |
BALANCED
FUND |
I |
WELLS
FARGO CLEARING SERVICES, LLC SPECIAL
CUSTODY ACCT FOR THE EXCLUSIVE
BENEFIT OF CUSTOMER 2801
MARKET ST SAINT
LOUIS MO 63103-2523 |
6.41% |
Record |
BALANCED
FUND |
R2 |
MG
TRUSTCO CUST FBO JTDM
FAMILY PRACTICE LLC DEFERRED 717
17TH ST STE 1300 DENVER
CO 80202-3304 |
13.00% |
Beneficial |
BALANCED
FUND |
R2 |
MLPF&
S FOR THE SOLE
BENEFIT OF ITS CUSTOMERS ATTN:
FUND ADMINISTRATION 4800
DEER LAKE DRIVE EAST 2ND FL JACKSONVILLE
FL 32246-6484 |
10.25% |
Record |
BALANCED
FUND |
R2 |
SPECIAL
CUSTODY ACCOUNT FOR THE EXCLUSIVE
BENEFIT OF CUSTOMERS OF UBS
FINANCIAL SERVICES INC 1000
HARBOR BLVD WEEHAWKEN
NJ 07086-6761 |
8.21% |
Record |
BALANCED
FUND |
R2 |
STEVE
BERGMAN FBO BERGMAN
REALTY CORP 401K PSP &
TRUST 1251
WATERFRONT PL STE 525 PITTSBURGH
PA 15222-4228 |
7.46% |
Beneficial |
BALANCED
FUND |
R2 |
ALERUS
FINANCIAL FBO SIGHT
MACHINE 401 K PLAN 1251
WATERFRONT PL STE 525 PITTSBURGH
PA 15222-4228 |
5.63% |
Beneficial |
BALANCED
FUND |
R2 |
ASCENSUS
TRUST COMPANY FBO EMAGINED
SECURITY INC 401 K & PS PO
BOX 10758 FARGO
ND 58106-0758 |
5.21% |
Beneficial |
BALANCED
FUND |
R4 |
JOHN
HANCOCK TRUST COMPANY 200
BERKELEY ST STE 7 BOSTON
MA 02116-5038 |
40.12% |
Record |
BALANCED
FUND |
R4 |
STATE
STREET BANK AND TRUST AS TRUSTEE
AND OR CUSTODIAN FBO ADP ACCESS
PRODUCT 1
LINCOLN ST BOSTON
MA 02111-2901 |
37.01% |
Beneficial |
BALANCED
FUND |
R4 |
MATRIX
TRUST COMPANY CUST FBO L
& H COMPANY INC 401 (K) PROFIT 717
17TH ST STE 1300 DENVER
CO 80202-3304 |
10.04% |
Beneficial |
|
|
|
| |
Fund
Name |
Share
Class |
Name
and Address |
Percentage
Owned |
Type
of Ownership |
BALANCED
FUND |
R5 |
ASCENSUS
TRUST COMPANY FBO LAUDADIO
POLYMERS INC 401K PS PLAN PO
BOX 10577 FARGO
ND 58106-0577 |
60.90% |
Beneficial |
BALANCED
FUND |
R5 |
MATRIX
TRUST COMPANY AS AGENT FOR NEWPORT
TRUST COMPANY JACKSON
SPRING & MFG CO INC 401K 35
IRON POINT CIR STE 300 FOLSOM
CA 95630-8589 |
28.04% |
Beneficial |
BALANCED
FUND |
R6 |
EDWARD
D JONES & CO FOR
THE BENEFIT OF CUSTOMERS 12555
MANCHESTER ROAD SAINT
LOUIS MO 63131-3710 |
89.36% |
Record |
CLASSIC
VALUE FUND |
A |
NATIONAL
FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL
FUNDS 200
LIBERTY ST # 1WFC NEW
YORK NY 10281-1015 |
28.44% |
Record |
CLASSIC
VALUE FUND |
A |
EDWARD
D JONES & CO FOR
THE BENEFIT OF CUSTOMERS 12555
MANCHESTER ROAD SAINT
LOUIS MO 63131-3710 |
15.25% |
Record |
CLASSIC
VALUE FUND |
A |
MLPF&
S FOR THE SOLE
BENEFIT OF ITS CUSTOMERS ATTN:
FUND ADMINISTRATION 4800
DEER LAKE DRIVE EAST 2ND FL JACKSONVILLE
FL 32246-6484 |
5.47% |
Record |
CLASSIC
VALUE FUND |
A |
MORGAN
STANLEY SMITH BARNEY LLC FOR
EXCLUSIVE BENEFIT OF CUSTOMERS 1 NEW
YORK PLAZA FL. 12 NEW
YORK NY 10004-1965 |
5.33% |
Record |
CLASSIC
VALUE FUND |
C |
WELLS
FARGO CLEARING SERVICES, LLC SPECIAL
CUSTODY ACCT FOR THE EXCLUSIVE
BENEFIT OF CUSTOMER 2801
MARKET ST SAINT
LOUIS MO 63103-2523 |
20.54% |
Record |
CLASSIC
VALUE FUND |
C |
MLPF&
S FOR THE SOLE
BENEFIT OF ITS CUSTOMERS ATTN:
FUND ADMINISTRATION 4800
DEER LAKE DRIVE EAST 2ND FL JACKSONVILLE
FL 32246-6484 |
11.00% |
Record |
CLASSIC
VALUE FUND |
C |
MORGAN
STANLEY SMITH BARNEY LLC FOR
EXCLUSIVE BENEFIT OF CUSTOMERS 1 NEW
YORK PLAZA FL. 12 NEW
YORK NY 10004-1965 |
8.57% |
Record |
CLASSIC
VALUE FUND |
C |
LPL
FINANCIAL OMNIBUS
CUSTOMER ACCOUNT ATTN:
MUTUAL FUND TRADING 4707
EXECUTIVE DRIVE SAN
DIEGO CA 92121-3091 |
6.65% |
Record |
CLASSIC
VALUE FUND |
C |
AMERICAN
ENTERPRISE INVESTMENT SVC 707
2ND AVE S MINNEAPOLIS
MN 55402-2405 |
6.41% |
Record |
|
|
|
| |
Fund
Name |
Share
Class |
Name
and Address |
Percentage
Owned |
Type
of Ownership |
CLASSIC
VALUE FUND |
C |
CHARLES
SCHWAB & CO INC SPECIAL
CUSTODY ACCT FBO CUSTOMERS ATTN
MUTUAL FUNDS 101
MONTGOMERY ST SAN
FRANCISCO CA 94104-4151 |
6.38% |
Record |
CLASSIC
VALUE FUND |
C |
NATIONAL
FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL
FUNDS 200
LIBERTY ST # 1WFC NEW
YORK NY 10281-1015 |
5.74% |
Record |
CLASSIC
VALUE FUND |
C |
STIFEL
NICOLAUS & CO INC EXCLUSIVE
BENEFIT OF CUSTOMERS 501 N
BROADWAY SAINT
LOUIS MO 63102-2188 |
5.57% |
Record |
CLASSIC
VALUE FUND |
I |
AMERICAN
ENTERPRISE INVESTMENT SVC 707
2ND AVE S MINNEAPOLIS
MN 55402-2405 |
41.44% |
Record |
CLASSIC
VALUE FUND |
I |
CHARLES
SCHWAB & CO INC SPECIAL
CUSTODY ACCT FBO CUSTOMERS ATTN
MUTUAL FUNDS 101
MONTGOMERY ST SAN
FRANCISCO CA 94104-4151 |
27.60% |
Record |
CLASSIC
VALUE FUND |
I |
WELLS
FARGO CLEARING SERVICES, LLC SPECIAL
CUSTODY ACCT FOR THE EXCLUSIVE
BENEFIT OF CUSTOMER 2801
MARKET ST SAINT
LOUIS MO 63103-2523 |
6.87% |
Record |
CLASSIC
VALUE FUND |
I |
PERSHING
LLC 1
PERSHING PLZ JERSEY
CITY NJ 07399-0001 |
6.02% |
Record |
CLASSIC
VALUE FUND |
R2 |
ASCENSUS
TRUSTCO FBO AG
RISK SOLUTIONS RETPLAN PO
BOX 10758 FARGO
ND 58106-0758 |
42.99% |
Beneficial |
CLASSIC
VALUE FUND |
R2 |
ASCENSUS
TRUST COMPANY FBO MAIN PO
BOX 10758 FARGO
ND 58106-0758 |
12.20% |
Beneficial |
CLASSIC
VALUE FUND |
R2 |
LPL
FINANCIAL OMNIBUS
CUSTOMER ACCOUNT ATTN:
MUTUAL FUND TRADING 4707
EXECUTIVE DRIVE SAN
DIEGO CA 92121-3091 |
9.14% |
Record |
CLASSIC
VALUE FUND |
R5 |
MID
ATLANTIC TRUST COMPANY FBO ONE
SOURCE OFFICE REFRESHMENT 401 K
PROFIT SHARING PLAN & TRUST 1251
WATERFRONT PL STE 525 PITTSBURGH
PA 15222-4228 |
80.54% |
Beneficial |
CLASSIC
VALUE FUND |
R5 |
MID
ATLANTIC TRUST COMPANY FBO WOODBURY
MEDICAL PRACTICE 401(K) PR 1251
WATERFRONT PL STE 525 PITTSBURGH
PA 15222-4228 |
19.46% |
Beneficial |
|
|
|
| |
Fund
Name |
Share
Class |
Name
and Address |
Percentage
Owned |
Type
of Ownership |
CLASSIC
VALUE FUND |
R6 |
EDWARD
D JONES & CO FOR
THE BENEFIT OF CUSTOMERS 12555
MANCHESTER ROAD SAINT
LOUIS MO 63131-3710 |
66.37% |
Record |
CLASSIC
VALUE FUND |
R6 |
THE
NORTHERN TRUST CORPORATION AGEN FBO
MODERN WOODMEN RETIREMENT PLAN PO
BOX 92956 CHICAGO
IL 60675-2956 |
25.45% |
Beneficial |
DISCIPLINED
VALUE INTERNATIONAL FUND |
A |
EDWARD
D JONES & CO FOR
THE BENEFIT OF CUSTOMERS 12555
MANCHESTER ROAD SAINT
LOUIS MO 63131-3710 |
58.64% |
Record |
DISCIPLINED
VALUE INTERNATIONAL FUND |
C |
MORGAN
STANLEY SMITH BARNEY LLC FOR
EXCLUSIVE BENEFIT OF CUSTOMERS 1 NEW
YORK PLAZA FL. 12 NEW
YORK NY 10004-1965 |
26.26% |
Record |
DISCIPLINED
VALUE INTERNATIONAL FUND |
C |
RAYMOND
JAMES OMNIBUS
FOR MUTUAL FUNDS HOUSE
ACCT FIRM 880
CARILLON PKWY ST
PETERSBURG FL 33716-1100 |
19.66% |
Record |
DISCIPLINED
VALUE INTERNATIONAL FUND |
C |
NATIONAL
FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL
FUNDS 200
LIBERTY ST # 1WFC NEW
YORK NY 10281-1015 |
12.32% |
Record |
DISCIPLINED
VALUE INTERNATIONAL FUND |
C |
EDWARD
D JONES & CO FOR
THE BENEFIT OF CUSTOMERS 12555
MANCHESTER ROAD SAINT
LOUIS MO 63131-3710 |
7.79% |
Record |
DISCIPLINED
VALUE INTERNATIONAL FUND |
C |
LPL
FINANCIAL OMNIBUS
CUSTOMER ACCOUNT ATTN:
MUTUAL FUND TRADING 4707
EXECUTIVE DRIVE SAN
DIEGO CA 92121-3091 |
6.31% |
Record |
DISCIPLINED
VALUE INTERNATIONAL FUND |
I |
NATIONAL
FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL
FUNDS 200
LIBERTY ST # 1WFC NEW
YORK NY 10281-1015 |
48.20% |
Record |
DISCIPLINED
VALUE INTERNATIONAL FUND |
I |
RAYMOND
JAMES OMNIBUS
FOR MUTUAL FUNDS HOUSE
ACCT FIRM 880
CARILLON PKWY ST
PETERSBURG FL 33716-1100 |
12.03% |
Record |
DISCIPLINED
VALUE INTERNATIONAL FUND |
I |
AMERICAN
ENTERPRISE INVESTMENT SVC 707
2ND AVE S MINNEAPOLIS
MN 55402-2405 |
8.19% |
Record |
DISCIPLINED
VALUE INTERNATIONAL FUND |
I |
MORGAN
STANLEY SMITH BARNEY LLC FOR
EXCLUSIVE BENEFIT OF CUSTOMERS 1 NEW
YORK PLAZA FL. 12 NEW
YORK NY 10004-1965 |
6.69% |
Record |
|
|
|
| |
Fund
Name |
Share
Class |
Name
and Address |
Percentage
Owned |
Type
of Ownership |
DISCIPLINED
VALUE INTERNATIONAL FUND |
I |
AMERITRADE
INC PO
BOX 2226 OMAHA
NE 68103-2226 |
5.66% |
Record |
DISCIPLINED
VALUE INTERNATIONAL FUND |
I |
PERSHING
LLC 1
PERSHING PLZ JERSEY
CITY NJ 07399-0001 |
5.40% |
Record |
DISCIPLINED
VALUE INTERNATIONAL FUND |
I |
CHARLES
SCHWAB & CO INC MUTUAL
FUNDS DEPT 101
MONTGOMERY ST SAN
FRANCISCO CA 94105 |
5.19% |
Record |
DISCIPLINED
VALUE INTERNATIONAL FUND |
NAV |
JHF
II MULTIMANAGER LIFESTYLE GROWTH PORTFOLIO 200
BERKELEY ST BOSTON
MA 02116-5022 |
27.20% |
Beneficial |
DISCIPLINED
VALUE INTERNATIONAL FUND |
NAV |
JHF
II MULTIMANAGER LIFESTYLE BALANCED PORTFOLIO 201
BERKELEY ST BOSTON
MA 02116-5022 |
20.84% |
Beneficial |
DISCIPLINED
VALUE INTERNATIONAL FUND |
NAV |
JHF
II MULTIMANAGER LIFESTYLE AGGRESSIVE PORTFOLIO 202
BERKELEY ST BOSTON
MA 02116-5022 |
11.99% |
Beneficial |
DISCIPLINED
VALUE INTERNATIONAL FUND |
R2 |
EMPOWER
TRUST FBO EMPOWER
BENEFIT PLANS 8515
E ORCHARD RD # 2T2 GREENWOOD
VLG CO 80111-5002 |
87.25% |
Record |
DISCIPLINED
VALUE INTERNATIONAL FUND |
R4 |
MATRIX
TRUST COMPANY CUST FBO IAMS
CONSULTING LLC 401K PLAN 717
17TH ST STE 1300 DENVER
CO 80202-3304 |
45.16% |
Beneficial |
DISCIPLINED
VALUE INTERNATIONAL FUND |
R4 |
ASCENSUS
TRUST COMPANY FBO DATOCWITTEN
GROUP INC 401K PLAN PO
BOX 10758 FARGO
ND 58106-0758 |
38.52% |
Beneficial |
DISCIPLINED
VALUE INTERNATIONAL FUND |
R4 |
MID
ATLANTIC TRUST COMPANY FBO TAFT
& PARTNERS LLC 401(K) PROFIT S 1251
WATERFRONT PL STE 525 PITTSBURGH
PA 15222-4228 |
12.65% |
Beneficial |
DISCIPLINED
VALUE INTERNATIONAL FUND |
R6 |
EDWARD
D JONES & CO FOR
THE BENEFIT OF CUSTOMERS 12555
MANCHESTER ROAD SAINT
LOUIS MO 63131-3710 |
22.83% |
Record |
DISCIPLINED
VALUE INTERNATIONAL FUND |
R6 |
JOHN
HANCOCK LIFE INSURANCE COMPANY
(USA) ATTN:
JHRPS TRADING OPS ST6 200
BERKELEY ST BOSTON
MA 02116-5022 |
22.15% |
Beneficial |
DISCIPLINED
VALUE INTERNATIONAL FUND |
R6 |
NATIONAL
FINANCIAL SERVICES LLC 499
WASHINGTON BLVD JERSEY
CITY NJ 07310-1995 |
17.72% |
Record |
|
|
|
| |
Fund
Name |
Share
Class |
Name
and Address |
Percentage
Owned |
Type
of Ownership |
DISCIPLINED
VALUE INTERNATIONAL FUND |
R6 |
NATIONAL
FINANCIAL SERVICES LLC 499
WASHINGTON BLVD JERSEY
CITY NJ 07310-1995 |
9.01% |
Record |
DISCIPLINED
VALUE INTERNATIONAL FUND |
R6 |
ATTN
MUTUAL FUND ADMINISTRATOR C/O
PRINCIPAL FINANCIAL SEI
PRIVATE TRUST COMPANY 1
FREEDOM VALLEY DR OAKS
PA 19456-9989 |
5.81% |
Beneficial |
DISCIPLINED
VALUE INTERNATIONAL FUND |
R6 |
CAPINCO
C/O US BANK NA 1555
N RIVERCENTER DR STE 302 MILWAUKEE
WI 53212-3958 |
5.41% |
Beneficial |
DIVERSIFIED
MACRO FUND |
A |
MORGAN
STANLEY SMITH BARNEY LLC FOR
EXCLUSIVE BENEFIT OF CUSTOMERS 1 NEW
YORK PLAZA FL. 12 NEW
YORK NY 10004-1965 |
30.88% |
Record |
DIVERSIFIED
MACRO FUND |
A |
MLPF&
S FOR THE SOLE
BENEFIT OF ITS CUSTOMERS ATTN:
FUND ADMINISTRATION 4800
DEER LAKE DRIVE EAST 2ND FL JACKSONVILLE
FL 32246-6484 |
6.09% |
Record |
DIVERSIFIED
MACRO FUND |
C |
MORGAN
STANLEY SMITH BARNEY LLC FOR
EXCLUSIVE BENEFIT OF CUSTOMERS 1 NEW
YORK PLAZA FL. 12 NEW
YORK NY 10004-1965 |
67.57% |
Record |
DIVERSIFIED
MACRO FUND |
C |
MLPF&
S FOR THE SOLE
BENEFIT OF ITS CUSTOMERS ATTN:
FUND ADMINISTRATION 4800
DEER LAKE DRIVE EAST 2ND FL JACKSONVILLE
FL 32246-6484 |
11.89% |
Record |
DIVERSIFIED
MACRO FUND |
C |
PERSHING
LLC 1
PERSHING PLZ JERSEY
CITY NJ 07399-0001 |
9.70% |
Record |
DIVERSIFIED
MACRO FUND |
I |
MLPF&
S FOR THE SOLE
BENEFIT OF ITS CUSTOMERS ATTN:
FUND ADMINISTRATION 4800
DEER LAKE DRIVE EAST 2ND FL JACKSONVILLE
FL 32246-6484 |
44.23% |
Record |
DIVERSIFIED
MACRO FUND |
I |
MORGAN
STANLEY SMITH BARNEY LLC FOR
EXCLUSIVE BENEFIT OF CUSTOMERS 1 NEW
YORK PLAZA FL. 12 NEW
YORK NY 10004-1965 |
27.58% |
Record |
DIVERSIFIED
MACRO FUND |
I |
LPL
FINANCIAL OMNIBUS
CUSTOMER ACCOUNT ATTN:
MUTUAL FUND TRADING 4707
EXECUTIVE DRIVE SAN
DIEGO CA 92121-3091 |
8.18% |
Record |
DIVERSIFIED
MACRO FUND |
I |
PERSHING
LLC 1
PERSHING PLZ JERSEY
CITY NJ 07399-0001 |
5.10% |
Record |
DIVERSIFIED
MACRO FUND |
NAV |
JHF
II ALTERNATIVE ASSET ALLOCATION 200
BERKELEY ST BOSTON
MA 02116-5022 |
29.01% |
Beneficial |
|
|
|
| |
Fund
Name |
Share
Class |
Name
and Address |
Percentage
Owned |
Type
of Ownership |
DIVERSIFIED
MACRO FUND |
NAV |
JHF
II MULTIMANAGER LIFESTYLE BALANCED PORTFOLIO 200
BERKELEY ST BOSTON
MA 02116-5022 |
28.18% |
Beneficial |
DIVERSIFIED
MACRO FUND |
NAV |
JHF
II MULTIMANAGER LIFESTYLE GROWTH PORTFOLIO 200
BERKELEY ST BOSTON
MA 02116-5022 |
19.94% |
Beneficial |
DIVERSIFIED
MACRO FUND |
NAV |
JHF
II MULTIMANAGER LIFESTYLE MODERATE PORTFOLIO 200
BERKELEY ST BOSTON
MA 02116-5022 |
11.55% |
Beneficial |
DIVERSIFIED
MACRO FUND |
NAV |
JHF
II MULTIMANAGER LIFESTYLE AGGRESSIVE PORTFOLIO 200
BERKELEY ST BOSTON
MA 02116-5022 |
11.31% |
Beneficial |
DIVERSIFIED
MACRO FUND |
R6 |
J P
MORGAN SECURITIES LLC OMNIBUS ACCOUNT
FOR THE EXCLUSIVE BENEFIT OF
CUSTOMERS 4
CHASE METROTECH CENTER 3RD
FL MUTUAL FUND DEPARTMENT BROOKLYN
NY 11245-0004 |
70.38% |
Record |
DIVERSIFIED
MACRO FUND |
R6 |
ATTN
MUTUAL FUND OPERATIONS MAC
& CO 500
GRANT ST RM 151-1010 PITTSBURGH
PA 15219-2502 |
17.42% |
Beneficial |
EMERGING
MARKETS EQUITY FUND |
A |
EDWARD
D JONES & CO FOR
THE BENEFIT OF CUSTOMERS 12555
MANCHESTER ROAD SAINT
LOUIS MO 63131-3710 |
75.33% |
Record |
EMERGING
MARKETS EQUITY FUND |
C |
AMERICAN
ENTERPRISE INVESTMENT SVC 707
2ND AVE S MINNEAPOLIS
MN 55402-2405 |
29.78% |
Record |
EMERGING
MARKETS EQUITY FUND |
C |
PERSHING
LLC 1
PERSHING PLZ JERSEY
CITY NJ 07399-0001 |
21.92% |
Record |
EMERGING
MARKETS EQUITY FUND |
C |
RBC
CAPITAL MARKETS LLC MUTUAL
FUND OMNIBUS PROCESSING ATTN
MUTUAL FUND PRODUCT GRP 250
NICOLLETT MALL STE 1800 MINNEAPOLIS
MN 55401-7554 |
8.75% |
Record |
EMERGING
MARKETS EQUITY FUND |
C |
JOHN
HANCOCK LIFE & HEALTH INS CO CUSTODIAN
FOR THE IRA OF MARY
T CEMBROLA 48
BARBARA JEAN ST GRAFTON
MA 01519-1054 |
6.49% |
Beneficial |
EMERGING
MARKETS EQUITY FUND |
C |
STIFEL
NICOLAUS & CO INC EXCLUSIVE
BENEFIT OF CUSTOMERS 501 N
BROADWAY SAINT
LOUIS MO 63102-2188 |
5.38% |
Record |
EMERGING
MARKETS EQUITY FUND |
I |
AMERICAN
ENTERPRISE INVESTMENT SVC 707
2ND AVE S MINNEAPOLIS
MN 55402-2405 |
95.16% |
Record |
|
|
|
| |
Fund
Name |
Share
Class |
Name
and Address |
Percentage
Owned |
Type
of Ownership |
EMERGING
MARKETS EQUITY FUND |
NAV |
JHF
II MULTIMANAGER LIFESTYLE GROWTH PORTFOLIO 200
BERKELEY ST BOSTON
MA 02116-5022 |
23.52% |
Beneficial |
EMERGING
MARKETS EQUITY FUND |
NAV |
JHVIT
MANAGED VOLATILITY GROWTH PORTFOLIO 200
BERKELEY ST BOSTON
MA 02116-5022 |
17.15% |
Beneficial |
EMERGING
MARKETS EQUITY FUND |
NAV |
JHF
II MULTIMANAGER LIFESTYLE BALANCED PORTFOLIO 200
BERKELEY ST BOSTON
MA 02116-5022 |
13.39% |
Beneficial |
EMERGING
MARKETS EQUITY FUND |
NAV |
JHF
II MULTIMANAGER LIFESTYLE AGGRESSIVE PORTFOLIO 200
BERKELEY ST BOSTON
MA 02116-5022 |
13.12% |
Beneficial |
EMERGING
MARKETS EQUITY FUND |
NAV |
JHVIT
MANAGED VOLATILITY BALANCED PORTFOLIO 200
BERKELEY ST BOSTON
MA 02116-5022 |
8.18% |
Beneficial |
EMERGING
MARKETS EQUITY FUND |
R2 |
JOHN
HANCOCK LIFE INSURANCE CO USA 200
BERKELEY ST BOSTON
MA 02116-5023 |
92.08% |
Beneficial |
EMERGING
MARKETS EQUITY FUND |
R4 |
JOHN
HANCOCK LIFE INSURANCE CO USA 200
BERKELEY ST BOSTON
MA 02116-5023 |
69.44% |
Beneficial |
EMERGING
MARKETS EQUITY FUND |
R4 |
TD
AMERITRADE INC FEBO OUR
CUSTOMERS PO
BOX 2226 OMAHA
NE 68103-2226 |
20.66% |
Record |
EMERGING
MARKETS EQUITY FUND |
R4 |
MATRIX
TRUST COMPANY AS AGENT FOR ADVISOR
TRUST INC WEST
IRONDEQUOIT (NY) 403(B) 717
17TH ST STE 1300 DENVER
CO 80202-3304 |
7.86% |
Beneficial |
EMERGING
MARKETS EQUITY FUND |
R6 |
EDWARD
D JONES & CO FOR
THE BENEFIT OF CUSTOMERS 12555
MANCHESTER ROAD SAINT
LOUIS MO 63131-3710 |
86.95% |
Record |
ESG
INTERNATIONAL EQUITY FUND |
A |
EDWARD
D JONES & CO FOR
THE BENEFIT OF CUSTOMERS 12555
MANCHESTER ROAD SAINT
LOUIS MO 63131-3710 |
33.08% |
Record |
ESG
INTERNATIONAL EQUITY FUND |
A |
CHARLES
SCHWAB & CO INC MUTUAL
FUNDS DEPT 101
MONTGOMERY ST SAN
FRANCISCO CA 94104-4151 |
32.36% |
Record |
ESG
INTERNATIONAL EQUITY FUND |
A |
NATIONAL
FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL
FUNDS 200
LIBERTY ST # 1WFC NEW
YORK NY 10281-1015 |
7.34% |
Record |
|
|
|
| |
Fund
Name |
Share
Class |
Name
and Address |
Percentage
Owned |
Type
of Ownership |
ESG
INTERNATIONAL EQUITY FUND |
A |
TD
AMERITRADE INC FEBO OUR
CUSTOMERS PO
BOX 2226 OMAHA
NE 68103-2226 |
7.16% |
Record |
ESG
INTERNATIONAL EQUITY FUND |
I |
MANULIFE
REINSURANCE (BERMUDA) LTD 200
BERKELEY ST BOSTON
MA 02116-5022 |
39.38% |
Beneficial |
ESG
INTERNATIONAL EQUITY FUND |
I |
RAYMOND
JAMES OMNIBUS
FOR MUTUAL FUNDS HOUSE
ACCT FIRM 880
CARILLON PKWY ST
PETERSBURG FL 33716-1100 |
25.49% |
Record |
ESG
INTERNATIONAL EQUITY FUND |
I |
NATIONAL
FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL
FUNDS 200
LIBERTY ST # 1WFC NEW
YORK NY 10281-1015 |
8.23% |
Record |
ESG
INTERNATIONAL EQUITY FUND |
I |
AMERICAN
ENTERPRISE INVESTMENT SVC 707
2ND AVE S MINNEAPOLIS
MN 55402-2405 |
7.19% |
Record |
ESG
INTERNATIONAL EQUITY FUND |
I |
CHARLES
SCHWAB & CO INC SPECIAL
CUSTODY ACCOUNT FOR EXCLUSIVE
BENEFIT OF CUSTOMERS ATTN
MUTUAL FUNDS 101
MONTGOMERY ST SAN
FRANCISCO CA 94104-4151 |
6.91% |
Record |
ESG
INTERNATIONAL EQUITY FUND |
I |
ATTN
MUTUAL FUND ADMINISTRATOR C/O
PRINCIPAL FINANCIAL SEI
PRIVATE TRUST COMPANY 1
FREEDOM VALLEY DR OAKS
PA 19456-9989 |
5.83% |
Beneficial |
ESG
INTERNATIONAL EQUITY FUND |
R6 |
MANULIFE
REINSURANCE (BERMUDA) LTD 200
BERKELEY ST BOSTON
MA 02116-5022 |
73.45% |
Beneficial |
ESG
INTERNATIONAL EQUITY FUND |
R6 |
EDWARD
D JONES & CO FOR
THE BENEFIT OF CUSTOMERS 12555
MANCHESTER ROAD SAINT
LOUIS MO 63131-3710 |
24.77% |
Record |
ESG
LARGE CAP CORE FUND |
A |
MORGAN
STANLEY SMITH BARNEY LLC FOR
EXCLUSIVE BENEFIT OF CUSTOMERS 1 NEW
YORK PLAZA FL. 12 NEW
YORK NY 10004-1965 |
15.58% |
Record |
ESG
LARGE CAP CORE FUND |
A |
EDWARD
D JONES & CO FOR
THE BENEFIT OF CUSTOMERS 12555
MANCHESTER ROAD SAINT
LOUIS MO 63131-3710 |
9.86% |
Record |
ESG
LARGE CAP CORE FUND |
A |
AMERICAN
ENTERPRISE INVESTMENT SVC 707
2ND AVE S MINNEAPOLIS
MN 55402-2405 |
8.35% |
Record |
|
|
|
| |
Fund
Name |
Share
Class |
Name
and Address |
Percentage
Owned |
Type
of Ownership |
ESG
LARGE CAP CORE FUND |
A |
NATIONAL
FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL
FUNDS 200
LIBERTY ST # 1WFC NEW
YORK NY 10281-1015 |
6.93% |
Record |
ESG
LARGE CAP CORE FUND |
A |
CHARLES
SCHWAB & CO INC SPECIAL
CUSTODY ACCT FBO CUSTOMERS ATTN
MUTUAL FUNDS 101
MONTGOMERY ST SAN
FRANCISCO CA 94104-4151 |
6.44% |
Record |
ESG
LARGE CAP CORE FUND |
A |
PERSHING
LLC 1
PERSHING PLZ JERSEY
CITY NJ 07399-0001 |
6.03% |
Record |
ESG
LARGE CAP CORE FUND |
C |
MORGAN
STANLEY SMITH BARNEY LLC FOR
EXCLUSIVE BENEFIT OF CUSTOMERS 1 NEW
YORK PLAZA FL. 12 NEW
YORK NY 10004-1965 |
24.53% |
Record |
ESG
LARGE CAP CORE FUND |
C |
AMERICAN
ENTERPRISE INVESTMENT SVC 707
2ND AVE S MINNEAPOLIS
MN 55402-2405 |
20.23% |
Record |
ESG
LARGE CAP CORE FUND |
C |
LPL
FINANCIAL OMNIBUS
CUSTOMER ACCOUNT ATTN:
MUTUAL FUND TRADING 4707
EXECUTIVE DRIVE SAN
DIEGO CA 92121-3091 |
14.52% |
Record |
ESG
LARGE CAP CORE FUND |
C |
NATIONAL
FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL
FUNDS 200
LIBERTY ST # 1WFC NEW
YORK NY 10281-1015 |
14.40% |
Record |
ESG
LARGE CAP CORE FUND |
C |
RAYMOND
JAMES OMNIBUS
FOR MUTUAL FUNDS HOUSE
ACCT FIRM 880
CARILLON PKWY ST
PETERSBURG FL 33716-1100 |
10.06% |
Record |
ESG
LARGE CAP CORE FUND |
C |
PERSHING
LLC 1
PERSHING PLZ JERSEY
CITY NJ 07399-0001 |
7.66% |
Record |
ESG
LARGE CAP CORE FUND |
I |
MORGAN
STANLEY SMITH BARNEY LLC FOR
EXCLUSIVE BENEFIT OF CUSTOMERS 1 NEW
YORK PLAZA FL. 12 NEW
YORK NY 10004-1965 |
19.20% |
Record |
ESG
LARGE CAP CORE FUND |
I |
MANULIFE
REINSURANCE (BERMUDA) LTD 200
BERKELEY ST BOSTON
MA 02116-5022 |
18.46% |
Beneficial |
ESG
LARGE CAP CORE FUND |
I |
AMERICAN
ENTERPRISE INVESTMENT SVC 707
2ND AVE S MINNEAPOLIS
MN 55402-2405 |
16.61% |
Record |
ESG
LARGE CAP CORE FUND |
I |
NATIONAL
FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL
FUNDS 200
LIBERTY ST # 1WFC NEW
YORK NY 10281-1015 |
12.27% |
Record |
|
|
|
| |
Fund
Name |
Share
Class |
Name
and Address |
Percentage
Owned |
Type
of Ownership |
ESG
LARGE CAP CORE FUND |
I |
CHARLES
SCHWAB & CO INC SPECIAL
CUSTODY ACCT FBO CUSTOMERS ATTN
MUTUAL FUNDS 101
MONTGOMERY ST SAN
FRANCISCO CA 94104-4151 |
10.21% |
Record |
ESG
LARGE CAP CORE FUND |
I |
RAYMOND
JAMES OMNIBUS
FOR MUTUAL FUNDS HOUSE
ACCT FIRM 880
CARILLON PKWY ST
PETERSBURG FL 33716-1100 |
5.35% |
Record |
ESG
LARGE CAP CORE FUND |
R6 |
JOHN
HANCOCK LIFE INSURANCE COMPANY
(USA) ATTN:
JHRPS TRADING OPS ST6 200
BERKELEY ST BOSTON
MA 02116-5022 |
42.33% |
Beneficial |
ESG
LARGE CAP CORE FUND |
R6 |
EDWARD
D JONES & CO FOR
THE BENEFIT OF CUSTOMERS 12555
MANCHESTER ROAD SAINT
LOUIS MO 63131-3710 |
27.87% |
Record |
ESG
LARGE CAP CORE FUND |
R6 |
NATIONAL
FINANCIAL SERVICES LLC 499
WASHINGTON BLVD JERSEY
CITY NJ 07310-1995 |
10.97% |
Record |
ESG
LARGE CAP CORE FUND |
R6 |
NATIONAL
FINANCIAL SERVICES LLC 499
WASHINGTON BLVD JERSEY
CITY NJ 07310-1995 |
8.99% |
Record |
ESG
LARGE CAP CORE FUND |
R6 |
TIAA
FSB CUST/TTEE FBO RETIREMENT
PLANS FOR WHICH TIAA
ACTS AS RECORDKEEPER ATTN
TRUST OPERATIONS 211 N
BROADWAY STE 1000 SAINT
LOUIS MO 63102-2748 |
6.17% |
Record |
FINANCIAL
INDUSTRIES FUND |
A |
MLPF&
S FOR THE SOLE
BENEFIT OF ITS CUSTOMERS ATTN:
FUND ADMINISTRATION 4800
DEER LAKE DR E FL 2 JACKSONVILLE
FL 32246-6484 |
10.60% |
Record |
FINANCIAL
INDUSTRIES FUND |
A |
NATIONAL
FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL
FUNDS 200
LIBERTY ST # 1WFC NEW
YORK NY 10281-1015 |
8.40% |
Record |
FINANCIAL
INDUSTRIES FUND |
A |
WELLS
FARGO CLEARING SERVICES, LLC SPECIAL
CUSTODY ACCT FOR THE EXCLUSIVE
BENEFIT OF CUSTOMER 2801
MARKET ST SAINT
LOUIS MO 63103-2523 |
7.22% |
Record |
FINANCIAL
INDUSTRIES FUND |
A |
MORGAN
STANLEY SMITH BARNEY LLC FOR
EXCLUSIVE BENEFIT OF CUSTOMERS 1 NEW
YORK PLAZA FL. 12 NEW
YORK NY 10004-1965 |
5.78% |
Record |
|
|
|
| |
Fund
Name |
Share
Class |
Name
and Address |
Percentage
Owned |
Type
of Ownership |
FINANCIAL
INDUSTRIES FUND |
C |
J P
MORGAN SECURITIES LLC OMNIBUS ACCOUNT
FOR THE EXCLUSIVE BENEFIT OF
CUSTOMERS 4
CHASE METROTECH CENTER 3RD
FL MUTUAL FUND DEPARTMENT BROOKLYN
NY 11245-0004 |
15.66% |
Record |
FINANCIAL
INDUSTRIES FUND |
C |
WELLS
FARGO CLEARING SERVICES, LLC SPECIAL
CUSTODY ACCT FOR THE EXCLUSIVE
BENEFIT OF CUSTOMER 2801
MARKET ST SAINT
LOUIS MO 63103-2523 |
12.25% |
Record |
FINANCIAL
INDUSTRIES FUND |
C |
RAYMOND
JAMES OMNIBUS
FOR MUTUAL FUNDS HOUSE
ACCT FIRM 880
CARILLON PKWY ST
PETERSBURG FL 33716-1100 |
11.33% |
Record |
FINANCIAL
INDUSTRIES FUND |
C |
MLPF&S
FOR THE SOLE
BENEFIT OF ITS CUSTOMERS ATTN:
FUND ADMINISTRATION 4800
DEERLAKE DRIVE EAST 2ND FL JACKSONVILLE
FL 32246-6484 |
8.44% |
Record |
FINANCIAL
INDUSTRIES FUND |
C |
NATIONAL
FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL
FUNDS 200
LIBERTY ST # 1WFC NEW
YORK NY 10281-1015 |
8.18% |
Record |
FINANCIAL
INDUSTRIES FUND |
C |
PERSHING
LLC 1
PERSHING PLZ JERSEY
CITY NJ 07399-0001 |
7.39% |
Record |
FINANCIAL
INDUSTRIES FUND |
C |
CHARLES
SCHWAB & CO INC SPECIAL
CUSTODY ACCT FBO CUSTOMERS ATTN
MUTUAL FUNDS 101
MONTGOMERY ST SAN
FRANCISCO CA 94104-4151 |
5.89% |
Record |
FINANCIAL
INDUSTRIES FUND |
C |
AMERICAN
ENTERPRISE INVESTMENT SVC 707
2ND AVE S MINNEAPOLIS
MN 55402-2405 |
5.32% |
Record |
FINANCIAL
INDUSTRIES FUND |
I |
MLPF&
S FOR THE SOLE
BENEFIT OF ITS CUSTOMERS ATTN
FUND ADMINISTRATION 4800
DEERLAKE DRIVE EAST 2ND FL JACKSONVILLE
FL 32246-6484 |
29.92% |
Record |
FINANCIAL
INDUSTRIES FUND |
I |
NATIONAL
FINANCIAL SERVICES LLC FEBO
CUSTOMERS ATTN:
MUTUAL FUNDS DEPARTMENT 4TH
FLOOR 499
WASHINGTON BLVD JERSEY
CITY NJ 07310-1995 |
13.49% |
Record |
FINANCIAL
INDUSTRIES FUND |
I |
PERSHING
LLC 1
PERSHING PLZ JERSEY
CITY NJ 07399-0001 |
11.68% |
Record |
|
|
|
| |
Fund
Name |
Share
Class |
Name
and Address |
Percentage
Owned |
Type
of Ownership |
FINANCIAL
INDUSTRIES FUND |
I |
RAYMOND
JAMES OMNIBUS
FOR MUTUAL FUNDS HOUSE
ACCT FIRM 880
CARILLON PKWY ST
PETERSBURG FL 33716-1100 |
7.76% |
Record |
FINANCIAL
INDUSTRIES FUND |
I |
SPECIAL
CUSTODY ACCOUNT FOR THE EXCLUSIVE
BENEFIT OF CUSTOMERS OF UBS
FINANCIAL SERVICES INC 1000
HARBOR BLVD WEEHAWKEN
NJ 07086-6761 |
5.63% |
Record |
FINANCIAL
INDUSTRIES FUND |
NAV |
JHF
II MULTIMANAGER LIFESTYLE GROWTH PORTFOLIO 200
BERKELEY ST BOSTON
MA 02116-5022 |
33.97% |
Beneficial |
FINANCIAL
INDUSTRIES FUND |
NAV |
JHF
II MULTIMANAGER LIFESTYLE BALANCED PORTFOLIO 200
BERKELEY ST BOSTON
MA 02116-5022 |
24.85% |
Beneficial |
FINANCIAL
INDUSTRIES FUND |
NAV |
JHF
II MULTIMANAGER LIFESTYLE AGGRESSIVE PORTFOLIO 200
BERKELEY ST BOSTON
MA 02116-5022 |
14.76% |
Beneficial |
FINANCIAL
INDUSTRIES FUND |
R6 |
MANULIFE
ASSET MANAGEMENT (US) LLC 2021
MANULIFE INVESTMENT MANAGEMENT ABCD 197
CLARENDON ST BOSTON
MA 02116-5010 |
49.53% |
Record |
FINANCIAL
INDUSTRIES FUND |
R6 |
MANULIFE
INVESTMENT MANAGEMENT (US) LLC 2019-2020
MIM US DEF INCENTIVE PLAN 197
CLARENDON ST BOSTON
MA 02116-5010 |
25.70% |
Record |
FINANCIAL
INDUSTRIES FUND |
R6 |
MANULIFE
INVESTMENT MANAGEMENT (US) 2020
MANULIFE INVESTMENT MANAGEMENT
ABCD 197
CLARENDON ST BOSTON
MA 02116-5010 |
21.23% |
Record |
FUNDAMENTAL
LARGE CAP CORE FUND |
A |
EDWARD
D JONES & CO FOR
THE BENEFIT OF CUSTOMERS 12555
MANCHESTER ROAD SAINT
LOUIS MO 63131-3710 |
21.13% |
Record |
FUNDAMENTAL
LARGE CAP CORE FUND |
A |
NATIONAL
FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL
FUNDS 200
LIBERTY ST # 1WFC NEW
YORK NY 10281-1015 |
5.20% |
Record |
FUNDAMENTAL
LARGE CAP CORE FUND |
C |
WELLS
FARGO CLEARING SERVICES, LLC SPECIAL
CUSTODY ACCT FOR THE EXCLUSIVE
BENEFIT OF CUSTOMER 2801
MARKET ST SAINT
LOUIS MO 63103-2523 |
18.64% |
Record |
|
|
|
| |
Fund
Name |
Share
Class |
Name
and Address |
Percentage
Owned |
Type
of Ownership |
FUNDAMENTAL
LARGE CAP CORE FUND |
C |
MORGAN
STANLEY SMITH BARNEY LLC FOR
EXCLUSIVE BENEFIT OF CUSTOMERS 1 NEW
YORK PLAZA FL. 12 NEW
YORK NY 10004-1965 |
9.38% |
Record |
FUNDAMENTAL
LARGE CAP CORE FUND |
C |
MLPF&
S FOR THE SOLE
BENEFIT OF ITS CUSTOMERS ATTN:
FUND ADMINISTRATION 4800
DEERLAKE DRIVE EAST 2ND FL JACKSONVILLE
FL 32246-6484 |
8.11% |
Record |
FUNDAMENTAL
LARGE CAP CORE FUND |
C |
PERSHING
LLC 1
PERSHING PLZ JERSEY
CITY NJ 07399-0001 |
7.68% |
Record |
FUNDAMENTAL
LARGE CAP CORE FUND |
C |
RAYMOND
JAMES OMNIBUS
FOR MUTUAL FUNDS HOUSE
ACCT FIRM 880
CARILLON PKWY ST
PETERSBURG FL 33716-1100 |
7.51% |
Record |
FUNDAMENTAL
LARGE CAP CORE FUND |
C |
AMERICAN
ENTERPRISE INVESTMENT SVC 707
2ND AVE S MINNEAPOLIS
MN 55402-2405 |
7.01% |
Record |
FUNDAMENTAL
LARGE CAP CORE FUND |
C |
EDWARD
D JONES & CO FOR
THE BENEFIT OF CUSTOMERS 12555
MANCHESTER ROAD SAINT
LOUIS MO 63131-3710 |
6.12% |
Record |
FUNDAMENTAL
LARGE CAP CORE FUND |
C |
SPECIAL
CUSTODY ACCOUNT FOR THE EXCLUSIVE
BENEFIT OF CUSTOMERS OF UBS
FINANCIAL SERVICES INC 1000
HARBOR BLVD WEEHAWKEN
NJ 07086-6761 |
5.25% |
Record |
FUNDAMENTAL
LARGE CAP CORE FUND |
I |
MLPF&
S FOR THE SOLE
BENEFIT OF ITS CUSTOMERS ATTN:
FUND ADMINISTRATION 4800
DEER LAKE DRIVE EAST 2ND FL JACKSONVILLE
FL 32246-6484 |
15.58% |
Record |
FUNDAMENTAL
LARGE CAP CORE FUND |
I |
AMERICAN
ENTERPRISE INVESTMENT SVC 707
2ND AVE S MINNEAPOLIS
MN 55402-2405 |
12.59% |
Record |
FUNDAMENTAL
LARGE CAP CORE FUND |
I |
MORGAN
STANLEY SMITH BARNEY LLC FOR
EXCLUSIVE BENEFIT OF CUSTOMERS 1 NEW
YORK PLAZA FL. 12 NEW
YORK NY 10004-1965 |
12.10% |
Record |
FUNDAMENTAL
LARGE CAP CORE FUND |
I |
NATIONAL
FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL
FUNDS 200
LIBERTY ST # 1WFC NEW
YORK NY 10281-1015 |
11.33% |
Record |
FUNDAMENTAL
LARGE CAP CORE FUND |
I |
CHARLES
SCHWAB & CO INC MUTUAL
FUNDS DEPT 101
MONTGOMERY ST SAN
FRANCISCO CA 94104-4151 |
10.05% |
Record |
|
|
|
| |
Fund
Name |
Share
Class |
Name
and Address |
Percentage
Owned |
Type
of Ownership |
FUNDAMENTAL
LARGE CAP CORE FUND |
I |
SPECIAL
CUSTODY ACCOUNT FOR THE EXCLUSIVE
BENEFIT OF CUSTOMERS OF UBS
FINANCIAL SERVICES INC 1000
HARBOR BLVD WEEHAWKEN
NJ 07086-6761 |
8.29% |
Record |
FUNDAMENTAL
LARGE CAP CORE FUND |
I |
WELLS
FARGO CLEARING SERVICES, LLC SPECIAL
CUSTODY ACCT FOR THE EXCLUSIVE
BENEFIT OF CUSTOMER 2801
MARKET ST SAINT
LOUIS MO 63103-2523 |
7.17% |
Record |
FUNDAMENTAL
LARGE CAP CORE FUND |
I |
RAYMOND
JAMES OMNIBUS
FOR MUTUAL FUNDS HOUSE
ACCT FIRM 880
CARILLON PKWY ST
PETERSBURG FL 33716-1100 |
5.33% |
Record |
FUNDAMENTAL
LARGE CAP CORE FUND |
I |
PERSHING
LLC 1
PERSHING PLZ JERSEY
CITY NJ 07399-0001 |
5.03% |
Record |
FUNDAMENTAL
LARGE CAP CORE FUND |
NAV |
JHF
II MULTIMANAGER LIFESTYLE GROWTH PORTFOLIO 200
BERKELEY ST BOSTON
MA 02116-5022 |
22.52% |
Beneficial |
FUNDAMENTAL
LARGE CAP CORE FUND |
NAV |
JHVIT
MANAGED VOLATILITY GROWTH PORTFOLIO 200
BERKELEY ST BOSTON
MA 02116-5022 |
20.34% |
Beneficial |
FUNDAMENTAL
LARGE CAP CORE FUND |
NAV |
JHF
II MULTIMANAGER LIFESTYLE BALANCED PORTFOLIO 200
BERKELEY ST BOSTON
MA 02116-5022 |
13.19% |
Beneficial |
FUNDAMENTAL
LARGE CAP CORE FUND |
NAV |
JHF
II MULTIMANAGER LIFESTYLE AGGRESSIVE PORTFOLIO 200
BERKELEY ST BOSTON
MA 02116-5022 |
12.56% |
Beneficial |
FUNDAMENTAL
LARGE CAP CORE FUND |
NAV |
JHVIT
MANAGED VOLATILITY BALANCED PORTFOLIO 200
BERKELEY ST BOSTON
MA 02116-5022 |
11.81% |
Beneficial |
FUNDAMENTAL
LARGE CAP CORE FUND |
NAV |
JOHN
HANCOCK LIFE INSURANCE CO USA 200
BERKELEY ST BOSTON
MA 02116-5022 |
5.23% |
Beneficial |
FUNDAMENTAL
LARGE CAP CORE FUND |
R2 |
SAMMONS
FINANCIAL NETWORK LLC 8300
MILLS CIVIC PKWY WDM
IA 50266-3833 |
19.23% |
Record |
FUNDAMENTAL
LARGE CAP CORE FUND |
R2 |
MORGAN
STANLEY SMITH BARNEY LLC FOR
EXCLUSIVE BENEFIT OF CUSTOMERS 1 NEW
YORK PLAZA FL. 12 NEW
YORK NY 10004-1965 |
10.08% |
Record |
FUNDAMENTAL
LARGE CAP CORE FUND |
R2 |
SPECIAL
CUSTODY ACCOUNT FOR THE EXCLUSIVE
BENEFIT OF CUSTOMERS OF UBS
FINANCIAL SERVICES INC 1000
HARBOR BLVD WEEHAWKEN
NJ 07086-6761 |
8.90% |
Record |
|
|
|
| |
Fund
Name |
Share
Class |
Name
and Address |
Percentage
Owned |
Type
of Ownership |
FUNDAMENTAL
LARGE CAP CORE FUND |
R2 |
ASCENSUS
TRUST COMPANY FBO GRACE
CONSULTING SOLO 401K PO
BOX 10758 FARGO
ND 58106-0758 |
8.08% |
Beneficial |
FUNDAMENTAL
LARGE CAP CORE FUND |
R2 |
ASCENSUS
TRUST COMPANY FBO FRENCH
PUB INC 401K PLAN PO
BOX 10758 FARGO
ND 58106-0758 |
5.05% |
Beneficial |
FUNDAMENTAL
LARGE CAP CORE FUND |
R4 |
EMPOWER
TRUST FBO EMPLOYEE
BENEFITS CLIENTS 401K 8515
E ORCHARD RD 2T2 GREENWOOD
VILLAGE CO 80111-5002 |
83.36% |
Record |
FUNDAMENTAL
LARGE CAP CORE FUND |
R4 |
ASCENSUS
TRUST COMPANY FBO IMS
INC RETIREMENT SAVINGS PLAN PO
BOX 10758 FARGO
ND 58106-0758 |
7.13% |
Beneficial |
FUNDAMENTAL
LARGE CAP CORE FUND |
R5 |
MID
ATLANTIC TRUST COMPANY FBO FARMER,
FUQUA & HUFF, P C 401(K) P 1251
WATERFRONT PL STE 525 PITTSBURGH
PA 15222-4228 |
40.33% |
Beneficial |
FUNDAMENTAL
LARGE CAP CORE FUND |
R5 |
GREAT-WEST
TRUST CO EMPLOYEE
BENEFITS CLIENTS 401K 8515
E ORCHARD RD 2T2 GREENWOOD
VILLAGE CO 80111-5002 |
14.81% |
Record |
FUNDAMENTAL
LARGE CAP CORE FUND |
R5 |
ASCENSUS
TRUST COMPANY FBO BTS
RETIREMENT PLAN PO
BOX 10758 FARGO
ND 58106-0758 |
10.73% |
Beneficial |
FUNDAMENTAL
LARGE CAP CORE FUND |
R5 |
LISA
& MILTON ANDERSON TTEE FBO C/O
FASCORE MERRIAM
ANDERSON ARCHITECTS INC PSP 8515
E ORCHARD RD # 2T2 GREENWOOD
VLG CO 80111-5002 |
9.42% |
Beneficial |
FUNDAMENTAL
LARGE CAP CORE FUND |
R5 |
MID
ATLANTIC TRUST COMPANY FBO SCHUSTER
PHYSICAL THERAPY 401(K) PR 1251
WATERFRONT PL STE 525 PITTSBURGH
PA 15222-4228 |
9.42% |
Beneficial |
FUNDAMENTAL
LARGE CAP CORE FUND |
R5 |
MID
ATLANTIC TRUST COMPANY FBO BHAKTA
OPTOMETRIC INC 401(K) PROFIT 1251
WATERFRONT PL STE 525 PITTSBURGH
PA 15222-4228 |
8.85% |
Beneficial |
FUNDAMENTAL
LARGE CAP CORE FUND |
R6 |
EDWARD
D JONES & CO FOR
THE BENEFIT OF CUSTOMERS 12555
MANCHESTER ROAD SAINT
LOUIS MO 63131-3710 |
88.60% |
Record |
GLOBAL
ENVIRONMENTAL OPPORTUNITIES
FUND |
A |
JOHN
HANCOCK LIFE & HEALTH INS CO CUSTODIAN
FOR THE IRA OF JOHN
G WEINZIERL 7015
6TH ST SE BUFFALO
MN 55313-4642 |
25.57% |
Beneficial |
|
|
|
| |
Fund
Name |
Share
Class |
Name
and Address |
Percentage
Owned |
Type
of Ownership |
GLOBAL
ENVIRONMENTAL OPPORTUNITIES
FUND |
A |
JOHN
HANCOCK LIFE & HEALTH INS CO CUSTODIAN
FOR THE IRA OF IRIS
C ZUNIGA 15520
ROLLING MEADOWS CIR WELLINGTON
FL 33414-9086 |
19.72% |
Beneficial |
GLOBAL
ENVIRONMENTAL OPPORTUNITIES
FUND |
A |
MANULIFE
REINSURANCE (BERMUDA) LTD 200
BERKELEY ST BOSTON
MA 02116-5022 |
16.23% |
Beneficial |
GLOBAL
ENVIRONMENTAL OPPORTUNITIES
FUND |
A |
JOHN
HANCOCK LIFE & HEALTH INS CO CUSTODIAN
FOR THE IRA OF BENJAMIN
A BURCK 237
MAIN RD PHIPPSBURG
ME 04562-4137 |
10.57% |
Beneficial |
GLOBAL
ENVIRONMENTAL OPPORTUNITIES
FUND |
A |
JOHN
HANCOCK LIFE & HEALTH INS CO CUSTODIAN
FOR THE IRA OF JANET
L HARRINGTON 86
FOREST RD SALISBURY
MA 01952-1604 |
6.16% |
Beneficial |
GLOBAL
ENVIRONMENTAL OPPORTUNITIES
FUND |
A |
JOHN
HANCOCK LIFE & HEALTH INS CO CUSTODIAN
FOR THE IRA OF ERIC
WORTH 209
SLEEPY HOLLOW TRL FREDERICKSBRG
VA 22405-6133 |
5.06% |
Beneficial |
GLOBAL
ENVIRONMENTAL OPPORTUNITIES
FUND |
C |
MANULIFE
REINSURANCE (BERMUDA) LTD 200
BERKELEY ST BOSTON
MA 02116-5022 |
99.80% |
Beneficial |
GLOBAL
ENVIRONMENTAL OPPORTUNITIES
FUND |
I |
CETERA
INVESTMENT SVCS (FBO) DONNA
RIGGI 470
CROW LN BURNSVILLE
NC 28714-0687 |
58.22% |
Beneficial |
GLOBAL
ENVIRONMENTAL OPPORTUNITIES
FUND |
I |
MANULIFE
REINSURANCE (BERMUDA) LTD 200
BERKELEY ST BOSTON
MA 02116-5022 |
41.78% |
Beneficial |
GLOBAL
ENVIRONMENTAL OPPORTUNITIES
FUND |
R6 |
MANULIFE
REINSURANCE (BERMUDA) LTD 200
BERKELEY ST BOSTON
MA 02116-5022 |
60.12% |
Beneficial |
GLOBAL
ENVIRONMENTAL OPPORTUNITIES
FUND |
R6 |
BROWN
BROTHERS HARRIMAN AND COMPANY AS
CUSTODIAN 140
BROADWAY NEW
YORK NY 10005-1108 |
39.88% |
Record |
GLOBAL
THEMATIC OPPORTUNITIES FUND |
A |
RAYMOND
JAMES OMNIBUS
FOR MUTUAL FUNDS HOUSE
ACCT FIRM 880
CARILLON PKWY ST
PETERSBURG FL 33716-1100 |
14.38% |
Record |
GLOBAL
THEMATIC OPPORTUNITIES FUND |
A |
PERSHING
LLC 1
PERSHING PLZ JERSEY
CITY NJ 07399-0001 |
11.43% |
Record |
GLOBAL
THEMATIC OPPORTUNITIES FUND |
A |
JOHN
HANCOCK LIFE & HEALTH INS CO CUSTODIAN
FOR THE IRA OF JONATHAN
PINEO PO
BOX 2242 PISMO
BEACH CA 93448-2242 |
8.95% |
Beneficial |
|
|
|
| |
Fund
Name |
Share
Class |
Name
and Address |
Percentage
Owned |
Type
of Ownership |
GLOBAL
THEMATIC OPPORTUNITIES FUND |
A |
JOHN
HANCOCK LIFE & HEALTH INS CO CUSTODIAN
FOR THE IRA OF JEFFREY
JONES 131
HOUPE RIDGE LN STATESVILLE
NC 28625-1663 |
8.34% |
Beneficial |
GLOBAL
THEMATIC OPPORTUNITIES FUND |
A |
MORGAN
STANLEY SMITH BARNEY LLC FOR
EXCLUSIVE BENEFIT OF CUSTOMERS 1 NEW
YORK PLAZA FL. 12 NEW
YORK NY 10004-1965 |
6.16% |
Record |
GLOBAL
THEMATIC OPPORTUNITIES FUND |
A |
JOHN
HANCOCK LIFE & HEALTH INS CO CUSTODIAN
FOR THE IRA OF KEVIN
GAUGLER 155
MAURAN AVE E
PROVIDENCE RI 02914-5230 |
5.31% |
Beneficial |
GLOBAL
THEMATIC OPPORTUNITIES FUND |
C |
MORGAN
STANLEY SMITH BARNEY LLC FOR
EXCLUSIVE BENEFIT OF CUSTOMERS 1 NEW
YORK PLAZA FL. 12 NEW
YORK NY 10004-1965 |
67.88% |
Record |
GLOBAL
THEMATIC OPPORTUNITIES FUND |
C |
JOHN
HANCOCK LIFE & HEALTH INS CO CUSTODIAN
FOR THE IRA OF ROSEMARY
B FINAN 633
OLMSTEAD AVE APT 5G BRONX
NY 10473-1709 |
22.36% |
Beneficial |
GLOBAL
THEMATIC OPPORTUNITIES FUND |
C |
AMERICAN
ENTERPRISE INVESTMENT SVC 707
2ND AVE S MINNEAPOLIS
MN 55402-2405 |
8.85% |
Record |
GLOBAL
THEMATIC OPPORTUNITIES FUND |
I |
PERSHING
LLC 1
PERSHING PLZ JERSEY
CITY NJ 07399-0001 |
70.56% |
Record |
GLOBAL
THEMATIC OPPORTUNITIES FUND |
I |
MORGAN
STANLEY SMITH BARNEY LLC FOR
EXCLUSIVE BENEFIT OF CUSTOMERS 1 NEW
YORK PLAZA FL. 12 NEW
YORK NY 10004-1965 |
15.05% |
Record |
GLOBAL
THEMATIC OPPORTUNITIES FUND |
I |
CHARLES
SCHWAB & CO INC MUTUAL
FUNDS DEPT 101
MONTGOMERY ST SAN
FRANCISCO CA 94104-4151 |
11.59% |
Record |
GLOBAL
THEMATIC OPPORTUNITIES FUND |
NAV |
JHF
II MULTIMANAGER LIFESTYLE GROWTH PORTFOLIO 200
BERKELEY ST BOSTON
MA 02116-5022 |
51.68% |
Beneficial |
GLOBAL
THEMATIC OPPORTUNITIES FUND |
NAV |
JHF
II MULTIMANAGER LIFESTYLE BALANCED PORTFOLIO 200
BERKELEY ST BOSTON
MA 02116-5022 |
24.25% |
Beneficial |
GLOBAL
THEMATIC OPPORTUNITIES FUND |
NAV |
JHF
II MULTIMANAGER LIFESTYLE AGGRESSIVE PORTFOLIO 200
BERKELEY ST BOSTON
MA 02116-5022 |
24.07% |
Beneficial |
GLOBAL
THEMATIC OPPORTUNITIES FUND |
R6 |
JOHN
HANCOCK LIFE INSURANCE CO USA 200
BERKELEY ST BOSTON
MA 02116-5022 |
51.77% |
Beneficial |
|
|
|
| |
Fund
Name |
Share
Class |
Name
and Address |
Percentage
Owned |
Type
of Ownership |
GLOBAL
THEMATIC OPPORTUNITIES FUND |
R6 |
GLEN
J GIBBONS TOD SUBJECT
TO (STA) TOD RULES 17
SEVEN OAKS DR BARRINGTON
RI 02806-2356 |
48.23% |
Beneficial |
INFRASTRUCTURE
FUND |
A |
EDWARD
D JONES & CO FOR
THE BENEFIT OF CUSTOMERS 12555
MANCHESTER ROAD SAINT
LOUIS MO 63131-3710 |
47.92% |
Record |
INFRASTRUCTURE
FUND |
A |
NATIONAL
FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL
FUNDS 200
LIBERTY ST # 1WFC NEW
YORK NY 10281-1015 |
8.87% |
Record |
INFRASTRUCTURE
FUND |
A |
AMERICAN
ENTERPRISE INVESTMENT SVC 707
2ND AVE S MINNEAPOLIS
MN 55402-2405 |
8.43% |
Record |
INFRASTRUCTURE
FUND |
A |
CHARLES
SCHWAB & CO INC SPECIAL
CUSTODY ACCT FBO CUSTOMERS ATTN
MUTUAL FUNDS 101
MONTGOMERY ST SAN
FRANCISCO CA 94104-4151 |
7.82% |
Record |
INFRASTRUCTURE
FUND |
C |
NATIONAL
FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL
FUNDS 200
LIBERTY ST # 1WFC NEW
YORK NY 10281-1015 |
28.68% |
Record |
INFRASTRUCTURE
FUND |
C |
AMERICAN
ENTERPRISE INVESTMENT SVC 707
2ND AVE S MINNEAPOLIS
MN 55402-2405 |
21.69% |
Record |
INFRASTRUCTURE
FUND |
C |
LPL
FINANCIAL OMNIBUS
CUSTOMER ACCOUNT ATTN:
MUTUAL FUND TRADING 4707
EXECUTIVE DRIVE SAN
DIEGO CA 92121-3091 |
17.43% |
Record |
INFRASTRUCTURE
FUND |
C |
PERSHING
LLC 1
PERSHING PLZ JERSEY
CITY NJ 07399-0001 |
9.33% |
Record |
INFRASTRUCTURE
FUND |
C |
RAYMOND
JAMES OMNIBUS
FOR MUTUAL FUNDS HOUSE
ACCT FIRM 880
CARILLON PKWY ST
PETERSBURG FL 33716-1100 |
5.31% |
Record |
INFRASTRUCTURE
FUND |
C |
WELLS
FARGO CLEARING SERVICES, LLC SPECIAL
CUSTODY ACCT FOR THE EXCLUSIVE
BENEFIT OF CUSTOMER 2801
MARKET ST SAINT
LOUIS MO 63103-2523 |
5.14% |
Record |
INFRASTRUCTURE
FUND |
I |
NATIONAL
FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL
FUNDS 200
LIBERTY ST # 1WFC NEW
YORK NY 10281-1015 |
21.64% |
Record |
|
|
|
| |
Fund
Name |
Share
Class |
Name
and Address |
Percentage
Owned |
Type
of Ownership |
INFRASTRUCTURE
FUND |
I |
CHARLES
SCHWAB & CO INC MUTUAL
FUNDS DEPT 101
MONTGOMERY ST SAN
FRANCISCO CA 94104-4151 |
15.49% |
Record |
INFRASTRUCTURE
FUND |
I |
ATTN
MUTUAL FUND ADMIN C/O
LAIRD NORTON SEI
PRIVATE TRUST COMPANY 1
FREEDOM VALLEY DR OAKS
PA 19456-9989 |
15.44% |
Beneficial |
INFRASTRUCTURE
FUND |
I |
AMERICAN
ENTERPRISE INVESTMENT SVC 707
2ND AVE S MINNEAPOLIS
MN 55402-2405 |
10.43% |
Record |
INFRASTRUCTURE
FUND |
I |
LPL
FINANCIAL OMNIBUS
CUSTOMER ACCOUNT ATTN:
MUTUAL FUND TRADING 4707
EXECUTIVE DRIVE SAN
DIEGO CA 92121-3091 |
10.28% |
Record |
INFRASTRUCTURE
FUND |
I |
SPECIAL
CUSTODY ACCOUNT FOR THE EXCLUSIVE
BENEFIT OF CUSTOMERS OF UBS
FINANCIAL SERVICES INC 1000
HARBOR BLVD WEEHAWKEN
NJ 07086-6761 |
8.01% |
Record |
INFRASTRUCTURE
FUND |
I |
PERSHING
LLC 1
PERSHING PLZ JERSEY
CITY NJ 07399-0001 |
6.65% |
Record |
INFRASTRUCTURE
FUND |
NAV |
JHF
II ALTERNATIVE ASSET ALLOCATION 200
BERKELEY ST BOSTON
MA 02116-5022 |
43.36% |
Beneficial |
INFRASTRUCTURE
FUND |
NAV |
JHF
II MULTIMANAGER LIFESTYLE CONSERVATIVE PORTFOLIO 200
BERKELEY ST BOSTON
MA 02116-5022 |
41.63% |
Beneficial |
INFRASTRUCTURE
FUND |
NAV |
JHF
II MULTIMANAGER LIFESTYLE MODERATEPORTFOLIO 200
BERKELEY ST BOSTON
MA 02116-5022 |
15.00% |
Beneficial |
INFRASTRUCTURE
FUND |
R6 |
EDWARD
D JONES & CO FOR
THE BENEFIT OF CUSTOMERS 12555
MANCHESTER ROAD SAINT
LOUIS MO 63131-3710 |
79.93% |
Record |
INFRASTRUCTURE
FUND |
R6 |
NORTHERN
TRUST AS CUSTODIAN FBO VAI INTERNAL
US EQUITIES PO
BOX 92956 CHICAGO
IL 60675-2956 |
16.72% |
Beneficial |
INTERNATIONAL
DYNAMIC GROWTH FUND |
C |
AMERICAN
ENTERPRISE INVESTMENT SVC 707
2ND AVE S MINNEAPOLIS
MN 55402-2405 |
30.54% |
Record |
INTERNATIONAL
DYNAMIC GROWTH FUND |
C |
NATIONAL
FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL
FUNDS 200
LIBERTY ST # 1WFC NEW
YORK NY 10281-1015 |
27.60% |
Record |
|
|
|
| |
Fund
Name |
Share
Class |
Name
and Address |
Percentage
Owned |
Type
of Ownership |
INTERNATIONAL
DYNAMIC GROWTH FUND |
C |
PERSHING
LLC 1
PERSHING PLZ JERSEY
CITY NJ 07399-0001 |
12.45% |
Record |
INTERNATIONAL
DYNAMIC GROWTH FUND |
C |
JOHN
HANCOCK LIFE & HEALTH INS CO HORN
& HORN PA SIMPLE IRA FBO
DEBRA A HORN 3552
DOVECOTE MEADOW LN DAVIE
FL 33328-7303 |
9.99% |
Beneficial |
INTERNATIONAL
DYNAMIC GROWTH FUND |
C |
JOHN
HANCOCK LIFE & HEALTH INS CO HORN
& HORN PA SIMPLE IRA FBO
MERRICK L HORN 3552
DOVECOTE MEADOW LN DAVIE
FL 33328-7303 |
5.68% |
Beneficial |
INTERNATIONAL
DYNAMIC GROWTH FUND |
C |
TD
AMERITRADE INC FEBO OUR
CUSTOMERS PO
BOX 2226 OMAHA
NE 68103-2226 |
5.42% |
Record |
INTERNATIONAL
DYNAMIC GROWTH FUND |
I |
ATTN
MUTUAL FUND OPS MAC
& CO 500
GRANT ST RM 151-1010 PITTSBURGH
PA 15219-2502 |
50.07% |
Beneficial |
INTERNATIONAL
DYNAMIC GROWTH FUND |
I |
AMERICAN
ENTERPRISE INVESTMENT SVC 707
2ND AVE S MINNEAPOLIS
MN 55402-2405 |
11.06% |
Record |
INTERNATIONAL
DYNAMIC GROWTH FUND |
I |
NATIONAL
FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL
FUNDS 200
LIBERTY ST # 1WFC NEW
YORK NY 10281-1015 |
11.05% |
Record |
INTERNATIONAL
DYNAMIC GROWTH FUND |
I |
ATTN
MUTUAL FUND OPERATIONS MAC&CO 500
GRANT ST RM 151-1010 PITTSBURGH
PA 15219-2502 |
8.98% |
Beneficial |
INTERNATIONAL
DYNAMIC GROWTH FUND |
I |
PERSHING
LLC 1
PERSHING PLZ JERSEY
CITY NJ 07399-0001 |
6.16% |
Record |
INTERNATIONAL
DYNAMIC GROWTH FUND |
I |
CHARLES
SCHWAB & CO INC SPECIAL
CUSTODY ACCT FBO CUSTOMERS ATTN
MUTUAL FUNDS 101
MONTGOMERY ST SAN
FRANCISCO CA 94104-4151 |
5.43% |
Record |
INTERNATIONAL
DYNAMIC GROWTH FUND |
NAV |
JHF
II MULTIMANAGER LIFESTYLE GROWTH PORTFOLIO 200
BERKELEY ST BOSTON
MA 02116-5022 |
34.15% |
Beneficial |
INTERNATIONAL
DYNAMIC GROWTH FUND |
NAV |
JHF
II MULTIMANAGER LIFESTYLE BALANCED PORTFOLIO 200
BERKELEY ST BOSTON
MA 02116-5022 |
25.02% |
Beneficial |
INTERNATIONAL
DYNAMIC GROWTH FUND |
NAV |
JHF
II MULTIMANAGER LIFESTYLE AGGRESSIVE PORTFOLIO 200
BERKELEY ST BOSTON
MA 02116-5022 |
15.22% |
Beneficial |
|
|
|
| |
Fund
Name |
Share
Class |
Name
and Address |
Percentage
Owned |
Type
of Ownership |
INTERNATIONAL
DYNAMIC GROWTH FUND |
R6 |
NORTHERN
TRUST CO CUST FBO UNIDEL PO
BOX 92956 CHICAGO
IL 60675-2956 |
99.89% |
Beneficial |
REGIONAL
BANK FUND |
A |
NATIONAL
FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL
FUNDS 200
LIBERTY ST # 1WFC NEW
YORK NY 10281-1015 |
11.03% |
Record |
REGIONAL
BANK FUND |
A |
MLPF&
S FOR THE SOLE
BENEFIT OF ITS CUSTOMERS ATTN:
FUND ADMINISTRATION 4800
DEER LAKE DRIVE EAST 2ND FL JACKSONVILLE
FL 32246-6484 |
7.65% |
Record |
REGIONAL
BANK FUND |
A |
WELLS
FARGO CLEARING SERVICES, LLC SPECIAL
CUSTODY ACCT FOR THE EXCLUSIVE
BENEFIT OF CUSTOMER 2801
MARKET ST SAINT
LOUIS MO 63103-2523 |
6.76% |
Record |
REGIONAL
BANK FUND |
A |
MORGAN
STANLEY SMITH BARNEY LLC FOR
EXCLUSIVE BENEFIT OF CUSTOMERS 1 NEW
YORK PLAZA FL. 12 NEW
YORK NY 10004-1965 |
6.72% |
Record |
REGIONAL
BANK FUND |
A |
EDWARD
D JONES & CO FOR
THE BENEFIT OF CUSTOMERS 12555
MANCHESTER ROAD SAINT
LOUIS MO 63131-3710 |
6.13% |
Record |
REGIONAL
BANK FUND |
C |
WELLS
FARGO CLEARING SERVICES, LLC SPECIAL
CUSTODY ACCT FOR THE EXCLUSIVE
BENEFIT OF CUSTOMER 2801
MARKET ST SAINT
LOUIS MO 63103-2523 |
19.70% |
Record |
REGIONAL
BANK FUND |
C |
RAYMOND
JAMES OMNIBUS
FOR MUTUAL FUNDS HOUSE
ACCT FIRM 880
CARILLON PKWY ST
PETERSBURG FL 33716-1100 |
17.84% |
Record |
REGIONAL
BANK FUND |
C |
PERSHING
LLC 1
PERSHING PLZ JERSEY
CITY NJ 07399-0001 |
10.89% |
Record |
REGIONAL
BANK FUND |
C |
MORGAN
STANLEY SMITH BARNEY LLC FOR
EXCLUSIVE BENEFIT OF CUSTOMERS 1 NEW
YORK PLAZA FL. 12 NEW
YORK NY 10004-1965 |
10.50% |
Record |
REGIONAL
BANK FUND |
C |
NATIONAL
FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL
FUNDS 200
LIBERTY ST # 1WFC NEW
YORK NY 10281-1015 |
7.10% |
Record |
REGIONAL
BANK FUND |
C |
AMERICAN
ENTERPRISE INVESTMENT SVC 707
2ND AVE S MINNEAPOLIS
MN 55402-2405 |
6.62% |
Record |
|
|
|
| |
Fund
Name |
Share
Class |
Name
and Address |
Percentage
Owned |
Type
of Ownership |
REGIONAL
BANK FUND |
C |
LPL
FINANCIAL OMNIBUS
CUSTOMER ACCOUNT ATTN:
MUTUAL FUND TRADING 4707
EXECUTIVE DRIVE SAN
DIEGO CA 92121-3091 |
6.62% |
Record |
REGIONAL
BANK FUND |
I |
MLPF&
S FOR THE SOLE
BENEFIT OF ITS CUSTOMERS ATTN
FUND ADMINISTRATION 4800
DEERLAKE DRIVE EAST 2ND FL JACKSONVILLE
FL 32246-6484 |
16.84% |
Record |
REGIONAL
BANK FUND |
I |
NATIONAL
FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL
FUNDS 200
LIBERTY ST # 1WFC NEW
YORK NY 10281-1015 |
13.05% |
Record |
REGIONAL
BANK FUND |
I |
RAYMOND
JAMES OMNIBUS
FOR MUTUAL FUNDS HOUSE
ACCT FIRM 880
CARILLON PKWY ST
PETERSBURG FL 33716-1100 |
10.46% |
Record |
REGIONAL
BANK FUND |
I |
WELLS
FARGO CLEARING SERVICES, LLC SPECIAL
CUSTODY ACCT FOR THE EXCLUSIVE
BENEFIT OF CUSTOMER 2801
MARKET ST SAINT
LOUIS MO 63103-2523 |
8.82% |
Record |
REGIONAL
BANK FUND |
I |
LPL
FINANCIAL OMNIBUS
CUSTOMER ACCOUNT ATTN:
MUTUAL FUND TRADING 4707
EXECUTIVE DRIVE SAN
DIEGO CA 92121-3091 |
8.58% |
Record |
REGIONAL
BANK FUND |
I |
AMERICAN
ENTERPRISE INVESTMENT SVC 707
2ND AVE S MINNEAPOLIS
MN 55402-2405 |
7.48% |
Record |
REGIONAL
BANK FUND |
I |
CHARLES
SCHWAB & CO INC MUTUAL
FUNDS DEPT 101
MONTGOMERY ST SAN
FRANCISCO CA 94104-4151 |
7.31% |
Record |
REGIONAL
BANK FUND |
I |
MORGAN
STANLEY SMITH BARNEY LLC FOR
EXCLUSIVE BENEFIT OF CUSTOMERS 1 NEW
YORK PLAZA FL. 12 NEW
YORK NY 10004-1965 |
6.61% |
Record |
REGIONAL
BANK FUND |
I |
PERSHING
LLC 1
PERSHING PLZ JERSEY
CITY NJ 07399-0001 |
6.13% |
Record |
REGIONAL
BANK FUND |
I |
SPECIAL
CUSTODY ACCOUNT FOR THE EXCLUSIVE
BENEFIT OF CUSTOMERS OF UBS
FINANCIAL SERVICES INC 1000
HARBOR BLVD WEEHAWKEN
NJ 07086-6761 |
5.09% |
Record |
|
|
|
| |
Fund
Name |
Share
Class |
Name
and Address |
Percentage
Owned |
Type
of Ownership |
REGIONAL
BANK FUND |
R6 |
DCGT
AS TTEE AND/OR CUST FBO
PLIC VARIOUS RETIREMENT PLANS ATTN
NPIO TRADE DESK OMNIBUS 711
HIGH ST DES
MOINES IA 50392-0001 |
34.23% |
Beneficial |
REGIONAL
BANK FUND |
R6 |
EDWARD
D JONES & CO FOR
THE BENEFIT OF CUSTOMERS 12555
MANCHESTER ROAD SAINT
LOUIS MO 63131-3710 |
19.07% |
Record |
REGIONAL
BANK FUND |
R6 |
MANULIFE
ASSET MANAGEMENT (US) LLC 2021
MANULIFE INVESTMENT MANAGEMENT ABCD 197
CLARENDON ST BOSTON
MA 02116-5010 |
11.38% |
Record |
REGIONAL
BANK FUND |
R6 |
MANULIFE
INVESTMENT MANAGEMENT (US) LLC 2019-2020
MIM US DEF INCENTIVE PLAN 197
CLARENDON ST BOSTON
MA 02116-5010 |
10.70% |
Record |
REGIONAL
BANK FUND |
R6 |
EMPOWER
TRUST FBO FBO
CERTAIN RETIREMENT PLANS 8515
E ORCHARD ROAD 2T2 GREENWOOD
VLG CO 80111-5002 |
6.78% |
Record |
REGIONAL
BANK FUND |
R6 |
MANULIFE
INVESTMENT MANAGEMENT (US) 2020
MANULIFE INVESTMENT MANAGEMENT
ABCD 197
CLARENDON ST BOSTON
MA 02116-5010 |
5.89% |
Record |
SEAPORT
LONG/SHORT FUND |
A |
MORGAN
STANLEY SMITH BARNEY LLC FOR
EXCLUSIVE BENEFIT OF CUSTOMERS 1 NEW
YORK PLAZA FL. 12 NEW
YORK NY 10004-1965 |
59.33% |
Record |
SEAPORT
LONG/SHORT FUND |
A |
CHARLES
SCHWAB & CO INC SPECIAL
CUSTODY ACCT FBO CUSTOMERS ATTN
MUTUAL FUNDS 101
MONTGOMERY ST SAN
FRANCISCO CA 94104-4151 |
6.28% |
Record |
SEAPORT
LONG/SHORT FUND |
A |
MLPF&
S FOR THE SOLE
BENEFIT OF ITS CUSTOMERS ATTN:
FUND ADMINISTRATION 4800
DEERLAKE DRIVE EAST 2ND FL JACKSONVILLE
FL 32246-6484 |
6.17% |
Record |
SEAPORT
LONG/SHORT FUND |
A |
PERSHING
LLC 1
PERSHING PLZ JERSEY
CITY NJ 07399-0001 |
5.02% |
Record |
SEAPORT
LONG/SHORT FUND |
C |
MORGAN
STANLEY SMITH BARNEY LLC FOR
EXCLUSIVE BENEFIT OF CUSTOMERS 1 NEW
YORK PLAZA FL. 12 NEW
YORK NY 10004-1965 |
45.26% |
Record |
|
|
|
| |
Fund
Name |
Share
Class |
Name
and Address |
Percentage
Owned |
Type
of Ownership |
SEAPORT
LONG/SHORT FUND |
C |
MLPF&
S FOR THE SOLE
BENEFIT OF ITS CUSTOMERS ATTN:
FUND ADMINISTRATION 4800
DEERLAKE DRIVE EAST 2ND FL JACKSONVILLE
FL 32246-6484 |
21.88% |
Record |
SEAPORT
LONG/SHORT FUND |
C |
NATIONAL
FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL
FUNDS 200
LIBERTY ST # 1WFC NEW
YORK NY 10281-1015 |
12.00% |
Record |
SEAPORT
LONG/SHORT FUND |
C |
WELLS
FARGO CLEARING SERVICES, LLC SPECIAL
CUSTODY ACCT FOR THE EXCLUSIVE
BENEFIT OF CUSTOMER 2801
MARKET ST SAINT
LOUIS MO 63103-2523 |
8.90% |
Record |
SEAPORT
LONG/SHORT FUND |
I |
MLPF&
S FOR THE SOLE
BENEFIT OF ITS CUSTOMERS ATTN:
FUND ADMINISTRATION 4800
DEER LAKE DR E FL 2 JACKSONVILLE
FL 32246-6484 |
37.98% |
Record |
SEAPORT
LONG/SHORT FUND |
I |
MORGAN
STANLEY SMITH BARNEY LLC FOR
EXCLUSIVE BENEFIT OF CUSTOMERS 1 NEW
YORK PLAZA FL. 12 NEW
YORK NY 10004-1965 |
27.00% |
Record |
SEAPORT
LONG/SHORT FUND |
I |
NATIONAL
FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL
FUNDS 200
LIBERTY ST # 1WFC NEW
YORK NY 10281-1015 |
11.50% |
Record |
SEAPORT
LONG/SHORT FUND |
I |
CHARLES
SCHWAB & CO INC MUTUAL
FUNDS DEPT 101
MONTGOMERY ST SAN
FRANCISCO CA 94104-4151 |
9.88% |
Record |
SEAPORT
LONG/SHORT FUND |
NAV |
JHF
II ALTERNATIVE ASSET ALLOCATION 200
BERKELEY ST BOSTON
MA 02116-5022 |
100.00% |
Beneficial |
SEAPORT
LONG/SHORT FUND |
R6 |
NORTHERN
TRUST AS CUSTODIAN FBO
UNITED STATES OLYMPIC ENDOWMENT PO
BOX 92956 CHICAGO
IL 60675-2956 |
36.47% |
Beneficial |
SEAPORT
LONG/SHORT FUND |
R6 |
CAPINCO
C/O US BANK NA 1555
N RIVERCENTER DR STE 302 MILWAUKEE
WI 53212-3958 |
35.92% |
Beneficial |
SEAPORT
LONG/SHORT FUND |
R6 |
SEI
PRIVATE TRUST COMPANY C/O
MELLON BANK ATTN
MUTUAL FUNDS ADMIN 1
FREEDOM VALLEY DR OAKS
PA 19456-9989 |
7.03% |
Beneficial |
SEAPORT
LONG/SHORT FUND |
R6 |
STRATEVEST
CO OMNIBUS ACCOUNT PO
BOX 1034 CHERRY
HILL NJ 08034-0009 |
5.56% |
Record |
|
|
|
| |
Fund
Name |
Share
Class |
Name
and Address |
Percentage
Owned |
Type
of Ownership |
SEAPORT
LONG/SHORT FUND |
R6 |
C/O M
& T BANK SEI
PRIVATE TRUST COMPANY 1
FREEDOM VALLEY DR OAKS
PA 19456-9989 |
5.27% |
Beneficial |
SEAPORT
LONG/SHORT FUND |
R6 |
BAND
& CO C/O US
BANK NA PO
BOX 1787 MILWAUKEE
WI 53201-1787 |
5.22% |
Beneficial |
SMALL
CAP CORE FUND |
A |
EDWARD
D JONES & CO FOR
THE BENEFIT OF CUSTOMERS 12555
MANCHESTER ROAD SAINT
LOUIS MO 63131-3710 |
60.41% |
Record |
SMALL
CAP CORE FUND |
A |
CHARLES
SCHWAB & CO INC SPECIAL
CUSTODY ACCOUNT FOR BENE
OF CUST ATTN
MUTUAL FUNDS 101
MONTGOMERY ST SAN
FRANCISCO CA 94104-4151 |
5.39% |
Record |
SMALL
CAP CORE FUND |
A |
NATIONAL
FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL
FUNDS 200
LIBERTY ST # 1WFC NEW
YORK NY 10281-1015 |
5.02% |
Record |
SMALL
CAP CORE FUND |
I |
AMERICAN
ENTERPRISE INVESTMENT SVC 707
2ND AVE S MINNEAPOLIS
MN 55402-2405 |
20.52% |
Record |
SMALL
CAP CORE FUND |
I |
LPL
FINANCIAL OMNIBUS
CUSTOMER ACCOUNT ATTN:
MUTUAL FUND TRADING 4707
EXECUTIVE DRIVE SAN
DIEGO CA 92121-3091 |
19.76% |
Record |
SMALL
CAP CORE FUND |
I |
NATIONAL
FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL
FUNDS 200
LIBERTY ST # 1WFC NEW
YORK NY 10281-1015 |
19.36% |
Record |
SMALL
CAP CORE FUND |
I |
CHARLES
SCHWAB & CO INC SPECIAL
CUSTODY ACCOUNT FOR BENE
OF CUST ATTN
MUTUAL FUNDS 101
MONTGOMERY ST SAN
FRANCISCO CA 94104-4151 |
12.25% |
Record |
SMALL
CAP CORE FUND |
I |
RAYMOND
JAMES OMNIBUS
FOR MUTUAL FUNDS HOUSE
ACCT FIRM 880
CARILLON PKWY ST
PETERSBURG FL 33716-1100 |
8.32% |
Record |
SMALL
CAP CORE FUND |
I |
PERSHING
LLC 1
PERSHING PLZ JERSEY
CITY NJ 07399-0001 |
7.54% |
Record |
|
|
|
| |
Fund
Name |
Share
Class |
Name
and Address |
Percentage
Owned |
Type
of Ownership |
SMALL
CAP CORE FUND |
NAV |
JHF
II MULTIMANAGER LIFESTYLE GROWTH PORTFOLIO 200
BERKELEY ST BOSTON
MA 02116-5022 |
47.16% |
Beneficial |
SMALL
CAP CORE FUND |
NAV |
JHF
II MULTIMANAGER LIFESTYLE BALANCED PORTFOLIO 200
BERKELEY ST BOSTON
MA 02116-5022 |
30.50% |
Beneficial |
SMALL
CAP CORE FUND |
NAV |
JHF
II MULTIMANAGER LIFESTYLE AGGRESSIVE PORTFOLIO 200
BERKELEY ST BOSTON
MA 02116-5022 |
20.15% |
Beneficial |
SMALL
CAP CORE FUND |
R6 |
EDWARD
D JONES & CO FOR
THE BENEFIT OF CUSTOMERS 12555
MANCHESTER ROAD SAINT
LOUIS MO 63131-3710 |
85.53% |
Record |
U.S.
GLOBAL LEADERS GROWTH FUND |
A |
EDWARD
D JONES & CO FOR
THE BENEFIT OF CUSTOMERS 12555
MANCHESTER ROAD SAINT
LOUIS MO 63131-3710 |
39.18% |
Record |
U.S.
GLOBAL LEADERS GROWTH FUND |
A |
NATIONAL
FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL
FUNDS 200
LIBERTY ST # 1WFC NEW
YORK NY 10281-1015 |
8.22% |
Record |
U.S.
GLOBAL LEADERS GROWTH FUND |
C |
PERSHING
LLC 1
PERSHING PLZ JERSEY
CITY NJ 07399-0001 |
13.76% |
Record |
U.S.
GLOBAL LEADERS GROWTH FUND |
C |
NATIONAL
FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL
FUNDS 200
LIBERTY ST # 1WFC NEW
YORK NY 10281-1015 |
12.67% |
Record |
U.S.
GLOBAL LEADERS GROWTH FUND |
C |
AMERICAN
ENTERPRISE INVESTMENT SVC 707
2ND AVE S MINNEAPOLIS
MN 55402-2405 |
12.13% |
Record |
U.S.
GLOBAL LEADERS GROWTH FUND |
C |
EDWARD
D JONES & CO FOR
THE BENEFIT OF CUSTOMERS 12555
MANCHESTER ROAD SAINT
LOUIS MO 63131-3710 |
8.41% |
Record |
U.S.
GLOBAL LEADERS GROWTH FUND |
C |
RAYMOND
JAMES OMNIBUS
FOR MUTUAL FUNDS HOUSE
ACCT FIRM 880
CARILLON PKWY ST
PETERSBURG FL 33716-1100 |
6.82% |
Record |
U.S.
GLOBAL LEADERS GROWTH FUND |
C |
WELLS
FARGO CLEARING SERVICES, LLC SPECIAL
CUSTODY ACCT FOR THE EXCLUSIVE
BENEFIT OF CUSTOMER 2801
MARKET ST SAINT
LOUIS MO 63103-2523 |
6.68% |
Record |
|
|
|
| |
Fund
Name |
Share
Class |
Name
and Address |
Percentage
Owned |
Type
of Ownership |
U.S.
GLOBAL LEADERS GROWTH FUND |
C |
LPL
FINANCIAL OMNIBUS
CUSTOMER ACCOUNT ATTN:
MUTUAL FUND TRADING 4707
EXECUTIVE DRIVE SAN
DIEGO CA 92121-3091 |
6.62% |
Record |
U.S.
GLOBAL LEADERS GROWTH FUND |
C |
MORGAN
STANLEY SMITH BARNEY LLC FOR
EXCLUSIVE BENEFIT OF CUSTOMERS 1 NEW
YORK PLAZA FL. 12 NEW
YORK NY 10004-1965 |
6.52% |
Record |
U.S.
GLOBAL LEADERS GROWTH FUND |
I |
AMERICAN
ENTERPRISE INVESTMENT SVC 707
2ND AVE S MINNEAPOLIS
MN 55402-2405 |
70.82% |
Record |
U.S.
GLOBAL LEADERS GROWTH FUND |
I |
NATIONAL
FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL
FUNDS 200
LIBERTY ST # 1WFC NEW
YORK NY 10281-1015 |
9.11% |
Record |
U.S.
GLOBAL LEADERS GROWTH FUND |
R2 |
MLPF&
S FOR THE SOLE
BENEFIT OF ITS CUSTOMERS ATTN:
FUND ADMINISTRATION 4800
DEER LAKE DRIVE EAST 2ND FL JACKSONVILLE
FL 32246-6484 |
16.46% |
Record |
U.S.
GLOBAL LEADERS GROWTH FUND |
R2 |
SPECIAL
CUSTODY ACCOUNT FOR THE EXCLUSIVE
BENEFIT OF CUSTOMERS OF UBS
FINANCIAL SERVICES INC 1000
HARBOR BLVD WEEHAWKEN
NJ 07086-6761 |
15.50% |
Record |
U.S.
GLOBAL LEADERS GROWTH FUND |
R2 |
ASCENSUS
TRUST COMPANY FBO INLAND
PAPER COMPANY 401 K PLAN 7 PO
BOX 10758 FARGO
ND 58106-0758 |
13.84% |
Beneficial |
U.S.
GLOBAL LEADERS GROWTH FUND |
R2 |
ASCENSUS
TRUSTCO FBO HAW
KEY LLC CO RETPLAN PO
BOX 10758 FARGO
ND 58106-0758 |
5.03% |
Beneficial |
U.S.
GLOBAL LEADERS GROWTH FUND |
R6 |
EDWARD
D JONES & CO FOR
THE BENEFIT OF CUSTOMERS 12555
MANCHESTER ROAD SAINT
LOUIS MO 63131-3710 |
83.96% |
Record |
U.S.
GLOBAL LEADERS GROWTH FUND |
R6 |
CHARLES
SCHWAB & CO INC MUTUAL
FUNDS DEPT 101
MONTGOMERY ST SAN
FRANCISCO CA 94104-4151 |
10.77% |
Record |
INVESTMENT
MANAGEMENT ARRANGEMENTS AND OTHER SERVICES
Advisory
Agreement
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 or Accounting and Legal Services
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 Trusts 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.
Each 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 each Advisory Agreement, the
Advisor receives a fee from the relevant Trust computed
separately for each relevant fund. The amount of the advisory fee is determined
by applying the daily equivalent of an annual fee rate to the net assets
of the fund. Each fund
other than U.S. Global
Leaders Growth Fund pays the advisory fee daily. U.S. Global
Leaders Growth Fund pays the advisory
fee monthly in arrears. The
management fees a fund currently is obligated to pay the Advisor are as set
forth in its Prospectus.
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, the 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 October 31, 2022, October
31,
2021, and
October 31, 2020.
|
|
| |
|
Advisory
Fee Paid in Fiscal Year Ended |
Fund |
2022 ($) |
2021 ($) |
2020 ($) |
Balanced
Fund |
|
|
|
Gross
Fees |
24,532,304 |
22,036,075 |
14,762,658 |
Waivers |
(350,248) |
(336,113) |
(177,307) |
Net
Fees |
24,182,056 |
21,699,962 |
14,585,351 |
Classic
Value Fund |
|
|
|
Gross
Fees |
18,821,239 |
17,634,411 |
13,412,683 |
Waivers |
(220,284) |
(212,222) |
(127,607) |
Net
Fees |
18,600,955 |
17,422,189 |
13,285,076 |
Disciplined
Value International Fund |
|
|
|
Gross
Fees |
15,852,603 |
16,744,077 |
12,574,516 |
Waivers |
(167,763) |
(189,537) |
(114,074) |
Net
Fees |
15,684,840 |
16,554,540 |
12,460,442 |
Diversified
Macro Fund |
|
|
|
Gross
Fees |
7,259,874 |
4,480,753 |
2,760,017 |
Waivers |
(48,444) |
(33,042) |
(301,252) |
Net
Fees |
7,211,430 |
4,447,711 |
2,458,765 |
Emerging
Markets Equity Fund |
|
|
|
Gross
Fees |
18,667,933 |
19,129,441 |
17,605,967 |
Waivers |
(3,193,045) |
(3,225,474) |
(344,375) |
Net
Fees |
15,474,888 |
15,903,967 |
17,261,592 |
ESG
International Equity Fund |
|
|
|
Gross
Fees |
1,070,957 |
776,929 |
492,617 |
Waivers |
(264,088) |
(206,344) |
(178,490) |
Net
Fees |
806,869 |
570,585 |
314,127 |
ESG
Large Cap Core Fund |
|
|
|
Gross
Fees |
1,304,520 |
1,020,309 |
481,491 |
Waivers |
(253,931) |
(202,848) |
(178,551) |
Net
Fees |
1,050,589 |
817,461 |
302,940 |
Financial
Industries Fund |
|
|
|
Gross
Fees |
5,255,421 |
5,595,419 |
4,854,155 |
Waivers |
(56,855) |
(63,631) |
(44,766) |
Net
Fees |
5,198,566 |
5,531,788 |
4,809,389 |
Fundamental
Large Cap Core Fund |
|
|
|
Gross
Fees |
33,576,173 |
35,836,578 |
30,111,321 |
Waivers |
(450,583) |
(512,932) |
(354,302) |
Net
Fees |
33,125,590 |
35,323,646 |
29,757,019 |
Global
Environmental Opportunities Fund |
|
|
|
Gross
Fees |
114,065 |
23,7771
|
N/A |
Waivers |
(114,065) |
(23,777)1
|
N/A |
Net
Fees |
0 |
01
|
N/A |
Global
Thematic Opportunities Fund |
|
|
|
Gross
Fees |
2,692,806 |
3,197,693 |
2,846,425 |
Waivers |
(180,333) |
(310,971) |
(396,512) |
Net
Fees |
2,512,473 |
2,886,722 |
2,449,913 |
|
|
| |
|
Advisory
Fee Paid in Fiscal Year Ended |
Fund |
2022 ($) |
2021 ($) |
2020 ($) |
Infrastructure
Fund |
|
|
|
Gross
Fees |
5,700,725 |
4,300,517 |
3,284,586 |
Waivers |
(60,570) |
(49,241) |
(64,299) |
Net
Fees |
5,640,155 |
4,251,276 |
3,220,287 |
International
Dynamic Growth Fund |
|
|
|
Gross
Fees |
2,605,992 |
2,400,957 |
2,344,015 |
Waivers |
(289,115) |
(276,656) |
(350,799) |
Net
Fees |
2,316,877 |
2,124,301 |
1,993,216 |
Regional
Bank Fund |
|
|
|
Gross
Fees |
9,685,980 |
9,104,606 |
8,379,028 |
Waivers |
(104,444) |
(104,089) |
(78,398) |
Net
Fees |
9,581,536 |
9,000,517 |
8,300,630 |
Seaport
Long/Short Fund |
|
|
|
Gross
Fees |
14,769,479 |
14,709,000 |
10,654,718 |
Waivers |
(84,305) |
(88,541) |
(51,513) |
Net
Fees |
14,685,174 |
14,620,459 |
10,603,205 |
Small
Cap Core Fund |
|
|
|
Gross
Fees |
13,615,295 |
10,945,153 |
5,462,598 |
Waivers |
(143,505) |
(117,003) |
(45,949) |
Net
Fees |
13,471,790 |
10,828,150 |
5,416,649 |
U.S.
Global Leaders Growth Fund |
|
|
|
Gross
Fees |
17,377,480 |
17,828,057 |
12,733,117 |
Waivers |
(197,897) |
(217,259) |
(124,419) |
Net
Fees |
17,179,583 |
17,610,798 |
12,608,698 |
1 |
Period
from July 21, 2021 (commencement of operations) to October 31,
2021. |
Service
Agreement and Accounting and Legal Services Agreement
Pursuant to
(i) a
Service Agreement with Capital
Series (with
respect to Classic
Value Fund only), Investment Trust (all series), and Investment
Trust II (all
series); and (ii) an Accounting and Legal Services Agreement with Capital Series
(with
respect to U.S. Global
Leaders Growth Fund
only), the
Advisor is
responsible for providing, at the expense of the applicable Trust or Trusts,
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. Pursuant to
the Accounting and Legal Services Agreement, such expenses shall not exceed
levels that are fair and reasonable in light of the usual and customary
charges made by others for services of the same nature and quality. The
payments under the Service Agreement and the Accounting and Legal
Services Agreement are not intended to provide a profit to the Advisor. Instead,
the Advisor provides the services under the Service Agreement and the
Accounting and Legal Services Agreement because it also provides advisory
services under the Advisory Agreement. Pursuant to
each 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 or the Accounting and Legal Services 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 either Agreement.
The Service
Agreement and the Accounting and Legal Services Agreement each 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 either Agreement at any
time without penalty on 60 days' written notice to the other party. Either
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 or the
Accounting
and Legal Services Agreement, as applicable, for the fiscal periods ended
October 31, 2022, October
31, 2021, and
October 31, 2020.
|
|
| |
|
Service
Fee Paid in Fiscal Year Ended October 31, |
Fund |
2022 ($) |
2021 ($) |
2020 ($) |
Balanced
Fund |
656,812 |
596,437 |
481,801 |
Classic
Value Fund |
400,334 |
384,124 |
331,239 |
Disciplined
Value International Fund |
314,413 |
337,412 |
309,106 |
Diversified
Macro Fund |
99,481 |
56,789 |
46,184 |
Emerging
Markets Equity Fund |
311,504 |
328,276 |
358,010 |
ESG
International Equity Fund |
19,472 |
14,718 |
10,495 |
ESG
Large Cap Core Fund |
26,023 |
22,064 |
11,875 |
Financial
Industries Fund |
104,111 |
114,109 |
113,968 |
Fundamental
Large Cap Core Fund |
834,166 |
914,213 |
923,269 |
Global
Environmental Opportunities Fund |
2,393 |
5271
|
N/A |
Global
Thematic Opportunities Fund |
50,032 |
60,821 |
66,932 |
Infrastructure
Fund |
117,811 |
87,997 |
78,796 |
International
Dynamic Growth Fund |
50,183 |
45,880 |
57,356 |
Regional
Bank Fund |
196,959 |
186,099 |
205,852 |
Seaport
Long/Short Fund |
160,008 |
158,425 |
136,245 |
Small
Cap Core Fund |
260,091 |
210,318 |
125,021 |
U.S.
Global Leaders Growth Fund |
368,806 |
388,639 |
333,767 |
1 |
Period
from July 21, 2021 (commencement of operations) to October 31,
2021. |
Subadvisory Agreements
Duties
of the Subadvisors. Under the
terms of each of the current subadvisory agreements (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. 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.
The
Subadvisory Agreement for Classic Value Fund provides that the subadvisor will
not be liable for any losses, claims, damages, liabilities or litigation
(including legal and other expenses) incurred or suffered by the Advisor, the
relevant Trust, the fund or any of their affiliates as a result of any
error of
judgment or mistake of law by the subadvisor with respect to the fund, except
that nothing in the respective Agreement shall waive or limit the liability
of the subadvisor for any and all losses, claims, damages, liabilities or
litigation (including reasonable legal and other expenses) to which the
Advisor,
the fund or any affiliated persons may become subject under any statute, at
common law or otherwise arising out of or based on (a) the subadvisor's
causing the fund to be in violation of any applicable federal or state law, rule
or regulation or any investment policy or restriction set forth in the
fund's Prospectus or this SAI or any written policies, procedures, guidelines or
instructions provided in writing to the subadvisor by the Trustees or the
Advisor, (b) the subadvisor's causing the fund to fail to satisfy the
requirements of Subchapter M of the Code for qualification as a RIC, or (c) the
subadvisor's
willful misfeasance, bad faith or gross negligence generally in the performance
of its duties hereunder or its reckless disregard of its obligations
and duties under the respective Agreement.
Subadvisory
Fees. As
compensation for their services, each subadvisor receives fees from
the Advisor computed separately for each fund.
Subadvisory
Arrangement for Emerging Markets Equity Fund. In
rendering investment advisory services to Emerging Markets Equity Fund,
Manulife IM
(US), the subadvisor to the fund, may use the portfolio management, research and
other resources of Manulife Investment Management (Singapore)
Pte. Ltd. ("Manulife IM (Singapore)") and Manulife Asset Management (Europe)
Limited ("Manulife IM (Europe)"), each an affiliate of Manulife IM
(US) (each a "Participating Affiliate," and together, "Participating
Affiliates"). The Participating Affiliates are not registered with the SEC as
investment
advisors under the Advisers Act. Manulife IM (US) has entered into separate
memoranda of understanding and supervisory agreements (collectively,
the "Participating Affiliate Agreements") with each Participating Affiliate
pursuant to which each Participating Affiliate 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 the
Participating
Affiliates may render portfolio management, research and other services to
Emerging Markets Equity Fund under the Participating Affiliate
Agreements and are subject to supervision by Manulife IM (US).
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 Trusts' "Manager of Managers" exemptive order received
from the SEC, each 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
of the
Subadvisory Agreements 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
applicable Trust affected by the Subadvisory Agreement; or (b) all
of the series of the applicable
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 applicable Trust affected by the amendment; or (b)
all the
series of the applicable Trust.
With
respect to Classic
Value Fund, Disciplined
Value International Fund, Diversified Macro Fund, Emerging Markets Equity Fund,
ESG International Equity
Fund, ESG Large Cap Core Fund, Financial
Industries Fund, Fundamental Large Cap Core Fund, Global
Environmental Opportunities Fund, Global
Thematic Opportunities Fund, Infrastructure Fund, International Dynamic Growth
Fund, Seaport Long/Short Fund, Small Cap Core Fund, and U.S. Global
Leaders Growth Fund, 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.
Diversified
Macro Fund, through a Subsidiary (its separate wholly-owned subsidiary organized
under the laws of the Cayman Islands), seeks exposure to
the
commodities markets, including by investing in certain
commodity-linked instruments. The Subsidiary has entered into a separate
advisory agreement
with the Advisor for the management of the Subsidiary's portfolio. In turn, the
Advisor has entered into a separate contract with the fund's subadvisor
whereby the subadvisor provides day-to-day management of the Subsidiary's
investments, subject to the supervision of the Advisor.
Other
Services
Proxy
Voting. Based on
the terms of the current Subadvisory Agreements, each 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, each 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, on www.jhinvestments.com and (2) on the SEC's website at
sec.gov.
DISTRIBUTION
AGREEMENTS
Each Trust
has a Distribution Agreement with John Hancock Investment Management
Distributors LLC, an affiliate of the Advisor, 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, and Class R6 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 October 31, 2022, October
31, 2021, and
October 31, 2020.
|
|
|
|
|
|
| |
|
|
Fiscal
Period Ended October 31, |
Fund |
Share Class |
2022 ($) |
2021 ($) |
2020 ($) |
|
|
Amount
Charged |
Amount
Reatined |
Amount
Charged |
Amount
Retained |
Amount Charged |
Amount
Retained |
Balanced
Fund |
Class A |
1,981,211 |
208,930 |
2,907,820 |
314,664 |
2,163,080 |
224,127 |
|
Class C |
22,552 |
0 |
21,812 |
0 |
34,100 |
0 |
Classic
Value Fund |
Class A |
97,054 |
19,349 |
111,498 |
18,762 |
119,571 |
19,799 |
|
Class C |
1,436 |
0 |
372 |
0 |
827 |
0 |
Disciplined
Value International Fund |
Class
A |
61,515 |
10,535 |
72,679 |
12,268 |
91,946 |
15,498 |
|
Class
C |
1,508 |
0 |
146 |
0 |
308 |
0 |
Diversified
Macro Fund |
Class
A |
66,211 |
11,798 |
335 |
50 |
0 |
0 |
|
Class
C |
134 |
0 |
0 |
0 |
0 |
0 |
Emerging
Markets Equity Fund |
Class
A |
71,945 |
12,771 |
121,601 |
20,656 |
3,729 |
586 |
|
Class
C |
764 |
0 |
0 |
0 |
0 |
0 |
ESG
International Equity Fund |
Class
A |
19,597 |
3,434 |
14,559 |
2,443 |
4,867 |
848 |
|
Class
C |
0 |
0 |
0 |
0 |
0 |
0 |
ESG
Large Cap Core Fund |
Class
A |
92,114 |
14,843 |
113,343 |
18,921 |
14,568 |
2,394 |
|
Class
C |
1,195 |
0 |
200 |
0 |
0 |
0 |
Financial
Industries Fund |
Class A |
91,638 |
17,392 |
99,992 |
16,284 |
88,139 |
14,145 |
|
Class
C |
1,407 |
0 |
926 |
0 |
1,993 |
0 |
Fundamental
Large Cap Core Fund |
Class A |
676,595 |
115,769 |
798,749 |
132,468 |
700,348 |
115,463 |
|
Class C |
5,002 |
0 |
2,749 |
0 |
4,523 |
0 |
Global
Environmental Opportunities
Fund |
Class
A |
46 |
7 |
01
|
01
|
N/A |
N/A |
|
Class
C |
0 |
0 |
01
|
01
|
N/A |
N/A |
Global
Thematic Opportunities Fund |
Class
A |
3,051 |
677 |
3,089 |
493 |
1,203 |
207 |
|
Class
C |
0 |
0 |
0 |
0 |
0 |
0 |
Infrastructure
Fund |
Class
A |
215,454 |
33,771 |
568,496 |
93,908 |
175,486 |
29,277 |
|
Class
C |
2,540 |
0 |
180 |
0 |
2,640 |
0 |
International
Dynamic Growth Fund |
Class
A |
8,207 |
1,619 |
15,736 |
3,114 |
8,485 |
995 |
|
Class
C |
424 |
0 |
0 |
0 |
0 |
0 |
Regional
Bank Fund |
Class A |
439,275 |
77,840 |
478,946 |
78,464 |
331,426 |
53,972 |
|
Class
C |
5,977 |
0 |
6,600 |
0 |
10,071 |
0 |
Seaport
Long/Short Fund |
Class
A |
11,489 |
1,930 |
10,168 |
1,662 |
22,504 |
4,303 |
|
Class
C |
1,049 |
0 |
540 |
0 |
509 |
0 |
Small
Cap Core Fund |
Class
A |
283,940 |
48,488 |
391,967 |
66,530 |
193,575 |
33,186 |
U.S.
Global Leaders Growth Fund |
Class A |
447,201 |
68,756 |
803,190 |
133,463 |
831,096 |
139,663 |
|
Class C |
5,415 |
0 |
12,080 |
0 |
11,873 |
0 |
1 |
Period
from July 21, 2021 (commencement of operations) to October 31,
2021. |
Distribution
Plans. The Board
has adopted distribution plans with respect to Class A, Class C, Class R2,
Class R4, and Class R5 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.
| |
Share
Class |
Rule
12b-1 Fee (%) |
Class
A (Balanced Fund, Emerging Markets Equity Fund, Financial Industries Fund,
Infrastructure Fund, Regional Bank Fund,
and Seaport Long/Short Fund) |
0.30 |
Class
A (Classic Value Fund, Disciplined Value International Fund, Diversified
Macro Fund, ESG International Equity Fund, ESG
Large Cap Core Fund, Fundamental Large Cap Core Fund, Global Environmental
Opportunities Fund, Global Thematic
Opportunities Fund, International Dynamic Growth Fund, Small Cap Core
Fund, and U.S. Global Leaders Growth
Fund) |
0.25 |
Class
C |
1.00 |
Class
R2 |
0.25 |
Class
R41
|
0.25 |
Class
R5 |
0.00 |
1 |
The
Distributor has contractually agreed to limit the Rule 12b-1 distribution
and service fees for Class R4 shares of the Balanced Fund,
Disciplined
Value International Fund,
Emerging Markets Equity Fund, and Fundamental Large Cap Core Fund to
0.15% until February 28, 2024. |
There are
two types of Rule 12b-1 Plans: "reimbursement" and "compensation" plans. While a
reimbursement plan provides for reimbursement of certain
distribution and shareholder service expenses of a fund, a compensation plan
provides for direct payment of distribution and shareholder service
fees to the Distributor. Except as noted below, the funds' Rule 12b-1
Plans are compensation Rule 12b-1 Plans. Under a compensation Rule 12b-1 Plan,
the Distributor will retain the entire amount of the payments made to it, even
if such amount exceeds the Distributor's actual distribution-related
expenses for the applicable fiscal year.
The fees
charged under the Rule 12b-1 Plans will be paid to the Distributor either in
reimbursement of distribution and shareholder service expenses incurred by
the Distributor on the funds' behalf, or as direct compensation to the
Distributor in contemplation of such expenses, as noted above. 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
following share classes have reimbursement plans for the stated funds: Class A
(Classic Value Fund, Financial Industries Fund, Fundamental Large Cap Core
Fund, Regional Bank Fund, and U.S. Global Leaders Growth Fund) and Class C
(Balanced Fund, Classic Value Fund, Financial Industries Fund, Fundamental
Large Cap Core Fund, Regional Bank Fund, and U.S. Global Leaders Growth Fund).
Under a reimbursement Rule 12b-1 Plan, if the aggregate
payments received by the Distributor for a particular class of shares of a fund
in any fiscal year exceed the expenditures made by the Distributor
in that year pursuant to that Rule 12b-1 Plan, the Distributor will reimburse
the fund for the amount of the excess. If, however, the expenditures
made by the Distributor on a fund's behalf during any fiscal year exceed the
payments received under such Rule 12b-1 Plan, the Distributor
is entitled to carry over such unreimbursed expenses (for Class C shares, with
interest) to be paid in subsequent fiscal years from available Rule 12b-1
amounts. However, with respect to Class A reimbursement Rule 12b-1 Plans, these
expenses will not be carried beyond twelve months from the
date they were incurred. The funds do not treat unreimbursed expenses under
Class C reimbursement Rule 12b-1 Plans as a liability of the funds
because the Trustees can terminate any of these Plans at any time with no
additional liability to the shareholders and the funds for these expenses.
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 relevant Trust. The holders
of Class A, Class C, Class R2, Class R4, and Class R5 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 October 31, 2022, the
following amounts were paid to the Distributor pursuant to each fund's Rule
12b-1 Plans.
|
|
| |
Fund |
Share
Class |
Rule
12b-1 Service Fee Payments
($) |
Rule
12b-1 Distribution Fee Payments
($) |
Balanced
Fund |
Class
A |
6,394,065 |
1,278,807 |
Balanced
Fund |
Class
C |
633,956 |
1,901,865 |
Balanced
Fund |
Class
R2 |
25,512 |
- |
Balanced
Fund |
Class
R4 |
38,522 |
- |
Classic
Value Fund |
Class
A |
977,715 |
- |
Classic
Value Fund |
Class
C |
18,593 |
55,780 |
Classic
Value Fund |
Class
R2 |
6,067 |
- |
Disciplined
Value International Fund |
Class
A |
282,726 |
- |
Disciplined
Value International Fund |
Class
C |
14,096 |
42,288 |
Disciplined
Value International Fund |
Class
R2 |
6,766 |
- |
Disciplined
Value International Fund |
Class
R4 |
255 |
- |
Diversified
Macro Fund |
Class
A |
12,441 |
- |
Diversified
Macro Fund |
Class
C |
2,159 |
6,478 |
Emerging
Markets Equity Fund |
Class
A |
53,484 |
10,697 |
Emerging
Markets Equity Fund |
Class
C |
3,613 |
10,839 |
Emerging
Markets Equity Fund |
Class
R2 |
550 |
- |
Emerging
Markets Equity Fund |
Class
R4 |
102 |
- |
ESG
International Equity Fund |
Class
A |
20,736 |
- |
ESG
Large Cap Core Fund |
Class
A |
51,145 |
- |
ESG
Large Cap Core Fund |
Class
C |
12,340 |
37,019 |
Financial
Industries Fund |
Class
A |
691,843 |
23,997 |
Financial
Industries Fund |
Class
C |
30,238 |
90,713 |
Fundamental
Large Cap Core Fund |
Class
A |
4,885,289 |
- |
Fundamental
Large Cap Core Fund |
Class
C |
174,046 |
522,137 |
Fundamental
Large Cap Core Fund |
Class
R2 |
19,569 |
- |
Fundamental
Large Cap Core Fund |
Class
R4 |
2,745 |
- |
Global
Environmental Opportunities Fund |
Class
A |
424 |
- |
Global
Environmental Opportunities Fund |
Class
C |
251 |
753 |
Global
Thematic Opportunities Fund |
Class
A |
3,887 |
- |
Global
Thematic Opportunities Fund |
Class
C |
1,796 |
5,389 |
Infrastructure
Fund |
Class
A |
168,273 |
33,655 |
Infrastructure
Fund |
Class
C |
29,918 |
89,754 |
International
Dynamic Growth Fund |
Class
A |
33,172 |
- |
International
Dynamic Growth Fund |
Class
C |
657 |
1,970 |
Regional
Bank Fund |
Class
A |
1,916,554 |
311,033 |
|
|
| |
Fund |
Share
Class |
Rule
12b-1 Service Fee Payments
($) |
Rule
12b-1 Distribution Fee Payments
($) |
Regional
Bank Fund |
Class
C |
292,001 |
876,002 |
Seaport
Long/Short Fund |
Class
A |
33,890 |
6,778 |
Seaport
Long/Short Fund |
Class
C |
8,935 |
26,806 |
Small
Cap Core Fund |
Class
A |
887,790 |
- |
U.S.
Global Leaders Growth Fund |
Class
A |
2,361,744 |
- |
U.S.
Global Leaders Growth Fund |
Class
C |
126,735 |
380,206 |
U.S.
Global Leaders Growth Fund |
Class
R2 |
4,326 |
- |
During the
fiscal period ended October 31, 2022, the
following unreimbursed expense amounts were incurred under the funds'
reimbursement Rule 12b-1
Plans:
|
|
| |
Fund |
Share
Class |
Unreimbursed
Expenses ($) |
Unreimbursed
Expenses as a Percent of
the Share Class Net Assets (%) |
Balanced
Fund |
Class C |
$9,245,056 |
3.81% |
Classic
Value Fund |
Class
A |
$404,290 |
0.10% |
|
Class
C |
$4,781,198 |
65.25% |
Financial
Industries Fund |
Class
A |
$15,606 |
0.01% |
|
Class
C |
$779,102 |
6.73% |
Fundamental
Large Cap Core Fund |
Class
A |
$390,389 |
0.02% |
|
Class C |
$4,917,873 |
7.45% |
Regional
Bank Fund |
Class
A |
$48,535 |
0.01% |
|
Class
C |
$3,379,802 |
2.93% |
U.S.
Global Leaders Growth Fund |
Class
A |
$715,838 |
0.08% |
|
Class
C |
$4,328,384 |
9.42% |
Class R
Service Plans. Each
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.
SALES
COMPENSATION
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 February 28, 2024,
as
described in each such fund's Class R4 Prospectus.
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
October 31, 2022, 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:
|
Business
Partner Firms |
Advisor
Group-FSC Securities Corporation |
Advisor
Group-Royal Alliance Associates, Inc. |
Advisor
Group-Sagepoint Financial, Inc. |
Advisor
Group-Woodbury Financial Services |
Advisor
Group-Securities America, Inc. |
Advisor
Group-Triad Advisors, LLC. |
Ameriprise
Financial Services, Inc. |
Avantax
Wealth Management |
Banc
of America/Merrill Lynch |
BOK
Financial Securities, Inc. |
Centaurus
Financial, Inc. |
Cetera
- Advisor Network LLC |
|
Business
Partner Firms |
Cetera
- Advisors LLC |
Cetera
- Financial Institutions |
Cetera
- Financial Specialists, Inc. |
Charles
Schwab |
Commonwealth
Financial Network |
Concourse
Financial Group Securities |
Crown
Capital Securities L.P. |
DA
Davidson & Co Inc. |
Edward
D. Jones & Co. LP |
Fidelity
- Fidelity Brokerage Services LLC |
Fidelity
- Fidelity Investments Institutional Operations Company,
Inc. |
Fidelity
- National Financial Services LLC |
|
Business
Partner Firms |
Fifth
Third Securities, Inc. |
First
Command Financial Planning |
First
Horizon Advisors |
Geneos
Wealth Management |
GWFS
Equities, Inc. |
Independent
Financial Group |
Infinex
Investments Inc. |
J.P.
Morgan Securities LLC |
Key
Investment Services |
LPL
Financial LLC |
MML
Investor Services, Inc. |
Money
Concepts Capital Corp. |
Morgan
Stanley Wealth Management, LLC |
Northwestern
Mutual Investment Services, LLC |
|
Business
Partner Firms |
Principal
Securities, Inc. |
Raymond
James and Associates, Inc. |
Raymond
James Financial Services, Inc. |
RBC
Capital Markets Corporation |
Robert
W. Baird & Co. |
Stifel,
Nicolaus, & Co, Inc. |
TD
Ameritrade |
The
Investment Center, Inc. |
Transamerica
Financial Advisors, Inc. |
UBS
Financial Services, Inc. |
Unionbanc
Investment Services |
Valley
Financial Management, Inc. |
Wells
Fargo Advisors |
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 price)1
|
Selling
Firm receives commission2
|
Selling
Firm receives Rule
12b-1 service fee |
Total
Selling Firm compensation3,4
|
Class
A investments (all funds except
Balanced Fund)5
|
|
|
|
|
Up to
$49,999 |
5.00% |
4.25% |
0.25% |
4.50% |
$50,000
- $99,999 |
4.50% |
3.75% |
0.25% |
4.00% |
$100,000
- $249,999 |
3.50% |
2.85% |
0.25% |
3.10% |
$250,000
- $499,999 |
2.50% |
2.10% |
0.25% |
2.35% |
$500,000
- $999,999 |
2.00% |
1.60% |
0.25% |
1.85% |
Class
A investments (Balanced Fund)5,6
|
|
|
|
|
Up to
$49,999 |
4.50% |
4.05% |
0.25% |
4.30% |
$50,000
- $99,999 |
3.50% |
3.05% |
0.25% |
3.30% |
$100,000
- $249,999 |
3.00% |
2.55% |
0.25% |
2.80% |
$250,000
- $4,999,999 |
— |
0.75% |
0.25% |
1.00% |
Next
$1 - $5M above that |
— |
0.25% |
0.25% |
0.50% |
Next
$1 or more above that |
— |
0.00% |
0.25% |
0.25% |
Class
A investments of $1 million or more
(all funds except Balanced Fund)6
|
|
|
|
|
First
$1M - $4,999,999 |
— |
0.75% |
0.25% |
1.00% |
Next
$1 - $5M above that |
— |
0.25% |
0.25% |
0.50% |
Next
$1 or more above that |
— |
0.00% |
0.25% |
0.25% |
Class
C investments7 All
Amounts |
— |
0.75% |
0.25% |
1.00% |
|
|
|
| |
First
Year Broker or Other Selling Firm Compensation |
|
Investor
pays sales charge
(% of offering price)1 |
Selling
Firm receives commission2 |
Selling
Firm receives Rule
12b-1 service fee |
Total
Selling Firm compensation3,4 |
Class
R2 investments5 All
Amounts |
— |
0.00% |
0.25% |
0.25% |
Class
R4 investments5 All
Amounts |
— |
0.00% |
0.15% |
0.15% |
Class
R5 investments All
Amounts |
— |
0.00% |
0.00% |
0.00% |
Class
R6 investments All
Amounts |
— |
0.00% |
0.00% |
0.00% |
Class
I investments8 All
Amounts |
— |
0.00% |
0.00% |
0.00% |
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, 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, Class R4, and Class R5 Service 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. |
CDSC
revenues collected by the Distributor may be used to pay Selling Firm
commissions when there is no initial sales charge.
NET
ASSET VALUE
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. 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. 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. 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.
Shares of
the Subsidiary will be valued at NAV.
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 Trusts' 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. Each 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.
Each 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 receive either complete portfolio holdings information or summaries
of a fund's portfolio holdings with their annual and semiannual
reports.
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 relevant 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 Trusts' 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
October 31, 2022, 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 |
Disclosure
Purpose |
Abel
Noser LLC |
Transaction
Cost Analysis |
ACA
Performance Services |
GIPS
Verification and Compliance |
Accenture |
Operational
Functions |
Bloomberg
L.P. |
Pricing
/ Analytics / Trade Order Management |
BNP
Paribas S.A. |
Leverage
Provider / Pledging |
Broadridge
Financial Solutions |
Proxy
Voting / Software Vendor / Data Provider |
Brown
Brothers Harriman |
Reconciliation
/ Corporate Actions / Service Provider |
Capital
Institutional Services (CAPIS) |
Rebalancing
Strategy / Transition Services / Recapture |
Charles
River |
Trading |
Citibank |
Securities
Lending |
Clarkson |
Vessel
Valuations or Appraisals (for shipping) |
Confluence
Technologies |
Consulting |
DataLend |
Securities
Lending Analytics |
DG3 |
Financial
Reporting / Type Setting |
Donnelley
Financial Solutions |
Financial
Reporting / Printing |
DUCO |
Reconciliation
services |
Dynamo
Software |
Fair
Value and Private Transactions Support |
Electra
Information Systems |
Reconciliation |
Ernst
& Young |
Tax
Reporting |
ETF
Global |
Holdings
Analytics |
EVARE |
Analytics
/ Data Gathering / Reconciliation |
FactSet |
Data
Gathering / Analytics / Performance |
Foley
Hoag |
Foreign
Currency Trade Review |
FX
Transparency
|
FX
Trade Execution Analysis |
Gainskeeper |
Wash
Sales / REIT Data |
Glass
Lewis |
Proxy
Voting |
Goldman
Sachs (GSAL) |
Securities
Lending |
Indus
Valley Partners (IVP) |
Treasury
and reconciliation services |
Institutional
Shareholder Services (ISS) |
Class
Actions / Proxy Voting |
Interactive
Data |
Pricing |
KPMG |
Tax
Reporting |
Law
Firm of Davis and Harman |
Development
of Revenue Ruling |
Linedata |
NAV
Oversight |
| |
Entity
Receiving Portfolio Information |
Disclosure
Purpose |
Lipper |
Ratings
/ Surveys |
Markit |
Service
Provider-Electronic Data Management / Service Provider |
Milestone |
Service
Provider-Valuation Oversight |
Morningstar,
Inc. |
Ratings
/ Surveys |
MSCI
Inc. |
Liquidity
Risk Management, Performance |
National
Financial Services |
Securities
Lending |
Northern
Trust Co. |
Back
Office Functions / Trade Execution Analysis |
PricewaterhouseCoopers
LLP |
Audit
Services |
Riordan
Consulting |
GIPS
Performance Composites |
RSM
US LLP |
Consulting |
Russell
Implementation Services |
Transition
Services |
Ryan
Business Technology Solutions |
Investment
guidelines and controls |
SEI
Global Services, Inc. ("SEI") |
Reconciliation |
SS&C
Technologies/Advent/Apx Advent |
Analytics
/ Data Gathering / Reconciliation /Performance |
Star
Compliance |
Code
of Ethics Monitoring |
State
Street Bank |
Service
Provider-IBOR / Operational Functions |
State
Street Closed End Financing |
All
SS lending funds |
State
Street Investment Management Solutions |
Back
Office Functions |
SunGard |
Securities
Lending Analytics |
SWIFT |
Accounting
/ Custody & Trade Messaging |
Trade
Informatics (f.k.a. SJ Levinson) |
Trade
Execution Analysis |
Virtu
Analytics, LLC |
Trade
Execution Analysis |
Wolters
Kluwer |
Audit
Services / Tax Reporting |
The CCO is
required to pre-approve the disclosure of nonpublic information regarding a
fund's portfolio holdings to any affiliated persons of the relevant
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
relevant 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 relevant 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 Trusts'
Policy Regarding Disclosure of Portfolio Holdings, and may be subject to
different
portfolio holdings disclosure policies. The funds' subadvisors may
not, and the Trusts' 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 Trusts' 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 Trusts' 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 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 which 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
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 which are held directly at John Hancock funds or at
the
PFS Financial Center. |
• |
Participants
actively enrolled in a John Hancock RPS plan account rolling over or
transferring assets into a new John Hancock custodial IRA or
John Hancock
custodial Roth IRA that invests in John Hancock funds through
John Hancock PFS (to the extent such assets are otherwise prohibited
from
rolling over or transferring into the John Hancock RPS plan account),
including subsequent investments into such accounts and which 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. |
• |
Retirement
plans investing through the PruSolutionSM
program. |
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
($250,000
for Balanced 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 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 CDSC
redemption period for
Class A or 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 ($250,000
for Balanced 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:
For all
account types:
• |
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
of Class A shares by retirement plans that invested through the
PruSolutionsSM
program. |
• |
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.
|
|
|
|
| |
Type
of Distribution |
401(a)
Plan (401(k), MPP,
PSP) & 457 |
403(b) |
Roth
IRA & Coverdell ESA |
IRA,
SEP IRA & Simple
IRA |
Non-retirement |
Death
or Disability |
Waived |
Waived |
Waived |
Waived |
Waived |
Over
70½ (or 72, in the case
of individuals for whom
the minimum distribution
requirements
begin at age
72) |
Waived |
Waived |
Waived1
|
Waived1
|
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) |
Waived |
Waived |
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 |
|
|
|
|
| |
Type
of Distribution |
401(a)
Plan (401(k), MPP,
PSP) & 457 |
403(b) |
Roth
IRA & Coverdell ESA |
IRA,
SEP IRA & Simple
IRA |
Non-retirement |
Under
59½ (Class C only) |
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 |
Termination
of Plan |
Not
Waived |
Waived |
N/A |
N/A |
N/A |
Hardships |
Waived |
Waived |
N/A |
N/A |
N/A |
Qualified
Domestic Relations
Orders |
Waived |
Waived |
N/A |
N/A |
N/A |
Termination
of Employment
Before Normal
Retirement Age |
Waived |
Waived |
N/A |
N/A |
N/A |
Return
of Excess |
Waived |
Waived |
Waived |
Waived |
N/A |
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.
SPECIAL
REDEMPTIONS
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. Each fund
(other than Financial Industries Fund and Regional Bank Fund) has, however,
elected to be governed by Rule 18f-1 under the 1940 Act.
Under that rule, a fund must redeem its shares for cash except to the extent
that the redemption payments to any shareholder during any 90-day
period would exceed the lesser of $250,000 or 1% of the fund's NAV at the
beginning of such period.
Each 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. Each
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. Each 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 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 each Trust.
Each 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 each 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 20 series of
the Trusts. Additional series may be added in the future. The
Trustees also have authorized the issuance of 8 classes of shares of
the funds, designated as Class A, Class C, Class I, Class NAV, Class R2,
Class R4, Class
R5, and Class R6. 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, each 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
relevant 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, each Declaration of
Trust contains an express disclaimer of shareholder liability for acts,
obligations
or affairs of the relevant Trust. Each 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. Each Declaration of Trust also provides that no series
of the relevant Trust shall be liable for the liabilities of any other
series. Furthermore, no series of a 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.
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
Declaration of Trust of
Investment Trust also
provides that the Board may approve the merger of a relevant fund with an
affiliated fund without shareholder
approval, in accordance with the 1940 Act. This provision will permit the merger
of affiliated funds without shareholder approval in certain circumstances
to avoid incurring the expense of soliciting proxies when a combination does not
raise significant issues for shareholders. For example, this
provision would permit the combination of two small funds having the same
portfolio managers, the same investment objectives, and the same fee
structure
in order to achieve economies of scale and thereby reduce fund expenses borne by
shareholders. Such a merger will still require the Board (including
a majority of the Independent Trustees) to determine that the merger is in the
best interests of the combining funds and will not dilute the interest of
existing shareholders. The Trustees would evaluate any and all information
reasonably necessary to make their determination and consider and give
appropriate weight to all pertinent factors in fulfilling their duty of care to
shareholders.
Shareholders
of an acquired fund will still be required to approve a combination that would
result in a change in a fundamental investment policy, a material
change to the terms of an advisory agreement, the institution of or an increase
in Rule 12b-1 fees, or when the board of the surviving fund does not
have a majority of Independent Trustees who were elected by its shareholders.
Under Massachusetts law, shareholder approval is not required
for fund mergers, consolidation, or sales of assets. Shareholder approval
nevertheless will be obtained for combinations of affiliated funds when
required by the 1940 Act. Shareholder approval also will be obtained for
combinations with unaffiliated funds when deemed appropriate by the Trustees.
Each 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% or 4.50%. 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, and Class R6 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 October 31, 2022.
|
|
| |
Fund |
NAV
and Redemption Price per Class
A Share ($) |
Maximum
Sales Charge (5.00%
of offering price, unless otherwise
noted) ($) |
Maximum
Offering Price to Public ($) |
Balanced
Fund |
22.25 |
1.05 |
23.30 |
Classic
Value Fund |
37.10 |
1.95 |
39.05 |
Disciplined
Value International Fund |
12.11 |
0.64 |
12.75 |
Diversified
Macro Fund |
10.68 |
0.56 |
11.24 |
Emerging
Markets Equity Fund |
7.82 |
0.41 |
8.23 |
ESG
International Equity Fund |
11.49 |
0.60 |
12.09 |
ESG
Large Cap Core Fund |
17.70 |
0.93 |
18.63 |
Financial
Industries Fund |
17.14 |
0.90 |
18.04 |
Fundamental
Large Cap Core Fund |
54.43 |
2.86 |
57.29 |
Global
Environmental Opportunities Fund |
7.94 |
0.42 |
8.36 |
Global
Thematic Opportunities Fund |
9.94 |
0.52 |
10.46 |
Infrastructure
Fund |
12.07 |
0.64 |
12.71 |
International
Dynamic Growth Fund |
8.42 |
0.24 |
8.86 |
Regional
Bank Fund |
29.71 |
1.56 |
31.27 |
Seaport
Long/Short Fund |
10.61 |
0.56 |
11.17 |
|
|
| |
Fund |
NAV
and Redemption Price per Class
A Share ($) |
Maximum
Sales Charge (5.00%
of offering price, unless otherwise
noted) ($) |
Maximum
Offering Price to Public ($) |
Small
Cap Core Fund |
13.97 |
0.74 |
14.71 |
U.S.
Global Leaders Growth Fund |
48.62 |
2.56 |
51.18 |
| |
|
NAV,
Shares Offering Price and Redemption
Price per Share |
Fund |
Class
C ($) |
Balanced
Fund |
22.22 |
Classic
Value Fund |
36.24 |
Disciplined
Value International Fund |
12.04 |
Diversified
Macro Fund |
10.58 |
Emerging
Markets Equity Fund |
7.54 |
ESG
International Equity Fund |
- |
ESG
Large Cap Core Fund |
17.15 |
Financial
Industries Fund |
14.77 |
Fundamental
Large Cap Core Fund |
46.04 |
Global
Environmental Opportunities Fund |
7.86 |
Global
Thematic Opportunities Fund |
9.72 |
Infrastructure
Fund |
11.91 |
International
Dynamic Growth Fund |
8.15 |
Regional
Bank Fund |
28.09 |
Seaport
Long/Short Fund |
10.01 |
Small
Cap Core Fund |
- |
U.S.
Global Leaders Growth Fund |
36.15 |
|
|
|
| |
|
NAV,
Shares Offering Price and Redemption Price per
Share |
Fund |
Class R2
($) |
Class R4
($) |
Class R5
($) |
Class R6
($) |
Balanced
Fund |
22.22 |
22.37 |
22.33 |
22.26 |
Classic
Value Fund |
37.01 |
- |
37.29 |
37.30 |
Disciplined
Value International Fund |
12.12 |
12.12 |
- |
12.15 |
Diversified
Macro Fund |
- |
- |
- |
10.74 |
Emerging
Markets Equity Fund |
7.82 |
7.85 |
- |
7.87 |
ESG
International Equity Fund |
- |
- |
- |
11.53 |
ESG
Large Cap Core Fund |
- |
- |
- |
17.79 |
Financial
Industries Fund |
- |
- |
- |
17.16 |
Fundamental
Large Cap Core Fund |
57.06 |
57.16 |
57.74 |
57.79 |
Global
Environmental Opportunities Fund |
- |
- |
- |
7.96 |
Global
Thematic Opportunities Fund |
- |
- |
- |
10.00 |
Infrastructure
Fund |
- |
- |
- |
12.11 |
International
Dynamic Growth Fund |
- |
- |
- |
8.52 |
Regional
Bank Fund |
- |
- |
- |
29.70 |
Seaport
Long/Short Fund |
- |
- |
- |
11.06 |
Small
Cap Core Fund |
- |
- |
- |
14.12 |
U.S.
Global Leaders Growth Fund |
52.01 |
- |
- |
55.18 |
|
| |
|
NAV,
Shares Offering Price and Redemption Price per
Share |
Fund |
Class
I ($) |
Class
NAV ($) |
Balanced
Fund |
22.23 |
- |
Classic
Value Fund |
37.24 |
- |
Disciplined
Value International Fund |
12.14 |
12.14 |
Diversified
Macro Fund |
10.72 |
10.73 |
Emerging
Markets Equity Fund |
7.86 |
7.86 |
ESG
International Equity Fund |
11.52 |
- |
ESG
Large Cap Core Fund |
17.77 |
- |
Financial
Industries Fund |
17.15 |
17.16 |
Fundamental
Large Cap Core Fund |
57.56 |
57.77 |
Global
Environmental Opportunities Fund |
7.95 |
- |
Global
Thematic Opportunities Fund |
9.99 |
10.01 |
Infrastructure
Fund |
12.09 |
12.11 |
International
Dynamic Growth Fund |
8.50 |
8.53 |
Regional
Bank Fund |
29.70 |
- |
Seaport
Long/Short Fund |
10.92 |
11.06 |
Small
Cap Core Fund |
14.06 |
14.11 |
U.S.
Global Leaders Growth Fund |
54.46 |
- |
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. If
more than 50% of the value of a fund's total assets at the close of
any taxable year consists of stock or securities of foreign corporations, the
fund will be able to elect to pass such taxes through to the shareholders
(as additional income) along with a corresponding entitlement to a foreign tax
credit or deduction. 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.
Diversified
Macro Fund may invest a portion of its assets in the Subsidiary, a Cayman
Islands exempted company that is classified as a corporation for federal tax
purposes. A foreign corporation, such as the Subsidiary, generally is not
subject to federal income tax unless it is engaged in the conduct of
a trade or
business in the United States. The Subsidiary intends to operate in a manner
that is expected to meet the requirements of a safe harbor under
section 864(b)(2) of the Code, under which it may trade in stocks or securities
or certain commodities for its own account without being deemed to
be engaged in a U.S. trade or business. If, however, certain of the Subsidiary's
activities did not meet those safe harbor requirements, it might be
considered as engaging in such a trade or business. Even if the Subsidiary is
not so engaged, it may be subject to a withholding tax at a rate of 30% on
some portion of its U.S.-source gross income that is not effectively connected
with the conduct of a U.S. trade or business.
The
Subsidiary will be treated as a controlled foreign corporation (a "CFC"), and
the fund with the Subsidiary will be a "United States shareholder" thereof. As
a result, the fund will be required to include in its gross income each taxable
year all of the Subsidiary's "subpart F income," which generally
is treated as ordinary income; it is expected that virtually all of the
Subsidiary's income will be "subpart F income." If the Subsidiary realizes a
net loss,
that loss generally will not be available to offset the fund's
income. The fund's inclusion of the Subsidiary's "subpart F income" in its gross
income will
increase the fund's tax basis in its shares of the Subsidiary. Distributions by
the Subsidiary to a fund will not be taxable to the extent of its previously
undistributed "subpart F income" and will reduce the fund's tax basis in those
shares.
Although
gains from the disposition of commodities are not considered qualifying income
for purposes of the 90% gross income test described above, the Service
has issued numerous private letter rulings ("PLRs") in recent years that a RIC's
income from a wholly-owned foreign subsidiary (such as the Subsidiary)
is qualifying income. Because a PLR may be cited as precedent only by the
taxpayer(s) to which it is issued, the fund
cannot rely upon such PLRs.
Further, in July 2011 the Service suspended the issuance of further PLRs to RICs
seeking commodities exposure through the use of foreign wholly-owned
subsidiaries (and structured notes).
RICs'
investments in CFCs for purposes of indirectly investing in commodities has been
further impacted by the issuance of regulations under the Code published
on March 19, 2019 ("Regulations"). Under the Regulations, the income a RIC is
deemed under the Code to constructively derive from a CFC, in which
the RIC invests in connection with its business of investing in securities, each
taxable year will be considered qualifying income for the RIC whether or
not distributed by the CFC to the RIC out of its associated earnings and profits
for the applicable taxable year.
The federal
income tax treatment of the fund's income from the Subsidiary may be adversely
affected by future legislation, other Treasury Regulations, and/or
other guidance issued by the Service that could affect the character, timing of
recognition, and/or amount of the fund's taxable income and/or net capital
gains and, therefore, the distributions it makes.
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). 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 October
31, 2022 to the
extent provided by regulations, to offset future net realized
capital gains:
|
|
| |
Fund |
Short-term
Losses ($) |
Long-term
Losses ($) |
Total ($) |
Balanced
Fund |
39,645,634 |
- |
39,645,634 |
Classic
Value Fund |
- |
- |
- |
Disciplined
Value International Fund |
132,784,073 |
113,094,228 |
245,878,301 |
Diversified
Macro Fund |
3,979,588 |
10,006,336 |
13,985,924 |
Emerging
Markets Equity Fund |
148,414,508 |
57,356,993 |
205,771,501 |
ESG
International Equity Fund |
440,748 |
- |
440,748 |
ESG
Large Cap Core Fund |
943,998 |
158,724 |
1,102,722 |
Financial
Industries Fund |
- |
- |
- |
Fundamental
Large Cap Core Fund |
- |
- |
- |
Global
Environmental Opportunities Fund |
511,327 |
87,642 |
598,969 |
Global
Thematic Opportunities Fund |
6,286,913 |
63,976 |
6,350,889 |
Infrastructure
Fund |
27,708,898 |
11,870,267 |
39,579,165 |
International
Dynamic Growth Fund |
24,460,184 |
- |
24,460,184 |
Regional
Bank Fund |
- |
- |
- |
Seaport
Long/Short Fund |
30,304,804 |
- |
30,304,804 |
Small
Cap Core Fund |
- |
- |
- |
U.S.
Global Leaders Growth Fund |
23,247,166 |
- |
23,247,166 |
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.
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 net asset value 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 net asset value 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 designate 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
legislation known as 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 withholding
tax regime went into effect on July 1, 2014 with respect to U.S.-source income.
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, real estate investment trusts, 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.
Taxation
of the Subsidiary. The
Subsidiary is classified as a corporation for U.S. federal income tax purposes.
The fund having the Subsidiary intends to
take the position that income from its investments in the Subsidiary will
constitute qualifying income for purposes of qualifying as a RIC. The
IRS has
issued regulations providing that "subpart F income" (as defined below) deemed
received from a CFC (as defined below), in which a RIC invests in
connection with its business of investing in securities, and included in a RIC's
gross income constitutes "qualifying income." The tax treatment of income from
the Subsidiary may be adversely affected by future legislation, Treasury
Regulations and/or guidance issued by the IRS, which could affect the
character, timing and/or amount of a fund's taxable income or any gains and
distributions made by the fund. If the fund were to earn non-qualifying
income from any source including the Subsidiary in excess of 10% of its gross
income for any taxable year, it would fail to qualify as a RIC for that year,
unless the fund were eligible to cure and cured such failure by paying a
fund-level tax equal to the full amount of such excess.
Foreign
corporations, such as the Subsidiary, will generally not be subject to U.S.
federal income taxation unless they are deemed to be engaged in a U.S. trade
or business. It is expected that the Subsidiary will conduct it activities in a
manner so as to meet the requirements of a safe harbor under Section
864(b)(2) of the Code under which the Subsidiary may engage in trading in stocks
or securities or certain commodities without being deemed to be
engaged in a U.S. trade or business. However, if certain of the Subsidiary's
activities were determined not to be of the type described in the safe
harbor
(which is not expected), then the activities of the Subsidiary may constitute a
U.S. trade or business, and would be taxed as such.
The
Subsidiary is treated as a controlled foreign corporation ("CFC") for tax
purposes and the fund with the Subsidiary is treated as a "U.S.
shareholder"
of the Subsidiary. As a result, the fund is required to include in gross income
for U.S. federal income tax purposes all of the Subsidiary's "subpart F
income," whether or not such income is distributed by the Subsidiary. It is
expected that all of the Subsidiary's income will be "subpart F income."
The fund's recognition of the Subsidiary's "subpart F income" will
increase the fund's tax basis in the Subsidiary. Distributions by the
Subsidiary
to the fund will be tax-free to the extent of its previously undistributed
"subpart F income," and will correspondingly reduce the fund's tax basis in
the Subsidiary. "Subpart F income" is generally treated as ordinary income,
regardless of the character of the Subsidiary's underlying income. If a net
loss is realized by the Subsidiary, such loss is not generally available to
offset the income earned by the fund.
PORTFOLIO
BROKERAGE
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 October 31,
2022. 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.
|
| |
Fund |
Regular
Broker Dealer |
Holdings
($000s) |
Balanced
Fund |
Bank
of America Corp. |
17,876 |
|
Barclays
Bank PLC |
5,504 |
|
Citigroup,
Inc. |
11,898 |
|
JPMorgan
Chase & Co. |
93,281 |
|
Morgan
Stanley & Company, Inc. |
8,356 |
|
The
Goldman Sachs Group, Inc. |
44,850 |
|
UBS
Group AG |
1,159 |
Classic
Value Fund |
Bank
of America Corp. |
45,876 |
|
State
Street Corp. |
6,631 |
|
The
Goldman Sachs Group, Inc. |
28,628 |
|
Wells
Fargo & Company |
81,941 |
Disciplined
Value International Fund |
UBS
Group AG |
20,056 |
Diversified
Macro Fund |
N/A |
N/A |
Emerging
Markets Equity Fund |
JPMorgan
Chase & Co. |
67,688 |
ESG
International Equity Fund |
N/A |
N/A |
ESG
Large Cap Core Fund |
Bank
of America Corp. |
2,722 |
Financial
Industries Fund |
AllianceBernstein
Holding LP |
8,662 |
|
Bank
of America Corp. |
19,322 |
|
BNP
Paribas SA |
1,982 |
|
JPMorgan
Chase & Co. |
13,042 |
|
Morgan
Stanley & Company, Inc. |
14,970 |
Fundamental
Large Cap Core Fund |
Barclays
Bank PLC |
60,000 |
|
JPMorgan
Chase & Co. |
129,084 |
|
Morgan
Stanley & Company, Inc. |
233,555 |
|
State
Street Corp. |
56,179 |
|
The
Goldman Sachs Group, Inc. |
123,802 |
Global
Environmental Opportunities Fund |
N/A |
N/A |
|
| |
Fund |
Regular
Broker Dealer |
Holdings
($000s) |
Global
Thematic Opportunities Fund |
N/A |
N/A |
Infrastructure
Fund |
Royal
Bank of Scotland PLC |
11,200 |
International
Dynamic Growth Fund |
N/A |
N/A |
Regional
Bank Fund |
Bank
of America Corp. |
26,765 |
|
JPMorgan
Chase & Co. |
28,351 |
Seaport
Long/Short Fund |
Citigroup,
Inc. |
1 |
|
JPMorgan
Chase & Co. |
1,005 |
|
Morgan
Stanley & Company, Inc. |
6,580 |
|
State
Street Corp. |
61,029 |
|
The
Goldman Sachs Group, Inc. |
3,050 |
Small
Cap Core Fund |
N/A |
N/A |
U.S.
Global Leaders Growth Fund |
State
Street Corp. |
35,199 |
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 Trusts, 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.
Specific
Trade–Order Procedure for Diversified Macro Fund and Other
Accounts. Graham
Capital Management, L.P. ("Graham") has established
the following procedure when processing orders for multiple accounts, including
Diversified Macro Fund. Graham randomizes the sequence in
which otherwise identical orders for different accounts are sent to execution
platforms so that no account's orders consistently arrive before
other accounts' orders: the first order to be sent is picked at random, the
second is picked at random from those remaining, and so on. Graham believes
that this randomization eliminates any possible bias that might result from
processing similar orders in a fixed sequence.
Affiliated
Underwriting Transactions by a Subadvisor. Each 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 October 31, 2022, October
31, 2021, and
October 31, 2020 are
set forth in the table below:
|
|
| |
|
Total
Commissions Paid in Fiscal Period Ended October 31, |
Fund |
2022 ($) |
2021 ($) |
2020 ($) |
Balanced
Fund |
220,982 |
224,692 |
267,349 |
Classic
Value Fund |
1,188,926 |
1,296,481 |
1,331,744 |
Disciplined
Value International Fund |
2,017,133 |
2,383,835 |
2,106,654 |
Diversified
Macro Fund |
0 |
0 |
0 |
Emerging
Markets Equity Fund |
1,409,554 |
1,307,856 |
1,821,830 |
ESG
International Equity Fund |
109,179 |
96,391 |
39,885 |
ESG
Large Cap Core Fund |
17,560 |
19,170 |
14,911 |
Financial
Industries Fund |
296,136 |
546,838 |
343,865 |
Fundamental
Large Cap Core Fund |
748,907 |
907,748 |
1,015,429 |
Global
Environmental Opportunities Fund |
5,301 |
1,1881
|
N/A |
Global
Thematic Opportunities Fund |
101,390 |
143,463 |
122,949 |
|
|
| |
|
Total
Commissions Paid in Fiscal Period Ended October 31, |
Fund |
2022 ($) |
2021 ($) |
2020 ($) |
Infrastructure
Fund |
206,928 |
167,448 |
116,247 |
International
Dynamic Growth Fund |
498,721 |
510,631 |
528,931 |
Regional
Bank Fund |
190,052 |
256,892 |
407,956 |
Seaport
Long/Short Fund |
3,066,070 |
2,586,110 |
2,104,403 |
Small
Cap Core Fund |
2,126,105 |
1,818,023 |
1,197,789 |
U.S.
Global Leaders Growth Fund |
256,469 |
195,189 |
315,496 |
1 |
Period
from July 21, 2021 (commencement of operations) to October 31,
2021. |
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 October 31, 2022, October
31, 2021, and
October 31, 2020,
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.
TRANSFER
AGENT SERVICES
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 four 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 and Institutional 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.
Class R6
Shares. An amount
equal to the total Signature Services Cost associated with providing services to
Class R6 shares of the Trusts 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.
Retirement
Share Classes. An amount
equal to the total Signature Services Cost associated with providing services to
Class R2, Class R4, and Class R5 shares
of the Trusts 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.
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 allocation of Signature Services Costs for Class R6 shares of the municipal
bond funds is described above. The Trusts
currently do 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 Trusts, 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 October 31, 2022, 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.
FINANCIAL
STATEMENTS
The
financial
statements of each
fund for the fiscal period ended October 31, 2022, are
incorporated herein by reference from each fund's most recent
Annual Report filed with the SEC on Form N-CSR pursuant to Rule 30b2-1 under the
1940 Act.
CUSTODY
OF PORTFOLIO SECURITIES
Except as
noted below, State Street Bank and Trust Company, State Street Financial Center,
One Lincoln Street, Boston, Massachusetts 02111, 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
Balanced
Fund, Disciplined Value International Fund, Diversified
Macro Fund, Emerging Markets Equity Fund, ESG International Equity Fund, ESG
Large Cap Core Fund, Fundamental Large Cap Core Fund, Global
Environmental Opportunities Fund, Global Thematic Opportunities Fund, and
International Dynamic Growth 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. Citibank
also currently acts as custodian of the Subsidiary's
assets.
CODES
OF ETHICS
Each 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
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.
IN GENERAL
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://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
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's
opinions are forward looking and include Fitch's views of future performance. In
many cases, these views on future performance may include
forecasts, which may in turn (i) be informed by non-disclosable management
projections, (ii) be based on a trend (sector or wider economic cycle) at a
certain stage in the cycle, or (iii) be based on historical performance. As a
result, while ratings may include cyclical considerations and attempt to
assess the likelihood of repayment at "ultimate/final maturity," material
changes in economic conditions and expectations (for a particular issuer) may
result in a rating change.
The terms
"investment grade" and "speculative grade" have established themselves over time
as shorthand to describe the categories ‘AAA' to ‘BBB' (investment
grade) and ‘BB' to ‘D' (speculative grade). 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 either signal a higher level
of credit risk or that a default has already occurred. For the convenience
of investors, Fitch may also include issues relating to a rated issuer that are
not and have not been rated on its web page. Such issues are also
denoted as ‘NR'.
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 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:
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 five business days in the
absence of a stated grace period or within the earlier of the stated grace
period or 30 calendar days. The ‘D' rating also will be used upon the filing
of a bankruptcy petition or taking of similar action and where default on an
obligation is a virtual certainty, for example due to automatic stay
provisions.
An obligation's rating is lowered to ‘D' if it is subject to a distressed
exchange offer.
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: Issuers
(or supporting institutions) rated Prime-1 have a superior ability to repay
short-term debt obligations.
P-2: Issuers
(or supporting institutions) rated Prime-2 have a strong ability to repay
short-term debt obligations.
P-3: Issuers
(or supporting institutions) rated Prime-3 have 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 ratings are generally assigned to those obligations
considered short-term in the relevant market. Short-term ratings
are also
used to indicate the creditworthiness of an obligor with respect to put features
on long-term obligations. Medium term notes are assigned long-term
ratings. 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. An obligation's rating is lowered to ‘D' if it is subject to a
distressed exchange offer.
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.
TAX-EXEMPT
NOTE RATINGS
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 that ensure the timely payment of purchase
price upon demand.
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 that ensure the timely payment of purchase
price upon demand.
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 that ensure the timely payment of
purchase price upon demand.
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 an investment grade short-term rating or may lack the structural and/or
legal protections necessary to ensure the timely payment of purchase
price upon demand.
* 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.
S&P GLOBAL RATINGS' MUNICIPAL SHORT-TERM
NOTE 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
exchange offer, 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
AXIOM
INVESTORS LLC
("Axiom")
International
Dynamic Growth Fund
PORTFOLIO
MANAGERS AND OTHER ACCOUNTS MANAGED
Bradley
Amoils, Dean
Bumbaca, CFA, and Andrew
Jacobson, CFA are jointly and primarily responsible for the day-to-day
management of the fund's portfolio.
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 pays 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 October 31, 2022:
|
|
|
|
|
| |
|
Other
Registered Investment Companies |
Other
Pooled Investment Vehicles |
Other
Accounts |
Portfolio
Manager |
Number
of Accounts |
Assets
(in millions) |
Number
of Accounts |
Assets
(in millions) |
Number
of Accounts |
Assets
(in millions) |
Bradley
Amoils |
0 |
$0 |
15 |
$3,711.17 |
4 |
$2,928.14 |
Dean
Bumbaca |
0 |
$0 |
3 |
$1,101.94 |
1 |
$110.77 |
Andrew
Jacobson |
4 |
$270.03 |
30 |
$7,974.09 |
22 |
$5,891.07 |
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 |
Other
Accounts |
Portfolio
Manager |
Number
of Accounts |
Assets
(in millions) |
Number
of Accounts |
Assets
(in millions) |
Number
of Accounts |
Assets
(in millions) |
Bradley
Amoils |
0 |
$0 |
2 |
$130.38 |
0 |
$0 |
Dean
Bumbaca |
0 |
$0 |
0 |
$0 |
0 |
$0 |
Andrew
Jacobson |
0 |
$0 |
2 |
$130.38 |
8 |
$1,211.00 |
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 October
31,
2022. 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.
The portfolio
manager's ownership
of fund shares is stated
in the
footnote that follows the table.
| |
Portfolio
Manager |
Dollar
Range of Shares Owned1
|
Bradley
Amoils |
over
$1,000,000 |
Dean
Bumbaca |
none |
Andrew
Jacobson |
over
$1,000,000 |
1 |
As of
October 31, 2022,
Bradley Amoils,
Dean Bumbaca, and
Andrew Jacobson beneficially owned $0,
$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.
BOSTON
COMMON ASSET MANAGEMENT, LLC
("Boston
Common")
ESG
International Equity Fund
PORTFOLIO
MANAGERS AND OTHER ACCOUNTS MANAGED
Praveen
Abichandani, CFA, Corné Biemans, and Matthew Zalosh, CFA are jointly and
primarily responsible for the day-to-day management of the fund's portfolio.
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 pays 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 October 31, 2022:
|
|
|
|
|
| |
|
Other
Registered Investment Companies |
Other
Pooled Investment Vehicles |
Other
Accounts |
Portfolio
Manager |
Number
of Accounts |
Assets
(in millions) |
Number
of Accounts |
Assets
(in millions) |
Number
of Accounts |
Assets
(in millions) |
Praveen
Abichandani |
5 |
$1,138.47 |
8 |
$2,874.24 |
543 |
$1,653.17 |
Corné
Biemans |
4 |
$1,117.59 |
6 |
$2,656.55 |
533 |
$1,889.88 |
Matthew
Zalosh |
4 |
$1,087.69 |
7 |
$2,402.35 |
230 |
$153.71 |
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 |
Other
Accounts |
Portfolio
Manager |
Number
of Accounts |
Assets
(in millions) |
Number
of Accounts |
Assets
(in millions) |
Number
of Accounts |
Assets
(in millions) |
Praveen
Abichandani |
0 |
$0 |
0 |
$0 |
0 |
$0 |
Corné
Biemans |
0 |
$0 |
0 |
$0 |
0 |
$0 |
Matthew
Zalosh |
0 |
$0 |
0 |
$0 |
0 |
$0 |
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 October 31, 2022. 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.
The portfolio manager's ownership of fund shares is stated in the
footnote that follows the table.
| |
Portfolio
Manager |
Dollar
Range of Shares Owned1
|
Praveen
Abichandani |
$50,001–$100,000 |
Corné
Biemans |
$100,001–$500,000 |
Matthew
Zalosh |
$100,001–$500,000 |
1 |
As of
October 31, 2022,
Praveen Abichandani, Corné Biemans, and Matthew Zalosh beneficially owned
$50,001–$100,000,
$100,001–$500,000, and $100,001–$500,000,
respectively, of the fund. |
POTENTIAL
CONFLICTS OF INTEREST
Material
conflicts of interest exist whenever a portfolio manager simultaneously manages
multiple accounts. Even though Boston Common does not charge
performance-based fees, it has different fee structures and some clients pay a
higher fee for management services. This creates an incentive for Boston
Common to favor those accounts in order to increase its compensation. Boston
Common mitigates the risk of this conflict by using trade allocation
policies that are designed to ensure that the funds and separately managed
accounts are treated fairly. Reviews of transactions are made in order to
ensure fairness of allocation and price. The risk of conflicts of interest is
also mitigated by the fact that the funds are managed in the same way as our
separately managed model accounts in the same product. Further, compensation is
based on the profitability of the business and each investment
professional's sector attribution and is not tied to the fund's performance or
the performance of specific accounts, which reduces the risk that one
account will be favored over another.
In
addition, conflicts of interest may arise during our proxy voting process.
Boston Common surveys its proxy advisory firm annually regarding many
items, one
of which is conflicts of interest. Its proxy advisory firm makes their conflict
policies available online. Boston Common has the ability to access and
review these policies.
Boston
Common utilizes a custom proxy voting policy with its proxy advisory firm. The
Boston Common team works with the custom voting team at the proxy
advisory firm to resolve any potential conflicts of interest both before the
proxy voting season starts and if/when conflicts arise during the season.
Boston Common's policy is to resolve any conflicts of interest to the clients'
benefit. Boston Common's investment team is consulted if a question or
potential conflict arises between Boston Common and its client. Boston Common
also uses its proxy administrator, ISS - Institutional Shareholder
Services, to vote proxies according to specific, pre-determined guidelines. The
retention of ISS - Institutional Shareholder Services is one way in
which Boston Common resolves potential conflicts between its interests and those
of its clients.
The
Director of Shareowner Engagement and members of the ESG Team will determine how
proxy issues should be the voted. These decisions will be made in
accordance with Boston Common's social guidelines. The Director of Shareowner
Engagement and the ESG Team will periodically consult with Boston
Common's portfolio managers and analysts to avoid potential conflicts of
interest between social and economic issues. These consultations will take
place at regularly scheduled meetings of Boston Common's investment team and
notes will be maintained of these meetings. Boston Common's
Chief Compliance Officer is responsible for working with John Hancock to
file Form N-PX in a timely manner. The funds' voting record is posted to
the funds' website.
COMPENSATION
Boston
Common offers its portfolio managers a combination of cash compensation (a base
salary and bonus) and a competitive benefits package. The bonus pool
is determined based on the business's profitability, then allocated among the
team based on each employee's individual contribution. Employees
also participate in a 401(k) plan and receive profit sharing contributions. In
addition, senior members of the team have the opportunity to participate
in direct ownership via the purchase of shares in the firm. The percentage of
compensation from each of these sources varies by individual and based
on the profitability of the business.
For
portfolio managers, Boston Common emphasizes variable compensation arrangements
based on investment returns and analytical contribution through
productivity. Boston Common monitors attribution analysis of all major products
through the year and on a multi-year basis, with a focus at year end on
rolling three-year returns. This is an important (but not sole) component of the
year end assessment of portfolio manager and investment team
performance. The final levels are based on management's judgment of how
effectively the employee is advancing the long-term goals of the firm
and its
clients. An employee's year-end bonus can make up the majority of total
compensation. Boston Common attempts to be competitive within its industry
for firms of similar size. Its recruiting firms provide insight into
compensation trends within the local investment management industry that
help Boston
Common determine compensation targets for its staff.
Boston
Common also has a profit sharing plan for all employees and ownership grants for
key professionals who Boston Common believes are critical to the
long-term success of the firm. To date, priority in ownership grants has been on
retaining key professionals and providing proper incentives for them more
so than on succession planning, since the firm's senior professionals are still
more than a decade from standard retirement age. Boston Common
considers its portfolio managers as key professionals.
Additionally,
as described in the Conflicts of Interest section, compensation is not tied to
the performance of specific accounts, which reduces the risk that one
account will be favored over another.
BOSTON
PARTNERS GLOBAL INVESTORS, INC.
("Boston
Partners")
Disciplined
Value International Fund
PORTFOLIO
MANAGERS AND OTHER ACCOUNTS MANAGED
Joseph F.
Feeney, Jr., CFA, Christopher K. Hart, CFA, and Joshua M. Jones, CFA, are
jointly and primarily responsible for the day-to-day management of the
fund's portfolio.
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 pays 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 October 31, 2022:
|
|
|
|
|
| |
|
Other
Registered Investment Companies |
Other
Pooled Investment Vehicles |
Other
Accounts |
Portfolio
Manager |
Number
of Accounts |
Assets
(in millions) |
Number
of Accounts |
Assets
(in millions) |
Number
of Accounts |
Assets
(in millions) |
Joseph
F. Feeney, Jr.* |
9 |
$3,607 |
7 |
$5,834 |
26 |
$1,767 |
Christopher
K. Hart |
4 |
$2,448 |
7 |
$5,834 |
26 |
$1,767 |
Joshua
M. Jones |
4 |
$2,448 |
7 |
$5,834 |
26 |
$1,767 |
* |
As
CIO, Joseph F. Feeney, Jr. is responsible for overseeing all of Boston
Partner's investment strategies. |
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 |
Other
Accounts |
Portfolio
Manager |
Number
of Accounts |
Assets
(in millions) |
Number
of Accounts |
Assets
(in millions) |
Number
of Accounts |
Assets
(in millions) |
Joseph
F. Feeney, Jr. |
0 |
$0 |
0 |
$0 |
0 |
$0 |
Christopher
K. Hart |
0 |
$0 |
0 |
$0 |
0 |
$0 |
Joshua
M. Jones |
0 |
$0 |
0 |
$0 |
0 |
$0 |
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 October 31, 2022. 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.
The portfolio manager's ownership of fund shares is stated in the
footnote that follows the table.
| |
Portfolio
Manager |
Dollar
Range of Shares Owned1
|
Joseph
F. Feeney, Jr. |
$500,001–$1,000,000 |
Christopher
K. Hart |
$500,001–$1,000,000 |
Joshua
M. Jones |
$50,001–$100,000 |
1 |
As of
October 31, 2022,
Joseph F. Feeney, Jr., Christopher K. Hart, and Joshua M. Jones
beneficially owned $500,001–$1,000,000,
$500,001–$1,000,000, and
$50,001–$100,000,
respectively, 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.
COMPENSATION
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. In the case
of John Hancock Disciplined Value International Fund, product investment
performance is based on the fund's 1-, 3-, and 5-year performance compared to
its market benchmark, the Russell 1000 Value Index, and compared to
its consultant peer group for large cap value. 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.
GRAHAM
CAPITAL MANAGEMENT, L.P.
("Graham")
Diversified
Macro Fund
PORTFOLIO
MANAGERS AND OTHER ACCOUNTS MANAGED
Pablo
Calderini and Kenneth Tropin are jointly and primarily responsible for the
day-to-day management of the fund's portfolio.
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 pays 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 October 31, 2022:
|
|
|
|
|
| |
|
Other
Registered Investment Companies |
Other
Pooled Investment Vehicles |
Other
Accounts |
Portfolio
Manager |
Number
of Accounts |
Assets
(in millions) |
Number
of Accounts |
Assets
(in millions) |
Number
of Accounts |
Assets
(in millions) |
Pablo
Calderini |
5 |
$2,708 |
50 |
$7,993 |
27 |
$7,163 |
Kenneth
Tropin |
5 |
$2,708 |
50 |
$7,993 |
27 |
$7,163 |
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 |
Other
Accounts |
Portfolio
Manager |
Number
of Accounts |
Assets
(in millions) |
Number
of Accounts |
Assets
(in millions) |
Number
of Accounts |
Assets
(in millions) |
Pablo
Calderini |
0 |
$0 |
38 |
$6,757 |
20 |
$3,159 |
Kenneth
Tropin |
0 |
$0 |
38 |
$6,757 |
20 |
$3,159 |
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 October 31, 2022. 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.
The portfolio manager's ownership of fund shares is stated in the
footnote that follows the table.
| |
Portfolio
Manager |
Dollar
Range of Shares Owned1
|
Pablo
Calderini |
$10,001–$50,000 |
Kenneth
Tropin |
$10,001–$50,000 |
1 |
As of
October 31, 2022,
Kenneth Tropin and Pablo Calderini beneficially owned $10,001–$50,000 and
$10,001–$50,000, respectively, of the fund. |
POTENTIAL
CONFLICTS OF INTEREST
The
portfolio managers may manage numerous accounts for multiple clients. These
accounts may include collective investment funds and separate accounts
managed on behalf of institutional clients, including registered investment
companies. The portfolio managers make investment decisions for each
account based on the investment objectives and policies and other relevant
investment considerations applicable to that portfolio.
When the
portfolio managers have responsibility for managing more than one account,
potential conflicts of interest may arise. Those conflicts could include
preferential treatment of one account over others in terms of allocation of
resources or of investment opportunities. For instance, Graham may receive
fees from certain accounts that are higher than the fee it receives from the
fund, or it may receive a performance-based fee on certain accounts.
In those instances, the portfolio managers may have an incentive to favor the
higher and/or performance-based fee accounts over the fund. Graham has
adopted policies and procedures designed to address these potential material
conflicts. For instance, Graham utilizes a system for allocating
investment opportunities among accounts that is designed to provide a fair and
equitable allocation.
COMPENSATION
The
portfolio managers receive a salary, in the case of Messrs. Calderini and
Tropin, and a discretionary bonus and a formula bonus linked to performance
of certain GCM Graham funds, in the case of Mr. Calderini. In addition, Mr.
Tropin, as an indirect owner of Graham, is allocated a portion of Graham's
net income.
MANULIFE
IM (US)
Balanced
Fund
Emerging
Markets Equity Fund
Financial
Industries Fund
Fundamental
Large Cap Core Fund
Regional
Bank Fund
Small
Cap Core Fund
PORTFOLIO
MANAGERS AND OTHER ACCOUNTS MANAGED
The
following table shows the portfolio managers at Manulife IM (US) who are
primarily responsible, or jointly and primarily responsible, for the
day-to-day
management of the stated funds' portfolios.
| |
Fund
Managed |
Portfolio
Managers |
Balanced
Fund |
Susan
A. Curry, Jeffrey N. Given, CFA, and Michael J. Scanlon, Jr.,
CFA |
Emerging
Markets Equity Fund |
Bryony
Deuchars, CFA, David Dugdale, PhD, CFA, Philip Ehrmann, Kathryn
Langridge, Bhupinder Sachdev, CFA, and Talib Saifee |
Financial
Industries Fund |
Susan
A. Curry and Ryan P. Lentell, CFA |
Fundamental
Large Cap Core Fund |
Emory
W. Sanders, Jr., CFA, and Jonathan T. White, CFA |
Regional
Bank Fund |
Susan
A. Curry and Ryan P. Lentell, CFA |
Small
Cap Core Fund |
Ryan
Davies, CFA, Joseph Nowinski, and Bill Talbot,
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 pays 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 any similarly managed accounts.
The
following table provides information as of October 31, 2022:
|
|
|
|
|
| |
|
Other
Registered Investment Companies |
Other
Pooled Investment Vehicles |
Other
Accounts |
Portfolio
Manager |
Number
of Accounts |
Assets
(in millions) |
Number
of Accounts |
Assets
(in millions) |
Number
of Accounts |
Assets
(in millions) |
Susan
A. Curry |
2 |
$940 |
2 |
$294 |
0 |
$0 |
Ryan
Davies |
0 |
$0 |
6 |
$100 |
0 |
$0 |
Bryony
Deuchars |
0 |
$0 |
0 |
$0 |
0 |
$0 |
David
Dugdale |
0 |
$0 |
0 |
$0 |
0 |
$0 |
Philip
Ehrmann |
0 |
$0 |
4 |
$533 |
0 |
$0 |
Jeffrey
N. Given |
16 |
$30,466 |
34 |
$6,838 |
19 |
$10,050 |
Kathryn
Langridge |
0 |
$0 |
4 |
$533 |
0 |
$0 |
Ryan
P. Lentell |
2 |
$940 |
2 |
$294 |
0 |
$0 |
Joseph
Nowinski |
0 |
$0 |
6 |
$100 |
0 |
$0 |
Bhupinder
Sachdev |
0 |
$0 |
0 |
$0 |
0 |
$0 |
Emory
W. Sanders, Jr. |
5 |
$3,168 |
28 |
$6,484 |
9 |
$2,813 |
Talib
Saifee |
0 |
$0 |
4 |
$533 |
0 |
$0 |
Michael
J. Scanlon, Jr. |
0 |
$0 |
4 |
$260 |
0 |
$0 |
Bill
Talbot |
0 |
$0 |
6 |
$100 |
0 |
$0 |
Jonathan
T. White |
4 |
$2,463 |
23 |
$5,027 |
9 |
$2,813 |
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 |
Other
Accounts |
Portfolio
Manager |
Number
of Accounts |
Assets
(in millions) |
Number
of Accounts |
Assets
(in millions) |
Number
of Accounts |
Assets
(in millions) |
Susan
A. Curry |
0 |
$0 |
0 |
$0 |
0 |
$0 |
Ryan
Davies |
0 |
$0 |
0 |
$0 |
0 |
$0 |
Bryony
Deuchars |
0 |
$0 |
0 |
$0 |
0 |
$0 |
David
Dugdale |
0 |
$0 |
0 |
$0 |
0 |
$0 |
Philip
Ehrmann |
0 |
$0 |
0 |
$0 |
0 |
$0 |
Jeffrey
N. Given |
0 |
$0 |
0 |
$0 |
0 |
$0 |
Kathryn
Langridge |
0 |
$0 |
0 |
$0 |
0 |
$0 |
Ryan
P. Lentell |
0 |
$0 |
0 |
$0 |
0 |
$0 |
Joseph
Nowinski |
0 |
$0 |
0 |
$0 |
0 |
$0 |
Bhupinder
Sachdev |
0 |
$0 |
0 |
$0 |
0 |
$0 |
Talib
Saifee |
0 |
$0 |
0 |
$0 |
0 |
$0 |
Emory
W. Sanders, Jr. |
0 |
$0 |
0 |
$0 |
4 |
$1,109 |
Michael
J. Scanlon, Jr. |
0 |
$0 |
0 |
$0 |
0 |
$0 |
Bill
Talbot |
0 |
$0 |
0 |
$0 |
0 |
$0 |
Jonathan
T. White |
0 |
$0 |
0 |
$0 |
4 |
$1,109 |
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 October 31, 2022. 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 that follows the
table.
| |
Portfolio
Manager |
Dollar
Range of Shares Owned |
Balanced
Fund1
|
Susan
A. Curry |
$100,001–$500,000 |
Jeffrey
N. Given |
$100,001–$500,000 |
Michael
J. Scanlon, Jr. |
over
$1,000,000 |
Emerging
Markets Equity Fund2
|
Bryony
Deuchars |
$10,001–$50,000 |
David
Dugdale |
$100,001–$500,000 |
Philip
Ehrmann |
$500,001–$1,000,000 |
Kathryn
Langridge |
$500,001–$1,000,000 |
Bhupinder
Sachdev |
$10,001–$50,000 |
Tailib
Saifee |
$100,001–$500,000 |
Financial
Industries Fund3
|
Susan
A. Curry |
$500,001–$1,000,000 |
Ryan
P. Lentell |
$500,001–$1,000,000 |
Fundamental
Large Cap Core Fund4
|
Emory
W. Sanders, Jr. |
over
$1,000,000 |
Jonathan
T. White |
$500,001–$1,000,000 |
Regional
Bank Fund5
|
Susan
A. Curry |
$500,001–$1,000,000 |
Ryan
P. Lentell |
$500,001–$1,000,000 |
Small
Cap Core Fund6
|
| |
Portfolio
Manager |
Dollar
Range of Shares Owned |
Ryan
Davies |
$100,001–$500,000 |
Joseph
Nowinski |
$100,001–$500,000 |
Bill
Talbot |
$100,001–$500,000 |
1 |
As of
October 31, 2022,
Susan A. Curry, Jeffrey N. Given, and Michael J. Scanlon, Jr. beneficially
owned $100,001–$500,000,
$100,001–$500,000, and
over $1,000,000,
respectively, of Balanced Fund. |
2 |
As of
October 31, 2022,
Bryony Deuchars, David Dugdale,
Philip Ehrmann, Kathryn Langridge,
Bhupinder Sachdev, and
Tailib Saifee beneficially owned $0, $0, $0,
$0, $0,
and
$0, respectively, of Emerging Markets Equity
Fund. |
3 |
As of
October 31, 2022,
Susan A. Curry and Ryan P. Lentell beneficially owned $500,001–$1,000,000 and
$500,001–$1,000,000, respectively, of Financial Industries
Fund. |
4 |
As of
October 31, 2022,
Emory W. Sanders, Jr. and Jonathan T. White beneficially owned over
$1,000,000 and $500,001–$1,000,000, respectively, of Fundamental
Large
Cap Core Fund. |
5 |
As of
October 31, 2022,
Susan A. Curry and Ryan P. Lentell beneficially owned $500,001–$1,000,000 and
$500,001–$1,000,000, respectively, of Regional Bank Fund. |
6 |
As of
October 31, 2022,
Ryan Davies, Joseph Nowinski, and Bill
Talbot beneficially owned $100,001–$500,000,
$100,001–$500,000, $100,001–$500,000, respectively, of
Small Cap Core 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. |
COMPENSATION
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.
| |
Fund |
Benchmark
Index for Incentive Period |
Balanced
Fund |
Morningstar
US OE Moderate Allocation |
Emerging
Markets Equity Fund |
eVestment
Emerging Markets All Cap Equity Universe Gross |
Financial
Industries Fund |
Morningstar
US OE Financial |
Fundamental
Large Cap Core Fund |
Lipper
Large Cap Core |
Regional
Bank Fund |
S&P
Composite 1500 Banks Index Total Return |
Small
Cap Core Fund |
eA US
Small Cap Core Equity |
PICTET
ASSET MANAGEMENT SA
("Pictet
AM")
Global
Environmental Opportunities Fund
Global
Thematic Opportunities Fund
PORTFOLIO
MANAGERS AND OTHER ACCOUNTS MANAGED
The
following table shows the portfolio managers at Pictet AM who are jointly
and primarily responsible for the day-to-day management of the stated
funds'
portfolios.
| |
Fund
Managed |
Portfolio
Managers |
Global
Environmental Opportunities Fund |
Luciano
Diana, Yi Du, Gabriel Micheli, and Katie Self |
Global
Thematic Opportunities Fund |
Hans
Peter Portner, CFA and Gertjan van der
Geer |
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 pays 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 he manages and
similarly managed accounts.
The
following table provides information as of October 31, 2022:
|
|
|
|
|
| |
|
Other
Registered Investment Companies |
Other
Pooled Investment Vehicles |
Other
Accounts |
Portfolio
Manager |
Number
of Accounts |
Assets
(in millions) |
Number
of Accounts |
Assets
(in millions) |
Number
of Accounts |
Assets
(in millions) |
Luciano
Diana |
1 |
$25 |
2 |
$7,562 |
7 |
$1,044 |
Yi
Du |
1 |
$25 |
2 |
$7,562 |
7 |
$1,044 |
Gabriel
Micheli |
1 |
$25 |
2 |
$7,562 |
7 |
$1,044 |
Katie
Self |
1 |
$25 |
2 |
$7,562 |
7 |
$1,044 |
Hans
Peter Portner |
1 |
$284 |
6 |
$1,778 |
10 |
$623 |
Gertjan
van der Geer |
1 |
$284 |
6 |
$1,778 |
10 |
$623 |
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 |
Other
Accounts |
Portfolio
Manager |
Number
of Accounts |
Assets
(in millions) |
Number
of Accounts |
Assets
(in millions) |
Number
of Accounts |
Assets
(in millions) |
Luciano
Diana |
0 |
$0 |
0 |
$0 |
0 |
$0 |
Yi
Du |
0 |
$0 |
0 |
$0 |
0 |
$0 |
Katie
Self |
0 |
$0 |
0 |
$0 |
0 |
$0 |
Gabriel
Micheli |
0 |
$0 |
0 |
$0 |
0 |
$0 |
Hans
Peter Portner |
0 |
$0 |
0 |
$0 |
0 |
$0 |
Gertjan
van der Geer |
0 |
$0 |
0 |
$0 |
0 |
$0 |
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 October 31, 2022. 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.
The portfolio manager's ownership of fund shares is stated in the
footnote that follows the table.
| |
Portfolio
Manager |
Dollar
Range of Shares Owned |
Global
Environmental Opportunities Fund1
|
|
Luciano
Diana |
$50,001–$100,000 |
Yi
Du |
$1–$10,000 |
| |
Portfolio
Manager |
Dollar
Range of Shares Owned |
Gabriel
Micheli |
$1–$10,000 |
Katie
Self |
none |
Global
Thematic Opportunities Fund2
|
|
Hans
Peter Portner |
$500,001–$1,000,000 |
Gertjan
van der Geer |
$100,001–$500,000 |
1 |
As of
October 31, 2022,
Luciano Diana, Yi Du, Gabriel
Micheli, and
Katie Self
beneficially owned $0, $0, $0,
and
$0, respectively, of Global Environmental Opportunities Fund. |
2 |
As of
October 31, 2022,
Hans Peter Portner and Gertjan van der Geer beneficially owned $0 and $0,
respectively, of Global Thematic Opportunities
Fund. |
POTENTIAL
CONFLICTS OF INTEREST
Pictet AM
has a fiduciary duty to manage its client's assets in accordance with the fund's
stated investment strategies, in accordance with the Financial
Conduct Authority, the Financial Market Supervisory Authority and SEC rules
(Rules), and also to manage any conflicts of interest arising between
either Pictet AM and its client, or an employee and the client. The Pictet AM
Compliance manual sets out how conflicts of interest between Pictet AM
and the client are handled, and the detailed Pictet AM Code of Ethics sets out
the standards required of employees which addresses conflicts
of interests between employees and the firm's clients. In addition, Pictet AM
has also issued an internal policy on conflicts of interest. Compliance
with the fund's stated investment strategies, the Rules and the Code of Ethics
(especially Personal Account Dealing) is monitored on a regular
basis by Pictet AM's compliance department. However, all members of staff have
an obligation to report any breaches of which they become aware. All
breaches identified are recorded and reported to Pictet AM's Compliance and
Business Risk departments, who will oversee and approve any corrective
action, which should take place as soon as reasonably practicable. In accordance
with general fiduciary and regulatory law, Pictet AM discloses
that the following conflicts of interest may arise among others:
• |
Pictet
AM or an associate (which is, broadly, an entity within Pictet AM) may
undertake regulated activities for other
clients; |
• |
a
director or employee of Pictet AM or of an associate may be a director of,
hold or deal in securities of, or is otherwise interested in any company
whose
securities are held or dealt in on your
behalf; |
• |
a
transaction is effected in securities issued by an associate or the client
of an associate; |
• |
a
transaction is effected in securities in respect of which Pictet AM or an
associate may benefit from a commission, fee, mark-up or mark-down
payable
otherwise than by a client, and/or Pictet AM or an associate also may be
remunerated by the counterparty to any such
transaction; |
• |
Pictet
AM deals on a client's behalf with, or in the securities of, an
associate; |
• |
Pictet
AM may act as agent for a client in relation to transactions in which it
also is acting as agent for the account of other customers and/or
associates; |
• |
a
transaction is effected in units or shares of in-house funds or connected
investment trusts or of any company of which Pictet AM or an associate is
the
manager, operator, banker, adviser, custodian or
trustee; |
• |
Pictet
AM may effect transactions involving placings and/or new issues with an
associate which may be acting as principal or receiving agent's
commission; |
• |
a
transaction is effected in securities of a company for which Pictet AM or
an associate has underwritten, or managed or arranged an issue or offer
for
sale, within the previous 12 months; |
• |
a
transaction is effected in securities in respect of which Pictet AM or an
associate, or a director or employee of Pictet AM or an associate, is
contemporaneously
trading or has traded on its own account or has either a long or short
position. |
If Pictet
AM's organizational arrangements and all reasonable efforts taken to prevent or
manage conflicts of interest are not sufficient to ensure, with reasonable
confidence, that the material risks of damage to the interests of a client will
be prevented, Pictet AM will clearly disclose the specific description
of the nature and sources of the conflict to the client. Such disclosure will be
made prior to the conclusion of a contract, and in a durable medium to
the client and include sufficient detail of the conflict and the steps
undertaken to mitigate these risks, to enable the client to take an informed
decision with respect to the service in the context of which the conflicts of
interest arise. As at the date of this statement, Pictet AM does not
have any
conflicts where the measures in place do not sufficiently mitigate the conflict
and the risk of harm to the client. In an extreme case where we consider
that the conflict of interest is too great and cannot be managed in any other
way (including by disclosure), we may decline to act for the client.
COMPENSATION
Pictet AM's
remuneration scheme is directly related to the performance of the individual,
his/her team and of the institutional asset management division
under the Pictet AM Group. For the investment staff and senior management team,
remuneration comprises salary, bonus and the Pictet Group
parts. The bonus and parts elements of compensation are structured to reflect
individual performance and the long-term value of the individual to the
group. To increase the objectivity of the assessment, the Pictet AM Group uses
Balanced Scorecards (BSC) to enable a direct link to be made between the
calculation of the discretionary element of remuneration, the performance of the
individual, his or her unit and Pictet AM. An element of pay is also
linked to the profits of the Pictet Group as a whole. The BSC includes a range
of quantitative and qualitative objectives, each of which is linked to
the overall objectives of Pictet AM Group's business and weighted according to
its relative significance. Among the precisely measurable objectives
are risk adjusted investment performance, revenue growth on new business and
client retention. For investment managers, the dominant
factor is
investment performance. For the funds, the managers' performance is measured on
an after-tax basis against the index. Qualitative measures are
classified under processes & innovation, and people & skills, and
include team management, recruitment goals and peer cooperation. Pictet AM
employees
are also eligible to participate in Pictet Group's pension and insurance
plans.
PZENA
INVESTMENT MANAGEMENT, LLC
("Pzena")
Classic
Value Fund
PORTFOLIO
MANAGERS AND OTHER ACCOUNTS MANAGED
John J.
Flynn, Richard S. Pzena, and Benjamin S. Silver, CFA, CPA, are jointly and
primarily responsible for the day-to-day management of the fund's portfolio.
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 pays 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 October 31, 2022:
|
|
|
|
|
| |
|
Other
Registered Investment Companies |
Other
Pooled Investment Vehicles |
Other
Accounts |
Portfolio
Manager |
Number
of Accounts |
Assets
(in millions) |
Number
of Accounts |
Assets
(in millions) |
Number
of Accounts |
Assets
(in millions) |
John
J. Flynn |
7 |
$9,603 |
10 |
$279 |
84 |
$3,181 |
Richard
S. Pzena |
5 |
$9,424 |
8 |
$205 |
28 |
$994 |
Benjamin
S. Silver |
8 |
$11,209 |
31 |
$10,938 |
99 |
$5,869 |
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 |
Other
Accounts |
Portfolio
Manager |
Number
of Accounts |
Assets
(in millions) |
Number
of Accounts |
Assets
(in millions) |
Number
of Accounts |
Assets
(in millions) |
John
J. Flynn |
2 |
$8,880 |
1 |
$16 |
0 |
$0 |
Richard
S. Pzena |
2 |
$8,880 |
2 |
$108 |
0 |
$0 |
Benjamin
S. Silver |
3 |
$10,486 |
4 |
$234 |
0 |
$0 |
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 October 31, 2022. 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.
The portfolio manager's ownership of fund shares is stated in the
footnote that follows the table.
| |
Portfolio
Manager |
Dollar
Range of Shares Owned1
|
John
J. Flynn |
$100,001–$500,000 |
Richard
S. Pzena |
over
$1,000,000 |
Benjamin
S. Silver |
$500,001–$1,000,000 |
1 |
As of
October 31, 2022,
John J. Flynn, Richard S. Pzena, and Benjamin S. Silver beneficially owned
$100,001–$500,000,
over $1,000,000, and $500,001–$1,000,000,
respectively, of the 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 fund does not
believe that any material conflicts are likely to arise out of a portfolio
manager's responsibility for the management of the fund as well as one
or more
other accounts. All investment decisions in the portfolio are made unanimously
by the fund's portfolio management team so no single portfolio
manager may act unilaterally. The subadvisor has 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 subadvisor has structured its
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 IPOs and
private
placements. If, for example, an IPO 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 IPO. 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 procedures of the
subadvisor generally result in such trades being "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 also may 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 may 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 Advisor or 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. Additionally, to prevent conflicts of interest
associated with managing accounts with different compensation structures,
Pzena generally requires portfolio decisions to be made on a strategy-specific
basis and pre-allocation of all client orders based on specific
fee-neutral criteria. The investment performance on specific accounts
is
not a factor in determining the portfolio manager's compensation. See
"Compensation" below. |
• |
A
portfolio manager may 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, 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. While these accounts have many similarities, the investment
performance of each account will be different due to differences in fees,
expenses
and cash flows. |
COMPENSATION
Portfolio
managers and other investment professionals at Pzena are compensated through a
combination of a fixed base salary (set annually), discretionary
bonus and equity ownership, if appropriate due to superior performance. The time
frame that Pzena examines for bonus compensation is annual.
Pzena considers both quantitative and qualitative factors when determining
performance bonuses; however, performance bonuses are not based on
investment performance or assets under management. For investment professionals,
Pzena examines such things as effort, efficiency, ability to focus on
the correct issues, stock modeling ability, and ability to successfully interact
with company management. However, Pzena always looks at the person
as a whole and contributions that he/she has made and is likely to make in the
future. Pzena avoids a compensation model that is driven by individual
security performance, as this can lead to short-term thinking which is contrary
to the firm's value investment philosophy.
Ownership
is provided to professionals who have contributed meaningfully to the long-term
success of the organization. Partnership eligibility is determined
by the Firm's Executive Committee, typically requiring a period of employment of
five years at the Firm. Our overriding criteria on a person's
eligibility for partnership is our assessment that we want to work with that
individual for the rest of his or her career. Employees invited into
the
partnership generally receive an initial share grant at no cost to them and are
subsequently offered economically attractive opportunities to exchange
cash compensation for additional shares.
SUSTAINABLE
GROWTH ADVISERS, LP
("SGA")
U.S.
Global Leaders Growth Fund
PORTFOLIO
MANAGERS AND OTHER ACCOUNTS MANAGED
Hrishikesh
Gupta, Kishore
Rao, and Robert L. Rohn are jointly and primarily responsible for the day-to-day
management of the fund's portfolio.
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 pays 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 October 31, 2022:
|
|
|
|
|
| |
|
Other
Registered Investment Companies |
Other
Pooled Investment Vehicles |
Other
Accounts |
Portfolio
Manager |
Number
of Accounts |
Assets
(in millions) |
Number
of Accounts |
Assets
(in millions) |
Number
of Accounts |
Assets
(in millions) |
Hrishikesh
Gupta |
11 |
$8,771.54 |
31 |
$7,125.04 |
60 |
$3,404.97 |
Kishore
Rao |
13 |
$8,920.73 |
33 |
$7,212.34 |
62 |
$3,419.61 |
Robert
L. Rohn |
11 |
$8,771.54 |
31 |
$7,125.04 |
60 |
$3,404.97 |
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 |
Other
Accounts |
Portfolio
Manager |
Number
of Accounts |
Assets
(in millions) |
Number
of Accounts |
Assets
(in millions) |
Number
of Accounts |
Assets
(in millions) |
Hrishikesh
Gupta |
0 |
$0 |
0 |
$0 |
1 |
$73.23 |
Kishore
Rao |
0 |
$0 |
0 |
$0 |
1 |
$73.23 |
Robert
L. Rohn |
0 |
$0 |
0 |
$0 |
1 |
$73.23 |
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 October 31, 2022. 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.
The portfolio manager's ownership of fund shares is stated in the
footnote that follows the table.
| |
Portfolio
Manager |
Dollar
Range of Shares Owned1
|
Hrishikesh
Gupta |
$500,001–$1,000,000 |
Kishore
Rao |
$500,001–$1,000,000 |
Robert
L. Rohn |
over
$1,000,000 |
1 |
As of
October 31, 2022,
Hrishikesh Gupta,
Kishore Rao, and Robert L. Rohn beneficially owned $500,001–$1,000,000,
$500,001–$1,000,000, and over $1,000,000,
respectively, of the 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 Fund does
not believe that any material conflicts are likely to arise out of a portfolio
manager's responsibility for the management of the Fund as well as one or
more other accounts. The subadvisor has 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 subadvisor has structured its compensation
arrangements in a manner that is intended to limit such potential for
conflicts
of interests, including by not using performance-based compensation that is tied
to any specific account performance for any employee. See "Compensation"
below.
• |
A
portfolio manager could favor one account over another in allocating new
investment opportunities that have limited supply, such as IPOs and
private
placements. If, for example, an IPO 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 IPO.
|
|
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 procedures of the
subadvisor generally result in such trades being "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 also may 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 may 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 Advisor or 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. |
• |
A
portfolio manager may 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, 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. While these accounts have many similarities, the investment
performance of each account will be different due to differences in fees,
expenses
and cash flows. |
COMPENSATION
SGA has
adopted a system of compensation for portfolio managers that seeks to align the
financial interests of the investment professionals with those of SGA. The
compensation of each of SGA's three principals/portfolio managers is based upon
(i) a fixed base compensation and (ii) SGA's financial performance.
SGA's compensation arrangements with its investment professionals are not
determined on the basis of specific funds or accounts managed by
the investment professional. All investment professionals receive customary
benefits that are offered generally to all salaried employees of SGA.
Additionally, most members of the investment team are equity owners in the firm
and are entitled to their proportional participation in the firm's
profits. A substantial portion of total compensation of staff members is
expected to come from the equity participation in SGA.
Incentive
Compensation.
SGA retains
for the benefit of its partners and employees almost 50% of its profits through
continued direct equity ownership of the firm as well as an additional
participation in the profitability of the firm through an incremental
equity-like incentive program referred to as "Performance Shares" that is
linked
directly to client long-term success. The Performance Shares plan is funded by
17.5% of the profits of the firm and is distributed internally in an
equity-like
manner based on long-term, individual contribution to client success. The
allocation of this Performance Shares payment is determined annually by
SGA's three founding principals.
To ensure
these Performance Shares are broadly distributed to investment team members, the
founders have limited their participation to a maximum of 1% each.
The above-referenced Performance Shares (i.e. allocation of 17.5% of the profits
of the firm) is paid 80% in cash and the remaining 20% is deferred
over a three year period.
Deferred
Compensation. In
addition to the existing partnership equity interests noted above, SGA employees
are able to earn the right to acquire additional
shares in the company.
Other
Compensation. SGA
partners and employees receive a comprehensive benefits package including an
annual contribution to a tax-deferred retirement
account.
TRILLIUM
ASSET MANAGEMENT, LLC
("Trillium")
ESG
Large Cap Core Fund
PORTFOLIO
MANAGERS AND OTHER ACCOUNTS MANAGED
Elizabeth
R. Levy, CFA, Mitali Prasad, CFA, and Cheryl I. Smith, Ph.D., CFA
are jointly and primarily responsible for the day-to-day management of the
fund's
portfolio.
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 pays 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 October 31, 2022:
|
|
|
|
|
| |
|
Other
Registered Investment Companies |
Other
Pooled Investment Vehicles |
Other
Accounts |
Portfolio
Manager |
Number
of Accounts |
Assets
(in millions) |
Number
of Accounts |
Assets
(in millions) |
Number
of Accounts |
Assets
(in millions) |
Elizabeth
R. Levy |
1 |
$35.65 |
0 |
$0 |
1434 |
$1,267.63 |
Mitali
Prasad |
1 |
$35.65 |
0 |
$0 |
652 |
$732.44 |
Cheryl
I. Smith |
1 |
$374.61 |
0 |
$0 |
1119 |
$1,018.45 |
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 |
Other
Accounts |
Portfolio
Manager |
Number
of Accounts |
Assets
(in millions) |
Number
of Accounts |
Assets
(in millions) |
Number
of Accounts |
Assets
(in millions) |
Elizabeth
R. Levy |
0 |
$0 |
0 |
$0 |
0 |
$0 |
Mitali
Prasad |
0 |
$0 |
0 |
$0 |
0 |
$0 |
Cheryl
I. Smith |
0 |
$0 |
0 |
$0 |
0 |
$0 |
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 October 31, 2022. 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.
The portfolio manager's ownership of fund shares is stated in the
footnote that follows the table.
| |
Portfolio
Manager |
Dollar
Range of Shares Owned1
|
Elizabeth
R. Levy |
$100,001–$500,000 |
Mitali
Prasad |
$1–$10,000 |
Cheryl
I. Smith |
over
$1,000,000 |
1 |
As of
October 31, 2022,
Elizabeth R. Levy, Mitali Prasad, and Cheryl I. Smith beneficially owned
$100,001–$500,000, $1–$10,000, and over $1,000,000, respectively,
of ESG Large Cap Core Fund. |
POTENTIAL
CONFLICTS OF INTEREST
Actual or
apparent material conflicts of interest may arise when a portfolio manager has
day-to-day management responsibilities with respect to more than one
investment account or in other circumstances. Portfolio managers of investment
companies managed by Trillium may be presented with potential
conflicts of interests in the allocation of investment opportunities, the
allocation of their time and investment ideas, and the allocation of
aggregated
orders among investment company accounts and other accounts managed by the
portfolio managers, affiliated client accounts, and any accounts in
which the portfolio managers may have personal investments.
Portfolio
managers are eligible to participate in the Company's 401k profit-sharing plan.
Contributions to this plan and allocations to individual employees
are determined on an annual basis based on a variety of factors such as Company
and individual performance. Additionally, incentive compensation
is based in part on quantitative assessment of performance of investment
strategies. Trillium reviews both short- and longer-term performance
to determine variable compensation. Trillium also conducts ongoing monitoring of
strategy risk exposures, which helps ensure that
portfolio
managers do not take undue risk to achieve higher compensation. Trillium
believes such inherent conflicts of interest in managing accounts for various
clients are controlled and mitigated by its Trade Allocation Policy, Code of
Ethics and other compliance policies and procedures to which the
portfolio managers are subject. In addition, Trillium does not charge any
performance-based fees.
COMPENSATION
Portfolio
managers are compensated with fixed base salaries and variable bonuses
consistent with industry standards.
Base
Salary. Salaries
are not based on the performance of investment companies managed by Trillium or
their overall net assets, but rather are based on
the portfolio manager's position and years of experience.
Incentive
Compensation. Portfolio
managers are eligible to receive a bonus based on Trillium's profitability and
individual contribution to Trillium's business.
Contribution to Trillium includes investment performance, participation in
advocacy, and client or sales interactions as needed. Portfolio managers
are reviewed using a combination of qualitative and quantitative measures based
on their input to the investment management process and the overall
success of Trillium. Trillium pays the variable component once per
year.
Deferred
Compensation. Portfolio
managers participate in a deferred compensation plan which includes mandatory
deferral and vesting of a percentage
of overall variable compensation which exceeds a certain cash threshold.
Deferrals vest over three years and are allocated by the participant
to any combination of investment choices included in the plan.
Other
Compensation. Employees
are eligible to participate in a firm-wide profit-sharing plan, which may
receive a discretionary annual contribution from
Trillium's income stream.
WELLINGTON
MANAGEMENT COMPANY LLP
("Wellington
Management")
Infrastructure
Fund
Seaport
Long/Short Fund
PORTFOLIO
MANAGERS AND OTHER ACCOUNTS MANAGED
The
following table shows the portfolio managers at Wellington Management who are
jointly and
primarily responsible for the
day-to-day management of the
stated funds' portfolios.
| |
Fund |
Portfolio
Managers |
Infrastructure
Fund |
Timothy
J. Casaletto, CFA, and G. Thomas Levering |
Seaport
Long/Short Fund |
Jennifer
N. Berg, CFA, Ann C. Gallo, Bruce L. Glazer, Wen Shi, Phd, CFA,
Rebecca
D. Sykes, CFA, Michael G. Toman, and Keith
White |
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 pays 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 he or
she
manages and
any
similarly
managed accounts.
The
following table provides information as of October 31, 2022:
|
|
|
|
|
| |
|
Other
Registered Investment Companies |
Other
Pooled Investment Vehicles |
Other
Accounts |
Portfolio
Manager |
Number
of Accounts |
Assets
(in millions) |
Number
of Accounts |
Assets
(in millions) |
Number
of Accounts |
Assets
(in millions) |
Jennifer
N. Berg |
7 |
$330.61 |
32 |
$1,264.78 |
47 |
$1,373.30 |
Timothy
J. Casaletto |
1 |
$4.39 |
5 |
$52.15 |
7 |
$51.67 |
Ann
C. Gallo |
4 |
$1,108.50 |
24 |
$6,165.90 |
8 |
$2,941.90 |
Bruce
L. Glazer |
14 |
$1,451.20 |
36 |
$1,314.35 |
54 |
$1,002.94 |
G.
Thomas Levering |
17 |
$6,800.26 |
44 |
$3,762.80 |
52 |
$1,571.20 |
Wen
Shi |
11 |
$722.78 |
31 |
$1,842.72 |
71 |
$1,970.91 |
Rebecca
D. Sykes |
13 |
$1,307.85 |
49 |
$6,347.97 |
60 |
$4,430.59 |
Michael
G. Toman |
0 |
$0 |
5 |
$270.46 |
0 |
$0 |
Keith
E. White |
1 |
$1,263.55 |
4 |
$2,378.01 |
0 |
$0 |
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 |
Other
Accounts |
Portfolio
Manager |
Number
of Accounts |
Assets
(in millions) |
Number
of Accounts |
Assets
(in millions) |
Number
of Accounts |
Assets
(in millions) |
Jennifer
N. Berg |
0 |
$0 |
17 |
$933.69 |
11 |
$308.77 |
Timothy
J. Casaletto |
0 |
$0 |
0 |
$0 |
3 |
$35.33 |
Ann
C. Gallo |
0 |
$0 |
11 |
$1,016.00 |
2 |
$1.910.24 |
Bruce
L. Glazer |
1 |
$41.15 |
13 |
$683.86 |
11 |
$159.81 |
G.
Thomas Levering |
2 |
$5,978.00 |
19 |
$2,476.67 |
11 |
$329.66 |
Wen
Shi |
1 |
$17.34 |
9 |
$355.35 |
10 |
$563.26 |
Rebecca
D. Sykes |
1 |
$6.44 |
13 |
$466.67 |
14 |
$1,855.24 |
Michael
G. Toman |
0 |
$0 |
5 |
$270.46 |
0 |
$0 |
Keith
E. White |
1 |
$1,263.55 |
4 |
$2,378.01 |
0 |
$0 |
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 October 31, 2022. 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 that follows the
table.
| |
Portfolio
Manager |
Dollar
Range of Shares Owned |
Infrastructure
Fund1
|
Timothy
J. Casaletto |
none |
G.
Thomas Levering |
over
$1,000,000 |
Seaport
Long/Short Fund2
|
Jennifer
N. Berg |
none |
Ann
C. Gallo |
$100,001–$500,000 |
Bruce
L. Glazer |
none |
Wen
Shi |
none |
Rebecca
D. Sykes |
none |
Michael
G. Toman |
none |
Keith
E. White |
$10,001–$50,000 |
1 |
As of
October 31, 2022,
Timothy J. Casaletto and G.
Thomas Levering beneficially owned $0
and over
$1,000,000,
respectively, of
Infrastructure Fund. |
2 |
As of
October 31, 2022,
Jennifer N. Berg, Ann
C. Gallo, Bruce L. Glazer, Wen
Shi, Rebecca
D. Sykes, Michael
G. Toman, and
Keith E. White beneficially owned $0,
$100,001–$500,000,
$0,
$0, $0,
$0, and $10,001–$50,000,
respectively, of Seaport Long/Short 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.
Casaletto, Glazer,
Levering, Shi, Toman,
and White
and Mses. Berg,
Gallo, and Sykes also manage accounts, which 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.
COMPENSATION
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 October 31, 2022.
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. Each Investment
Professional is eligible to receive an incentive payment based on the revenues
earned by Wellington Management from the fund managed by the
Investment Professional and generally each other account managed by such
Investment Professional. 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 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.
Glazer,
Levering, and White, and Mses. Berg, Gallo, and Sykes are
Partners.
APPENDIX
C – PROXY VOTING POLICIES AND PROCEDURES
JOHN
HANCOCK FUNDS
PROXY
VOTING POLICIES AND PROCEDURES
(Updated
December 10, 2019)
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 or through the fund's
website, at the fund's option.
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").
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.)
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:
•
Aggregation
of Votes:
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.
•
Reporting:
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.
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.
JOHN
HANCOCK VARIABLE TRUST ADVISERS LLC
JOHN
HANCOCK INVESTMENT MANAGEMENT LLC
PROXY
VOTING POLICIES AND PROCEDURES
Updated December
1, 2019
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 proxy voting record with the SEC annually on
Form N-PX.
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 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.
Regulatory
Requirement
Rule
206(4)-6 under the Advisers Act
Reporting
Form-N-PX
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 COO 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.
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.
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.
AXIOM
INVESTORS LLC
PROXY
VOTING POLICIES AND GUIDELINES
Effective
January 2022
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.
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 decide 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 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.
|
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; |
• |
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.
VI.
Disclosure
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. |
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).
BOSTON
COMMON ASSET MANAGEMENT
Effective
Date: March
2022
PROXY
VOTING POLICIES AND PROCEDURES
I.
GENERAL POLICY STATEMENT
Boston
Common Asset Management, LLC ("Boston Common") is a registered investment
adviser under the Investment Advisers Act of 1940, as amended
(the "Advisers Act"). Its authority to vote proxies is derived from Rule
206(4)-6 under the Advisers Act, its advisory agreements and similar
documents.
Boston Common votes proxies on behalf of clients who have not specifically opted
to retain those responsibilities. Boston Common votes proxies of
accounts it manages directly, as well as the proxies of sub-advised accounts. As
a registered investment adviser, Boston Common has a legal and
fiduciary duty to act in the best interest of each client as determined, among
other things, by the client's investment objectives, Boston Common's
comprehensive social guidelines, and if applicable, the social responsibility
guidelines set out in the client's advisory agreement. As a socially
responsible investment adviser, Boston Common engages in shareowner activism on
behalf of clients, which may also include engaging in active
dialogues with management or filing shareholder proposals.
II.
PROXY VOTING GUIDELINES
Boston
Common's proxy voting guidelines are designed to promote best global corporate
governance practices wherever possible. The guidelines advocate
for increased board independence and diversity, disclosure, transparency and
management accountability to shareowners. To achieve these objectives,
Boston Common does not always vote with the recommendations of
management.
Boston
Common pays particular attention to nominations for boards of directors. For
U.S. companies, Boston Common may vote against the election of the
board of directors if there are not at least thirty-percent women and the board
does not contain both a woman and a racial minority representative,
or if the board is not comprised of a majority of independent directors. For
non-U.S. companies, Boston Common may vote against the election of
the board of directors if the board is not comprised of 1) at least 30% women in
Canada and Australia, 2) at least 33% women in the UK, Ireland and
Europe, 3) at least two women in India, 4) at least 40% women in France, Italy
and Norway, and 5) at least one woman in all other regions. For
non-U.S. companies, Boston Common may vote against the election of the board of
directors if the board is not comprised of at least one racial minority in
the UK, Ireland, Australia and Canada.
Boston
Common carefully evaluates the merit of shareholder-sponsored resolutions and
will likely vote in favor of resolutions that encourage management
to increase disclosure, board independence and diversity, and transparency and
accountability on corporate governance, social, and environmental
issues. For example, Boston Common generally supports resolutions requiring
increased disclosure on a company's policies and practices
relating to the environment, executive compensation, human rights, and labor and
employment. Boston Common also files shareholder proposals
related to these issues on behalf of its clients. Boston Common may vote against
any item that would tend to give a company's management a "blank
check" or that would encourage the entrenchment of management. Examples include
classified boards, restrictions against cumulative voting,
establishment of different classes of stock, excessive compensation, poor
stewardship, golden parachutes, or any activity that could be viewed
as a
"poison pill" maneuver. This would also include proposals that seek to expand
the number of options, re-price options, or other actions that would
excessively
dilute common stock shares.
There may
be instances in which Boston Common will not vote proxies. This may happen, for
example, if a portfolio holds foreign securities and the cost of
voting the securities is prohibitively expensive. Boston Common will weigh the
costs and benefits of voting on foreign companies' proxy proposals
and will make an informed decision as to whether voting a given proxy is prudent
and in clients' interests. As part of this determination, it will consider
whether the effect of all of clients' votes on the value of the investment will
outweigh the cost of voting.
a.
Conflicts of Interest
Boston
Common's policy is to resolve any conflicts of interest to the clients' benefit.
Boston Common's Proxy Committee is consulted if a question or potential
conflict arises between Boston Common and its client. Boston Common also uses
its proxy administrator, ISS - Institutional Shareholder Services,
to vote proxies according to specific, pre-determined guidelines. The retention
of ISS - Institutional Shareholder Services is one way in which Boston
Common resolves potential conflicts between its interests and those of its
clients.
b.
ERISA Clients
Using ISS -
Institutional Shareholder Services and the guidelines provided to it, Boston
Common votes proxies as the fiduciary of ERISA clients' assets unless the
plan's fiduciary has specifically retained the right to vote proxies. As is the
case with all its clients, Boston Common votes proxies for ERISA clients for
the clients' benefit. Boston Common's duties in voting proxies for ERISA clients
include the duty of loyalty, prudence, compliance with the plan, and a
duty to avoid prohibited transactions.
III.
PROXY VOTING PROCEDURES
Boston
Common has adopted the following procedures, which it believes are reasonably
designed to ensure that proxies are voted in the best interests of clients
and in accordance with its fiduciary duties and Rule 206(4)-6 under the Advisers
Act.
|
a.
Boston Common's Proxy Committee has oversight of the firm's proxy voting
policies and procedures. At least annually, the Proxy Committee shall
review
and approve Boston Common's proxy voting policies and procedures and any
updates thereto. b.
The Chief Compliance Officer will develop and authorize Boston Common's
proxy voting policies and procedures, subject to the initial approval of
the
Proxy Committee. These procedures will be implemented by the Chief
Compliance Officer or by Boston Common personnel under the supervision
of the Chief Compliance Officer. These procedures
include: |
|
i.
Providing a copy of these Proxy Policies and Procedures to relevant Boston
Common personnel; ii.
Providing all new clients with a copy of these Proxy Voting Policies and
Procedures; iii.
Ensuring that the allocation of proxy voting responsibility between Boston
Common and the client is clearly established and documented in the
client
intake process; iv.
Overseeing the process by which client accounts are properly set up with
ISS - Institutional Shareholder Services and the client's custodian
bank; v.
Coordinating with ISS - Institutional Shareholder
Services; vi.
Providing ISS - Institutional Shareholder Services with guidelines for
voting client proxies; vii.
As applicable, overseeing the process by which Boston Common personnel
vote proxies in override situations, to ensure proxies are being
voted
in accordance with any special restrictions imposed by the
client; viii.
Responding to client requests for documentation showing how their proxies
were voted, maintaining a log of such requests and maintaining
copies
of communications with clients regarding proxy
voting. |
The Chief
Compliance Officer, or his or her delegate, shall ensure that pursuant to Rule
204-2(c) of the Advisers Act, Boston Common (or as to items (ii) and
(iii), ISS - Institutional Shareholder Services on Boston Common's behalf),
retains the following documents:
|
i. A
copy of Boston Common's Proxy Voting Policies and Procedures, as amended
from time to time; ii.
Proxy statements received regarding client securities; iii.
A record of each vote cast; and iv. A
copy of any document created by Boston Common that (a) was material to a
decision on how to vote a proxy; or (b) memorializes the basis
for
that decision. |
These
documents will be kept in an easily accessible place for a period of five years,
the first two in the offices of Boston Common.
The
Director of Shareowner Engagement and members of the ESG Team will determine how
proxy issues should be the voted. These decisions will be made in
accordance with Boston Common's comprehensive social guidelines. The Director of
Shareowner Engagement and the ESG Team will periodically
consult with Boston Common's portfolio managers and analysts to avoid potential
conflicts of interest between social and economic issues.
These consultations will take place at meetings of Boston Common's investment
team and notes will be maintained of these meetings.
The Chief
Compliance Officer will work with ISS – Institutional Shareholder Services to
obtain an official proxy voting record for Boston Common's registered
investment companies. The Chief Compliance Officer will coordinate with the Fund
Administration group of each mutual fund to coordinate the filing
of such record with the SEC on Form N-PX.
IV.
Disclosure to Clients
A copy of
the Boston Common's proxy policies and procedures, as updated from time to time,
are available upon request.
V.
Proxy Voting Vendor
Oversight
Boston
Common's proxy vendor, ISS – Institutional Shareholder Services, will be
included in the annual compliance vendor due diligence review. Boston
Common will review the due diligence package prepared by ISS which includes a
disclosure of the firm's Conflicts Policy, Affiliated Relationships
and Form ADV, among other items.
BOSTON
PARTNERS
GLOBAL INVESTORS, INC.
PROXY
VOTING POLICIES AND PROCEDURES
MARCH
2022
PROXY
VOTING POLICY AND PROCEDURES SUMMARY
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) 832-8153.
GRAHAM
CAPITAL MANAGEMENT, L.P.
1. PROXY
VOTING AND CLASS ACTIONS
Graham has
adopted policies and procedures (the "Proxy Voting Policies and Procedures")
which have been designed to ensure that Graham complies with the
requirements of Rule 206(4)-6 and Rule 204-2(c)(2) under the Advisers Act, and
reflect Graham's commitment to vote all Client securities for which it
exercises voting authority in a manner consistent with the best interest of the
Client. Employees who have the authority to vote Client securities
must familiarize themselves with and strictly adhere to Graham's Proxy Voting
Policies and Procedures.
Although
the Advisers Act does not obligate advisers to adopt policies and procedures in
respect of participating in class actions, in its capacity as a fiduciary
to its Clients Graham has nonetheless adopted such policies and
procedures.
|
B.
Proxy Voting Policies and Procedures |
Graham has
selected and retained ISS Governance Services to assist in the proxy voting
process. The CCO manages Graham's relationship with ISS. The CCO
ensures that ISS votes all proxies according to Graham's general guidance, and
retains all required documentation associated with proxy voting.
Graham has
approved a list of proxy voting guidelines that ISS generally follows when
recommending how to vote on particular proxies. The following guidelines
reflect ISS' general approach on certain key proxy proposals; however, these
guidelines represent only a small number of proposals and the guidelines
are much broader in scope and more detailed.
|
•
Auditor
Ratification. ISS
generally recommends to vote FOR proposals to ratify auditors except where
(i) the auditor has a financial interest or association
with the company, (ii) there is reason to believe the auditor has rendered
an opinion that is neither accurate nor indicative of the company's
financial position, (iii) poor accounting practices have been identified
that rise to a serious level of concern or (iv) fees for non-audit
services
are excessive; |
|
•
Board of
Directors. ISS
generally recommends to vote FOR director nominees except where (i) the
board lacks accountability coupled with sustained
poor performance relative to peers, (ii) the board demonstrates a lack of
responsiveness (e.g., in responding to shareholder proposals, takeover
offers, issues that resulted in one or more directors receiving more than
50% withhold/against votes, etc.), (iii) there are defects in the
composition
of the board (e.g., unacceptable attendance at board and committee
meetings, directors serve on excessive number of boards of other
companies,
etc.), and (iv) the board lacks sufficient controls or features to ensure
its independence; |
|
•
Capital Structure
Changes. ISS
generally recommends to vote (i) FOR proposals to increase the number of
shares where the primary purpose is to issue
shares in connection with a transaction on the same ballot, (ii) AGAINST
proposals to increase the number of shares of a class with superior
voting
rights, (iii) AGAINST proposals to increase the number of shares if a vote
for a reverse stock split is on the same ballot, and (iv) AGAINST
proposals
to create a new class of common stock, except under certain
conditions; |
|
•
Executive
Compensation. ISS
Generally recommends to vote (i) AGAINST advisory votes on executive
compensation if there is a significant misalignment
between CEO pay and company performance, the company maintains problematic
pay practices or the board exhibits a significant level
of poor communications and responsiveness to shareholders, (ii)
AGAINST/WITHHOLD from the members of the compensation committee or
full
board as applicable where there is no management-say-on pay item on the
ballot, and in other instances, and (iii) AGAINST an equity plan if
there
is a performance misalignment and the CEO's pay is skewed towards
non-performance based equity awards. |
Portfolio
Managers that wish to deviate from ISS's proxy recommendations must provide the
CCO with a written explanation of the reason for the deviation,
as well as a representation that the employee and Graham are not conflicted in
making the chosen voting decision.
Because
Graham generally will vote proxies based upon the recommendations of ISS, there
is little to no risk of a conflict of interest arising. However, in
instances that might involve a conflict of interest between Graham and its
Clients, such as where a portfolio manager wishes to deviate from ISS's
recommendation
or such other instances as Graham may determine, the CCO, in conjunction with
the compliance committee as appropriate, will review the
relevant facts and determine whether or not a material conflict of interest may
arise due to business, personal or family relationships of Graham, its
owners, its employees or its affiliates, with persons having an interest in the
outcome of the vote. If a material conflict exists, Graham will take steps
to ensure that its voting decision is based on the best interests of the Client
and is not a product of the conflict. Graham shall keep appropriate
records demonstrating how such conflicts were resolved.
ISS will
retain, on Graham's behalf, the following information in connection with each
proxy vote:
|
• The
Issuer's name; • The
security ticker symbol or CUSIP, as applicable; • The
shareholder meeting date; • The
number of shares that Graham voted; • A
brief identification of the matter voted on; •
Whether the matter was proposed by the Issuer or a security
holder; •
Whether Graham cast a vote; • How
Graham cast its vote (for the proposal, against the proposal, or abstain);
and •
Whether Graham cast its vote with or against
management. |
With
respect to each registered investment company for which Graham provides
discretionary subadvisory services, Graham will provide each fund with a copy
of Graham's proxy voting policy. In addition, when requested, Graham will
provide such funds with information concerning Graham's proxy voting
policy and voting results as required to enable such funds to file periodic
proxy voting reports.
As a
fiduciary, Graham always seeks to act in the best interest of its Clients, with
good faith, loyalty, and due care. Accordingly, with respect to class
actions
involving any Graham Funds, Graham will determine whether the fund will (a)
participate in a recovery achieved through a class action, (b) opt out of the
class action and separately pursue its own remedy, or (c) opt out of the class
action and not pursue its own remedy. Graham's legal department
oversees the completion of Proof of Claim forms and any associated documentation
the submission of such documents to the claim administrator,
and the receipt of any recovered monies. Graham will maintain documentation
associated with participation in class actions by any Graham
Funds. Consistent with its procedures for selecting and monitoring service
providers and its fiduciary obligation to Clients, Graham may utilize
third-party
service providers to facilitate the processing and administration of class
action claims.
Graham, for
itself or on behalf of its funds, generally does not serve as the lead plaintiff
in class actions because the costs of such participation typically
exceed any extra benefits that accrue to lead plaintiffs.
|
D.
Disclosures to Investors |
Graham
includes a description of its policies and procedures regarding proxy voting and
class actions in Part 2 of the Form ADV, along with a statement
that Investors can contact Graham to obtain a copy of these policies and
procedures and information about how Graham voted proxies.
Any request
for information about proxy voting or class actions should be promptly forwarded
to the CCO, who will respond to any such requests.
As a matter
of policy, Graham does not disclose how it expects to vote on upcoming proxies.
Additionally, Graham does not disclose the way it voted proxies to
unaffiliated third parties without a legitimate need to know such
information.
MANULIFE
INVESTMENT MANAGEMENT
GLOBAL
PROXY VOTING POLICY
AND
PROCEDURES
April
2021
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
• |
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. |
• |
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. |
• |
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. |
• |
Manulife
IM will disclose information about its proxy voting policies and
procedures to its clients. |
• |
Manulife
IM will maintain certain records relating to proxy
voting. |
Philosophy
on sustainable investing
Manulife
IM's commitment to sustainable investment2 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:
• |
Robust
oversight, including a strong and effective board with independent and
objective leaders working on behalf of
shareholders; |
• |
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; |
• |
A
management team aligned with shareholders through remuneration structures
that incentivize long-term performance through the judicious and
sustainable
stewardship of company resources; |
• |
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 |
• |
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.
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.
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.
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:
• |
Manulife
IM's aggregated holdings across all client accounts represent 2% or
greater of issued capital; |
• |
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.
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:
• |
Costs
associated with voting the proxy exceed the expected benefits to
clients; |
• |
Underlying
securities have been lent out pursuant to a client's securities lending
program and have not been subject to
recall; |
• |
Short
notice of a shareholder meeting; |
• |
Requirements
to vote proxies in person; |
• |
Restrictions
on a nonnational's ability to exercise votes, determined by local market
regulation; |
• |
Restrictions
on the sale of securities in proximity to the shareholder meeting (i.e.
share blocking); |
• |
Requirements
to disclose commercially sensitive information that may be made public
(i.e. reregistration); |
• |
Requirements
to provide local agents with power of attorney to facilitate the voting
instructions (such proxies are voted on a best-efforts basis);
or |
• |
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.
Manulife IM
has engaged its proxy voting service provider to:
• |
Research
and make voting recommendations; |
• |
Ensure
proxies are voted and submitted in a timely
manner; |
• |
Provide
alerts when issuers file additional materials related to proxy voting
matters; |
• |
Perform
other administrative functions of proxy
voting; |
• |
Maintain
records of proxy statements and provide copies of such proxy statements
promptly upon request; |
• |
Maintain
records of votes cast; and |
• |
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.
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:
• |
Manulife
IM has a business relationship or potential relationship with the
issuer; |
• |
Manulife
IM has a business relationship with the proponent of the proxy proposal;
or |
• |
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.
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:
• |
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. |
• |
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. |
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.
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*
*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.
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 uses 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.
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 non-executive, 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.
b.
Committee independence: Manulife
IM also prefers that key board committees are composed of independent directors.
Specifically, the audit, nomination
and compensation committees should be entirely or majority composed of
independent directors.
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.
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.
e.
Classified/staggered boards: Manulife
IM prefers that directors be subject to election and re-election 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 supports proposals to eliminate these structures.
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.
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.
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.
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.
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:
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).
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
e. Right
to call a special meeting: Manulife
IM is supportive of the shareholder right to call a special meeting. This right
allows shareholders to quickly
respond to events which 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.
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:
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.
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.
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.
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.
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.
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.
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.
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:
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.
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.
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.
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 share
holdings 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. Firm should
be transparent regarding auditor fees and others 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.
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.
b.
Auditor rotation: If
Manulife IM believes that the independence and objectivity of an auditor maybe
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.
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).
2 Further
information on Sustainable Investing at Manulife IM can be found at
manulifeim.com/institutional.
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.
4 Manulife
IM aggregated voting records are available through this site
manulifeim.com/institutional/us/en/sustainability.
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.
PICTET ASSET
MANAGEMENT
May
2022
PROXY
VOTING
4. PROXY
VOTING
4.1
Scope
The
following principles are used to define the securities eligible for proxy
voting10:
› For
actively managed funds, we aim to vote on 100% of equity holdings.
› For
passively managed funds, we aim to vote on companies representing 80% of
underlying benchmarks by weight11. This
target may be revised upwards or
downwards for specific strategies depending on factors such as portfolio size,
geography or market capitalization.
› For
segregated accounts, including mandates and third-party (i.e. sub-advisory)
mutual funds managed by Pictet Asset Management, clients who delegate
the exercise of voting rights to us have the choice between Pictet Asset
Management's voting guidelines or their own voting guidelines.
4.2
Purpose
The
overarching purpose of our voting is to protect and promote the rights and
long-term interests of our clients as shareholders. We consider it our
responsibility
to engage with and challenge companies' management to ensure that the issuers we
invest in on our clients' behalf are well-run, adhere to their
strategy and deliver shareholder value. We aim to support a strong culture of
corporate governance, effective management of environmental and social
issues and comprehensive reporting according to credible standards.
4.3
Voting Guidelines
In line
with Good Corporate Governance Practices12, our proxy
voting upholds best practice in corporate governance including board and
management,
executive remuneration, risk management and shareholder rights. Given that the
long-term interests of shareholders are the paramount objective,
we do not always support the management of companies and may vote against
management from time to time. We also reserve the right to deviate
from our voting guidelines to take into account company-specific
circumstances.
The
complete version of these guidelines can be found under the following
links:
Pictet
Asset Management's voting guidelines are reviewed every year and adapted as
appropriate to reflect the specificities of certain regions and/or ownership
structures.
4.4
Research & Decision Making
To assist
us in performing our proxy voting responsibilities, Pictet Asset Management uses
the services of third-party specialists to provide research and to
facilitate the execution of voting decisions at all relevant company meetings
worldwide.
Third party
specialists are tasked with collecting meeting notices for all holdings and
researching the implications of every resolution according to voting
guidelines defined by Pictet Asset Management. All recommendations are
communicated to relevant investment teams and the Environmental Social
Governance (ESG) team.
Pictet
Asset Management retains full discretion over all voting decisions and always
reserves the right to deviate from third party voting recommendations,
on a case by case basis, in order to act in the best interests of our clients.
Such divergences may be initiated by investment teams or by the
ESG team and must be supported by written rationale.
In
instances when consensus cannot be reached between the investments teams and ESG
team, the decision is escalated to relevant Chief Investment Officers
(CIOs) and, if necessary, the Head of Investments.
4.5
Security Lending
Security
lending can impair our ability to execute our voting rights. As a result,
investment teams wishing to exercise full voting rights have two options:
› Recalling
shares on loan on a case-by-case basis
› Removing
a portfolio from the securities lending pool
4.6
Shareholder Resolutions
Shareholder
resolutions at Annual General Meetings (AGMs)/Extraordinary General Meetings
(EGMs) are evaluated in accordance with Pictet Asset Management's
voting guidelines. Evaluations are based on their own merits and are supported
when they would improve the company's corporate governance
or business profile at a reasonable cost.
Pictet
Asset Management does not usually assume the role of an activist investor and
does not initiate shareholder resolutions or shareholder groups. However,
Pictet Asset Management may consider supporting the submission of shareholder
resolutions initiated by third-parties, or joining shareholder
groups, based on the following criteria:
› How would
the proposal enhance or protect shareholder value in the short-term and
long-term?
› Liquidity
and other technical issues that may impact specific portfolios, such as a share
blocking period between the submission and the general assembly.
› Legal and
compliance issues (such as concert party action or transparency requirements
relating to ownership size).
Supporting
the submission of a shareholder resolution, including the number of shares and
corresponding accounts earmarked to support the submission,
is subject to agreement by relevant investment teams and the ESG team. In cases
where no consensus is reached, the decision is escalated
to the relevant Chief Investment Officer and, if necessary, the Head of
Investments.
10 This
activity does not include indirect investments through third-party funds that we
invest in on behalf of our clients, where we expect those managers to
exercise their votes according to their own policy and report accordingly to
relevant Pictet Asset Management entities.
11 We do not
exercise voting rights in share blocking markets across passive
strategies.
12 See
Appendix D for further details on Good Corporate Governance
Practices.
PZENA
INVESTMENT MANAGEMENT
PROXY
VOTING
Revised
July 2021
INTRODUCTION
As a
registered investment adviser and fiduciary, Pzena Investment Management, LLC
("PIM") exercises our responsibility, where applicable, to vote in a manner
that, in our judgement, is solely in the client's best interest and will
maximize long-term shareholder value. The following policies and procedures
have been established to ensure decision making is consistent with PIM's
fiduciary responsibilities and applicable regulations under the Investment
Company Act, Advisers Act, and ERISA.
GENERAL APPROACH
Each proxy
that comes to PIM to be voted shall be evaluated per the prudent process
described below, in terms of what is in the best interest of our clients. We
deem the best interest of clients to be solely that which maximizes shareholder
value and yields the best economic results (e.g., higher stock
prices, long-term financial health, and stability). We will not subordinate the
interests of our clients to any non-pecuniary interests nor will we promote
non-pecuniary benefits or goals unrelated to our clients' long-term financial
interests.
PIM's
standard Investment Advisory Agreement provides that until notified by the
client to the contrary, PIM shall have the right to vote all proxies for
securities
held in that client's account. Where PIM has voting responsibility on behalf of
a client, and absent any client specific instructions, we generally
follow the Voting Guidelines ("Guidelines") set forth below. These Guidelines,
however, are not intended as rigid rules and do not cover all possible
proxy topics. Each proxy issue will be considered individually and PIM reserves
the right to evaluate each proxy vote on a case-by-case basis, as long as
voting decisions reflect what is in the best interest of our
clients.
To the
extent that, in voting proxies for an account subject to ERISA, PIM determines
that ERISA would require voting a proxy in a manner different from these
Guidelines, PIM may override these Guidelines as necessary in order to comply
with ERISA. Additionally, because clients, including ERISA clients, do
not pay any additional fees or expenses specifically related to our proxy
voting, there is not a need to consider the costs related to proxy voting
impacting the value of an investment or investment performance.
In those
instances where PIM does not have proxy voting responsibility, we shall forward
any proxy materials to the client or to such other person as the client
designates.
Proxy Voting Limitations
While,
subject to the considerations discussed above, PIM uses our best efforts to vote
proxies, in certain circumstances it may be impractical or impossible
to do so. Such instances include but are not limited to share blocking,
securities lending, if PIM concludes that abstention is in our clients'
economic
interests and/or the value of the portfolio holding is indeterminable or
insignificant.
VOTING GUIDELINES
The
following Guidelines summarize PIM's positions on various issues of concern to
investors and give an indication of how portfolio securities generally
will be voted. These Guidelines are not exhaustive and do not cover all
potential voting issues or the intricacies that may surround individual
proxy
votes. Actual proxy votes may also differ from the Guidelines presented, as we
will evaluate each individual proxy on its own merit.
It is also
worth noting that PIM considers the reputation, experience and competence of a
company's management and board when it researches and evaluates
the merits of investing in a particular security. In general, PIM has confidence
in the abilities and motives of the board and management of the
companies in which we invest.
1) ROUTINE
BUSINESS
|
PIM
will typically vote in accordance with the board and management on the
items below and other routine issues when adequate information on the
proposal
is provided. |
|
i.
Change in date and place of annual meeting (if not associated with a
takeover); |
|
ii.
Change in company name; |
|
iii.
Approval of financial statements; |
|
iv.
Reincorporation (unless to prevent takeover
attempts); |
|
vi.
Amend bylaws/articles of association to bring in line with changes in
local laws and regulations. |
|
PIM
will oppose vague, overly broad, open-ended, or general "other business"
proposals for which insufficient detail or explanation is provided or
risks
or consequences of a vote in favor cannot be
ascertained. |
2) CAPITAL
STRUCTURE
|
PIM
will consider on a case-by-case basis all proposals to increase the
issuance of common stock, considering company-specific factors that
include,
at a minimum: |
|
i.
Past board performance (use of authorized shares during the prior three
years); |
|
ii.
Stated purpose for the increase; |
|
iii.
Risks to shareholders of not approving the request;
or |
|
iv.
Potential dilutive impact. |
|
PIM
will generally vote for such proposals (without preemptive rights) up to a
maximum of 20% more than currently issued capital over a specified
period,
while taking into account management's prior use of these preemptive
rights. PIM will, however, vote against such proposals if restrictions
on
discounts are inadequate and/or the limit on the number of times the
mandate may be refreshed are not in line with local market
practices. |
3) AUDIT
SERVICES
|
PIM
is likely to support the approval of auditors
unless, |
|
i.
Independence is compromised; |
|
ii.
Non-audit ("other") fees are greater than the sum of the audit
fees1,
audit-related fees2 and
permissible tax fees3; |
|
iii.
There is reason to believe the independent auditor has rendered an opinion
which is neither accurate nor indicative of the company's financial
position;
or |
|
iv.
Serious concerns about accounting practices are identified such as fraud,
misapplication of Generally Accepted Accounting Principles ("GAAP")
and material weaknesses identified in Section 404 disclosures of the
Sarbanes-Oxley Act of 2002. |
|
PIM
will also apply a case-by-case assessment to shareholder proposals asking
companies to prohibit their auditors from engaging in non-audit
services
(or capping the level of non-audit services), taking into account whether
the non-audit fees are excessive (per the formula above) and whether
the company has policies and procedures in place to limit non-audit
services or otherwise prevent conflicts of
interest. |
4)
COMPENSATION
|
PIM
supports reasonable incentive programs designed to attract and retain key
talent. PIM typically supports management's discretion to set compensation
for executive officers, so long as the plan aligns management and
shareholder interests. PIM evaluates each plan in detail to assess
whether
the plan provides adequate incentive to reward long-term performance and
the impact on shareholder value (e.g.
dilution). |
|
PIM
prefers a shareholder vote on compensation plans to provide a mechanism to
register discontent with the plan itself or management team performance.
As long as such proposals are non-binding and worded in a generic manner
(unrestrictive to actual company plans), PIM will support them.
In evaluating these proposals, PIM will generally consider, at minimum:
company performance, pay practices relative to industry peers,
potentially
problematic pay practices and/or past unresponsive
behavior. |
|
Circumstances
where PIM may oppose these proposals
include: |
|
i.
Restricts the company's ability to hire new, suitable management;
or |
|
ii.
Restricts an otherwise responsible management team in some other way
harmful to the company. |
|
PIM will
generally support plans under which 50% or more of the shares awarded to
top executives are tied to performance goals. Maintaining appropriate
pay-for-performance alignment means executive pay practices must be
designed to attract, retain, and appropriately motivate the key
employees
who drive shareholder value creation over the long term. Our evaluation of
this issue will take into consideration, among other factors, the
link between pay and performance; the mix between fixed and variable pay;
performance goals; equity-based plan costs; and
dilution. |
|
PIM
is generally supportive of incentive options that provide the appropriate
degree of pay-for-performance alignment (as per the above) and are
therefore
in shareholder best interest. PIM will vote on a case-by-case basis
depending on certain plan features and equity grant practices, where
positive
factors may counterbalance negative factors, and vice
versa. |
|
However,
the following would generally cause PIM to vote against a management
incentive arrangement: |
|
i.
The proposed plan is in excess of 10% of
shares; |
|
ii.
Company has issued 3% or more of outstanding shares in a single year in
the recent past; |
|
iii.
The new plan replaces an existing plan before the existing plan's
termination date and some other terms of the new plan are likely to be
adverse
to the maximization of investment returns;
or |
|
iv.
The proposed plan resets options, or similarly compensates executives, for
declines in a company's stock price. This includes circumstances
where
a plan calls for exchanging a lower number of options with lower strike
prices for an existing larger volume of options with high strike
prices,
even when the option valuations might be considered the same total value.
However, this would not include instances where such a plan seeks
to retain key executives who have been undercompensated in the
past. |
|
Golden
Parachutes / Severance Agreements |
|
PIM
will vote on a case-by-case basis, considering at minimum existing
change-in-control arrangements maintained with named executive officers
and
new or extended arrangements. |
|
PIM
will generally vote against such proposals
if: |
|
i.
The proposed arrangement is excessive or not reasonable in light of
similar arrangements for other executives in the company or in the
company's
industry; |
|
ii.
The proposed parachute or severance arrangement is considerably more
financially attractive than continued employment. Although PIM will
apply
a case-by-case analysis of this issue, as a general rule, a proposed
severance arrangement which is three or more times greater than the
affected
executive's then current compensation shall be voted against;
or |
|
iii.
The triggering mechanism in the proposed arrangement is solely within the
recipient's control (e.g., resignation). |
|
Votes
to amend existing plans to increase shares reserved and to qualify for tax
deductibility under the provisions of Section 162(m) should be
considered
on a case-by-case basis, considering the overall impact of the
amendment(s). |
|
PIM
prefers that compensation peer groups are based on the industry, not size,
revenue or balance sheet. |
5)
BOARD
|
PIM
generally will
evaluate
director nominees individually and as a group based on our assessment of
record and reputation, business knowledge and
background, shareholder value mindedness, accessibility, corporate
governance abilities, time commitment, attention and awareness,
independence,
and character. PIM will apply a case-by-case approach to determine whether
to vote for or against directors nominated by outside parties
whose interests may conflict with our interests as shareholders,
regardless of whether management agrees with the
nomination. |
|
PIM
will
generally
withhold
votes from or vote against any insiders on audit, compensation or
nominating committees, and from any insiders and affiliated
outsiders on boards that are not at least majority independent. PIM also
prefers companies to have compensation and audit committees composed
of entirely independent directors. |
|
PIM
may vote in favor of any such directors in exceptional circumstances where
the company has shown significant
improvement. |
|
PIM
believes there is no optimal size or composition that fits every company.
However, PIM prefers that the number of directors cannot be altered
significantly
without shareholder approval; otherwise potentially allowing the size of
the board to be used as an anti-takeover
defense. |
|
PIM
believes that any restrictions on a director's tenure, such as a mandatory
retirement age or length of service limits, could harm shareholder
interests
by forcing experienced and knowledgeable directors off the board. However,
PIM prefers that boards do not have more than 50% of members
serving for longer than ten years to avoid board entrenchment and
‘group-think'. |
|
PIM
will evaluate and vote proposals to separate the Chairman and CEO
positions in a company on a case-by-case basis based on our assessment of
the
strength of the company's governing structure, the independence of the
board and compliance with NYSE and NASDAQ listing requirements,
among
other factors. When the positions of Chairman and CEO are combined, PIM
prefers that the company has a lead independent director to provide
some independent oversight. |
|
PIM
will generally vote against proposals to establish cumulative voting, as
this leads to misaligned voting and economic interest in a company. PIM
will,
however, vote in favor of proposals for cumulative voting at controlled
companies where insider voting power is greater than
50%. |
|
PIM
will vote such proposals on a case-by-case basis but prefers that
directors do not sit on more than three additional boards. In evaluating
these proposals
PIM will consider, at minimum, management tenure, director business
expertise and director performance. |
|
PIM
generally opposes classified boards because this makes a change in board
control more difficult and hence may reduce the accountability of
the
board to shareholders. However, these proposals will be evaluated on a
case-by-case basis and will consider, at minimum, company and director
performance. |
|
PIM
is generally supportive of a diverse board (age, race, gender etc.) that
is representative of its customers and stakeholders. That said, PIM does
not
believe in board quotas or any restrictions on director tenure that could
harm shareholder interests by preventing qualified board candidates
from
being nominated or forcing experienced or knowledgeable directors off the
board. |
6)
SHAREHOLDER RIGHTS
|
In
general PIM does not support any proposals designed to limit shareholder
rights; below we have outlined some of the issues we consider most
important. |
|
PIM
generally supports proposals enabling shareholders to call a special
meeting of a company so long as at least a 15% threshold with a one-year
holding
period is necessary for shareholders to do so. However, on a case-by-case
basis, a 10% threshold may be deemed more appropriate should particular
circumstances warrant; for example, in instances where executive
compensation or governance has been an issue for a
company. |
|
PIM
is generally opposed to proposals to create dual-class capitalization
structures as these provide disparate voting rights to different groups of
shareholders
with similar economic investments. However, PIM will review proposals to
eliminate a dual-class structure on a case-by-case basis, considering,
at minimum, management's prior record. |
|
PIM
does not support supermajority voting provisions with respect to corporate
governance issues unless it would be in the best interest of shareholders.
In general, vesting a minority with veto power over shareholder decisions
could deter tender offers and hence adversely affect shareholder
value. |
|
PIM
will assess these proposals on a case-by-case basis but generally supports
proxy access proposals that include an ownership level and holding
period
of at least 3% for three years or 10% for one
year. |
7)
SOCIAL/ENVIRONMENTAL
|
PIM
will consider environmental and social proposals on their own merits and
make a case-by-case assessment. PIM will consider supporting proposals
that address material issues if we believe they will protect and/or
enhance the long-term value of the
company. |
|
While
PIM is generally supportive of resolutions seeking additional ESG
disclosures, such proposals will be evaluated on a case-by-case basis,
taking
into consideration whether the requested disclosure is material,
incremental and of reasonable cost to the
business. |
8)
ANTI-TAKEOVER
|
PIM
generally supports anti-takeover measures that are in the best interest of
shareholders and does not support anti-takeover measures such as
poison
pills that entrench management and/or thwart maximization of investment
returns. |
ROLES &
RESPONSIBILITIES
Role of ISS
PIM has
engaged Institutional Shareholder Services ("ISS") to provide a proxy analysis
with research and a vote recommendation for each shareholder meeting of
the companies in our client portfolios. In engaging and continuing to engage
ISS, PIM has determined that, where applicable, ISS proxy voting
guidelines are consistent with ERISA's fiduciary duties including that the votes
are made in the best interest of our clients, focus on yielding the best
economic results for our clients. ISS also votes, records and generates a voting
activity report for our clients and assists us with recordkeeping and the
mechanics of voting. In no circumstance shall ISS have the authority to vote
proxies except in accordance with standing or specific instructions
given to it by PIM. PIM retains responsibility for instructing ISS how to vote,
and we still apply our own Guidelines as set forth herein. PIM does not
utilize pre-population or automated voting except as a safeguard mechanism
designed to ensure that, in the unlikely event that we fail to submit vote
instructions for a particular proxy, our shares will still get voted. If PIM
does not issue instructions for a particular vote, the default is for
ISS to mark
the ballots in accordance with our Guidelines (when they specifically cover the
item being voted on), and to refer all other items back to PIM for
instruction (when there is no PIM policy covering the vote).
When voting
a proxy for a security that PIM's Research team does not cover, we will vote in
accordance with our Guidelines (when they specifically cover the
item being voted on) and defer to ISS's recommendations on all other
items.
Periodically,
PIM's Vendor Management Committee conducts a due diligence review of ISS,
through which it reviews and evaluates certain key policies and
procedures submitted to us by ISS. On a quarterly basis, PIM reviews proxy
voting reports for a sample of accounts by comparing and reconciling
them
against one another and against our internal holdings information for those
accounts. PIM also samples and reviews proxy votes when testing our Proxy
Voting Policy, as part of our regular compliance testing procedures. Further,
PIM reviews ISS' procedures for receiving additional information
from issuers after a proxy has been sent, incorporating that information into
its recommendations, and sending that information and/or updated
recommendations to PIM.
Role of Analyst
The analyst
who is responsible for covering the company also votes the associated proxies
since they have first-hand in-depth knowledge of the company. In
evaluating proxy issues, the analyst will utilize a variety of sources to help
come to a decision:
|
i.
Information gathered through in-depth research and on-going company
analyses performed by our investment team in making buy, sell and hold
decisions
for our client portfolios. This process includes regular external
engagements with senior management of portfolio companies and internal
discussions
with Portfolio Managers ("PMs") and the Chief Investment Officer ("CIO"),
as needed; |
|
ii.
ISS reports to help identify and flag factual issues of relevance and
importance; |
|
iii.
Information from other sources, including the management of a company
presenting a proposal, shareholder groups, and other independent
proxy
research services; and/or |
|
iv.
Where applicable, any specific guidelines designated in writing by a
client. |
Proxy Voting Committee
To help
make sure that PIM votes client proxies in accordance with our fiduciary
obligation to maximize shareholder value, we have established a Proxy
Voting
Committee ("the Committee") which is responsible for overseeing the Guidelines.
The Committee consists of representatives from Legal and Research,
including our Chief Compliance Officer ("CCO"), Director of Research ("DOR"),
and at least one PM (who represents the interests of all PIM's
portfolio
managers and is responsible for obtaining and expressing their opinions at
committee meetings). The Committee will meet at least once annually
and as often as necessary to oversee our approach to proxy voting.
The DOR is
responsible for monitoring the analyst's compliance with the Guidelines, the CCO
is responsible for monitoring overall compliance with these
procedures and an internally-designated "Proxy Coordinator" is responsible for
day-to-day proxy voting activities.
CONFLICTS OF INTEREST
PIM is
sensitive to conflicts of interest that may arise in the proxy voting process.
PIM believes that application of the Guidelines should, in most cases,
adequately
address any potential conflicts of interest. However, if an actual or potential
material conflict of interest has been identified, PIM has put in place a
variety of different mitigation strategies as outlined below.
A potential
material conflict of interest could exist in the following
situations:
|
i.
PIM manages any pension or other assets affiliated with a publicly traded
company, and also holds that company's or an affiliated company's
securities
in one or more client portfolios; |
|
ii.
PIM has a client relationship with an individual who is a corporate
director, or a candidate for a corporate directorship of a public company
whose securities
are in one or more client portfolios; or |
|
iii.
A PIM officer, director or employee, or an immediate family member thereof
is a corporate director, or a candidate for a corporate directorship of
a
public company whose securities are in one or more client portfolios. For
purposes hereof, an immediate family member is generally defined as a
spouse,
child, parent, or sibling. |
If a
potential material conflict of interest exists, the following procedures will be
followed:
|
i. If
our proposed vote is consistent with the Guidelines, above, we will vote
in accordance with our proposed vote; |
|
ii.
If our proposed vote is inconsistent with or not covered by our
Guidelines, but is consistent with the recommendations of ISS, we will
vote in accordance
with ISS recommendations; and |
|
iii.
If our proposed vote is inconsistent with or not covered by our
Guidelines, and is inconsistent with the recommendations of ISS, the CCO
and the DOR
(or their respective designees) (the "Conflicts Committee") will review
the potential conflict and determine whether the potential conflict is
material. |
|
a. If
the Conflicts Committee determines that the potential conflict is not
material, we will vote in accordance with the proposed
vote. |
|
b. If
the Conflicts Committee determines the potential conflict is material, the
Conflicts Committee will review the proposed vote, the analysis and
rationale
for the vote recommendation, the recommendations of ISS and any other
information the Conflicts Committee may deem necessary in order
to determine whether the proposed vote is reasonable and not influenced by
any material conflicts of interest. The Conflicts Committee may
seek to interview the research analysts or portfolio managers or any other
party it may deem necessary for making its
determination. |
|
|
|
i. If
the Conflicts Committee determines the proposed vote is reasonable and not
influenced by any conflicts of interest, we will vote in accordance
with our proposed vote. |
|
|
|
ii.
If the Conflicts Committee cannot determine that the proposed vote is
reasonable and not influenced by any conflict of interest, the
Conflicts
Committee will determine the best course of action in the best interest of
the clients which may include deferring to the ISS recommendation
or notifying each client who holds the relevant securities of the
potential conflict, to seek such client's voting
instruction. |
On an
annual basis, we will review and assess the conflicts policies and Code of
Conduct that ISS posts on its website for sufficiency in addressing potential
conflict of interest, self-dealing and improper influence issues that may affect
voting recommendations by ISS. PIM will also periodically review
samples of ISS' recommendations for voting proxies, after the vote has occurred,
to ensure that ISS' recommendations are consistent with ISS' proxy
voting guidelines, as applicable. PIM's analysts also incorporate information
regarding ISS' potential conflicts of interest into their process when
evaluating
and voting proxies, and on a quarterly basis, our DOR reviews an updated list of
ISS' significant client relationships.
Other Situations
Client
Conflict
Where PIM
manages the assets of a proponent of a shareholder proposal for a company whose
securities are in one or more client portfolios, the following
guidance should be followed:
|
i.
The identity of the proponent of a shareholder proposal shall not be given
any substantive weight (either positive or negative) and shall not
otherwise
influence an analyst's determination whether a vote for or against a
proposal is in the best interest of our
clients. |
|
ii.
Where PIM determines that it is in the best interest of our clients to
vote against that proposal, a designated member of PIM's client service
team will
notify the client-proponent and give that client the option to direct PIM
in writing to vote the client's proxy differently than it is voting the
proxies of
our other clients. |
|
iii.
If the proponent of a shareholder proposal is a PIM client whose assets
under management with PIM constitute 30% or more of PIM's total assets
under
management, and PIM has determined that it is in the best interest of our
clients to vote for that proposal, PIM will disclose its intention to
vote
for such proposal to each additional client who also holds the securities
of the company soliciting the vote on such proposal and for whom PIM
has
authority to vote proxies. If a client does not object to the vote within
three business days of delivery of such disclosure, PIM will be free to
vote such
client's proxy as stated in such
disclosure. |
Analyst
Conflict
If the
analyst voting the proxy also beneficially owns shares of the company in his/her
personal trading accounts, they must notify the Proxy Coordinator
and the DOR must sign off on the analyst's votes for that company. It is the
responsibility of each analyst to disclose such personal interest
and obtain such approval. Any other owner, partner, officer, director, or
employee of PIM who has a personal or financial interest in the outcome of
the vote is prohibited from attempting to influence the proxy voting decision of
PIM personnel responsible for voting client securities.
VOTING PROCEDURES
If an
analyst desires to vote contrary to the Guidelines set forth in this proxy
voting policy or the written proxy voting policy designated by a specific
client, the
analyst will discuss the vote with the CIO, and/or DOR and/or a PM for the
strategy in which the security is held. The CIO, DOR and/or the PM, shall,
in turn, determine how to vote the proxy based on the analyst's recommendation
and the long-term economic impact such vote will have on the
securities held in client portfolios. If the CIO, DOR and/or the PM agree with
the analyst's recommendation and determine that a contrary vote is advisable
the analyst will provide written documentation of the reasons for the
vote.
Vote
Processing
It is
understood that PIM's and ISS' ability to commence voting proxies for new or
transferred accounts is dependent upon the actions of custodian's and banks
in updating their records and forwarding proxies. PIM will not be liable for any
action or inaction by any Custodian or bank with respect to proxy
ballots and voting.
Client
Communication
PIM will
include a copy of these proxy voting policies and procedures, as they may be
amended from time to time, in each new account pack sent to prospective
clients. We also will update our ADV disclosures regarding these policies and
procedures to reflect any material additions or other changes to
them, as needed. Such ADV disclosures will include an explanation of how to
request copies of these policies and procedures as well as any other
disclosures required by Rule 206(4)-6 of the Advisers Act.
Return
Proxies
The CCO or
designee shall send or cause to be sent (or otherwise communicate) all votes to
the company or companies soliciting the proxies within the applicable
time period designated for return of such votes, unless not possible to do so
due to late receipt or other exigent circumstances.
CORPORATE ACTIONS
PIM is
responsible for monitoring both mandatory (e.g. calls, cash dividends,
exchanges, mergers, spin-offs, stock dividends and stock splits) and
voluntary
(e.g. rights offerings, exchange offerings, and tender offers) corporate
actions. Operations personnel will ensure that all corporate actions
received
are promptly reviewed and recorded in PIM's portfolio accounting system, and
properly executed by the custodian banks for all eligible portfolios.
On a daily basis, a file of PIM's security database is sent to a third-party
service, Vantage, via an automated upload which then provides corporate
action information for securities included in the file. This information is
received and acted upon by the Operations personnel responsible for corporate
action processing. In addition, PIM receives details on voluntary and mandatory
corporate actions from the custodian banks via email or online
system and all available data is used to properly understand each corporate
event.
Voluntary
Corporate Actions
The
Portfolio Management team is responsible for providing guidance to Operations on
the course of action to be taken for each voluntary corporate action
received in accordance with the standards described above for proxy voting,
including, but not limited to, acting in the best interest of clients to
maximize
long-term shareholder value and yield the best economic results. In some
instances, if consistent with such standards, the Portfolio Management
team may maintain standing instructions on particular event types. As
appropriate, Legal and Compliance may be consulted to determine
whether certain clients may participate in certain corporate actions. Operations
personnel will then notify each custodian bank, either through an
online interface, via email, or with a signed faxed document of the election
selected. Once all necessary information is received and the corporate
action has been vetted, the event is processed in the portfolio accounting
system and filed electronically. A log of holdings information related to
the corporate action is maintained for each portfolio in order to confirm
accuracy of processing.
CLASS ACTIONS
PIM shall
not have any responsibility to initiate, consider or participate in any
bankruptcy, class action or other litigation against or involving any issue
of
securities held in or formerly held in a client account or to advise or take any
action on behalf of a client or former client with respect to any such
actions or
litigation.
RECORD KEEPING
PIM or ISS,
on PIM's behalf, maintains (i) copies of the proxy materials received by PIM for
client securities; (ii) records of proxies that were not received
and what actions were taken to obtain them; (iii) votes cast on behalf of
clients by account; (iv) records of any correspondence made regarding
specific proxies and the voting thereof; (v) client requests for proxy voting
information (including reports to mutual fund clients for whom PIM has
proxy voting authority containing information they need to satisfy their annual
reporting obligations under Rule 30b-1-4 and to complete Form N-PX); (vi)
documents prepared by PIM to inform and/or memorialize a voting decision,
including these policies and procedures and any documentation
related to a material conflict of interest; and (vii) records of any deviations
from broad Guidelines. Such records will be maintained for a minimum of
six years.
POLICY REVIEW
The Proxy
Voting Committee reviews these Voting Guidelines and procedures at least
annually and makes such changes as it deems appropriate, considering
current trends and developments in corporate governance and related issues, as
well as operational issues facing PIM and applicable regulations
under the Investment Company Act, Advisers Act and ERISA.
1 Audit fees
shall mean fees for statutory audits, comfort letters, attest services,
consents, and review of filings with the SEC
2
Audit-related fees shall mean fees for employee benefit plan audits, due
diligence related to M&A, audits in connection with acquisitions, internal
control reviews, consultation on financial accounting and reporting
standards
3 Tax fees
shall mean fees for tax compliance (tax returns, claims for refunds and tax
payment planning) and tax consultation and planning (assistance with tax audits
and appeals, tax advice relating to M&A, employee benefit plans and requests
for rulings or technical advice from taxing authorities)
SUSTAINABLE
GROWTH ADVISERS, LP
PROXY
VOTING POLICY AND PROCEDURES
Amendment Dated April 8,
2020
5.2.8
Proxy Voting Policies and Procedures
Sustainable
Growth recognizes that the act of managing assets of clients consisting of
equity securities can include the voting of proxies related to such equity
securities. Each client can either: (i) delegate the power to vote proxies to
the adviser; or (ii) retain the authority to vote his or her proxy. Where a
client has delegated the power to vote proxies in his or her account,
Sustainable Growth will vote the proxies in a manner that is in the best
interests
of the client. When Sustainable Growth has such responsibility, it will follow
the Proxy Voting Policies and Procedures.
Sustainable
Growth when administering the voting of proxies will comply with "Commission
Guidance Regarding Proxy Voting Responsibilities of Investment
Advisers" (August 29, 2019). Sustainable Growth may also take into consideration
proxy voting guidance of other regulators including the EU, UK,
Canadian and Australia regulatory authorities (as applicable).
5.2.8.1
Proxy Voting
5.2.8.1.1
Proxy Voting Responsibility
At the
inception of each investment adviser-client relationship, Sustainable Growth
shall require the client to indicate whether the client or Sustainable
Growth is
responsible for voting proxies in one or more of the following
documents:
• |
Client's
investment advisory contract; or |
• |
Separate
agreement between client and Sustainable Growth authorizing Sustainable
Growth to vote client's proxies. |
5.2.8.1.2
Client Responsibility to Vote Proxies
If
Sustainable Growth receives proxies related to a client's securities and
Sustainable Growth is not responsible for voting such proxies, Sustainable
Growth
shall make arrangements with the client and/or client's custodian or take such
other steps to ensure that the client timely receives such proxies.
5.2.8.1.3
Firm Responsibility to Vote Proxies
Unless the
power to vote proxies for a client is reserved to that client (or in the case of
an employee benefit plan, the plan's trustee or other fiduciaries),
Sustainable Growth is responsible for voting the proxies related to that
account. When exercising its authority to vote proxies, Sustainable Growth
shall:
• |
satisfy
its duties of care and loyalty to each client with respect to voting that
client's proxies; |
• |
conduct
a reasonable investigation into matters on which the
Sustainable
Growth votes; |
• |
consider
whether voting all of its clients' shares the same and/or in accordance
with a uniform voting policy would be in the best interest of each of
its
clients, including the potential effect of the vote on the value of a
client's investments that have different investment
objectives; |
• |
make
the determination with respect to each proxy vote that its vote or
recommendation is in the best interest of the client;
and |
• |
not
place its own interests ahead of the interests of any client with respect
to any proxy vote or recommendation. |
5.2.8.1.4
Proxy Voting Responsibility Monitoring
The
Portfolio Manager shall maintain records identifying those clients where
Sustainable Growth exercises proxy voting authority and those clients
where
Sustainable Growth does not have such authority.
5.2.8.2
Retaining Third Party Proxy Advisory Firms
Sustainable
Growth may retain a third-party company ("Third Party Proxy Advisory Firm") to
provide it with research and recommendations with voting client
proxies only after Sustainable Growth:
• |
Obtains
and reviews the proxy voting policies and procedures of the Third Party
Proxy Advisory Firm (or summaries of such policies and procedures),
and finds them acceptable and in the best interests of its
clients; |
• |
Determines
that the Third Party Proxy Advisory Firm has the capacity and competency
to analyze proxy issues; |
• |
Considers
the following: |
○ |
the
adequacy and quality of the Third Party Proxy Advisory Firm's staffing,
personnel, and technology; |
○ |
how
the Third Party Proxy Advisory Firm incorporates appropriate input in
formulating its methodologies and construction of issuer peer groups; |
○ |
where
relevant, how the Third Party Proxy Advisory Firm, in constructing peer
groups, takes into account the unique characteristics regarding
the
issuer, to the extent available, such as the issuer's size; its governance
structure; its industry and any particular practices unique to that
industry;
its history; and its financial position; |
○ |
the
extent to which the Third Party Proxy Advisory Proxy Firm has adequately
disclosed its methodologies in formulating voting recommendations; |
○ |
the
nature of any third-party information sources that the Third Party Proxy
Advisory Firm uses as a basis for its voting recommendations;
and |
○ |
how
the Third Party Proxy Advisory Firm would expect to engage with issuers
and third parties; |
• |
Obtains
sufficient information from the Third Party Proxy Advisory Firm initially
and on an ongoing basis to conclude that the Third Party Proxy
Advisory
Firm is independent and can make recommendations in an impartial
manner; |
• |
Requires
the Third Party Proxy Advisory Firm to disclose any relevant facts
concerning the Firm's relationships with issuers of publicly traded
securities
that are the subject of the proxy, such as the amount of compensation the
Third Party Proxy Advisory Firm receives from such
issuers; |
• |
Obtains
representations from the Third Party Proxy Advisory Firm that it faced no
conflict of interest with respect to recommendations or votes and
that
it will promptly inform Sustainable Growth if there is a conflict of
interest; and |
• |
Obtains
representations from the Third Party Proxy Advisory Firm that no member of
its staff providing services to issuers of publicly traded companies
play a role in the preparation of its analyses or vote on proxy
issues. |
5.2.8.3
Third Party Proxy Advisory Firm Advice
In the
event Sustainable Growth retains a Third-Party Proxy Advisory Firm to assist it
in voting proxies received from issuers, Sustainable Growth shall:
• |
vote
proxies in a manner that is in the best interest of its
clients; |
• |
exercise
its independent judgment when deciding how to vote a proxy, while taking
into account any
recommendations
from the Third-Party Proxy Advisory
Firm; |
○ |
the
internal guidelines published by the Third-Party Proxy Advisory Firm to
ensure the firm is following its guidelines, including how such firm
addresses
conflicts of interest; |
○ |
reports
prepared by the Third-Party Proxy Advisory Firm for
accuracy; |
○ |
the
Third-Party Proxy Advisory Firm's efforts to correct any identified
material deficiencies in the Third-Party Proxy Advisory Firm's
analysis; |
• |
periodically
review the Third Party Proxy Advisory Firm's disclosure to Sustainable
Growth regarding the sources of information and methodologies used
in formulating voting recommendations or executing voting
instructions; |
• |
request
the Third Party Proxy Advisory Firm to notify Sustainable Growth regarding
business changes it considers relevant (e.g., with respect to the
Third
Party Proxy Advisory Firm's capacity and competency to provide independent
proxy voting advice or carry out voting
instructions); |
• |
inquire
whether the Third Party Proxy Advisory Firm appropriately updates its
methodologies, guidelines, and voting recommendations on an ongoing
basis, including in response to feedback from issuers and their
shareholders; and |
• |
periodically
review how Sustainable Growth has voted client proxies and compare to the
recommendations of the Third-Party Proxy Advisory Firm and,
if applicable, investigate high correlations between its votes and Third
Party Proxy Advisory Firm recommendations (which may suggest "rote"
reliance
on proxy advisory firms). |
5.2.8.3
Proxy Voting Guidelines
Sustainable
Growth shall vote proxies related to securities held by any client in a manner
solely in the best interests of the client. Sustainable Growth shall
consider only those factors that relate to the client's investment, including
how its vote will economically impact and affect the value of the client's
investment. Proxy votes will be cast in favor of proposals that maintain or
strengthen the shared interests of shareholders and management, increase
shareholder value, and maintain or increase the rights of shareholders. Proxy
votes will be cast against proposals having the opposite effect. In voting
on each and every issue, Sustainable Growth shall vote in a prudent and diligent
fashion and only after a careful evaluation of the issue presented
on the ballot.
Prior to
electing to follow any specific guidelines, Sustainable Growth
will:
• |
Determine
the impact of following such guidelines on all clients, including whether
the guidelines would be more appropriate for one group of clients
and
not for others; |
• |
Identify
any direct or indirect benefits that might flow to Sustainable Growth as a
result of choosing one guideline over other
guidelines; |
• |
Address
any conflicts of interest raised by the selection of such guidelines by
following the Proxy Voting Conflicts of Interest section of these
Procedures;
and |
• |
Refrain
from using such guidelines if it provides an advantage to one group of
clients while disadvantaging or otherwise not being in the best interest
of
any of the remaining clients. |
Sustainable
Growth has adopted the following specific voting guidelines:
5.2.8.3.1
Corporate Governance
Unless
exceptional circumstances exist, Sustainable Growth will vote against proposals
that make it more difficult to replace Board members, including
proposals to:
• |
Overweight
management on the Board |
• |
Introduce
cumulative voting |
• |
Introduce
unequal voting rights |
• |
Create
super majority voting |
• |
Establish
pre-emptive rights |
5.2.8.3.2
Takeovers
Sustainable
Growth will vote against proposals that make it more difficult for a company to
be taken over by outsiders, and in favor of proposals that attempt to
do the opposite.
5.2.8.3.3
Capital Structure
Sustainable
Growth will vote against proposals to move the company to another jurisdiction
less favorable to shareholders' interests, or to restructure classes of
stock in such a way as to benefit one class of shareholders at the expense of
another, such as dual classes (A and B shares) of stock.
5.2.8.3.4
Outside Directors
Sustainable
Growth will vote against any proposal to allow the Chief Executive Officer of a
company to appoint outside directors, and in favor of any proposal to
eliminate this ability.
5.2.8.3.5
Social & Environmental Considerations
Sustainable
Growth takes into consideration environmental, social and governance issues both
in its investment process and proxy voting. Sustainable Growth will
generally support standards-based ESG proposals that enhance long-term
shareholder value while aligning the interests of an issuer with those of
society at large. In particular, Sustainable Growth will focus on proxy
proposals seeking greater transparency and adherence to internationally
recognized
standards and principals.
In
determining how to vote Sustainable Growth will analyze and consider the
following:
• |
Whether
the proposal is well framed and
reasonable |
• |
Whether
the proposal (if adopted) would have either a positive/negative impact on
the issuer's short or long term share
value |
• |
The
percentage of sales, assets and/or earnings
affected |
• |
Whether
the issuer has
already appropriately or adequately addressed the matter(s) at
issue |
• |
The
issuer's analysis and recommendation on the
proposal |
• |
The
issuer's past practices with respect to the proposal (ie., past
controversies, fines, litigation with respect to any such environmental
and/or social
practices) |
• |
How
other companies have addressed similar issues and
proposals |
• |
Other
risk factors including economic and reputational risks that may impact the
issuer's business |
5.2.8.4
Proxy Voting Conflicts of Interest
Sustainable
Growth recognizes that conflicts between itself and clients may arise in voting
the proxies of issuers of equity securities and that these conflicts
must be addressed. The designated Investment Committee member is responsible for
identifying potential conflicts of interest in regard to the proxy
voting process. Where appropriate, Sustainable Growth will use one of the
following methods to resolve such conflicts, provided such method
results in a decision to vote the proxies that is based on the clients' best
interest and is not the product of the conflict:
1 |
provide
the client with sufficient information regarding the shareholder vote and
Sustainable Growth's potential conflict to the client and obtain the
client's
consent before voting; |
2 |
vote
securities based on a pre-determined voting
policy; |
3 |
vote
client securities based upon the recommendations of a Third-Party Proxy
Advisory that itself does not have a conflict of interest;
or |
4 |
request
the client to engage another party to determine how the proxies should be
voted. |
Third Party Proxy Advisory
Firm
If
Sustainable Growth utilizes a Third Party Proxy Advisory Firm, Sustainable
Growth will review such firm's policies and procedures regarding how it
identifies
and addresses conflicts of interest.
5.2.8.5
Proxy Voting Review
Sustainable
Growth periodically will review the votes cast for clients.
Sustainable
Growth will test whether its casting of votes on behalf of clients is
consistently following its voting policies and procedures
including:
• |
sampling
proxy votes that relate to proposals that may require more issuer-specific
analysis (e.g., mergers and acquisition transactions, dissolutions,
conversions, or consolidations); and |
• |
sampling
proxy votes to determine whether they were consistent with its voting
policies and procedures and in its client's best
interest. |
Third-Party Proxy Advisory Firm
Voting
If
Sustainable Growth retains a Third-Party Proxy Advisory Firm to provide voting
recommendations, Sustainable Growth will periodically evaluate whether the
Third-Party Proxy Advisory Firm's voting recommendations are consistent with its
voting policies and procedures and in the client's best interest.
TRILLIUM
ASSET MANAGEMENT, LLC
PROXY
VOTING AND REPORTING
October
23, 2020
Trillium's
policy is to seek to vote our clients' proxies in accordance with their best
interests, both their financial interest and their values. Trillium's
clients
seek out our services in part because they share our devotion to aligning
stakeholders' values and objectives, combining impactful investment solutions
with active ownership with the goal to provide positive impact, long-term value,
and ‘social dividends'. Trillium's Proxy Voting Committee refines the
proxy voting guidelines on an annual basis in an effort to be consistent with
these goals. While the specific details of the guidelines will change in
accordance with current and upcoming issues, Trillium bases the underlying
decisions on the considered finding that proxy voting decisions must
incorporate financial, environmental, social, governance, and market wide
considerations.
The Chief
Advocacy Officer and the Chief Compliance Officer periodically sample proxy
voting records in an effort to make sure proxies are voted consistent
with client's best interests as conveyed in the proxy voting policy. In
instances where the proxy voting guidelines do not address how Trillium
should vote on shares held in Trillium strategies, the Proxy Voting Committee
will review the item and assess how to vote in the client's best interest.
In instances where the proxy voting guidelines do not address how Trillium
should vote on shares not held in Trillium strategies, the Chief Advocacy
Officer will review the item and refer it to the relevant investment manager,
the Proxy Voting Committee, or vote per the provider's recommendation
in accordance with the client's best interest.
Trillium
seeks to identify any conflicts of interests in voting proxies including
identifying any Fund's affiliate of a public company in which the Funds
may invest.
Any such conflicts will be reviewed by the Chief Advocacy Officer or Chief
Compliance Officer to determine how to mitigate the conflict. The conflict
will be reported to the CEO, COO or the CCO to determine if the Funds need to be
notified. If there is a conflict of interest between Trillium and a client or
Fund in respect to voting a proxy, Trillium will vote directly in line with the
proxy voting policy.
The Chief
Advocacy Officer has primary responsibility for coordinating the voting of
client and Funds proxies. Trillium engages a third-party provider to
assist with
the administration of proxy voting. Trillium relies upon a third-party proxy
voting service provider to implement Trillium's proxy voting policy and assist
with the administrative aspects of voting on behalf of clients. The Proxy Voting
Committee annually, and on a periodic basis, periodically reviews the
performance of the provider to seek to determine if services are sufficiently
accurate, transparent, complete, effective, and otherwise adequate to
meet our responsibilities. Further, the Proxy Policy Committee periodically
reviews information, policies, and procedures provided by the provider
regarding potential and actual conflicts of interest to determine if they create
potential or actual conflicts with the services provided to Trillium.
This annual review also considers the adequacy and timeliness of the providers
policies and procedures.
Trillium
does not borrow or lend shares for the primary purpose of voting them. Certain
Funds have a securities lending program whereby they lend shares to
third parties. In order to vote loaned shares at issuer annual and special
meetings, it is necessary to attempt to recall those shares prior to a
company's
record date. The Fund's Portfolio Managers provide a designated member of the
Shareholder Advocacy team with a list of all currently loaned
shares. If the Shareholder Advocacy team member finds that any company on the
list has a record date within one month, they report that finding to
the Fund's Portfolio Managers so that they can attempt to recall the
shares.
Trillium is
responsible for the collection of information and the preparation and filing of
Form N-PX. Trillium will provide the necessary information and review Form
N-PX for accuracy and completeness.
WELLINGTON
MANAGEMENT
GLOBAL
PROXY POLICY AND PROCEDURES
September
1, 2020
INTRODUCTION
Wellington
Management has adopted and implemented policies and procedures that it believes
are reasonably designed to ensure that proxies are voted in
the best interests of clients for whom it exercises proxy-voting
discretion.
Wellington
Management's Proxy Voting Guidelines (the "Guidelines") set forth broad
guidelines and positions on common proxy issues that Wellington Management
uses in voting on proxies In addition, Wellington Management also considers each
proposal in the context of the issuer, industry and country or
countries in which the issuer's business is conducted. The Guidelines are not
rigid rules and the merits of a particular proposal may cause Wellington
Management to enter a vote that differs from the Guidelines. Wellington
Management seeks to vote all proxies with the goal of increasing long-term
client value and, while client investment strategies may differ, applying this
common set of guidelines is consistent with the investment objective
of achieving positive long-term investment performance for each
client.
STATEMENT
OF POLICY
Wellington
Management:
1 |
Votes
client proxies for which clients have affirmatively delegated proxy-voting
authority, in writing, unless it has arranged in advance with the client
to
limit the circumstances in which it would exercise voting authority or
determines that it is in the best interest of one or more clients to
refrain from
voting a given proxy. |
2 |
Votes
all proxies in the best interests of the client for whom it is
voting. |
3 |
Identifies
and resolves all material proxy-related conflicts of interest between the
firm and its clients in the best interests of the
client. |
RESPONSIBILITY
AND OVERSIGHT
The
Investment Research Group ("Investment Research") monitors regulatory
requirements with respect to proxy voting and works with the firm's Legal and
Compliance Group and the Investment Stewardship Committee to develop practices
that implement those requirements. Investment Research
also acts as a resource for portfolio managers and research analysts on proxy
matters as needed. Day-to-day administration of the proxy voting
process is the responsibility of Investment Research. The Investment Stewardship
Committee is responsible for oversight of the implementation of the
Global Proxy Policy and Procedures, review and approval of the Guidelines,
identification and resolution of conflicts of interest, and for providing
advice and
guidance on specific proxy votes for individual issuers. The Investment
Stewardship Committee reviews the Global Proxy Policy and Procedures
annually.
PROCEDURES
Use of
Third-Party Voting Agent
Wellington
Management uses the services of a third-party voting agent for research, voting
recommendations, and to manage the administrative aspects of
proxy voting. The voting agent processes proxies for client accounts, casts
votes based on the Guidelines and maintains records of proxies voted.
Wellington Management complements the research received by its primary voting
agent with research from another voting agent.
Receipt
of Proxy
If a client
requests that Wellington Management votes proxies on its behalf, the client must
instruct its custodian bank to deliver all relevant voting material to
Wellington Management or its voting agent.
Reconciliation
Each public
security proxy received by electronic means is matched to the securities
eligible to be voted and a reminder is sent to any custodian or trustee
that has not forwarded the proxies as due. This reconciliation is performed at
the ballot level. Although proxies received for private securities, as well as
those received in non- electronic format, are voted as received, Wellington
Management is not able to reconcile these ballots, nor does it notify
custodians of non-receipt.
Research
In addition
to proprietary investment research undertaken by Wellington Management
investment professionals, Investment Research conducts proxy research
internally, and uses the resources of a number of external sources including
third-party voting agents to keep abreast of developments in corporate
governance and of current practices of specific companies.
Proxy
Voting
Following
the reconciliation process, each proxy is compared against the Guidelines, and
handled as follows:
• |
Generally,
issues for which explicit proxy voting guidance is provided in the
Guidelines (i.e., "For", "Against", "Abstain") are voted in accordance
with the
Guidelines. |
• |
Issues
identified as "case-by-case" in the Guidelines are further reviewed by
Investment Research. In certain circumstances, further input is needed,
so
the issues are forwarded to the relevant research analyst and/or portfolio
manager(s) for their input. |
• |
Absent
a material conflict of interest, the portfolio manager has the authority
to decide the final vote. Different portfolio managers holding the same
securities
may arrive at different voting conclusions for their clients'
proxies. |
Wellington
Management reviews a subset of the voting record to ensure that proxies are
voted in accordance with these Global
Proxy Policy and Procedures
and the Guidelines; and
ensures that documentation and reports, for clients and for internal purposes,
relating to the voting of proxies are promptly
and properly prepared and disseminated.
Material
Conflict of Interest Identification and Resolution Processes
Wellington
Management's broadly diversified client base and functional lines of
responsibility serve to minimize the number of, but not prevent, material
conflicts of interest it faces in voting proxies. Annually, the Investment
Stewardship Committee sets standards for identifying material conflicts
based on client, vendor, and lender relationships, and publishes those standards
to individuals involved in the proxy voting process. In addition,
the Investment Stewardship Committee encourages all personnel to contact
Investment Research about apparent conflicts of interest, even if the
apparent conflict does not meet the published materiality criteria. Apparent
conflicts are reviewed by designated members of the Investment Stewardship
Committee to determine if there is a conflict and if so whether the conflict is
material.
If a proxy
is identified as presenting a material conflict of interest, the matter must be
reviewed by designated members of the Investment Stewardship Committee,
who will resolve the conflict and direct the vote. In certain circumstances, the
designated members may determine that the full Investment Stewardship
Committee should convene.
OTHER
CONSIDERATIONS
In certain
instances, Wellington Management may be unable to vote or may determine not to
vote a proxy on behalf of one or more clients. While not exhaustive,
the following are potential instances in which a proxy vote might not be
entered.
Securities
Lending
In general,
Wellington Management does not know when securities have been lent out pursuant
to a client's securities lending program and are therefore
unavailable to be voted. Efforts to recall loaned securities are not always
effective, but, in rare circumstances, Wellington Management may determine
voting would outweigh the benefit to the client resulting from use of securities
for lending and recommend that a client attempt to have its custodian
recall the security to permit voting of related proxies.
Share
Blocking and Re-registration
Certain
countries impose trading restrictions or requirements regarding re-registration
of securities held in omnibus accounts in order for shareholders
to vote a proxy. The potential impact of such requirements is evaluated when
determining whether to vote such proxies.
Lack of
Adequate Information, Untimely Receipt of Proxy Materials, or Excessive
Costs
Wellington
Management may abstain from voting a proxy when the proxy statement or other
available information is inadequate to allow for an informed
vote, when the proxy materials are not delivered in a timely fashion or when, in
Wellington Management's judgment, the costs exceed the expected
benefits to clients (such as when powers of attorney or consularization are
required).
ADDITIONAL
INFORMATION
Wellington
Management maintains records related to proxies pursuant to Rule 204-2 of the
Investment Advisers Act of 1940 (the "Advisers Act"), the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and other
applicable laws. In addition, Wellington Management discloses annually
how it has exercised its voting rights for significant votes, as require by the
EU Shareholder Rights Directive II ("SRD II").
Wellington
Management provides clients with a copy of its Global
Proxy Policy and Procedures, including
the Guidelines, upon written request. In addition,
Wellington Management will provide specific client information relating to proxy
voting to a client upon written request.
Dated: 1
September 2020