2022-03-22MoneyMarketFundsGovernment-AbcProspectus
ALLSPRING
FUNDS TRUST
PART
B
ALLSPRING
MONEY MARKET FUNDS
STATEMENT
OF ADDITIONAL INFORMATION
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Statement
of Additional Information June
1, 2022 |
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Fund |
A |
C |
Administrator |
Institutional |
Premier |
Select |
Service |
Sweep |
Allspring
Government Money Market Fund |
WFGXX |
- |
WGAXX |
GVIXX |
- |
WFFXX |
NWGXX |
N/A |
Allspring
Heritage Money Market Fund |
- |
- |
SHMXX |
SHIXX |
- |
WFJXX |
WHTXX |
- |
Allspring
Money Market Fund |
STGXX |
N/A |
- |
- |
WMPXX |
- |
WMOXX |
- |
Allspring
Municipal Cash Management Money
Market Fund |
- |
- |
WUCXX |
EMMXX |
- |
- |
EISXX |
- |
Allspring National
Tax-Free Money Market Fund |
NWMXX |
- |
WNTXX |
- |
WFNXX |
- |
MMIXX |
- |
Allspring Treasury
Plus Money Market Fund |
PIVXX |
- |
WTPXX |
PISXX |
- |
WTLXX |
PRVXX |
- |
Allspring
100% Treasury Money Market Fund |
WFTXX |
- |
WTRXX |
WOTXX |
- |
- |
NWTXX |
- |
Allspring
Funds Trust
(the “Trust”) is an open-end, management investment company. This Statement of
Additional Information (“SAI”) contains additional
information about the above referenced series of the Trust in the Allspring
family of funds - (each, a “Fund” and collectively, the “Funds”).
This SAI is
not a prospectus and should be read in conjunction with the Funds’ Prospectuses
(each a “Prospectus” and collectively the “Prospectuses”) dated
June 1,
2022. The audited financial statements for the Funds, which include the
portfolios of investments and report of the independent registered
public accounting firm for the fiscal year ended January 31,
2022, are hereby incorporated by reference to the Funds’ Annual
Reports dated as of
January 31,
2022. The Prospectuses, Annual Reports and Semi-Annual Reports may be obtained
free of charge by visiting www.allspringglobal.com,
calling 1-800-222-8222
or writing to Allspring
Funds, P.O. Box 219967, Kansas City, MO 64121-9967.
MMFS/FASAI08
6-22
Money
Market Funds
HISTORICAL
FUND INFORMATION
The Trust
was organized as a Delaware statutory trust on March 10, 1999. On March 25,
1999, the Board of Trustees of Norwest
Advantage Funds (“Norwest”), the Board of Directors of Stagecoach Funds, Inc.
(“Stagecoach”) and the Board of
Trustees of the Trust (the “Board”), approved an Agreement and Plan of
Reorganization providing for, among other
things, the transfer of the assets and stated liabilities of various predecessor
Norwest and Stagecoach portfolios
to certain Funds of the Trust (the “Reorganization”). Prior to November 5, 1999,
the effective date of the Reorganization,
the Trust had only nominal assets.
On December
16, 2002, the Boards of Trustees of The Montgomery Funds and The Montgomery
Funds II (collectively,
“Montgomery”) approved an Agreement and Plan of Reorganization providing for,
among other things, the
transfer of the assets and stated liabilities of various predecessor Montgomery
portfolios into various Funds of the Trust.
The effective date of the reorganization was June 9, 2003.
On February
3, 2004, the Board, and on February 18, 2004, the Board of Trustees of The
Advisors’ Inner Circle Fund (“AIC
Trust”), approved an Agreement and Plan of Reorganization providing for, among
other things, the transfer of the assets
and stated liabilities of various predecessor AIC Trust portfolios into various
Funds of the Trust. The effective
date of the reorganization was July 26, 2004.
In August
and September 2004, the Boards of Directors of the Strong family of funds
(“Strong”) and the Board approved an
Agreement and Plan of Reorganization providing for, among other things, the
transfer of the assets and stated
liabilities of various predecessor Strong mutual funds into various Funds of the
Trust. The effective date of the reorganization
was April 8, 2005.
On December
30, 2009, the Board of Trustees of Evergreen Funds (“Evergreen”), and on January
11, 2010, the Board, approved an
Agreement and Plan of Reorganization providing for, among other things, the
transfer of the assets and stated
liabilities of various predecessor Evergreen portfolios and Wells Fargo
Advantage Funds portfolios to certain Funds of
the Trust. The effective date of the reorganization was July 12, 2010 for
certain Evergreen Funds, and July 19, 2010
for the remainder of the Evergreen Funds.
On December
15, 2015, the Wells Fargo Advantage Funds changed its name to the Wells Fargo
Funds.
On December
6, 2021, the Wells Fargo Funds changed its name to the Allspring
Funds.
The
Government
Money Market Fund commenced
operations on November 8, 1999 as successor to the Government
Money Market Fund of Stagecoach and the U.S. Government Fund of Norwest. The
predecessor Norwest
U.S. Government Fund, which is considered the surviving entity for accounting
purposes, commenced operations
on November 16, 1987.
The
Heritage
Money Market Fund commenced
operations on April 11, 2005, as successor to the Strong Heritage Money
Market Fund. The predecessor Strong Heritage Money Market Fund commenced
operations on June 29, 1995.
The
Money
Market Fund commenced
operations on November 8, 1999 as successor to the Class A shares of the
Prime Money
Market Fund of Stagecoach, the Money Market Fund of Stagecoach and the Ready
Cash Investment Fund of
Norwest. The predecessor Stagecoach Money Market Fund, which is considered the
surviving entity for accounting
purposes, commenced operations on July 1, 1992.
The
Municipal
Cash Management Money Market Fund commenced
operations on July 12, 2010, as successor to the Evergreen
Institutional Municipal Money Market Fund. The predecessor fund commenced
operations on November
20, 1996.
The
National
Tax-Free Money Market Fund commenced
operations on November 8, 1999 as successor to the Institutional
Class shares of the National Tax-Free Money Market Fund of Stagecoach and the
Service Class shares of the
Municipal Money Market Fund of Norwest. The predecessor Norwest Municipal Money
Market Fund, which is considered
the surviving entity for accounting purposes, commenced operations on January 7,
1988. The Fund
changed its
name from the National Tax-Free Institutional Money Market Fund to the National
Tax-Free Money Market Fund
effective July 28, 2003.
The
Treasury
Plus Money Market Fund commenced
operations on November 8, 1999 as successor to the Administrative,
Service and Institutional Class shares of the Treasury Plus Money Market Fund of
Stagecoach and the Service
Class shares of the Treasury Plus Fund of Norwest. The predecessor Stagecoach
Treasury Plus Money Market Fund, which
is considered the surviving entity for accounting purposes, commenced operations
on October 1, 1985. The
Fund changed its name from the Treasury Plus Institutional Money Market Fund to
the Treasury Plus Money
Market Fund effective July 28, 2003.
The
100%
Treasury Money Market Fund commenced
operations on November 8, 1999 as successor to the Treasury Fund of
Norwest. The predecessor Norwest Treasury Fund was originally organized as a
fund of Norwest and commenced
operations on December 3, 1990.
FUND
INVESTMENT POLICIES AND RISKS
Fundamental Investment
Policies
Each Fund
has adopted the following fundamental investment policies; that is, they may not
be changed without approval by
the holders of a majority (as defined under the Investment Company Act of 1940,
as amended (the “1940 Act”)
of the outstanding voting securities of each Fund.
The
Funds may not:
(1)
purchase the securities of issuers conducting their principal business activity
in the same industry if, immediately after the
purchase and as a result thereof, the value of a Fund’s investments in that
industry would equal or exceed 25% of the
current value of the Fund’s total assets, provided that this restriction does
not limit a Fund’s: (i) investments
in securities of other investment companies, (ii) investments in securities
issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, (iii) investments in municipal
securities (for the purpose of this restriction,
private activity bonds and notes shall not be deemed municipal securities if the
payments of principal and
interest on such bonds or notes is the ultimate responsibility of nongovernment
issuers), (iv) investments in repurchase
agreements; provided further that each Fund reserves freedom of action to
concentrate in the obligations
of domestic banks (as such term is interpreted by the Securities and Exchange
Commission (the “SEC”)) or its
staff); and provided further that each of the Municipal Cash Management Money
Market Fund and National Tax-Free
Money Market Fund (a) may invest 25% or more of the current value of its total
assets in private activity bonds or
notes that are the ultimate responsibility of non-government issuers conducting
their principal business activity in
the same industry and (b) may invest 25% or more of the current value of its
total assets in securities whose
issuers are located in the same state or securities the interest and principal
on which are paid from revenues of similar
type projects;
(2)
purchase securities of any issuer if, as a result, with respect to 75% of a
Fund’s total assets, more than 5% of the value of
its total assets would be invested in the securities of any one issuer or the
Fund’s ownership would be more than 10% of
the outstanding voting securities of such issuer, provided that this restriction
does not limit a Fund’s investments
in securities issued or guaranteed by the U.S. Government, its agencies and
instrumentalities, or investments
in securities of other investment companies;
(3) borrow
money, except to the extent permitted under the 1940 Act, including the rules,
regulations and any exemptive
orders obtained thereunder;
(4) issue
senior securities, except to the extent permitted under the 1940 Act, including
the rules, regulations and any
exemptive orders obtained thereunder;
(5) make
loans to other parties if, as a result, the aggregate value of such loans would
exceed one-third of a Fund’s total
assets. For the purposes of this limitation, entering into repurchase
agreements, lending securities and acquiring
any debt securities are not deemed to be the making of loans;
(6)
underwrite securities of other issuers, except to the extent that the purchase
of permitted investments directly from the
issuer thereof or from an underwriter for an issuer and the later disposition of
such securities in accordance with a
Fund’s investment program may be deemed to be an underwriting;
(7)
purchase or sell real estate unless acquired as a result of ownership of
securities or other instruments (but this shall not
prevent a Fund from investing in securities or other instruments backed by real
estate or securities of companies
engaged in the real estate business);
(8)
purchase or sell commodities, provided that (i) currency will not be deemed to
be a commodity for purposes of this
restriction, (ii) this restriction does not limit the purchase or sale of
futures contracts, forward contracts or options,
and (iii) this restriction does not limit the purchase or sale of securities or
other instruments backed by commodities
or the purchase or sale of commodities acquired as a result of ownership of
securities or other instruments;
(9) with
respect to the Municipal Cash Management Money Market Fund, invest less than 80%
of net assets plus investment
borrowings, under normal circumstances, in municipal obligations that pay
interest exempt from federal income tax,
but not necessarily the federal alternative minimum tax (“AMT”);
(10) with
respect to the National Tax-Free Money Market Fund, invest less than 80% of net
assets plus investment borrowings,
under normal circumstances, in investments the income from which is exempt from
federal income tax (including
federal AMT).
Non-Fundamental Investment
Policies
Each Fund
has adopted the following non-fundamental policies; that is, they may be changed
by the Trustees at any time
without approval of such Fund’s shareholders.
(1) Each
Fund may invest in shares of other investment companies to the extent permitted
under the 1940 Act, including
the rules, regulations and any exemptive orders obtained thereunder, provided
however, that no Fund that has
knowledge that its shares are purchased by another investment company investor
pursuant to Section 12(d)(1)(G)
of the 1940 Act will acquire any securities of registered open-end management
investment companies or registered
unit investment trusts in reliance on Section 12(d)(1)(F) or 12(d)(1)(G) of the
1940 Act.
(2) Each
Fund may not invest or hold more than 5% of the Fund’s net assets in illiquid
securities. For this purpose, illiquid
securities include, among others, (a) securities that are illiquid by virtue of
the absence of a readily available market or
legal or contractual restrictions on resale, (b) fixed time deposits that are
subject to withdrawal penalties and that
have maturities of more than seven days, and (c) repurchase agreements not
terminable within seven days.
(3) Each
Fund may lend securities from its portfolio to approved brokers, dealers and
financial institutions, to the extent
permitted under the 1940 Act, including the rules, regulations and exemptions
thereunder, which currently limit such
activities to one-third of the value of a Fund’s total assets (including the
value of the collateral received). Any such
loans of portfolio securities will be fully collateralized based on values that
are marked-to-market daily.
(4) Each
Fund may not make investments for the purpose of exercising control or
management, provided that this restriction
does not limit a Fund’s investments in securities of other investment companies
or investments in entities created
under the laws of foreign countries to facilitate investment in securities of
that country.
(5) Each
Fund may not purchase securities on margin (except for short-term credits
necessary for the clearance of transactions).
(6) Each
Fund may not sell securities short, unless it owns or has the right to obtain
securities equivalent in kind and amount to
the securities sold short (short sales “against the box”), and provided that
transactions in futures contracts
and options are not deemed to constitute selling securities short.
(7) Each
Fund that is subject to Rule 35d-1 (the “Names Rule”) under the 1940 Act, and
that has a non-fundamental policy or
policies in place to comply with the Names Rule, has adopted the following
policy:
Shareholders
will receive at least 60 days notice of any change to a Fund’s non-fundamental
policy complying with the Names
Rule. The notice will be provided in plain English in a separate written
document, and will contain the following
prominent statement or similar statement in bold-face type: “Important Notice
Regarding Change in
Investment
Policy.” This statement will appear on both the notice and the envelope in which
it is delivered, unless it is
delivered separately from other communications to investors, in which case the
statement will appear either on the notice
or the envelope in which the notice is delivered. The investment policy of the
Government Money Market Fund, the
Treasury Plus Money Market Fund and the 100% Treasury Money Market Fund
concerning “80% of the Fund’s net
assets” may be changed by the Board of Trustees without shareholder approval,
but shareholders would be given at
least 60 days’ notice. The investment policy of the Municipal Cash Management
Money Market Fund and the
National Tax-Free Money Market Fund concerning “80% of the Fund’s net assets”
may only be changed with shareholder
approval.
Further Explanation of Investment
Policies
Notwithstanding
the foregoing policies, any other investment companies in which the Funds may
invest have adopted
their own investment policies, which may be more or less restrictive than those
listed above, thereby allowing
the Funds to participate in certain investment strategies indirectly that are
prohibited under the fundamental
and non-fundamental investment policies listed above.
Permitted Investment Activities and Certain
Associated Risks
Set forth
below are descriptions of permitted investment activities for the Funds and
certain of their associated risks. The
activities are organized into various categories. To the extent that an activity
overlaps two or more categories, the
activity is referenced only once in this section. Not all of the Funds
participate in all of the investment activities described
below. In addition, with respect to any particular Fund, to the extent that an
investment activity is described
in such Fund’s Prospectus as being part of its principal investment strategy,
the information provided below
regarding such investment activity is intended to supplement, but not supersede,
the information contained in the
Prospectus, and the Fund may engage in such investment activity in accordance
with the limitations set forth in the
Prospectus. To the extent an investment activity is described in this SAI that
is not referenced in the Prospectus,
a Fund under normal circumstances will not engage in such investment activity
with more than 15% of its assets
unless otherwise specified below. Unless otherwise noted or required by
applicable law, the percentage limitations
included in this SAI apply at the time of purchase of a security.
For
purposes of monitoring the investment policies and restrictions of the Funds
(with the exception of the loans of portfolio
securities policy described below), the amount of any securities lending
collateral held by a Fund will be excluded in
calculating total assets.
The Funds
invest exclusively in money market instruments, which are high quality,
short-term investments that provide
short-term funds to businesses, financial institutions and governments. Common
money market instruments include
U.S. Government obligations, bank obligations, corporate bonds, commercial
paper, municipal securities, asset- and
mortgage-backed securities, and repurchase agreements. Please note that not all
securities that fall within the
categories of permitted investment activities set forth below qualify as money
market instruments, and the Funds
are not permitted to purchase such securities unless they so qualify. In the
event a money market security held by a
Fund ceases to be an “Eligible Security” (as defined in Rule 2a-7 under the 1940
Act) or no longer presents minimal
credit risks, immediate sale of such security is not required, provided that the
Board has determined that disposal of
the portfolio security would not be in the best interests of the
Fund.
DEBT
SECURITIES
Debt
securities include bonds, corporate debt securities and similar instruments,
issued by various U.S. and non-U.S. public- or
private-sector entities. The issuer of a debt security has a contractual
obligation to pay interest at a stated rate on
specific dates and to repay principal (the debt security’s face value)
periodically or on a specified maturity date. An
issuer may have the right to redeem or “call” a debt security before maturity,
in which case the investor may have to
reinvest the proceeds at lower market rates. The value of fixed-rate debt
securities will tend to fall when interest
rates rise, and rise when interest rates fall. The values of “floating-rate” or
“variable-rate” debt securities, on the other
hand, fluctuate much less in response to market interest-rate movements than the
value of fixed-rate debt securities.
Debt securities may be senior or subordinated obligations. Senior obligations,
including certain bonds and
corporate debt securities, generally have the first claim on a corporation’s
earnings and assets and, in the event of
liquidation, are paid before subordinated debt. Debt securities may be unsecured
(backed only by the issuer’s general
creditworthiness) or secured (also backed by specified
collateral).
Debt
securities are interest-bearing investments that promise a stable stream of
income; however, the prices of such securities
are inversely affected by changes in interest rates and, therefore, are subject
to the risk of market price fluctuations.
Longer-term securities are affected to a greater extent by changes in interest
rates than shorter-term securities.
The values of debt securities also may be affected by changes in the credit
rating or financial condition of the issuing
entities. Investing in debt securities is subject to certain risks including,
among others, credit and interest rate risk,
as more fully described in this section.
A Fund may
purchase instruments that are not rated if, as determined by the Fund’s
sub-adviser, such obligations present
minimal credit risk.
Certain of
the debt obligations a Fund may purchase (including certificates of
participation, commercial paper and other
short-term obligations) may be backed by a letter of credit from a bank or
insurance company. A letter of credit
guarantees that payment to a lender will be received on time and for the correct
amount, and is typically unconditional
and irrevocable. In the event that the indebted party is unable to make payment
on the debt obligation,
the bank or insurance company will be required to cover the full or remaining
amount of the debt obligation.
Corporate
debt securities are long and short term fixed-income securities typically issued
by businesses to finance their
operations. The issuer of a corporate debt security has a contractual obligation
to pay interest at a stated rate on specific
dates and to repay principal periodically or on a specified maturity date. The
rate of interest on a corporate
debt security may be fixed, floating, or variable, and could vary directly or
inversely with respect to a reference
rate. An issuer may have the right to redeem or “call” a corporate debt security
before maturity, in which case the
investor may have to reinvest the proceeds at lower market rates. The value of
fixed-rate corporate debt securities
will tend to fall when interest rates rise and rise when interest rates fall.
Senior obligations generally have the first
claim on a corporation’s earnings and assets and, in the event of liquidation,
are paid before subordinated debt.
Corporate debt securities may be unsecured (backed only by the issuer’s general
creditworthiness) or secured (also
backed by specified collateral). Because of the wide range of types and
maturities of corporate debt securities, as well as
the range of creditworthiness of issuers, corporate debt securities can have
widely varying risk/return profiles.
LIBOR Transition. The Funds’
investments, payment obligations and financing terms may be based on floating
rates, such as
London Inter-bank Offered Rate (“LIBOR”), Euro Interbank Offered Rate
(“EURIBOR”) and other similar types of
reference rates (each, a “Reference Rate”). On July 27, 2017, the Chief
Executive of the U.K. Financial Conduct Authority
(“FCA”), which regulates LIBOR, announced that the FCA will no longer persuade
nor compel banks to submit
rates for the calculation of LIBOR and certain other Reference Rates after 2021.
The FCA and the ICE Benchmark
Administration have since announced that most LIBOR settings will no longer be
published after December
31, 2021 and a majority of U.S. dollar LIBOR settings will cease publication
after June 30, 2023. It is possible
that a subset of LIBOR settings will be published after these dates on a
“synthetic” basis, but any such publications
would be considered non-representative of the underlying market. On March 5,
2021, the FCA and the ICE
Benchmark Administration (“IBA”) announced that most LIBOR settings will no
longer be published after December
31, 2021 and a majority of U.S. dollar LIBOR settings will cease publication
after June 30, 2023. Specifically,
the IBA announced that all LIBOR settings will either cease to be provided by
any administrator, or no longer be
representative immediately after December 31, 2021, for all four LIBOR settings
(Great British Pound (“GBP”),
Euro, Swiss Franc and Japanese Yen) and for the one-week and two-month U.S.
dollar LIBOR settings, and immediately
after June 30, 2023 for the remaining U.S. dollar LIBOR settings, including
three-month U.S. dollar LIBOR.
While the FCA may consult on the issue of requiring the IBA to produce certain
LIBOR tenors on a synthetic basis, it
has announced that all 35 LIBOR settings will either cease to be provided by any
administrator or will no longer be
representative as of the dates published by the IBA. Various financial industry
groups have begun planning for that
transition and certain regulators and industry groups have taken actions to
establish alternative Reference Rates.
Replacement rates that have been identified include the Secured Overnight
Financing Rate (“SOFR”), which is intended to
replace U.S. dollar LIBOR and measures the cost of overnight borrowings through
repurchase agreement transactions
collateralized with U.S. Treasury securities, and the Sterling Overnight Index
Average Rate (“SONIA”), which is
intended to replace GBP LIBOR and measures the overnight interest rate paid by
banks for unsecured transactions
in the sterling market, although other replacement rates could be adopted by
market participants.
The
termination of certain Reference Rates presents risks to the Funds. At this
time, it is not possible to exhaustively identify or
predict the effect of any such changes, any establishment of alternative
Reference Rates or any other reforms to
Reference Rates that may be enacted in the UK or elsewhere. The elimination of a
Reference Rate, or any other
changes or reforms to the determination or supervision of Reference Rates, could
have an adverse impact on the market
for, or value of any, securities or payments linked to those Reference Rates and
other financial obligations held by a
Fund, or on its overall financial condition or results of operations. In
addition, any substitute Reference Rate, and
any pricing adjustments imposed by a regulator or by counterparties or
otherwise, may adversely affect a Fund’s
performance and/or net asset value.
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. 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.
Adjustable Rate
Obligations. Adjustable
rate obligations include demand notes, medium term notes, bonds, commercial
paper, and certificates of participation in such instruments. The interest rate
on adjustable rate obligations
may be floating or variable. For certain adjustable-rate obligations, the rate
rises and declines based on the
movement of a reference index of interest rates and is adjusted periodically
according to a specified formula. Adjustable-rate
securities generally are less sensitive to interest rate changes, but may lose
value if their interest rates do
not rise as much, or as quickly, as interest rates in general. Conversely,
adjustable-rate securities generally will not
increase in value if interest rates decline. When a Fund holds adjustable-rate
securities, a reduction in market or
reference interest rates will reduce the income received from such
securities.
Adjustable-rate
obligations include floating- and variable-rate obligations. The interest rate
on a variable-rate demand
obligation is adjusted automatically at specified intervals, while the interest
rate on floating-rate obligations is adjusted
when the rate on the underlying index changes. These obligations typically have
long-stated maturities and may
have a conditional or unconditional demand feature that permits the holder to
demand payment of principal
at any time or at specified intervals. Variable-rate demand notes also include
master demand notes that are obligations
that permit a Fund to invest fluctuating amounts, which may change daily without
penalty, pursuant to direct
arrangements between the Fund, as lender, and the borrower. The borrower may
have a right, after a given period, to
prepay at its discretion the outstanding principal amount of the obligations
plus accrued interest upon a specified
number of days’ notice to the holders of such obligations. For more information,
refer to “Variable Amount Master
Demand Notes.”
Some
adjustable rate obligations may be secured by letters of credit or other credit
support arrangements provided by banks.
Such credit support arrangements often include unconditional and irrevocable
letters of credit that are issued by a
third party, usually a bank, which assumes the obligation for payment of
principal and interest in the event of
default by the issuer. Letters of credit are designed to enhance liquidity and
ensure repayment of principal and any
accrued interest if the underlying variable rate demand obligation should
default. Some variable rate obligations
feature other credit enhancements, such as standby bond purchase agreements
(“SBPAs”). A SBPA can feature a
liquidity facility that is designed to provide funding for the purchase price of
variable rate obligations that fail to be
remarketed. The liquidity facility provider is obligated solely to advance funds
for the purchase of tendered variable
rate bonds that fail to be remarketed and does not guarantee the repayment of
principal or interest. The liquidity
facility provider’s obligations under the SBPA are subject to conditions,
including the continued creditworthiness
of the underlying borrower or issuer, and the facility may terminate upon the
occurrence of certain
events of
default or at the expiration of its term. In addition, a liquidity facility
provider may fail to perform its obligations.
A Fund may
be unable to timely dispose of a variable rate obligation if the issuer defaults
and the letter of credit or liquidity
facility provider fails to perform its obligations or the facility otherwise
terminates and a successor letter of credit or
liquidity provider is not immediately obtained. The potential adverse impact to
a Fund resulting from the inability
of a letter of credit or liquidity facility provider to meet its obligations
could be magnified to the extent the provider
also furnishes credit support for other variable-rate obligations held by the
Fund.
In the case
of adjustable-rate securities that are not subject to a demand feature, a Fund
is reliant on the secondary market for
liquidity. In addition, there generally is no established secondary market for
master demand notes because
they are direct lending arrangements between the lender and borrower.
Accordingly, where these obligations
are not secured by letters of credit, SBPAs or other credit support
arrangements, a Fund is dependent on the ability
of the borrower to pay principal and interest in accordance with the terms of
the obligations. The failure by a Fund
to receive scheduled interest or principal payments on a loan would adversely
affect the income of the Fund and
would likely reduce the value of its assets, which would be reflected in a
reduction in the Fund’s NAV.
Adjustable-rate
obligations may or may not be rated by nationally recognized statistical ratings
organizations (e.g., Moody’s
Investors Service, Inc. (“Moody’s”), Standard & Poor’s Rating Group
(“S&P”), or Fitch Investors Service, Inc. (“Fitch”)).
Adjustable-rate obligations are subject to credit and other risks generally
associated with debt securities.
Asset-Backed
Securities.
Asset-backed securities are securities that are secured or “backed” by pools of
various types of
assets on which cash payments are due at fixed intervals over set periods of
time. Asset-backed securities are created
in a process called securitization. In a securitization transaction, an
originator of loans or an owner of accounts
receivable of a certain type of asset class sells such underlying assets to a
special purpose entity, so that there is no
recourse to such originator or owner. Payments of principal and interest on
asset-backed securities typically
are tied to payments made on the pool of underlying assets in the related
securitization. Such payments on the
underlying assets are effectively “passed through” to the asset-backed security
holders on a monthly or other regular,
periodic basis. The level of seniority of a particular asset-backed security
will determine the priority in which the holder
of such asset-backed security is paid, relative to other security holders and
parties in such securitization. Examples of
underlying assets include consumer loans or receivables, home equity loans,
credit card loans, student loans,
automobile loans or leases, and timeshares, although other types of receivables
or assets also may be used as underlying
assets.
While
asset-backed securities typically have a fixed, stated maturity date, low
prevailing interest rates may lead to an increase in
the prepayments made on the underlying assets. This may cause the outstanding
balances due on the underlying
assets to be paid down more rapidly. As a result, a decrease in the originally
anticipated interest from such
underlying securities may occur, causing the asset-backed securities to pay-down
in whole or in part prior to their
original stated maturity date. Prepayment proceeds would then have to be
reinvested at the lower prevailing interest
rates. Conversely, prepayments on the underlying assets may be less than
anticipated, especially during periods of
high or rising interest rates, causing an extension in the duration of the
asset-backed securities. The impact of
any prepayments made on the underlying assets may be difficult to predict and
may result in greater volatility.
Delinquencies
or losses that exceed the anticipated amounts for a given securitization could
adversely impact the payments
made on the related asset-backed securities. This is a reason why, as part of a
securitization, asset-backed securities
are often accompanied by some form of credit enhancement, such as a guaranty,
insurance policy, or subordination.
Credit protection in the form of derivative contracts may also be purchased. In
certain securitization transactions,
insurance, credit protection, or both may be purchased with respect to only the
most senior classes of asset-backed
securities, on the underlying collateral pool, or both. The extent and type of
credit enhancement varies across
securitization transactions.
Asset-backed
securities carry additional risks including, but not limited to, the possibility
that: i) the creditworthiness of the
credit support provider may deteriorate; and ii) such securities may become less
liquid or harder to value as a result of
market conditions or other circumstances.
Bank Obligations. Bank
obligations include certificates of deposit, time deposits, bankers’
acceptances, and other short-term
obligations of domestic banks, foreign subsidiaries of domestic banks, foreign
branches of domestic banks,
domestic and foreign branches of foreign banks, domestic savings and loan
associations and other banking institutions.
Certificates of deposit are negotiable certificates evidencing the obligation of
a bank to repay funds deposited
with it for a specified period of time. Time deposits are non-negotiable
deposits maintained in a banking institution
for a specified period of time at a stated interest rate. Bankers’ acceptances
are credit instruments evidencing
the obligation of a bank to pay a draft drawn on it by a customer. These
instruments reflect the obligation both of the
bank and of the customer to pay the face amount of the instrument upon maturity.
Other short-term obligations
may include uninsured, direct obligations of the banking institution bearing
fixed, floating or variable interest
rates.
The
activities of U.S. banks and most foreign banks are subject to comprehensive
regulations. New legislation or regulations,
or changes in interpretation and enforcement of existing laws or regulations,
may affect the manner of operations
and profitability of domestic banks. With respect to such obligations issued by
foreign branches of domestic
banks, foreign subsidiaries of domestic banks, and domestic and foreign branches
of foreign banks, a Fund may be
subject to additional investment risks that are different in some respects from
those incurred by a Fund that invests
only in debt obligations of domestic issuers. Such risks include political,
regulatory or economic developments,
the possible imposition of foreign withholding and other taxes (at potentially
confiscatory levels) on amounts
realized on such obligations, the possible establishment of exchange controls or
the adoption of other foreign
governmental restrictions that might adversely affect the payment of principal
and interest on these obligations
and the possible seizure or nationalization of foreign deposits. In addition,
foreign branches of domestic banks and
foreign banks may be subject to less stringent reserve requirements and to
different regulatory, accounting,
auditing, reporting and recordkeeping standards than those applicable to
domestic branches of U.S. banks.
Banks may
be particularly susceptible to certain economic factors, such as interest rate
changes or adverse developments
in the market for real estate. Fiscal and monetary policy and general economic
cycles can affect the availability
and cost of funds, loan demand and asset quality and thereby impact the earnings
and financial conditions
of banks. Further, the traditional banking industry is experiencing increased
competition from alternative types of
financial institutions.
Commercial Paper. Commercial
paper is a short-term, promissory note issued by a bank, corporation or other
borrower to
finance short-term credit needs. Commercial paper is typically unsecured but it
may be supported by letters of
credit, surety bonds or other forms of collateral. Commercial paper may be sold
at par or on a discount basis and
typically has a maturity from 1 to 270 days. Like bonds, and other fixed-income
securities, commercial paper
prices are susceptible to fluctuations in interest rates. As interest rates
rise, commercial paper prices typically will
decline and vice versa. The short-term nature of a commercial paper investment,
however, makes it less susceptible
to such volatility than many other securities. Variable amount master demand
notes are a type of commercial
paper. They are demand obligations that permit the investment of fluctuating
amounts at varying market rates of
interest pursuant to arrangements between the issuer and a commercial bank
acting as agent for the payee of such
notes whereby both parties have the right to vary the amount of the outstanding
indebtedness on the notes.
Dollar Roll
Transactions. Dollar
roll transactions are transactions wherein a Fund sells fixed-income securities
and simultaneously
makes a commitment to purchase similar, but not identical, securities at a later
date from the same party and
at a predetermined price. Mortgage-backed security dollar rolls and U.S.
Treasury dollar rolls are types of dollar
rolls. Like a forward commitment, during the roll period, no payment is made by
a Fund for the securities purchased,
and no interest or principal payments on the securities purchased accrue to the
Fund, but the Fund assumes the
risk of ownership. A Fund is compensated for entering into dollar roll
transactions by the difference between the
current sales price and the forward price for the future purchase, as well as by
the interest earned on the cash
proceeds of the initial sale. Dollar roll transactions may result in higher
transaction costs for a Fund.
Like other
when-issued securities or firm commitment agreements, dollar roll transactions
involve the risk that the market
value of the securities sold by a Fund may decline below the price at which the
Fund is committed to purchase
similar securities. In the event the buyer of securities from a Fund under a
dollar roll transaction becomes insolvent,
the Fund’s use of the proceeds of the transaction may be restricted pending a
determination by the other party, or
its trustee or receiver, whether to enforce the Fund’s obligation to repurchase
the securities. A Fund will
engage in
dollar roll transactions for the purpose of acquiring securities for its
portfolio and not for investment leverage.
Floating- and Variable-Rate
Obligations
Floating-
and variable-rate obligations include obligations such as demand notes, bonds
and preferred shares. Variable-rate
demand notes include master demand notes that are obligations that permit a Fund
to invest fluctuating
amounts, which may change daily without penalty, pursuant to direct arrangements
between the Fund, as lender,
and the borrower. The interest rate on a floating-rate demand obligation is
based on a referenced lending rate, such
as a bank’s prime rate, and is adjusted automatically each time such rate is
adjusted. The interest rate on a variable-rate
demand obligation is adjusted automatically at specified intervals. The issuer
of such obligations ordinarily
has a right, after a given period, to prepay at its discretion the outstanding
principal amount of the obligations
plus accrued interest upon a specified number of days notice to the holders of
such obligations. Frequently,
such obligations are secured by letters of credit or other credit support
arrangements provided by banks. Such
features often include unconditional and irrevocable letters of credit that are
issued by a third party, usually a
bank, savings and loan association or insurance company which assumes the
obligation for payment of principal
and interest in the event of default by the issuer. Letters of credit are
designed to enhance liquidity and ensure
repayment of principal and any accrued interest if the underlying variable-rate
demand obligation should default.
Some variable rate obligations feature other credit enhancements, such as
standby bond purchase agreements
(“SBPAs”). An SBPA can feature a liquidity facility that is designed to provide
funding for the purchase price of
variable rate obligations that are unable to be successfully remarketed for
resale. The liquidity facility provider is
obligated solely to advance funds for the purchase of tendered variable rate
bonds that fail to be remarketed
and does not guarantee the repayment of principal or interest. The liquidity
facility provider’s obligations under the
SBPA are subject to conditions, including the continued creditworthiness of the
underlying borrower or issuer, and
the facility may terminate upon the occurrence of certain events of default or
at the expiration of its term. In
addition, a liquidity facility provider may fail to perform its obligations. A
Fund may be unable to timely dispose of a variable
rate obligation if the underlying issuer defaults and the letter of credit or
liquidity facility provider fails to perform its
obligations or the facility otherwise terminates and a successor letter of
credit or liquidity provider is not immediately
obtained. The potential adverse impact to a Fund resulting from the inability of
a letter of credit or liquidity
facility provider to meet its obligations could be magnified to the extent the
provider also furnishes credit support for
other variable-rate obligations held by the Fund.
There
generally is no established secondary market for certain variable-rate
obligations, such as those not supported by letters
of credit, SBPAs or other credit support arrangements, because they are
direct lending arrangements between the
lender and borrower. Accordingly, where these obligations are not secured by
letters of credit, SBPAs or other
credit support arrangements, a Fund is dependent on the ability of the borrower
to pay principal and interest on demand.
Such obligations frequently are not rated by credit rating agencies and a Fund
may invest in obligations which are
not so rated only if the sub-adviser determines that at the time of investment
the obligations are of comparable
quality to the other obligations in which such Fund may invest. The sub-adviser,
on behalf of a Fund, monitors
the creditworthiness of the issuers of the floating- and variable-rate demand
obligations in such Fund’s portfolio.
Floating- and variable-rate instruments are subject to interest-rate and credit
risks and other risks generally associated
with debt securities. The floating- and variable-rate instruments that the Funds
may purchase include certificates
of participation in such instruments.
Foreign Obligations and
Securities.
Investments in foreign obligations and securities include high-quality,
short-term (thirteen
months or less) debt obligations of foreign issuers, including foreign branches
of U.S. banks, U.S. branches of foreign
banks, foreign governmental agencies and foreign companies that are denominated
in and pay interest in U.S.
dollars. Investments in foreign obligations involve certain considerations that
are not typically associated with investing
in domestic obligations. There may be less publicly available information about
a foreign issuer than about a domestic
issuer and the available information may be less reliable. Foreign issuers also
are not generally subject to the same
accounting, auditing and financial reporting standards or governmental
supervision as domestic issuers. In addition,
with respect to certain foreign countries, taxes may be withheld at the source
under foreign tax laws, and there is a
possibility of expropriation or potentially confiscatory levels of taxation,
political or social instability or diplomatic
developments that could adversely affect investments in, the liquidity of, and
the ability to enforce contractual
obligations with respect to, obligations of issuers located in those countries.
Amounts realized on certain
foreign
securities in which a Fund may invest may be subject to foreign withholding or
other taxes that could reduce the return
on these securities. Tax treaties between the United States and foreign
countries, however, may reduce or eliminate
the amount of foreign taxes to which the Fund would otherwise be
subject.
Recent
Events in European Countries. A number
of countries in Europe have experienced severe economic and financial
difficulties. Many non-governmental issuers, and even certain governments, have
defaulted on, or been forced to
restructure, their debts; many other issuers have faced difficulties obtaining
credit or refinancing existing obligations;
financial institutions have in many cases required government or central bank
support, have needed to raise
capital, and/or have been impaired in their ability to extend credit; and
financial markets in Europe and elsewhere
have experienced extreme volatility and declines in asset values and liquidity.
These difficulties may continue,
worsen or spread within and beyond Europe. Responses to the financial problems
by European governments,
central banks and others, including austerity measures and reforms, may not
work, may result in social unrest and
may limit future growth and economic recovery or have other unintended
consequences. Further defaults or
restructurings by governments and others of their debt could have additional
adverse effects on economies,
financial markets and asset valuations around the world.
The United
Kingdom formally left the European Union (“EU”) on January 31, 2020 (a measure
commonly referred to as
“Brexit”). In December 2020, the United Kingdom and the EU entered into a new
trading relationship. The agreement
allows for continued trading free of tariffs, but institutes other new
requirements for trading between the United
Kingdom and the EU. Aspects of the EU-United Kingdom trade relationship remain
subject to further negotiation.
Due to political uncertainty, it is not possible to anticipate the form or
nature of the future trading relationship
between the EU and the United Kingdom.
Since the
citizens of the United Kingdom voted via referendum to leave the EU in June
2016, global financial markets have
experienced significant volatility due to the uncertainty around Brexit. Even
with a new trading relationship having been
established, there will likely continue to be considerable uncertainty about the
potential impact of these developments
on United Kingdom, European and global economies and markets. There is also the
possibility of withdrawal
movements within other EU countries and the possibility of additional political,
economic and market uncertainty
and instability. Brexit and any similar developments may have negative effects
on economies and markets,
such as increased volatility and illiquidity and potentially lower economic
growth in the United Kingdom, EU and
globally, which may adversely affect the value of a Fund’s investments. Whether
or not a Fund invests in securities
of issuers located in Europe or with significant exposure to European issuers or
countries, these events could
result in losses to the Fund, as there may be negative effects on the value and
liquidity of the Fund’s investments
and/or the Fund’s ability to enter into certain transactions.
Russia
launched a large-scale invasion of Ukraine on February 24, 2022, significantly
amplifying already existing geopolitical
tensions. Actual and threatened responses to such military action may impact the
markets for certain Russian
commodities and may likely have collateral impacts on markets globally. As a
result of this military action, the United
States and many other countries (“Sanctioning Bodies) have instituted various
economic sanctions against
Russian individuals and entities (including corporate and banking). These
sanctions include, but are not limited to:
a prohibition on doing business with certain Russian companies, officials and
oligarchs; a commitment by certain
countries and the European Union to remove selected Russian banks from the
Society for Worldwide Interbank
Financial Telecommunications “SWIFT,” the electronic banking network that
connects banks globally; and restrictive
measures to prevent the Russian Central Bank from undermining the impact of the
sanctions. The Sanctioning
Bodies, or others, could also institute broader sanctions on Russia. These
sanctions and the resulting market
environment could result in the immediate freeze of Russian securities,
commodities, resources, and/or funds
invested in prohibited assets, impairing the ability of a Fund to buy, sell,
receive or deliver those securities and/or
assets. Further, due to closures of certain markets and restrictions on trading
certain securities, the value of certain
securities held by the Fund could be significantly impacted, which could lead to
such securities being valued at zero.
Sanctions could also result in Russia taking countermeasures or retaliatory
actions which may further impair the value
and liquidity of Russian securities, including cyber actions. The extent and
duration of the military action, resulting
sanctions imposed and other punitive action taken and resulting future market
disruptions, including declines in
its stock markets, the value of Russian sovereign debt and the value of the
ruble against the U.S. dollar, cannot be
easily predicted, but could be significant. Any such disruptions caused by
Russian military action or other actions
(including terror attacks, cyberattacks and espionage) or resulting actual and
threatened responses to such
activity,
including purchasing and financing restrictions, boycotts or changes in consumer
or purchaser preferences, sanctions,
tariffs or cyberattacks on the Russian government, Russian companies or Russian
individuals, including politicians,
may impact Russia’s economy and a Fund’s investments in Russian securities. As
Russia produces and exports
large amounts of crude oil and gas, any acts of terrorism, armed conflict or
government interventions (such as the
imposition of sanctions or other governmental restrictions on trade) causing
disruptions of Russian oil and gas exports
could negatively impact the Russian economy and, thus, adversely affect the
financial condition, results of operations
or prospects of related companies. Russia’s invasion of Ukraine, the responses
of countries and political bodies to
Russia’s actions, and the potential for wider conflict may increase financial
market volatility and could have severe
adverse effects on regional and global economic markets, including the markets
for certain securities and commodities,
such as oil and natural gas.
Illiquid
Securities. Pursuant
to Rule 22e-4 under the 1940 Act, a Fund (other than a money market Fund) may
not acquire any
“illiquid investment” if, immediately after the acquisition, the Fund would have
invested more than 15% of its net
assets in illiquid investments that are assets. An “illiquid investment” is any
investment that such a Fund reasonably
expects cannot be sold or disposed of in current market conditions in seven
calendar days or less without the
sale or disposition significantly changing the market value of the investment.
Illiquid investments include repurchase
agreements with a notice or demand period of more than seven days, certain
over-the-counter derivative instruments,
and securities and other financial instruments that are not readily marketable,
unless, based upon a review of
the relevant market, trading and investment-specific considerations, those
investments are determined not to be
illiquid. The Funds (other than the money market Funds) have implemented a
liquidity risk management program and
related procedures to identify illiquid investments pursuant to Rule 22e-4, and
the Board has approved the
designation of Allspring
Funds Management to administer the liquidity risk management program and
related procedures.
The money market Funds may invest up to 5% of its net assets in illiquid
investments. The 15% and 5% limits are
applied as of the date a Fund purchases an illiquid investment. It is possible
that a Fund’s holding of illiquid investment
could exceed the 15% limit (5% for the money market Funds), for example as a
result of market developments
or redemptions.
Each Fund
may purchase certain restricted securities that can be resold to institutional
investors and which may be determined
not to be illiquid investments pursuant to the Trust’s liquidity risk management
program. In many cases, those
securities are traded in the institutional market under Rule 144A under the 1933
Act and are called Rule 144A securities.
Investments
in illiquid investments involve more risks than investments in similar
securities that are readily marketable.
Illiquid investments may trade at a discount from comparable, more liquid
investments. Investment of a Fund’s
assets in illiquid investments may restrict the ability of the Fund to dispose
of its investments in a timely fashion and
for a fair price as well as its ability to take advantage of market
opportunities. The risks associated with illiquidity
will be particularly acute where a Fund’s operations require cash, such as when
a Fund has net redemptions,
and could result in the Fund borrowing to meet short-term cash requirements or
incurring losses on the sale of
illiquid investments.
Illiquid
investments are often restricted securities sold in private placement
transactions between issuers and their purchasers
and may be neither listed on an exchange nor traded in other established
markets. In many cases, the privately
placed securities may not be freely transferable under the laws of the
applicable jurisdiction or due to contractual
restrictions on resale. To the extent privately placed securities may be resold
in privately negotiated transactions,
the prices realized from the sales could be less than those originally paid by
the Fund or less than the fair value
of the securities. In addition, issuers whose securities are not publicly traded
may not be subject to the disclosure
and other investor protection requirements that may be applicable if their
securities were publicly traded. If any
privately placed securities held by a Fund are required to be registered under
the securities laws of one or more
jurisdictions before being resold, the Fund may be required to bear the expenses
of registration. Private placement
investments may involve investments in smaller, less seasoned issuers, which may
involve greater risks than
investments in more established companies. These issuers may have limited
product lines, markets or financial resources,
or they may be dependent on a limited management group. In making investments in
private placement securities,
a Fund may obtain access to material non-public information, which may restrict
the Fund’s ability to conduct
transactions in those securities.
Mortgage-Related
Securities. Certain
Funds may invest in mortgage-related securities. Mortgage pass-through
securities
are securities representing interests in “pools” of mortgages in which payments
of both interest and principal
on the securities are made monthly, in effect “passing through” monthly payments
made by the individual borrowers
on the residential mortgage loans which underlie the securities (net of fees
paid to the issuer or guarantor of the
securities). Early repayment of principal on mortgage pass-through securities
may expose the Fund to a lower rate of
return upon reinvestment of principal. Also, if a security subject to prepayment
has been purchased at a premium, in
the event of prepayment the value of the premium would be lost. Like other
fixed-income securities, when
interest rates rise, the value of a mortgage-related security generally will
decline; however, when interest rates decline,
the value of mortgage-related securities with prepayment features may not
increase as such as other fixed-income
securities.
Payment of
principal and interest on some mortgage pass-through securities (but not the
market value of the securities
themselves) may be guaranteed by the full faith and credit of the U.S.
Government or its agencies or instrumentalities.
Mortgage pass-through securities created by non-government issuers (such as
commercial banks, savings and
loan institutions, private mortgage insurance companies, mortgage bankers and
other secondary market
issuers) may be supported by various forms of insurance or guarantees, including
individual loan, title, pool and hazard
insurance, and letters of credit, which may be issued by governmental entities,
private insurers or the mortgage
poolers.
Municipal Bonds. Municipal
bonds are debt obligations of a governmental entity issued to obtain funds for
various public
purposes that obligate the municipality to pay the holder a specified sum of
money at specified intervals and to repay
the principal amount of the loan at maturity. The two principal classifications
of municipal bonds are “general
obligation” and “revenue” bonds. General obligation bonds are typically, but not
always, supported by the municipality’s
general taxing authority, while revenue bonds are supported by the revenues from
one or more particular
project, facility, class of facilities, or activity. The revenue bond
classification encompasses industrial revenue
bonds (“IRBs”) (formerly known as industrial development bonds). IRBs are
organized by a government entity but
the proceeds are directed to a private, for-profit business. IRBs are backed by
the credit and security of the
private, for-profit business. IRBs are typically used to support a specific
project, such as to build or acquire factories
or other heavy equipment and tools. With an IRB, the sponsoring government
entity holds title to the underlying
collateral until the bonds are paid in full. In certain circumstances, this may
provide a federal tax exempt status to
the bonds, and many times a property tax exemption on the collateral. With an
IRB, the sponsoring government
entity is not responsible for bond repayment and the bonds do not affect the
government’s credit rating.
Under the Internal Revenue Code, certain revenue bonds are considered “private
activity bonds” and interest paid on
such bonds is treated as an item of tax preference for purposes of calculating
federal alternative minimum tax
liability.
Certain of
the municipal obligations held by the Funds may be insured as to the timely
payment of principal and interest.
The insurance policies usually are obtained by the issuer of the municipal
obligation at the time of its original
issuance. In the event that the issuer defaults on interest or principal
payment, the insurer will be notified and will be
required to make payment to the bondholders. Although the insurance feature is
designed to reduce certain
financial risks, the premiums for insurance and the higher market price
sometimes paid for insured obligations
may reduce the Funds’ current yield. To the extent that securities held by the
Funds are insured as to principal
and interest payments by insurers whose claims-paying ability rating is
downgraded by a nationally recognized
statistical ratings organization (e.g., Moody’s, S&P, or Fitch), the value
of such securities may be affected. There is,
however, no guarantee that the insurer will meet its obligations. Moreover, the
insurance does not guarantee
the market value of the insured obligation or the net asset value of the Funds’
shares. In addition, such insurance
does not protect against market fluctuations caused by changes in interest rates
and other factors. The Funds also
may purchase municipal obligations that are additionally secured by bank credit
agreements or escrow accounts.
The credit quality of companies which provide such credit enhancements will
affect the value of those securities.
The risks
associated with municipal bonds vary. Local and national market forces—such as
declines in real estate prices and
general business activity—may result in decreasing tax bases, fluctuations in
interest rates, and increasing
construction costs, all of which could reduce the ability of certain issuers of
municipal bonds to repay their
obligations. Certain issuers of municipal bonds have also been unable to obtain
additional financing through, or
must pay
higher interest rates on, new issues, which may reduce revenues available for
issuers of municipal bonds to pay
existing obligations.
Because of
the large number of different issuers of municipal bonds, the variance in size
of bonds issued, and the range of
maturities within the issues, most municipal bonds do not trade on a daily
basis, and many trade only rarely. Because of
this, the spread between the bid and offer may be wider, and the time needed to
purchase or sell a particular
bond may be longer than for other securities.
Municipal
securities are typically issued together with an opinion of bond counsel to the
issuer that the interest paid on those
securities will be excludable from gross income for federal income tax purposes.
Such opinion may have been issued
as of a date prior to the date that a Fund acquired the municipal security.
Subsequent to a Fund’s acquisition
of such a municipal security, however, the security may be determined to pay, or
to have paid, taxable income. As
a result, the treatment of dividends previously paid or to be paid by a Fund as
“exempt-interest dividends”
could be adversely affected, subjecting the Fund’s shareholders to increased
federal income tax liabilities.
Under highly unusual circumstances, the Internal Revenue Service may determine
that a municipal bond issued as
tax-exempt should in fact be taxable. If any Fund held such a bond, it might
have to distribute taxable income, or
reclassify as taxable, ordinary income that was previously distributed as
exempt-interest dividends.
Changes or
proposed changes in state or federal tax laws could impact the value of
municipal debt securities that a Fund may
purchase. Also, the failure or possible failure of such debt issuances to
qualify for tax-exempt treatment may cause
the prices of such municipal securities to decline, possibly adversely affecting
the value of a Fund’s portfolio.
Such a failure could also result in additional taxable income to a Fund and/or
shareholders.
Municipal
Leases. Municipal
leases are obligations in privately arranged loans to state or local government
borrowers and may
take the form of a lease, installment purchase or conditional sales contract
(which typically provide for the title to
the leased asset to pass to the governmental issuer). They are issued by state
and local governments and authorities
to acquire land, equipment, and facilities. An investor may purchase these
obligations directly, or it may purchase
participation interests in such obligations. Interest income from such
obligations is generally exempt from local and
state taxes in the state of issuance. “Participations” in such leases are
undivided interests in a portion of the total
obligation. Participations entitle their holders to receive a pro rata share of
all payments under the lease. Municipal
leases and participations therein frequently involve special risks.
Municipal
leases may be subject to greater risks than general obligation or revenue bonds.
In most cases, municipal leases are
not backed by the taxing authority of the issuers and may have limited
marketability. Certain municipal lease
obligations contain “non-appropriation” clauses, which provide that the
municipality has no obligation to make lease or
installment purchase payments in future years unless money is appropriated for
such purpose in the relevant
years. Investments in municipal leases are thus subject to the risk that the
legislative body will not make the necessary
appropriation and the issuer fails to meet its obligation. Municipal leases may
also be subject to “abatement
risk.” The leases underlying certain municipal lease obligations may state that
lease payments are subject to
partial or full abatement. That abatement might occur, for example, if material
damage to or destruction of the
leased property interferes with the lessee’s use of the property. However, in
some cases that risk might be reduced by
insurance covering the leased property, or by the use of credit enhancements
such as letters of credit to back lease
payments, or perhaps by the lessee’s maintenance of reserve monies for lease
payments. While the obligation
might be secured by the lease, it might be difficult to dispose of that property
in case of a default.
Taxable
Municipal Obligations. Certain
municipal obligations may be subject to federal income tax for a variety of
reasons.
Taxable municipal obligations are typically issued by municipalities or their
agencies for purposes which do not qualify
for federal tax exemption, but do qualify for state and local tax exemptions.
For example, a taxable municipal
obligation would not qualify for the federal income exemption where (a) the
governmental entity did not receive
necessary authorization for tax-exempt treatment from state or local government
authorities, (b) the governmental
entity exceeds certain regulatory limitations on the cost of issuance for
tax-exempt financing, or (c) the
governmental entity finances public or private activities that do not qualify
for the federal income tax exemption. These
non-qualifying activities might include, for example, certain types of
multi-family housing, certain professional and local
sports facilities, refinancing of certain municipal debt, and borrowing to
replenish a municipality’s underfunded
pension plan. Generally, payments on taxable municipal obligations depend on the
revenues generated
by the projects, excise taxes or state appropriations, or whether the debt
obligations can be backed by
the
government’s taxing power. Due to federal taxation, taxable municipal
obligations typically offer yields more comparable
to other taxable sectors such as corporate bonds or agency bonds than to other
municipal obligations.
U.S.
Territories, Commonwealths and Possessions Obligations. A Fund may
invest in municipal securities issued by certain
territories, commonwealths and possessions of the United States, including but
not limited to, Puerto Rico, Guam, and
the U.S. Virgin Islands, that pay interest that is exempt from federal income
tax and state personal income tax.
The value of these securities may be highly sensitive to events affecting the
fiscal stability of the issuers. These
issuers may face significant financial difficulties for various reasons,
including as the result of events that cannot be
reasonably anticipated or controlled, such as social conflict or unrest, labor
disruption and natural disasters.
In particular, economic, legislative, regulatory or political developments
affecting the ability of the issuers to pay
interest or repay principal may significantly affect the value of a Fund’s
investments. These developments can include or
arise from, for example, insolvency of an issuer, uncertainties related to the
tax status of the securities, tax base
erosion, state or federal constitutional limits on tax increases or other
actions, budget deficits and other financial
difficulties, or changes in the credit ratings assigned to the issuers. The
value of a Fund’s shares will be negatively
impacted to the extent it invests in such securities. Further, there may be a
limited market for certain of these
municipal securities, and the Fund could face illiquidity risks.
Municipal
securities issued by Puerto Rico and its agencies and instrumentalities have
been subject to multiple credit
downgrades as a result of Puerto Rico’s ongoing fiscal challenges and
uncertainty about its ability to make full repayment
on these obligations. The majority of Puerto Rico’s debt is issued by the major
public agencies that are responsible
for many of the island’s public functions, such as water, wastewater, highways,
electricity, education and public
construction. Certain risks specific to Puerto Rico concern state taxes,
e-commerce spending, and underfunded
pension liabilities. Any debt restructuring could reduce the principal amount
due, the interest rate, the maturity
and other terms of Puerto Rico municipal securities, which could adversely
affect the value of such securities.
Municipal
Notes. Municipal
notes generally are used to provide short-term operating or capital needs and
typically have
maturities of one year or less. Notes sold as interim financing in anticipation
of collection of taxes, a bond sale or receipt
of other revenues are usually general obligations of the issuer. The values of
outstanding municipal securities
will vary as a result of changing market evaluations of the ability of their
issuers to meet the interest and principal
payments (i.e., credit risk). Such values also will change in response to
changes in the interest rates payable on new
issues of municipal securities (i.e., market risk). The category includes, but
is not limited to, tax anticipation notes, bond
anticipation notes, revenue anticipation notes, revenue anticipation warrants,
and tax and revenue anticipation
notes.
Repurchase
Agreements. Repurchase
agreements are agreements wherein the seller of a security to a Fund agrees
to
repurchase that security from a Fund at a mutually agreed upon time and price.
The maturities of the underlying securities
in a repurchase agreement transaction may be greater than twelve months,
although the maximum term of a
repurchase agreement will always be less than twelve months. If the seller
defaults and the value of the underlying
securities has declined, a Fund may incur a loss. In addition, if bankruptcy
proceedings are commenced with
respect to the seller of the security, a Fund’s disposition of the security may
be delayed or limited.
A Fund may
not enter into a repurchase agreement with a maturity of more than seven days,
if, as a result, more than 5% of the
market value of such Fund’s net assets would be invested in repurchase
agreements with maturities of more than
seven days, restricted securities and illiquid securities. A Fund will only
enter into repurchase agreements with
broker-dealers and commercial banks that meet guidelines established by the
Board and that are not affiliated with the
adviser. The Funds may participate in pooled repurchase agreement transactions
with other funds advised by the
adviser.
Each Fund
may enter into reverse repurchase agreements (an agreement under which a Fund
sells its portfolio securities
and agrees to repurchase them at an agreed-upon date and price). At the time a
Fund enters into a reverse repurchase
agreement it will place in a segregated custodial account liquid assets such as
U.S. Government securities
or other liquid high-grade debt securities having a value equal to or greater
than the repurchase price (including
accrued interest) and will subsequently monitor the account to ensure that such
value is maintained.
Sovereign Debt
Obligations. Sovereign
debt instruments are issued or guaranteed by foreign governments or their
agencies,
including those of emerging market countries. Sovereign debt may be in the form
of conventional
securities
or other types of debt instruments, such as loans or loan participations. The
debt obligations of a foreign government
or entity may not be supported by the full faith and credit of such foreign
government. Sovereign debt of emerging
market countries may involve a high degree of risk, and may be in default or
present the risk of default. Governmental
entities responsible for repayment of the debt may fail to repay principal and
interest when due, and may require
renegotiation or rescheduling of debt payments. Prospects for repayment of
principal and interest may depend on
political and economic factors. A Fund may have limited or no legal recourse in
the event of default with respect to
sovereign debt obligations. Sovereign debt instruments and foreign debt
securities share many of the same risks.
For more information, refer to “Foreign Debt Securities.”
Unless
otherwise stated in a Fund’s prospectus, countries are generally characterized
by a Fund’s sub-adviser as “emerging
market countries” by reference to a broad market index, by reference to the
World Bank’s per capita income
brackets or based on the sub-adviser’s qualitative judgments about a country’s
level of economic and institutional
development, and include markets commonly referred to as “frontier markets.” An
emerging market is generally
in the earlier stages of its industrialization cycle with a low per capita gross
domestic product (“GDP”) and a low
market capitalization to GDP ratio relative to those in the United States and
the European Union. Frontier market
countries generally have smaller economies and even less developed capital
markets than typical emerging market
countries and, as a result, the risks of investing in emerging market countries
are magnified in frontier market countries.
The
performance of sovereign debt instruments may be negatively affected by
fluctuations in a foreign currency’s strength or
weakness relative to the U.S. dollar, particularly to the extent the Fund
invests a significant percentage of its assets
in sovereign debt instruments denominated in non-U.S. currencies. Currency rates
in foreign countries may fluctuate
significantly over short or long periods of time for a number of reasons,
including changes in interest rates, imposition
of currency exchange controls and economic or political developments in the U.S.
or abroad.
Global
economies and financial markets have become increasingly interconnected, which
increases the possibility that
conditions in one country or region might adversely impact issuers in a
different country or region. Sovereign debt
instruments may be impacted by economic, political, social, diplomatic or other
conditions or events (including,
for example, military confrontations, war and terrorism). Any attempt by a Fund
to hedge against or otherwise
protect its portfolio, or to profit from such circumstances, may fail and,
accordingly, an investment in a Fund could
lose money over short or long periods. For example, the economies of many
countries or regions in which a
Fund may invest are highly dependent on trading with certain key trading
partners. Reductions in spending on products
and services by these key trading partners, the institution of tariffs or other
trade barriers, or a slowdown in
the economies of key trading partners may adversely affect the performance of
securities in which a Fund may
invest. The severity or duration of adverse economic conditions may also be
affected by policy changes made by
governments or quasi-governmental organizations. The imposition of sanctions by
the United States or another
government on a country could cause disruptions to the country’s financial
system and economy, which could
negatively impact the value of securities, including sovereign debt instruments.
The risks posed by sanctions may be
heightened to the extent a Fund invests significantly in the affected country or
region or in issuers from the affected
country that depend on global markets.
Although it
is not uncommon for governments to enter into trade agreements that would, among
other things, reduce
barriers among countries, increase competition among companies and reduce
government subsidies, there are no
assurances that such agreements will achieve their intended economic objectives.
There is also a possibility that such
trade arrangements: i) will not be implemented; ii) will be implemented, but not
completed; iii) or will be completed,
but then partially or completely unwound. It is also possible that a significant
participant could choose to abandon
a trade agreement, which could diminish its credibility and influence. Any of
these occurrences could have
adverse effects on the markets of both participating and non-participating
countries, including appreciation or depreciation
of currencies, a significant increase in exchange rate volatility, a resurgence
in economic protectionism and an
undermining of confidence in markets. Such developments could have an adverse
impact on a Fund’s investments
in the debt of countries participating in such trade agreements.
Further,
investments in certain countries may subject a Fund to tax rules, the
application of which may be uncertain. Countries
may amend or revise their existing tax laws, regulations and/or procedures in
the future, possibly with retroactive
effect. Changes in, or uncertainties regarding the laws, regulations or
procedures of a country could directly or
indirectly reduce the after-tax profits of a Fund.
U.S. Government
Obligations. U.S.
Government obligations include direct obligations of the U.S. Treasury,
including Treasury
bills, notes and bonds, the principal and interest payments of which are backed
by the full faith and credit of the U.S.
This category also includes other securities issued by U.S. Government agencies
or U.S. Government sponsored
entities, such as the Government National Mortgage Association (“GNMA”), Federal
National Mortgage Association
(“FNMA”) and Federal Home Loan Mortgage Corporation (“FHLMC”). U.S. Government
Obligations issued by U.S.
Government agencies or government-sponsored entities may not be backed by the
full faith and credit of the U.S.
Government.
GNMA, a
wholly owned U.S. Government corporation, is authorized to guarantee, with the
full faith and credit of the U.S.
Government, the timely payment of principal and interest on securities issued by
institutions approved by GNMA and
backed by pools of mortgages insured by the Federal Housing Administration or
the Department of Veterans
Affairs. Securities issued by FNMA and FHLMC are not backed by the full faith
and credit of the U.S. Government.
Pass-through securities issued by FNMA are guaranteed as to timely payment of
principal and interest by FNMA but
are not backed by the full faith and credit of the U.S. Government. FHLMC
guarantees the timely payment of
interest and ultimate collection or scheduled payment of principal, but its
guarantees are not backed by the full
faith and credit of the U.S. Government.
While U.S.
Treasury obligations are backed by the “full faith and credit” of the U.S.
Government, such securities are nonetheless
subject to risk. U.S. Government obligations are subject to low but varying
degrees of credit risk, and are still
subject to interest rate and market risk. From time to time, uncertainty
regarding congressional action to increase
the statutory debt ceiling could: i) increase the risk that the U.S. Government
may default on payments on certain
U.S. Government securities; ii) cause the credit rating of the U.S. Government
to be downgraded or increase volatility
in both stock and bond markets; iii) result in higher interest rates; iv) reduce
prices of U.S. Treasury securities;
and/or v) increase the costs of certain kinds of debt. U.S. Government
obligations may be adversely affected by
a default by, or decline in the credit quality of, the U.S. Government. In the
past, U.S. sovereign credit has experienced
downgrades, and there can be no guarantee that it will not be downgraded in the
future. Further, if a U.S.
Government-sponsored entity is negatively impacted by legislative or regulatory
action, is unable to meet its obligations,
or its creditworthiness declines, the performance of a Fund that holds
securities of the entity will be adversely
impacted.
Under the
direction of the Federal Housing Finance Agency (“FHFA”), FNMA and FHLMC have
entered into a joint initiative
to develop a common securitization platform for the issuance of a uniform
mortgage-backed security (the “Single
Security Initiative”) that aligns the characteristics of FNMA and FHLMC
certificates. The Single Security Initiative
was implemented in June 2019, and the effects it may have on the market for
mortgage-backed securities are
uncertain.
Variable Amount Master Demand
Notes. Variable
amount master demand notes are obligations that permit the investment
of fluctuating amounts at varying market rates of interest pursuant to
arrangements between the issuer and the
Funds whereby both parties have the right to vary the amount of the outstanding
indebtedness on the notes.
Because
these obligations are direct lending arrangements between the lender and
borrower, it is not contemplated that such
instruments generally will be traded, and there generally is no established
secondary market for these obligations,
although they are redeemable at face value. For variable amount master demand
notes that are not secured by
letters of credit or other credit support arrangements, a Fund’s right to
recover is dependent on the ability of
the borrower to pay principal and interest on schedule or on demand. Variable
amount master demand notes that
are secured by collateral are subject to the risk that the collateral securing
the notes will decline in value or have no
value. A decline in value of the collateral, whether as a result of market value
declines, bankruptcy proceedings
or otherwise, could cause the note to be undercollateralized. Variable amount
master demand notes are
typically not rated by credit rating agencies, and a Fund may invest in notes
that are not rated only if the sub-adviser
determines, at the time of investment, the obligations are of comparable credit
quality to the other obligations
in which the Fund may invest.
OTHER
PERMITTED INVESTMENT ACTIVITIES
Borrowing. Generally,
under the 1940 Act, a Fund may borrow money only from banks in an amount not
exceeding 1/3 of its
total assets (including the amount borrowed) less liabilities (other than
borrowings). A Fund may borrow money for
temporary or emergency purposes, including for short-term redemptions and
liquidity needs. Borrowing
involves
special risk considerations. Interest costs on borrowings may fluctuate with
changing market rates of interest
and may partially offset or exceed the return earned on borrowed funds (or on
the assets that were retained rather than
sold to meet the needs for which funds were borrowed). Under adverse market
conditions, a Fund might have to
sell portfolio securities to meet interest or principal payments at a time when
investment considerations would not
favor such sales. Reverse repurchase agreements, dollar roll transactions and
other similar investments that
involve a form of leverage have characteristics similar to borrowings, but are
not considered borrowings if a Fund covers
such leverage by maintaining a segregated account or otherwise. To help meet
short-term redemptions and
liquidity needs, the Funds are parties to a revolving credit agreement whereby a
Fund is permitted to use bank borrowings
for temporary or emergency purposes.
Funding Agreements. Funding
agreements are investment contracts with insurance companies which pay interest
at a fixed,
variable, or floating rate, and pay principal on a certain mutually agreeable
maturity date. The term to maturity
cannot exceed 397 days. Funding agreements may or may not allow the Fund to
demand repayment of principal
after an agreed upon waiting period or upon certain other conditions. The
insurance company may also have a
corresponding right to prepay the principal with accrued interest upon a
specified number of days’ notice to the Fund.
The maturity date of some funding agreements may be extended upon the mutual
agreement and consent of the
insurance company and the Fund.
Investment
Companies. These
securities include shares of other affiliated or unaffiliated open-end
investment companies
(i.e., mutual funds), closed-end funds, exchange-traded funds (“ETFs”), UCITS
funds (pooled investment vehicles
established in accordance with the Undertaking for Collective Investment in
Transferable Securities adopted by
European Union member states) and business development companies. A Fund may
invest in securities of other
investment companies up to the limits prescribed in Section 12(d) under the 1940
Act, the rules and regulations
thereunder and any exemptive relief currently or in the future available to a
Fund.
Except with
respect to funds structured as funds-of-funds or so-called master/feeder funds
or other funds whose strategies
otherwise allow such investments, the 1940 Act generally requires that a fund
limit its investments in another
investment company or series thereof so that, as of the time at which a
securities purchase is made: i) no more than
3% of the outstanding voting stock of any one investment company or series
thereof will be owned by a fund or by
companies controlled by a fund; ii) no more than 5% of the value of its total
assets will be invested in the securities
of any one investment company; and iii) no more than 10% of the value of its
total assets will be invested in the
aggregate in securities of other investment companies.
In October
2020, the SEC adopted a new regulatory framework, including new Rule 12d1-4
under the 1940 Act, for fund-of-funds
arrangements. This new regulatory framework included, among other things, the
rescission of certain SEC
exemptive orders and rules permitting investments in excess of the statutory
limits and the withdrawal of certain
related SEC staff no-action letters. While this new regulatory framework permits
the Funds to enter into more types of
fund-of-funds structures and to invest in other investment companies beyond the
statutory limits without an exemptive
order, it also imposes several conditions, including: (i) limits on ownership
and voting of acquired fund shares;
(ii) evaluations and findings by investment advisers of funds in fund-of-funds
arrangements; (iii) investment agreements
between funds in fund-of-funds arrangements; and (iv) limits on complex
fund-of-funds structures. These
regulatory changes may adversely impact a Fund’s investment strategies and
operations to the extent that it invests, or
might otherwise have invested, in shares of other investment companies. In
addition, these regulatory changes may
adversely impact a Fund’s investment strategies and operations to the extent
that it is invested in by other
investment companies in reliance on Rule 12d1-4 or Section
12(d)(1)(G).
Other
investment companies in which a Fund invests can be expected to pay fees and
other operating expenses, such as
investment advisory and administration fees, that would be in addition to those
paid by the Fund. Other investment
companies may include ETFs, which are publicly-traded unit investment trusts,
open-end funds or depositary
receipts that seek to track the performance of specific indices or companies in
related industries (e.g., passive
ETFs), and index funds. A passive ETF or index fund is an investment company
that seeks to track the performance
of an index (before fees and expenses) by holding in its portfolio either the
securities that comprise the index or a
representative sample of the securities in the index. Passive ETFs or index
funds in which the Funds invest will incur
expenses not incurred by their applicable indices. Certain securities comprising
the indices tracked by passive
ETFs or index funds may, from time to time, temporarily be unavailable, which
may further impede a passive
ETF’s or
index fund’s ability to track their respective indices. An actively-managed ETF
is an investment company that seeks to
outperform the performance of an index.
ETFs
generally are subject to the same risks as the underlying securities the ETFs
are designed to track and to the risks of
the specific sector or industry tracked by the ETF. ETFs also are subject to the
risk that their prices may not totally
correlate to the prices of the underlying securities the ETFs are designed to
track and the risk of possible trading
halts due to market conditions or for other reasons. Although ETFs that track
broad market indexes are typically
large and their shares are fairly liquid, ETFs that track more specific indexes
tend to be newer and smaller, and ETFs
have limited redemption features. Additionally, to the extent an ETF holds
securities traded in markets that close at a
different time from the ETF’s listing exchange, liquidity in such securities may
be reduced after the applicable
closing times, and during the time when the ETF’s listing exchange is open but
after the applicable market closing,
fixing or settlement times, bid/ask spreads and the resulting premium or
discount to the ETF’s shares’ NAV may
widen.
In
addition, a Fund may invest in the securities of closed-end investment
companies. Because shares of closed-end investment
companies trade on a stock exchange or in the OTC market, they may trade at a
premium or discount to their net
asset values, which may be substantial, and their potential lack of liquidity
could result in greater volatility. In
addition, closed-end investment companies may employ leverage, which also
subjects the closed-end investment company to
increased risks such as increased volatility. Moreover, closed-end investment
companies incur their own fees and
expenses.
When-Issued and Delayed-Delivery Transactions
and Forward Commitments. Certain
securities may be purchased or sold on a
when-issued or delayed-delivery basis, and contracts to purchase or sell
securities for a fixed price at a future date
beyond customary settlement time may also be made. Delivery and payment on such
transactions normally
take place within 120 days after the date of the commitment to purchase.
Securities purchased or sold on a when-issued,
delayed-delivery or forward commitment basis involve a risk of loss if the value
of the security to be purchased
declines, or the value of the security to be sold increases, before the
settlement date.
Each Fund
has a segregated account where it may maintain cash, U.S. Government obligations
or other high-quality debt
instruments in an amount at least equal in value to its commitments to purchase
when-issued securities. If the value of
these assets declines, a Fund will place additional liquid assets in the account
on a daily basis so that the value of
the assets in the account is at least equal to the amount of such
commitments.
Zero-Coupon, Step-Up Coupon, and Pay-in-Kind
Securities.
Zero-coupon, step-up coupon, and pay-in-kind securities are types
of debt securities that do not make regular cash interest payments. Asset-backed
securities, convertible securities,
corporate debt securities, foreign securities, high-yield securities,
mortgage-backed securities, municipal securities,
participation interests, stripped securities, U.S. Government and related
obligations and other types of debt
instruments may be structured as zero-coupon, step-up coupon, and pay-in-kind
securities.
Instead of
making periodic interest payments, zero-coupon securities are sold at discounts
from face value. The interest
earned by the investor from holding this security to maturity is the difference
between the maturity value and the
purchase price. Step-up coupon bonds are debt securities that do not pay
interest for a specified period of time and
then, after the initial period, pay interest at a series of different rates.
Pay-in-kind securities normally give the issuer
an option to pay cash at a coupon payment date or to give the holder of the
security a similar security with the same
coupon rate and a face value equal to the amount of the coupon payment that
would have been made. To the extent
these securities do not pay current cash income, the market prices of these
securities would generally be more
volatile and likely to respond to a greater degree to changes in interest rates
than the market prices of securities
that pay cash interest periodically having similar maturities and credit
qualities.
Other Risks
Large Shareholder
Risk To the
extent a large number of shares of a Fund is held by a single shareholder or a
small group of
shareholders, the Fund is subject to the risk that redemption by those
shareholders of all or a large portion of their
shares will adversely affect the Fund’s performance by forcing the Fund to sell
securities, potentially at disadvantageous
prices, to raise the cash needed to satisfy such redemption requests. This risk
may be heightened during
periods of declining or illiquid markets, or to the extent that such large
shareholders have short investment horizons or
unpredictable cash flow needs. Such redemptions may also increase transaction
costs and/or have adverse tax
consequences for remaining shareholders. In certain situations, redemptions by
large shareholders may also cause
a Fund to liquidate.
Liquidation Risk. There can
be no assurance that a Fund will grow to or maintain a viable size and, pursuant
to the Declaration
of Trust, the Board is authorized to close and/or liquidate a Fund at any time.
In the event of the liquidation
of a Fund, the expenses, timing and tax consequences of such liquidation may not
be favorable to some or all of
the Fund’s shareholders.
In addition
to the possibility that redemptions by large shareholders may cause a Fund to
liquidate (as discussed above),
other factors and events that may lead to the liquidation of a Fund include
changes in laws or regulations governing
the Fund or affecting the type of assets in which the Fund invests, or economic
developments or trends having a
significant adverse impact on the business or operations of the
Fund.
After a
Fund liquidation is announced, such Fund may begin to experience greater
redemption activity as the Fund approaches
its liquidation date. As portfolio managers effect portfolio transactions to
meet redemptions and prepare the Fund
for liquidation, the Fund may not meet its investment objective and principal
investment strategies. The Fund will
incur transaction costs as a result of these portfolio transactions which will
indirectly be borne by the Fund’s
shareholders. The Fund may be required to make a distribution of income and
capital gains realized, if any, from
liquidating its portfolio. It is anticipated that any distribution would be paid
to shareholders prior to liquidation. Shareholders
of the Fund on the date of liquidation would receive a distribution of their
account proceeds on the settlement
date in complete redemption of their shares. In the event of a liquidation,
please consult with a tax advisor to
determine your specific tax consequences, if any.
Operational and Cybersecurity
Risks. Fund
operations, including business, financial, accounting, data processing
systems or
other operating systems and facilities may be disrupted, disabled or damaged as
a result of a number of factors,
including events that are wholly or partially beyond our control. For example,
there could be electrical or telecommunications
outages; degradation or loss of internet or web services; natural disasters,
such as earthquakes, tornados
and hurricanes; disease pandemics; or events arising from local or larger scale
political or social events, as well as
terrorist acts.
The Funds
are also subject to the risk of potential cyber incidents, which may include,
but are not limited to, the harming of
or unauthorized access to digital systems (for example, through “hacking” or
infection by computer viruses or
other malicious software code), denial-of-service attacks on websites, and the
inadvertent or intentional release of
confidential or proprietary information. Cyber incidents may, among other
things, harm Fund operations, result in
financial losses to a Fund and its shareholders, cause the release of
confidential or highly restricted information,
and result in regulatory penalties, reputational damage, and/or increased
compliance, reimbursement or other
compensation costs. Fund operations that may be disrupted or halted due to a
cyber incident include trading,
the processing of shareholder transactions, and the calculation of a Fund’s net
asset value.
Issues
affecting operating systems and facilities through cyber incidents, any of the
scenarios described above, or other
factors, may harm the Funds by affecting a Fund’s manager, sub-adviser(s), or
other service providers, or issuers of
securities in which a Fund invests. Although the Funds have business continuity
plans and other safeguards
in place, including what the Funds believe to be robust information security
procedures and controls, there is no
guarantee that these measures will prevent cyber incidents or prevent or
ameliorate the effects of significant
and widespread disruption to our physical infrastructure or operating systems.
Furthermore, the Funds cannot
directly control the security or other measures taken by unaffiliated service
providers or the issuers of securities
in which the Funds invest. Such risks at issuers of securities in which the
Funds invest could result in material
adverse consequences for such issuers, and may cause a Fund’s investment in such
securities to lose value.
COVID-19/Coronavirus. A recent
outbreak of respiratory disease caused by a novel coronavirus was detected in
Wuhan City,
Hubei Province, China and has since spread globally. The disease, coronavirus
disease 2019 (abbreviated
as “COVID-19”), and concern about its spread has resulted in disruptions to
global markets, including through
border closings, restrictions on travel and large gatherings, expedited and
enhanced health screenings, quarantines,
cancellations, business and school closings, disruptions to employment and
supply chains, reduced productivity, and
reduced customer and client activity in multiple markets and sectors. On March
11, 2020, the World
Health Organization announced that it had made the assessment that COVID-19
can be characterized as a pandemic.
The impacts of COVID-19, and other epidemics and pandemics that may arise in the
future, could adversely
affect the economies of many nations, particular regions, or the entire global
economy, individual companies
and investment products, and the market in general. The full extent of such
impacts cannot necessarily be foreseen
at the present time. The impacts maybe short term or may last for an extended
period of time, and may exacerbate
other pre-existing political, social and economic risks in certain countries.
The risk of further spreading of COVID-19
has led to significant uncertainty and volatility in the financial markets. The
value of a Fund and the securities
in which a Fund invests may be adversely affected by impacts caused by COVID-19
and other epidemics and
pandemics that may arise in the future.
TRUSTEES
AND OFFICERS
The
following information supplements, and should be read in conjunction with, the
section in each
Prospectus entitled
“Management of the Funds.”
General
The
following table provides basic information about the Trustees and those Officers
of the Trust who perform policy-making
functions. Each of the Trustees and Officers listed below acts in identical
capacities for the Allspring
family of
funds which consists of, as of January 31,
2022, 139 series
comprising Allspring
Funds Trust, Allspring
Variable
Trust, Allspring
Master Trust and four closed-end funds (collectively the “Fund Complex” or
the “Trusts”). The
business address of each Trustee and Officer is 525 Market Street, 12th Floor,
San Francisco, CA 94105. Each Trustee and
Officer serves an indefinite term, with the Trustees subject to retirement from
service as required pursuant to
the Trust’s retirement policy at the end of the calendar year in which a Trustee
turns 75.
Information
for Trustees, all of whom are not “interested” persons of the Trust, as that
term is defined under the 1940 Act
(“Independent Trustees”), appears below. In addition to the Officers listed
below, the Funds have appointed an
Anti-Money Laundering Compliance Officer.
|
|
|
|
Name
and Year of Birth |
Position
Held with
Registrant/Length
of Service1
|
Principal
Occupation(s) During Past 5 Years or Longer |
Current
Other Public Company or Investment
Company Directorships |
|
|
INDEPENDENT
TRUSTEES |
|
William
R. Ebsworth (Born
1957) |
Trustee,
since 2015 |
Retired.
From 1984 to 2013, equities analyst,
portfolio manager, research director
and chief investment officer at Fidelity
Management and Research Company
in Boston, Tokyo, and Hong Kong,
and retired in 2013 as Chief Investment
Officer of Fidelity Strategic Advisers,
Inc. where he led a team of investment
professionals managing client
assets. Prior thereto, Board member
of Hong Kong Securities Clearing
Co., Hong Kong Options Clearing
Corp., the Thailand International Fund,
Ltd., Fidelity Investments Life Insurance
Company, and Empire Fidelity Investments
Life Insurance Company. Audit
Committee Chair and Investment Committee
Chair of the Vincent Memorial
Hospital Endowment (non-profit
organization). Mr. Ebsworth is a
CFA® charterholder. |
N/A |
Jane
A. Freeman (Born
1953) |
Trustee,
since 2015;
Chair Liaison,
since 2018 |
Retired.
From 2012 to 2014 and 1999 to 2008,
Chief Financial Officer of Scientific Learning
Corporation. From 2008 to 2012,
Ms. Freeman provided consulting services
related to strategic business projects.
Prior to 1999, Portfolio Manager at
Rockefeller & Co. and Scudder, Stevens
& Clark. Board member of the Harding
Loevner Funds from 1996 to 2014,
serving as both Lead Independent Director
and chair of the Audit Committee.
Board member of the Russell Exchange
Traded Funds Trust from 2011 to
2012 and the chair of the Audit Committee.
Ms. Freeman is also an inactive
Chartered Financial Analyst. |
N/A |
|
|
|
|
Name
and Year of Birth |
Position
Held with
Registrant/Length
of Service1 |
Principal
Occupation(s) During Past 5 Years or Longer |
Current
Other Public Company or Investment
Company Directorships |
Isaiah
Harris, Jr. (Born
1952) |
Trustee,
since 2009;
Audit Committee
Chair,
since 2019 |
Retired.
Chairman of the Board of CIGNA Corporation
from 2009 to 2021, and Director
from 2005 to 2008. From 2003 to
2011, Director of Deluxe Corporation. Prior
thereto, President and CEO of BellSouth
Advertising and Publishing Corp.
from 2005 to 2007, President and CEO
of BellSouth Enterprises from 2004 to
2005 and President of BellSouth Consumer
Services from 2000 to 2003. Emeritus
member of the Iowa State University
Foundation Board of Governors.
Emeritus Member of the Advisory
Board of Iowa State University School
of Business. Advisory Board Member,
Palm Harbor Academy (private school).
Advisory Board Member, Fellowship
of Christian Athletes. Mr. Harris
is a certified public accountant (inactive
status). |
N/A |
David
F. Larcker (Born
1950) |
Trustee,
since 2009 |
James
Irvin Miller Professor of Accounting
at the Graduate School of Business
(Emeritus), Stanford University, Director
of the Corporate Governance Research
Initiative and Senior Faculty of The
Rock Center for Corporate Governance
since 2006. From 2005 to 2008,
Professor of Accounting at the Graduate
School of Business, Stanford University.
Prior thereto, Ernst & Young Professor
of Accounting at The Wharton School,
University of Pennsylvania from 1985
to 2005. |
N/A |
Olivia
S. Mitchell (Born
1953) |
Trustee,
since 2006;
Nominating
and
Governance
Committee
Chair,
since 2018 |
International
Foundation of Employee Benefit
Plans Professor since 1993, Wharton
School of the University of Pennsylvania.
Director of Wharton’s Pension
Research Council and Boettner Center
on Pensions & Retirement Research,
and Research Associate at the National
Bureau of Economic Research. Previously
taught at Cornell University from
1978 to 1993. |
N/A |
Timothy
J. Penny (Born
1951) |
Trustee,
since 1996;
Chair, since
2018 |
President
and Chief Executive Officer of Southern
Minnesota Initiative Foundation,
a non-profit organization, since
2007. Member of the Board of Trustees
of NorthStar Education Finance, Inc.,
a non-profit organization, since 2007. |
N/A |
|
|
|
|
Name
and Year of Birth |
Position
Held with
Registrant/Length
of Service1 |
Principal
Occupation(s) During Past 5 Years or Longer |
Current
Other Public Company or Investment
Company Directorships |
James
G. Polisson (Born
1959) |
Trustee,
since 2018 |
Retired.
Chief Marketing Officer, Source (ETF)
UK Services, Ltd, from 2015 to 2017.
From 2012 to 2015, Principal of The
Polisson Group, LLC, a management consulting,
corporate advisory and principal
investing company. Chief Executive
Officer and Managing Director at
Russell Investments, Global Exchange Traded
Funds from 2010 to 2012. Managing
Director of Barclays Global Investors
from 1998 to 2010 and Global Chief
Marketing Officer for iShares and Barclays
Global Investors from 2000 to 2010.
Trustee of the San Francisco Mechanics’
Institute, a non-profit organization,
from 2013 to 2015. Board member
of the Russell Exchange Traded Fund
Trust from 2011 to 2012. Director of
Barclays Global Investors Holdings Deutschland
GmbH from 2006 to 2009. Mr.
Polisson is an attorney and has a retired
status with the Massachusetts and
District of Columbia Bar Associations. |
N/A |
|
|
|
|
Name
and Year of Birth |
Position
Held with
Registrant/Length
of Service1 |
Principal
Occupation(s) During Past 5 Years or Longer |
Current
Other Public Company or Investment
Company Directorships |
Pamela
Wheelock (Born
1959) |
Trustee,
since January
2020; previously
Trustee
from January
2018 to
July 2019 |
Board
member of the Destination Medical
Center Economic Development Agency,
Rochester, Minnesota since 2019.
Interim President of the McKnight Foundation
from January to September 2020.
McKnight Foundation Consultant, November
2020 to February 2021. Acting
Commissioner, Minnesota Department
of Human Services, July 2019
through September 2019. Consultant
(part-time), Minnesota Department
of Human Services, October 2019
through December 2019. Chief Operating
Officer, Twin Cities Habitat for Humanity
from 2017 to 2019. Vice President
of University Services, University
of Minnesota from 2012 to 2016.
Prior thereto, on the Board of Directors,
Governance Committee and Finance
Committee for the Minnesota Philanthropy
Partners (Saint Paul Foundation)
from 2012 to 2018, Interim Chief
Executive Officer of Blue Cross Blue
Shield of Minnesota from 2011 to 2012,
Chairman of the Board from 2009 to
2012 and Board Director from 2003 to 2015.
Vice President, Leadership and Community
Engagement, Bush Foundation,
Saint Paul, Minnesota (a private
foundation) from 2009 to 2011. Executive
Vice President and Chief Financial
Officer, Minnesota Sports and Entertainment
from 2004 to 2009 and Senior
Vice President from 2002 to 2004. Executive
Vice President of the Minnesota
Wild Foundation from 2004 to 2008.
Commissioner of Finance, State of Minnesota,
from 1999 to 2002. Currently Board
Chair of the Minnesota Wild Foundation
since 2010. |
N/A |
1. |
Length
of service dates reflect the Trustee’s commencement of service with the
Trust’s predecessor entities, where
applicable. |
|
|
|
Name
and Year of Birth |
Position
Held with Registrant/Length
of
Service1
|
Principal
Occupation(s) During Past 5 Years or Longer2
|
|
|
OFFICERS |
Andrew
Owen (Born
1960) |
President,
since 2017 |
President,
Chief Executive Officer and Director of Allspring Funds Management,
LLC since 2017 and co-president of Galliard Capital Management,
LLC, an affiliate of Allspring Funds Management, LLC,
since
2019. Prior thereto, Head of Affiliated Managers, Allspring Global
Investments,
from 2014 to 2019 and Executive Vice President responsible
for marketing, investments and product development for Allspring
Funds Management, LLC, from 2009 to 2014. In addition, Mr. Owen
was an Executive Vice President of Wells Fargo & Company from
2014
to 2021. |
Jeremy
DePalma (Born
1974) |
Treasurer,
since 2012
(for certain funds
in the Fund Complex);
since 2021
(for the remaining
funds in
the Fund Complex) |
Senior
Vice President of Allspring Funds Management, LLC since 2009. Senior
Vice President of Evergreen Investment Management Company, LLC
from 2008 to 2010 and head of the Fund Reporting and Control Team
within Fund Administration from 2005 to 2010. |
Kate
McKinley (Born
1977) |
Chief
Legal Officer
since 2021 |
Chief
Legal Officer of Allspring Global Investments since 2021. Prior
thereto,
held various roles at State Street Global Advisors beginning in
2010,
including serving as Senior Vice President and General Counsel
from
2019 to 2021, and Chief Operating Officer of the Institutional
Client
Group from 2016 - 2019. Prior to working at State Street Global
Advisors
served as Assistant General Counsel for Bank of America Corporation
from 2005 to 2010 and as an Associate at WilmerHale from
2002 to 2005. |
Christopher
Baker (Born
1976) |
Chief
Compliance
Officer
since 2022 |
Global
Chief Compliance Officer for Allspring Global Investments since
2022. Prior
thereto, Chief Compliance Officer for State Street Global Advisors
from 2018 to 2021. Senior Compliance Officer for the State Street
divisions of Alternative Investment Solutions, Sector Solutions,
and
Global Marketing from 2015 to 2018. From 2010 to 2015 Vice
President,
Global Head of Investment and Marketing Compliance for State
Street Global Advisors. |
Matthew
Prasse (Born
1983) |
Secretary,
since 2021 |
Senior
Counsel of the Allspring Legal Department since 2021. Senior Counsel
of the Wells Fargo Legal Department from 2018 to 2021. Previously,
Counsel for Barings LLC from 2015 to 2018. Prior to joining Barings,
Associate at Morgan, Lewis & Bockius LLP from 2008 to
2015. |
1. |
Length
of service dates reflect the Officer’s commencement of service with the
Trust’s predecessor entities, where applicable. |
2. |
For
those Officers with tenures at Allspring Global Investments and/or
Allspring Funds Management, LLC that began prior to 2021, such tenures
include years
of service during which these businesses/entities were known as Wells
Fargo Asset Management and Wells Fargo Funds Management, LLC, respectively. |
The Trust’s
Declaration of Trust, as amended and restated from time to time (the
“Declaration of Trust”), does not set forth any
specific qualifications to serve as a Trustee other than that no person shall
stand for initial election or appointment
as a Trustee if such person has already reached the age of 72. The Charter and
the Statement of Governance
Principles of the Nominating and Governance Committee also do not set forth any
specific qualifications,
but do set forth certain factors that the Nominating and Governance
Committee may take into account in
considering Trustee candidates and a process for evaluating potential conflicts
of interest, which identifies
certain disqualifying conflicts. All of the current Trustees are Independent
Trustees. Among the attributes or skills
common to all Trustees are their ability to review critically, evaluate,
question and discuss information provided to
them, to interact effectively with the other Trustees, Allspring
Funds Management, LLC (“Allspring
Funds Management”
or the “Manager”), sub-advisers, other service providers, counsel and the
independent registered public
accounting firm, and to exercise effective and independent business judgment in
the performance of their duties as
Trustees. Each Trustee’s ability to perform his or her duties effectively has
been attained through the Trustee’s
business, consulting, public service, professional and/or academic positions and
through experience from service as
a board member of the Trust and the other Trusts in the Fund Complex (and/or in
other capacities, including
for any predecessor funds), other registered investment companies, public
companies, and/or non-profit
entities or
other organizations. Each Trustee’s ability to perform his or her duties
effectively also has been enhanced by his or
her educational background, professional training, and/or other life
experiences. The specific experience, qualifications,
attributes and/or skills that led to the conclusion that a Trustee should serve
as a Trustee of the Trusts in the Fund
Complex are as set forth below.
William
R. Ebsworth. Mr.
Ebsworth has served as a Trustee of the Trusts in the Fund Complex since January
1, 2015. He also
served as a Trustee of Asset Allocation Trust from 2015 to 2018. From 1984 to
2013, he was employed as an equities
analyst, portfolio manager and research director at Fidelity Management and
Research Company in Boston, Tokyo, and
Hong Kong, and retired in 2013 as Chief Investment Officer of Fidelity Strategic
Advisers, Inc., where he led a team
of investment professionals managing client assets. Prior thereto, he was a
Board member of Hong Kong Securities
Clearing Co., Hong Kong Options Clearing Corp., the Thailand International Fund,
Ltd., Fidelity Investments
Life Insurance Company, and Empire Fidelity Investments Life Insurance Company.
Mr. Ebsworth is a CFA®
charterholder.
Jane
A. Freeman. Ms.
Freeman has served as a Trustee of the Trusts in the Fund Complex since January
1, 2015. She also served
as a Trustee of Asset Allocation Trust from 2015 to 2018. From 2012 to 2014 and
1999 to 2008, Ms. Freeman
served as the Chief Financial Officer of Scientific Learning Corporation. From
2008 to 2012, Ms. Freeman provided
consulting services related to strategic business projects. Prior to joining
Scientific Learning, Ms. Freeman was
employed as a portfolio manager at Rockefeller & Co. and Scudder, Stevens
& Clark. She served as a board member of
the Harding Loevner Funds from 1996 to 2014, serving as both Lead Independent
Director and chair of the Audit
Committee. She also served as a board member of the Russell Exchange Traded
Funds Trust from 2011 to 2012, and
as chair of the Audit Committee. Ms. Freeman is also an
inactive Chartered Financial Analyst.
Isaiah
Harris, Jr. Mr.
Harris has served as a Trustee of the Trusts in the Fund Complex since 2009 and
as Chair of the Audit
Committee since 2019 and was an Advisory Board Member from 2008 to 2009. He also
served as a Trustee of Asset
Allocation Trust from 2010 to 2018. He has been the Chairman of the Board of
CIGNA Corporation from 2009 to 2021,
and has been a director of CIGNA Corporation from 2005 to 2008. He served as a
director of Deluxe Corporation
from 2003 to 2011. As a director of these and other public companies, he has
served on board committees,
including Governance, Audit and Compensation Committees. Mr. Harris served in
senior executive positions,
including as president, chief executive officer, vice president of finance
and/or chief financial officer, of operating
companies for approximately 20 years. Mr. Harris has been determined by the
Board to be an audit committee
financial expert, as such term is defined in the applicable rules of the
SEC.
David
F. Larcker. Mr.
Larcker has served as a Trustee of the Trusts in the Fund Complex since 2009 and
was an Advisory
Board Member from 2008 to 2009. He also served as a Trustee of Asset Allocation
Trust from 2010 to 2018. Mr. Larcker
is the James Irvin Miller Professor of Accounting at the Graduate School of
Business (Emeritus) of Stanford
University. He is also the Morgan Stanley Director of the Center for Leadership
Development and Research and
Co-director of The Rock Center for Corporate Governance at Stanford University.
He has been a professor of accounting
for over 30 years. He has written numerous articles on a range of topics,
including managerial accounting,
financial statement analysis and corporate governance.
Olivia
S. Mitchell. Ms.
Mitchell has served as a Trustee of the Trusts in the Fund Complex since 2006
and as chair of the Nominating
and Governance Committee since 2018. She also served as a Trustee of Asset
Allocation Trust from 2010 to
2018. Ms. Mitchell is the International Foundation of Employee Benefit Plans
Professor at the Wharton School of
the University of Pennsylvania, where she is also Professor of Insurance/Risk
Management and Business Economics/Policy.
She also serves in senior positions with academic and policy organizations that
conduct research on
pensions, retirement, insurance, risk management and related topics, including
as Executive Director of the Pension
Research Council and Director of the Boettner Center on Pensions and Retirement
Research, both at the University
of Pennsylvania. She has taught on, and served as a consultant on economics,
insurance, and risk management,
served as Department Chair, advised numerous governmental entities, and written
numerous articles and books
on topics including retirement systems, private and social insurance, and health
and retirement policy.
Timothy
J. Penny. Mr. Penny
has served as a Trustee of the Trusts in the Fund Complex and their predecessor
funds since 1996,
and Chairman of the Board of Trustees since 2018. He also served as a Trustee of
Asset Allocation Trust from 2010
to 2018. He has been President and Chief Executive Officer of Southern Minnesota
Initiative Foundation
since 2007.
He also serves as a member of the board of another non-profit organization. Mr.
Penny was a member of the U.S.
House of Representatives for 12 years representing Southeastern Minnesota’s
First Congressional District.
James
G. Polisson. Mr.
Polisson has served as a Trustee of the Trusts in the Fund Complex since 2018
and was an Advisory
Board member in 2017. Mr. Polisson has extensive experience in the financial
services industry, including over 15
years in the ETF industry. From 2015 to July 31, 2017, Mr. Polisson was the
Chief Marketing Officer of Source (ETF) UK
Services, Ltd., one of the largest providers of exchange-traded products in
Europe. From 2012 to 2015, Mr. Polisson
was Principal of The Polisson Group, LLC, a management consulting, corporate
advisory and principal investing
firm. Prior to 2012, Mr. Polisson was Chief Executive Officer and Managing
Director of Russell Investments’ global ETF
business from 2010 to 2012. He was also a member of the Board of Trustees of
Russell Exchange Traded Funds
Trust, where he served as Chairman, President and Chief Executive Officer, from
2011 to 2012. Mr. Polisson also served
as Chief Marketing Officer for Barclays Global Investors from 2000 to 2010,
where he led global marketing
for the iShares ETF business.
Pamela
Wheelock. Ms.
Wheelock has served as a Trustee of the Trusts in the Fund Complex since January
2020 and previously
from January 2018 until July 2019 and was an Advisory Board member in 2017. Ms.
Wheelock has been a Board
member of the Destination Medical Center Economic Development Agency in
Rochester, Minnesota since 2019. She
was Interim President of the McKnight Foundation from January to September 2020.
She served as the acting
Commissioner of the Minnesota Department of Human Services from July 2019
through September 2019 and as a
consultant (part-time) of the Minnesota Department of Human Services from
October 2019 through December 2019. Ms.
Wheelock has more than 25 years of leadership experience in the private, public
and nonprofit sectors. Ms.
Wheelock was the Chief Operating Officer of Twin Cities Habitat for Humanity
from 2017 through 2019. Prior to joining
Habitat for Humanity in 2017, Ms. Wheelock was on the Board of Directors,
Governance Committee and Finance
Committee for the Minnesota Philanthropy Partners (Saint Paul Foundation) and
the Vice President of University
Services at the University of Minnesota from 2012, where she served as chief
operations officer of the University.
She also served as Interim President and Chief Executive Officer of Blue Cross
Blue Shield of Minnesota from 2011
to 2012, Vice President of the Bush Foundation from 2009 to 2011, and Executive
Vice President and Chief
Financial Officer of Minnesota Sports and Entertainment from 2004 to 2009. Ms.
Wheelock served as the Executive
Budget Officer and Finance Commissioner for the State of Minnesota from 1999 to
2002.
Board of Trustees - Leadership Structure and
Oversight Responsibilities
Overall
responsibility for oversight of the Trust and the Funds rests with the Board of
Trustees. The Board has engaged
Allspring
Funds Management to manage the Funds on a day-to day basis. The Board is
responsible for overseeing
Allspring
Funds Management and other service providers in the operation of the Trust
in accordance with the
provisions of the 1940 Act, applicable provisions of Delaware law, other
applicable laws and the Declaration of Trust. The
Board is currently composed of nine members, each of whom is an Independent
Trustee. The Board currently
conducts regular in-person meetings five times a year. In addition, the Board
may hold special in-person or telephonic
meetings or informal conference calls to discuss specific matters that may arise
or require action between
regular meetings. The Independent Trustees have engaged independent legal
counsel to assist them in performing
their oversight responsibilities.
The Board
has appointed an Independent Trustee to serve in the role of Chairman. The
Chairman’s role is to preside at all
meetings of the Board and to act as a liaison with respect to governance-related
matters with service providers, officers,
attorneys, and other Trustees generally between meetings. The Chairman may also
perform such other functions
as may be delegated by the Board from time to time. Timothy Penny serves as
chairman of the Board. In order to
assist the Chairman in maintaining effective communications with the other
Trustees and Allspring
Funds Management,
the Board has appointed a Chair Liaison to work with the Chairman to coordinate
Trustee communications
and to help coordinate timely responses to Trustee inquiries relating to board
governance and fiduciary
matters. The Chair Liaison serves for a one-year term, which may be extended
with the approval of the Board.
Except for any duties specified herein or pursuant to the Trust’s charter
document, the designation of Chairman or
Chair Liaison does not impose on such Independent Trustee any duties,
obligations or liability that are greater
than the duties, obligations or liability imposed on such person as a member of
the Board generally.
The Board
also has established a Nominating and Governance Committee, an Audit
Committee, a Valuation Committee
and a Dividend Committee to assist the Board in the oversight and direction
of the business and affairs of
the Trust,
and from time to time may establish informal working groups to review and
address the policies and practices
of the Trust with respect to certain specified matters. Additionally, the Board
has established investment teams to
review in detail the performance of each of the Funds, to meet with portfolio
managers, and to report back to the full
Board. The Board occasionally engages independent consultants to assist it in
evaluating initiatives or proposals.
The Board believes that the Board’s current 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 of Trustees and the full Board in a manner that enhances
effective oversight. The leadership
structure of the Board may be changed, at any time and in the discretion of the
Board, including in response to
changes in circumstances or the characteristics of the Trust.
The Funds
and Trusts are subject to a number of risks, including investment, compliance,
operational, liquidity and valuation
risks, among others. Day-to-day risk management functions are subsumed within
the responsibilities of Allspring
Funds Management, the sub-advisers and other service providers (depending on the
nature of the risk), who carry
out the Funds’ investment management and business affairs. Each of Allspring
Funds Management, the sub-advisers
and other service providers have their own, independent approach to risk
management, and their policies
and methods of carrying out risk management functions will depend, in part, on
their individual priorities, resources
and controls.
Risk
oversight forms part of the Board’s general oversight of the Funds and Trusts
and is addressed as part of various Board and
Committee activities. The Board recognizes that it is not possible to identify
all of the risks that may affect a Fund or
to develop processes and controls to eliminate or mitigate their occurrence or
effects and that it is necessary
for the Funds to bear certain risks (such as investment-related risks) to pursue
their goals. As part of its regular
oversight of the Trusts, the Board, directly or through a Committee, interacts
with and reviews reports from, among
others, Allspring
Funds Management, sub-advisers, the Chief Compliance Officer of the Funds, the
Chief Risk Officer of
Allspring
Funds Management, the independent registered public accounting firm for the
Funds, and internal
compliance auditors for Allspring
Funds Management or its affiliates, as appropriate, regarding risks faced
by the Funds
and relevant risk functions. The Board, with the assistance of its investment
teams, also reviews investment
policies and risks in connection with its review of the Funds’ performance, and
considers information regarding
the oversight of liquidity risks from Allspring
Funds Management’s investment personnel. The Board has appointed a
Chief Compliance Officer who oversees the implementation and testing of the
Funds’ compliance program and
regularly reports to the Board regarding compliance matters for the Funds and
their principal service providers.
Allspring
Funds Management has appointed a Chief Risk Officer to enhance the
framework around the assessment,
management, measurement and monitoring of risk indicators and other risk matters
concerning the Funds and
develop periodic reporting of risk management matters to the Board. In addition,
as part of the Board’s periodic
review of the Funds’ advisory, subadvisory and other service provider
agreements, the Board may consider risk
management aspects of their operations and the functions for which they are
responsible. With respect to valuation,
the Board oversees a management valuation team comprised of officers and
employees of Allspring
Funds Management,
has approved and periodically reviews written valuation policies and
procedures applicable to valuing Fund
portfolio investments, and has established a valuation committee of Trustees.
The Board may, at any time and in its
discretion, change the manner in which it conducts its risk oversight
role.
Committees.
As noted
above, the Board has established a standing Nominating and Governance Committee,
a standing Audit Committee,
a standing Valuation Committee and a standing Dividend Committee to assist the
Board in the oversight and
direction of the business and affairs of the Trust. The Nominating and
Governance Committee and Audit Committee
operate pursuant to charters approved by the Board. The Valuation Committee’s
responsibilities are set forth in
Valuation Procedures approved by the Board, and the Dividend Committee’s
responsibilities were set forth by the Board
when it established the Committee. Each Independent Trustee is a member of the
Trust’s Nominating and Governance
Committee, Audit Committee and Valuation Committee. The Dividend Committee is
comprised of three Independent
Trustees.
(1)
Nominating
and Governance Committee. Except
with respect to any trustee nomination made by an eligible shareholder
or shareholder group as permitted by applicable law and applicable provisions of
the Declaration of Trust and
any By-Laws of a Trust, the Committee shall make all nominations for membership
on the Board of Trustees of each
Trust. The Committee shall evaluate each candidate’s qualifications for Board
membership and his or her
independence
from the Funds’ manager, sub-adviser(s) and principal underwriter(s) and, as it
deems appropriate, other
principal service providers. Olivia Mitchell serves as the chairman of the
Nominating and Governance Committee.
The Nominating
and Governance Committee has adopted procedures by which a shareholder may
properly submit a nominee
recommendation for the Committee’s consideration, which are set forth in
Appendix A to the Trusts’ Nominating
and Governance Committee Charter. The shareholder must submit any such
recommendation (a “Shareholder
Recommendation”) in writing to the Trust, to the attention of the Trust’s
Secretary, at the address of the principal
executive offices of the Trust. The Shareholder Recommendation must include: (i)
a statement in writing setting
forth (A) the name, age, date of birth, business address, residence address, and
nationality of the person recommended
by the shareholder (the “candidate”), (B) the series (and, if applicable, class)
and number of all shares of the
Trust owned of record or beneficially by the candidate, as reported to such
shareholder by the candidate; (C) any other
information regarding the candidate called for with respect to director nominees
by paragraphs (a), (d), (e), and (f ) of
Item 401 of Regulation S-K or paragraph (b) of Item 22 of Rule 14a-101 (Schedule
14A) under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), adopted by the SEC (or
the corresponding provisions
of any regulation or rule subsequently adopted by the SEC or any successor
agency applicable to the Trust); (D)
any other information regarding the candidate that would be required to be
disclosed if the candidate were a
nominee in a proxy statement or other filing required to be made in connection
with solicitation of proxies for election of
directors pursuant to Section 14 of the Exchange Act and the rules and
regulations promulgated thereunder;
and (E) whether the recommending shareholder believes that the candidate is or
will be an “interested person” of
the Trust (as defined in the 1940 Act) and information regarding the candidate
that will be sufficient for the Trust
to make such determination; (ii) the written and signed consent of the candidate
to be named as a nominee and to
serve as a Trustee if elected; (iii) the recommending shareholder’s name as it
appears on the Trust’s books; (iv) the series
(and, if applicable, class) and number of all shares of the Trust owned
beneficially and of record by the recommending
shareholder; and (v) a description of all arrangements or understandings between
the recommending
shareholder and the candidate and any other person or persons (including their
names) pursuant to which the
recommendation is being made by the recommending shareholder. In addition,
the Nominating and Governance
Committee may require the candidate to interview in person or furnish such other
information as it may reasonably
require or deem necessary to determine the eligibility of such candidate to
serve as a Trustee of the Trust.
The Nominating and Governance Committee has full discretion to reject
candidates recommended by shareholders,
and there is no assurance that any such person properly recommended and
considered by the Committee
will be nominated for election to the Board. In the event of any conflict or
inconsistency with respect to the
requirements applicable to a Shareholder Recommendation as between those
established in the procedures and those in
the By-Laws of a Closed-End Fund, the requirements of the By-Laws of such
Closed-End Fund shall control.
The Nominating
and Governance Committee may from time-to-time propose nominations of one or
more individuals to serve as
members of an “advisory board,” as such term is defined in Section 2(a)(1) of
the 1940 Act.
(2)
Audit
Committee. The Audit
Committee oversees the Funds’ accounting and financial reporting policies,
including
their internal controls over financial reporting; oversees the quality and
objectivity of the Funds’ financial statements
and the independent audit thereof; and interacts with the Funds’ independent
registered public accounting
firm on behalf of the full Board and with appropriate officers of the Trust.
Isaiah Harris, Jr. serves as the chairman of
the Audit Committee.
(3)
Valuation
Committee. The Board
has delegated to the Valuation Committee the authority to take any action
regarding
the valuation of portfolio securities that the Valuation Committee deems
necessary or appropriate, including
determining the fair value of securities between regularly scheduled Board
meetings in instances where that
determination has not otherwise been delegated to the valuation team
(“Management Valuation Team”) of Allspring
Funds Management. The Board considers for ratification at each quarterly meeting
any valuation actions taken
during the previous quarter by the Valuation Committee or by the Management
Valuation Team other than pursuant to
Board-approved methodologies. Any one member of the Valuation Committee may
constitute a quorum for a
meeting of the committee.
(4)
Dividend
Committee. The Board
has delegated to the Dividend Committee the responsibility to review and
approve
certain dividend amount determinations made by a separate committee composed of
representatives from Allspring
Funds Management and certain sub-advisers (“Management Open-End Dividend
Committee”). The Board
has
delegated to the Management Open-End Dividend Committee the authority to
determine periodic dividend amounts
subject to certain Board-approved parameters to be paid by each of the Core Plus
Bond Fund, Diversified Income
Builder Fund, Emerging Markets Equity Income Fund, Income Plus Fund,
International Bond Fund, Managed Account
CoreBuilder Shares - Series CP and Real Return Fund. Under certain
circumstances, the Dividend Committee
must review and consider for approval, as it deems appropriate, recommendations
of the Management Open-End
Dividend Committee.
The
committees met the following number of times during the most recently completed
fiscal year:
|
|
|
Committee
Name |
|
Committee
Meetings During Last Fiscal Year |
Nominating
and Governance Committee |
|
4 |
Audit
Committee |
|
7 |
Valuation
Committee |
|
1 |
Dividend
Committee |
|
0 |
Compensation. The
Trustees do not receive any retirement benefits or deferred compensation from
the Trust or any other
member of the Fund Complex. The Trust’s Officers are not compensated by the
Trust for their services. Listed below is
the compensation that was paid to each current Trustee by a Fund and the Fund
Complex for the most recently
completed fiscal period:
|
|
|
|
Trustee
Compensation |
|
|
|
Trustee
|
|
Compensation
From Each
Fund |
Total
Compensation from
the Fund Complex1
|
William
R. Ebsworth |
|
$2,370 |
$329,500 |
Jane
A. Freeman |
|
$2,516 |
$349,750 |
Isaiah
Harris, Jr. |
|
$2,589 |
$360,000 |
David
F. Larcker |
|
$2,370 |
$329,500 |
Olivia
S. Mitchell |
|
$2,516 |
$349,750 |
Timothy
J. Penny |
|
$2,915 |
$405,250 |
James
G. Polisson |
|
$2,370 |
$329,500 |
Pamela
Wheelock |
|
$2,370 |
$329,500 |
1. |
As of
January
31, 2022, there were 139
series in the Fund Complex. |
Beneficial
Equity Ownership Information. The
following table contains specific information about the dollar range of
equity
securities beneficially owned by each Trustee as of December
31, 2021 in each Fund and
the aggregate dollar range of
equity securities in other Funds in the Fund Complex overseen by the Trustees,
stated as one of the following
ranges: A = $0; B = $1 - $10,000; C = 10,001 - $50,000; D = $50,001 - $100,000;
and E = Over $100,000.
|
|
|
|
|
|
|
|
|
Fund
|
Ebsworth |
Freeman |
Harris |
Larcker |
Mitchell |
Penny |
Polisson |
Wheelock |
Government
Money Market Fund |
A |
A |
A |
A |
A |
A |
A |
A |
Heritage
Money Market Fund |
A |
A |
A |
A |
A |
A |
A |
A |
Money
Market Fund |
A |
A |
A |
A |
E |
A |
A |
A |
Municipal
Cash Management Money Market Fund |
A |
A |
A |
A |
A |
A |
A |
A |
National
Tax-Free Money Market Fund |
A |
A |
A |
A |
A |
A |
A |
A |
Treasury
Plus Money Market Fund |
A |
A |
D |
A |
A |
A |
A |
A |
100%
Treasury Money Market Fund |
A |
A |
A |
A |
A |
A |
A |
A |
Aggregate
Dollar Range of Equity Securities in All Funds
Overseen by Trustee in Fund Complex1
|
E |
E |
E |
E |
E |
E |
E |
E |
1. |
Includes
Trustee ownership in shares of funds within the entire Allspring Fund
Complex (consisting of 139 funds). |
Ownership
of Securities of Certain Entities. As of the
calendar year ended December
31, 2021, none of the Independent
Trustees and/or their immediate family members owned securities of the manager,
any sub-advisers, or
the
distributor, or any entity directly or indirectly controlling, controlled by, or
under common control with the manager,
any sub-advisers, or the distributor.
MANAGER
AND OTHER SERVICE PROVIDERS
Manager and Class-Level
Administrator
Allspring
Funds Management, a wholly owned subsidiary of Allspring Global Investments
Holdings, LLC, a holding company
indirectly owned by certain private funds of GTCR LLC and Reverence Capital
Partners, L.P., is the manager and
class-level administrator for the Funds. Allspring
Funds Management provides advisory and Fund-level administrative
services to the Funds under an investment management agreement (the “Management
Agreement”) and
provides class-level administrative services to the Funds under a class-level
administration agreement (the “Class-Level
Administration Agreement”). Under the Management Agreement, Allspring
Funds Management is responsible
for, among other services, (i) implementing the investment objectives and
strategies of the Funds, (ii) supervising
the applicable Sub-Adviser(s), (iii) providing Fund-level administrative
services in connection with the Funds’
operations, (iv) developing and implementing procedures for monitoring
compliance with regulatory requirements
and compliance with the Funds’ investment objectives, policies and restrictions,
and (v) providing any other
Fund-level administrative services reasonably necessary for the operation of the
Funds other than those services
that are provided by the Funds’ transfer and dividend disbursing agent,
custodian, and fund accountant. Allspring
Funds Management also furnishes office space and certain facilities
required for conducting the Funds’ business
together with ordinary clerical and bookkeeping services.
Under the
Class-Level Administration Agreement, Allspring
Funds Management is responsible for, among other services,
(i) coordinating, supervising and paying the applicable transfer agent and
various sub-transfer agents and omnibus
account servicers and record-keepers, (ii) coordinating the preparation and
filing of registration statements,
notices, shareholder reports and other information materials, including
prospectuses, proxies and other shareholder
communications for a class, (iii) receiving and tabulating class-specific
shareholder votes, (iv) reviewing bills
submitted to a Fund and, upon determining that a bill is appropriate, allocating
amounts to the appropriate classes
thereof and instructing the Funds’ custodian to pay such bills, and (v)
assembling and disseminating information
concerning class performance, expenses, distributions and administration.
Allspring
Funds Management has
agreed to pay all of the Funds’ fees and expenses for services provided by the
Funds’ transfer agent and various
sub-transfer agents and omnibus account servicers and record-keepers out of the
fees it receives pursuant to
the Class-Level Administration Agreement.
As
compensation for its services under the Management Agreement, Allspring
Funds Management is entitled to receive a
monthly fee at the annual rates indicated below of each Fund’s average daily net
assets:
|
|
|
|
Fund
|
|
Fee |
Government
Money Market Fund Heritage
Money Market Fund Municipal
Cash Management Money Market Fund National
Tax-Free Money Market Fund Treasury
Plus Money Market Fund 100%
Treasury Money Market Fund |
|
First
$5B Next
$5B Next
$5B Next
$85B Over
$100B |
0.150% 0.140% 0.130% 0.125% 0.120% |
Money
Market Fund |
|
First
$5B Next
$5B Over
$10B |
0.20% 0.19% 0.18% |
Management Fees
Paid. The
amounts shown below reflect fees paid to and waived by Allspring
Funds Management under
the Management Agreement for the past three fiscal years or
periods.
|
|
|
Management
Fees Paid |
Fund/Fiscal
Year or Period |
Management
Fees Paid |
Management
Fees Waived |
January
31, 2022 |
|
|
Government
Money Market Fund |
$5,106,709 |
$177,456,895 |
|
|
|
Management
Fees Paid |
Fund/Fiscal
Year or Period |
Management
Fees Paid |
Management
Fees Waived |
Heritage
Money Market Fund |
$4,607,065 |
$5,107,155 |
Money
Market Fund |
$754,828 |
$6,676,056 |
Municipal
Cash Management Money Market Fund
|
$0 |
$547,151 |
National
Tax-Free Money Market Fund |
$5,955 |
$1,267,629 |
Treasury
Plus Money Market Fund |
$31,503,929 |
$0 |
100%
Treasury Money Market Fund |
$0 |
$23,650,020 |
January
31, 2021 |
|
|
Government
Money Market Fund |
$129,984,032 |
$44,860,588 |
Heritage
Money Market Fund |
$11,725,964 |
$3,227,530 |
Money
Market Fund |
$1,669,036 |
$7,248,655 |
Municipal
Cash Management Money Market Fund
|
$6,447 |
$341,960 |
National
Tax-Free Money Market Fund |
$1,024,214 |
$589,889 |
Treasury
Plus Money Market Fund |
$30,680,655 |
$0 |
100%
Treasury Money Market Fund |
$17,438,084 |
$8,747,136 |
January
31, 2020 |
|
|
Government
Money Market Fund |
$107,010,542 |
$0 |
Heritage
Money Market Fund |
$11,448,050 |
$1,886,633 |
Money
Market Fund |
$1,472,992 |
$1,353,745 |
Municipal
Cash Management Money Market Fund
|
$128,422 |
$300,977 |
National
Tax-Free Money Market Fund |
$832,994 |
$569,024 |
Treasury
Plus Money Market Fund |
$21,798,504 |
$0 |
100%
Treasury Money Market Fund |
$19,493,460 |
$0 |
For
providing class-level administrative services to the Funds pursuant to the
Class-Level Administration Agreement, including
paying the Funds’ fees
and expenses for services provided by the Funds’
transfer agent and various sub-transfer
agents and omnibus account servicers and record-keepers, Allspring
Funds Management is entitled to receive an
annual fee at the rates indicated below, as a percentage of the total net assets
of each Class:
|
|
|
|
|
Class-Level
Administrator Fee |
Share
Class |
|
%
of Total Net Assets |
Class
A |
|
0.22% |
Class
C |
|
0.22% |
Administrator
Class |
|
0.10% |
Institutional
Class |
|
0.08% |
Premier
Class |
|
0.08% |
Select
Class |
|
0.04% |
Service
Class |
|
0.12% |
Sweep
Class |
|
0.03% |
Administrative Service Fees
Paid. The
amounts shown below reflect fees paid to and waived by Allspring
Funds Management under
the Class-Level Administration Agreement for the past three fiscal years or
periods.
|
|
|
Administrative
Service Fees Paid |
Fund/Fiscal
Year or Period |
Administrative
Service Fees Paid |
Administrative
Service Fees Waived |
January
31, 2022 |
|
|
Government
Money Market Fund |
$61,640,714 |
$16,647,776 |
Heritage
Money Market Fund |
$2,727,601 |
$389,364 |
Money
Market Fund |
$2,597,523 |
$1,019,485 |
Municipal
Cash Management Money Market Fund
|
$69,887 |
$229,590 |
National
Tax-Free Money Market Fund |
$470,405 |
$385,877 |
Treasury
Plus Money Market Fund |
$0 |
$20,299,241 |
100%
Treasury Money Market Fund |
$5,848,860 |
$10,034,305 |
January
31, 2021 |
|
|
Government
Money Market Fund |
$64,271,322 |
$9,810,713 |
Heritage
Money Market Fund |
$2,162,356 |
$2,668,682 |
Money
Market Fund |
$3,662,962 |
$576,985 |
Municipal
Cash Management Money Market Fund
|
$171,018 |
$22,146 |
National
Tax-Free Money Market Fund |
$678,480 |
$377,124 |
Treasury
Plus Money Market Fund |
$5,538,111 |
$13,638,602 |
100%
Treasury Money Market Fund |
$9,882,860 |
$7,555,557 |
January
31, 2020 |
|
|
Government
Money Market Fund |
$25,437,298 |
$21,990,684 |
Heritage
Money Market Fund |
$1,292,242 |
$3,143,450 |
Money
Market Fund |
$1,291,568 |
$522,117 |
Municipal
Cash Management Money Market Fund
|
$227,746 |
$9,257 |
National
Tax-Free Money Market Fund |
$804,097 |
$130,655 |
Treasury
Plus Money Market Fund |
$10,419,022 |
$4,136,050 |
100%
Treasury Money Market Fund |
$7,034,573 |
$4,731,295 |
General. Each Fund’s
Management Agreement will continue in effect provided the continuance is
approved annually (i) by the
holders of a majority of the respective Fund’s outstanding voting securities or
by the Board and (ii) by a majority of
the Trustees who are not parties to the Management Agreement or “interested
persons” (as defined under the
1940 Act) of any such party. The Management Agreement may be terminated at any
time by vote of the Board or by
vote of a majority of a Fund’s outstanding voting securities, or by Allspring
Funds Management on 60 days’
written notice. It will terminate automatically if assigned.
For each Fund,
the Class-Level Administration Agreement will continue in effect provided the
continuance is approved
annually by the Board, including a majority of the Trustees who are not
“interested persons” (as defined under the
1940 Act) of any party to the Class-Level Administration Agreement. The
Class-Level Administration Agreement
may be terminated on 60 days’ written notice by either party.
Fund Expenses. From time
to time, service providers to a Fund,
including Allspring
Funds Management and/or its affiliates,
may contractually agree to waive fees from a Fund in
whole or in part. In addition, such service providers may
voluntarily waive all or a portion of any fees to which they are entitled
and/or reimburse certain expenses as they may
determine from time to time. A
Funds’
service providers may discontinue or modify these voluntary actions at
any time
without notice. Any such contractual or voluntary waiver will reduce
expenses and, accordingly, have a favorable
impact on a Fund’s
performance. Such contractual and voluntary waivers may differ depending on
share class.
Except for
the expenses borne by Allspring
Funds Management, the Trust bears all costs of its operations, including
the
compensation of the Independent Trustees; investment management,
shareholder services and class-level
administrative
fees; payments pursuant to any 12b-1 Plan; interest charges; taxes; fees and
expenses of its independent
auditors, legal counsel, transfer agent and distribution disbursing agent;
expenses of redeeming shares;
expenses of preparing and printing prospectuses (except the expense of printing
and mailing prospectuses used for
promotional purposes, unless otherwise payable pursuant to a 12b-1 Plan),
shareholders’ reports, notices, proxy
statements and reports to regulatory agencies; insurance premiums and certain
expenses relating to insurance
coverage; trade association membership dues (including membership dues in the
Investment Company Institute
allocable to a Fund);
brokerage and other expenses connected with the execution of portfolio
transactions; fees and
expenses of its custodian, including those for keeping books and accounts and
calculating the NAV per share
of a Fund;
expenses of shareholders’ meetings; expenses relating to the issuance,
registration and qualification of a Fund’s
shares; pricing services, organizational expenses and any extraordinary
expenses. Expenses attributable to a Fund are
charged against the Fund’s assets. General expenses of the Trust are allocated
among all of the series of the
Trust, including the Funds, in a manner proportionate to the net assets of each
Fund, on a transactional basis, or on such
other basis as the Board deems equitable.
Sub-Adviser
Allspring
Funds Management has engaged Allspring Global Investments, LLC (“Allspring
Investments”) (the “Sub-Adviser”),
an affiliate of Allspring Funds Management, to serve as sub-adviser to the
Funds. Subject to the direction
of the Board and the overall supervision and control of Allspring Funds
Management and the Trust, the Sub-Adviser
makes recommendations regarding the investment and reinvestment of the Funds’
assets. The Sub-Adviser
furnishes to Allspring Funds Management periodic reports on the investment
activity and performance of the
Funds. The Sub-Adviser also furnishes such additional reports and information as
Allspring Funds Management
and the Board and Officers may reasonably request. Allspring Funds Management
may, from time to time and in
its sole discretion, allocate and reallocate services provided by and fees paid
to the Sub-Adviser.
As
compensation for its sub-advisory services to the Funds, Allspring Investments
is entitled to receive a monthly fee equal to an
annual rate as shown in the table below, based on each Fund’s average daily net
assets. These fees may be paid by
Allspring Funds Management or directly by the Funds. If the sub-advisory fee is
paid directly by a Fund, the
compensation paid to Allspring Funds Management for advisory fees will be
reduced accordingly.
|
|
|
|
Fund
|
Sub-Adviser |
Fee |
|
Government
Money Market Fund Heritage
Money Market Fund Money
Market Fund Municipal
Cash Management Money Market Fund National
Tax-Free Money Market Fund Treasury
Plus Money Market Fund 100%
Treasury Money Market Fund |
Allspring
Investments |
First
$1B Next
$2B Next
$3B Over
$6B |
0.050% 0.030% 0.020% 0.010% |
Distributor and Shareholder Servicing
Agent
Allspring
Funds Distributor, LLC (the “Distributor”), an affiliate of Allspring
Funds Management located at 525 Market Street, San
Francisco, California 94105, serves as the distributor to the Allspring
Funds.
Each Fund
has adopted a distribution plan (the “12b-1 Plan”) pursuant to Rule 12b-1 under
the 1940 Act (the “Rule”) for the
classes of shares listed in the table below. The 12b-1 Plan was adopted by the
Board, including a majority of the
Trustees who were not “interested persons” (as defined under the 1940 Act) of
the Fund and who had no direct or indirect
financial interest in the operation of the 12b-1 Plan or in any agreement
related to the 12b-1 Plan (the “Non-Interested
Trustees”).
Under the
12b-1 Plan and pursuant to the related Distribution Agreement, each applicable
class pays the Distributor, on a
monthly basis, an annual fee up to the amount indicated in the table. The
Distributor may retain any portion of the total
distribution fee to compensate it for distribution-related services provided by
it or to reimburse it for other distribution-related
expenses. The Distributor’s distribution-related revenues from the 12b-1 Plan
may be more or less than
distribution-related expenses incurred during the period.
|
|
|
|
Fund
|
|
Class
C |
Sweep
Class |
Government
Money Market Fund |
|
N/A |
0.10% |
Heritage
Money Market Fund |
|
N/A |
N/A |
Money
Market Fund |
|
0.75% |
N/A |
Municipal
Cash Management Money Market Fund
|
|
N/A |
N/A |
National
Tax-Free Money Market Fund |
|
N/A |
N/A |
Treasury
Plus Money Market Fund |
|
N/A |
N/A |
100%
Treasury Money Market Fund |
|
N/A |
N/A |
For the
fiscal year ended January 31,
2022, the Funds paid the Distributor the following fees for
distribution-related services.
|
|
|
|
Distribution
Fees |
Fund |
Total
Distribution Fee Paid
by Fund |
Compensation
Paid to Distributor |
Compensation
to Broker/Dealers |
Government
Money Market Fund |
|
|
|
Sweep
|
$832,603 |
$832,603 |
$0 |
Money
Market Fund |
|
|
|
Class
C |
$16,322 |
$5,194 |
$11,128 |
100%
Treasury Money Market Fund |
|
|
|
Sweep
|
$188,933 |
$188,933 |
$0 |
General. The 12b-1
Plan and Distribution Agreement will continue in effect from year to year if
such continuance is approved at
least annually by vote of a majority of both the Trustees and the Non-Interested
Trustees. The Distribution
Agreement will terminate automatically if assigned, and may be terminated at any
time, without payment of
any penalty, on not less than 60 days’ written notice, by the Trust’s Board, by
a vote of a majority of the outstanding
voting securities of the Fund or by the Distributor. The 12b-1 Plan may
not be amended to increase materially
the amounts payable thereunder by the relevant class of a Fund without approval
by a vote of a majority of the
outstanding voting securities of such class, and no material amendment to the
12b-1 Plan shall be made unless approved by
vote of a majority of both the Trustees and Non-Interested Trustees. The 12b-1
Plan provides that, if and to the
extent any shareholder servicing payments are deemed to be payments for the
financing of any activity primarily
intended to result in the sale of Fund shares, such payments are deemed to have
been approved under the 12b-1
Plan.
Servicing Agent
Each Fund
has adopted a Shareholder Servicing Plan (the “Servicing Plan”) for its Class A,
Class C, Service Class, Sweep Class
and Administrator Class shares, as applicable, and has entered into a related
Shareholder Servicing Agreement
with the Distributor and Allspring Funds Management. Under this agreement, the
Distributor and Allspring
Funds Management are authorized to provide or engage third parties to provide,
pursuant to an Administrative
and Shareholder Services Agreement, shareholder support services. For providing
these services, the Distributor,
Allspring Funds Management and third parties are entitled to an annual fee from
the applicable class of the Fund of
up to 0.10% of the average daily net assets of the Administrator Class shares,
and up to 0.25% of the average
daily net assets of the Class A, Class C, Service Class and Sweep Class shares,
of the average daily net assets of
such class owned of record or beneficially by their customers.
General. The
Servicing Plan will continue in effect from year to year if such continuance is
approved by vote of a majority
vote of both the Trustees and the Non-Interested Trustees. No material amendment
to the Servicing Plan may be made
except by such a vote.
Underwriting Commissions
The
Distributor serves as the principal underwriter distributing securities of
the Funds on a
continuous basis.
For the
fiscal periods listed below, the aggregate amounts of underwriting commissions
paid to and retained by the Distributor
are as follows:
|
|
|
|
Underwriting
Commissions Paid |
|
|
|
Fund/Fiscal
Year or Period |
|
Aggregate
Total Underwriting
Commissions |
Underwriting
Commissions
Retained |
January
31, 2022 |
|
|
|
Government
Money Market Fund |
|
$0 |
$0 |
Heritage
Money Market Fund |
|
$0 |
$0 |
Money
Market Fund |
|
$345 |
$345 |
Municipal
Cash Management Money Market Fund
|
|
$0 |
$0 |
National
Tax-Free Money Market Fund |
|
$0 |
$0 |
Treasury
Plus Money Market Fund |
|
$0 |
$0 |
100%
Treasury Money Market Fund |
|
$2,974 |
$2,974 |
January
31, 2021 |
|
|
|
Government
Money Market Fund |
|
$0 |
$0 |
Heritage
Money Market Fund |
|
$0 |
$0 |
Money
Market Fund |
|
$2,260 |
$2,260 |
Municipal
Cash Management Money Market Fund
|
|
$0 |
$0 |
National
Tax-Free Money Market Fund |
|
$0 |
$0 |
Treasury
Plus Money Market Fund |
|
$0 |
$0 |
100%
Treasury Money Market Fund |
|
$0 |
$0 |
January
31, 2020 |
|
|
|
Government
Money Market Fund |
|
$0 |
$0 |
Heritage
Money Market Fund |
|
$0 |
$0 |
Money
Market Fund |
|
$0 |
$0 |
Municipal
Cash Management Money Market Fund
|
|
$0 |
$0 |
National
Tax-Free Money Market Fund |
|
$0 |
$0 |
Treasury
Plus Money Market Fund |
|
$0 |
$0 |
100%
Treasury Money Market Fund |
|
$0 |
$0 |
Custodian and Fund
Accountant
State
Street Bank and Trust Company (“State Street”), located at State Street
Financial Center, One Lincoln Street Boston,
Massachusetts 02111, acts as Custodian and fund accountant for the Funds. As
Custodian, State Street, among other
things, maintains a custody account or accounts in the name of each Fund,
handles the receipt and delivery of
securities, selects and monitors foreign sub-custodians as the Fund’s global
custody manager, determines
income and collects interest on each Fund’s investments and maintains certain
books and records. As fund
accountant, State Street is responsible for calculating each Fund’s daily net
asset value per share and for maintaining
its portfolio and general accounting records. For its services, State Street is
entitled to receive certain transaction
fees, asset-based fees and out-of-pocket costs.
Transfer and Distribution Disbursing
Agent
DST Asset
Manager Solutions, Inc. (“DST”), located at Two Thousand Crown Colony
Drive, Quincy, Massachusetts 02169, acts
as transfer and distribution disbursing agent for the Allspring
Funds. For providing such services, DST is entitled to
receive fees from the Administrator.
Independent Registered Public Accounting
Firm
KPMG LLP
(“KPMG”) has been selected as the independent registered public accounting firm
for the Funds. KPMG
provides
audit services, tax return preparation and assistance and consultation in
connection with review of certain SEC
filings. KPMG’s address is Two Financial Center, 60 South Street, Boston, MA
02111.
Code of Ethics
The Fund
Complex, Allspring
Funds Management, the Distributor and the Sub-Adviser each has adopted a code of
ethics
which contains policies on personal securities transactions by “access persons”
as defined in each of the codes.
These policies comply with Rule 17j-1 under the 1940 Act and Rule 204A-1 under
the Investment Advisers Act of
1940, as applicable. Each code of ethics, among other things, permits access
persons to invest in certain securities,
subject to various restrictions and requirements. To facilitate enforcement, the
codes of ethics generally require
that an access person submit reports to a designated compliance person regarding
personal securities transactions.
The codes of ethics for the Fund Complex, Allspring
Funds Management, the Distributor and the Sub-Adviser
are on public file with, and are available from, the SEC.
Proxy Voting Policies and
Procedures
The Trusts
have adopted policies and procedures for the Funds (“Fund Proxy Voting
Procedures”) that are used to determine
how to vote proxies relating to portfolio securities held by the Funds of the
Trusts. The Fund Proxy Voting Procedures
are designed to ensure that proxies are voted in the best interests of Fund
shareholders, without regard to any
relationship that any affiliated person of a Fund (or an affiliated person of
such affiliated person) may have with the
issuer of the security and with the goal of maximizing value to shareholders
consistent with governing laws and the
investment policies of each Fund. While securities are not purchased to exercise
control or to seek to effect corporate
change through share ownership activism, the Funds support sound corporate
governance practices within
companies in which they invest. The Board of the Trusts has delegated the
responsibility for voting proxies relating to
the Funds’ portfolio securities to Allspring
Funds Management. Allspring
Funds Management utilizes the Allspring
Global Investments Proxy Voting Policies and Procedures, included below, to
ensure that proxies relating to the Funds’
portfolio securities are voted in shareholders’ best interests.
Allspring Global Investments Proxy Voting
Policies and Procedures
Allspring
Global Investments (“Allspring”)
Stewardship
As
fiduciaries, we are committed to effective stewardship of the assets we manage
on behalf of our clients. To us, good
stewardship reflects responsible, active ownership and includes both engaging
with investee companies and voting
proxies in a manner that we believe will maximize the long-term value of our
investments.
Scope
of Policies and Procedures
In
conjunction with the Allspring
Engagement Policy, these Proxy Voting Policies and Procedures (“Policies and
Procedures”)
sets out how Allspring
complies with applicable regulatory requirements in respect of how we exercise
voting
rights when we invest in shares traded on a regulated market on behalf of a
client.
With
respect to client accounts of Allspring
Funds Management, this includes, among others, Allspring
Funds Trust, Allspring
Master Trust, Allspring
Variable Trust, Allspring
Global Dividend Opportunity Fund, Allspring
Income Opportunities
Fund, Allspring
Multi-Sector Income Fund, Allspring
Utilities and High Income Fund (the “Trusts”). It also
includes Allspring
(Lux) Worldwide Fund and Worldwide Alternative Fund SICAV-SIF, both
domiciled in Luxembourg
(the “Luxembourg Funds”). Aside from the investment funds managed by
Allspring
Funds Management, Allspring
also offers medium term note programs, managed for issuers of such notes
domiciled in Luxembourg. Hereafter,
all series of the Trusts, and all such Trusts not having separate series, and
all sub-funds of the Luxembourg Fund, as
well as the MTN issuers, are referred to as the “Investment Products”. In
addition, these Policies and Procedures
are used to determine how to vote proxies for the assets managed on behalf of
Allspring’s
other clients. Not all
clients delegate proxy-voting authority to Allspring.
Allspring
will not vote proxies, or provide advice to clients on how to
vote proxies in the absence of specific delegation of authority, a pre-existing
contractual agreement, or an obligation
under applicable law (e.g., securities that are held in an investment advisory
account for which Allspring
exercises
no investment discretion are not voted by Allspring).
Luxembourg
Products
Allspring
Luxemburg has delegated the portfolio management of the Luxembourg Funds it
manages to Allspring
and the
responsibility for exercising voting rights in conjunction with such delegation;
as such, these Policies and Procedures
shall apply to the portfolio management of the Fund. The respective portfolio
management may also delegate
the responsibility for exercising voting rights to the Proxy Voting Vendor, with
the prior consent of Allspring
Luxemburg.
Responsibility for exercising voting rights has also been delegated to
Allspring
with respect to the Worldwide
Alternative Fund SICAV-SIF and to the MTN issuers.
Voting
Philosophy
Allspring
has adopted these Policies and Procedures to ensure that proxies are voted in
the best interests of clients and
Investment Product investors, without regard to any relationship that any
affiliated person of Allspring
or the Investment
Product (or an affiliated person of such affiliated person) may have with the
issuer. Allspring
exercises its voting
responsibility as a fiduciary with the goal of maximizing value to clients
consistent with governing laws and the
investment policies of each client. While securities are not purchased to
exercise control or to seek to effect corporate
change through share ownership activism, Allspring
supports sound corporate governance practices at companies
in which client assets are invested. Allspring
has established an appropriate strategy determining when and how the
voting rights related to the instruments held in portfolios managed are
exercised, so that these rights are
exclusively reserved to the relevant Investment Product and its
investors.
Proxy
Administrator
Allspring’s
Operations Department (“Proxy Administrator”) administers the voting process.
The Proxy Administrator reports to
Allspring’s
Chief Operations Officer. The Proxy Administrator is responsible for
administering and overseeing
the proxy voting process to ensure the implementation of the Policies and
Procedures, including regular operational
reviews, typically conducted on a weekly basis. The Proxy Administrator monitors
third party voting of proxies to
ensure it is being done in a timely and responsible manner, including review of
scheduled vendor reports. The Proxy
Administrator in conjunction with the Allspring
Proxy Governance Committee reviews the continuing appropriateness
of the Policies and Procedures set forth herein, and recommends revisions as
necessary.
Third
Party Proxy Voting Vendor
Allspring
has retained a third-party proxy voting service, Institutional Shareholder
Services Inc. (“ISS”), to assist in the
implementation of certain proxy voting-related functions including: 1.)
Providing research on proxy matters 2.) Providing
technology to facilitate the sharing of research and discussions related to
proxy votes 3.) Vote proxies in accordance
with Allspring’s
guidelines 4.) Handle administrative and reporting items 5.) Maintain records of
proxy statements
received in connection with proxy votes and provide copies/analyses upon
request. Except in instances where
clients have retained voting authority, Allspring
retains the responsibility for proxy voting decisions.
Proxy
Committee
Allspring
Proxy Governance Committee
The
Allspring
Proxy Governance Committee shall be responsible for overseeing the proxy voting
process to ensure its
implementation in conformance with these Policies and Procedures. The
Allspring
Proxy Governance Committee shall
coordinate with Allspring
Compliance to monitor ISS, the proxy voting agent currently retained by
Allspring,
to determine
that ISS is accurately applying the Policies and Procedures as set forth herein
and operates as an independent
proxy voting agent. Allspring’s
ISS Vendor Oversight process includes an assessment of ISS’ Policy and
Procedures
(“P&P”), including conflict controls and monitoring, receipt and review of
routine performance-related reporting
by ISS to Allspring
and periodic onsite due diligence meetings. Due diligence meetings typically
include: meetings
with key staff, P&P related presentations and discussions,
technology-related demonstrations and assessments,
and some sample testing, if appropriate. The Allspring
Proxy Governance Committee shall review the continuing
appropriateness of the Policies and Procedures set forth herein. The
Allspring
Proxy Governance Committee
may delegate certain powers and responsibilities to proxy voting working groups.
The Allspring
Proxy Governance
Committee reviews and, in accordance with these Policies and Procedures, votes
on issues that have been
escalated from proxy voting working groups. Members of the Allspring
Proxy Governance Committee also oversee the
implementation of Allspring
Proxy Governance Committee recommendations for the respective functional
areas in Allspring
that they represent.
Proxy
Voting Due Diligence Working Group
Among other
delegated matters, the proxy voting Due Diligence Working Group (‘DDWG’) in
accordance with these Policies
and Procedures, reviews and votes on routine proxy proposals that it considers
under these Policies and Procedures
in a timely manner. If necessary, the DDWG escalates issues to the Allspring
Proxy Governance Committee
that are determined to be material by the DDWG or otherwise in accordance with
these Policies and Procedures.
The DDWG coordinates with Allspring
Global Investments Analytics and Compliance teams to review the performance
and independence of ISS in exercising its proxy voting
responsibilities.
Meetings;
Committee Actions
The
Allspring
Proxy Governance Committee shall convene or act through written consent,
including through the use of
electronic systems of record, of a majority of Allspring
Proxy Governance Committee members as needed and when
discretionary voting determinations need to be considered. Any working group of
the Allspring
Proxy Governance
Committee shall have the authority on matters delegated to it to act by vote or
written consent, including
through the use of electronic systems of record, of a majority of the working
group members available at that time.
The Allspring
Proxy Governance Committee shall also meet quarterly to review the Policies and
Procedures.
Membership
Members are
selected based on subject matter expertise for the specific deliverables the
committee is required to complete.
The voting members of the Allspring
Proxy Governance Committee are identified in the Allspring
Proxy Charter.
Changes to the membership of the Allspring
Proxy Governance Committee will be made only with approval of the
Allspring
Proxy Governance Committee. Upon departure from Allspring
Global Investments, a member’s position on
the Allspring
Proxy Governance Committee will automatically terminate.
Voting
Procedures
Unless
otherwise required by applicable law,1 proxies
will be voted in accordance with the following steps and in the following
order of consideration:
|
1.
First, any voting items related to Allspring
“Top-of-House” voting principles (as described below under the heading
“Allspring
Proxy Voting Principles/Guidelines”) will generally be voted in accordance
with a custom voting policy with |
|
ISS
(“Custom Policy”) designed to implement the Allspring’s
Top-of-House voting principles.2
|
|
2.
Second, any voting items for meetings deemed of “high
importance”3
(e.g., proxy contests, significant transactions such
as mergers and acquisitions, where ISS opposes management
recommendations will be referred to the Portfolio Management
teams for recommendation or the DDWG (or escalated to the Allspring
Proxy Governance -Committee) for case-by-case
review and vote determination. |
|
3.
Third, with respect to any voting items where ISS Sustainability Voting
Guidelines4
provide a different recommendation
than ISS Standard Voting Guidelines, the following steps are
taken: |
|
|
a.
The Allspring
Investment Analytics team5
evaluates the matter for materiality and any other relevant considerations. b. If
the Investment Analytics team recommends further review, the voting item
is then referred to the Portfolio Management
teams for recommendation or the DDWG (or escalated to the Allspring
Proxy Governance Committee) for case-by-case
review and vote determination. c. If
the Investment Analytics team does not recommend further review, the
matter is voted in accordance with ISS Standard
Voting Guidelines. |
|
4.
Fourth, any remaining proposals are voted in accordance with ISS Standard
Voting Guidelines6. |
Commitment
to the Principles of Responsible Investment
As a
signatory to the Principles for Responsible Investment, Allspring
has integrated certain material environmental, social, and
governance factors into its investment processes, which includes the proxy
process. As described under Voting
Procedures above, Allspring
considers ISS’s Sustainability Voting Guidelines as a point of reference in
certain cases
deemed to be material to a company’s long-term shareholder value.
Voting
Discretion
In all
cases, the Allspring
Proxy Governance Committee (and any working group thereof) will exercise its
voting discretion
in accordance with the voting philosophy of these Policies and Procedures. In
cases where a proxy item is
forwarded
by ISS to the Allspring
Proxy Governance Committee or a working group thereof, the Allspring
Proxy Governance
Committee or its working group may be assisted in its voting decision through
receipt of: (i) independent
research and voting recommendations provided by ISS or other independent
sources; (ii) input from the
investment sub-adviser responsible for purchasing the security; and (iii)
information provided by company management
and shareholder groups.
Portfolio
Manager and Sub-Adviser Input
The
Allspring
Proxy Governance Committee (and any working group thereof) may consult with
portfolio management
teams and Fund sub-advisers on specific proxy voting issues as it deems
appropriate. In addition, portfolio
management teams or Fund sub-advisers may proactively make recommendations to
the Allspring
Proxy Governance
Committee regarding any proxy voting issue. In this regard, the process takes
into consideration expressed
views of portfolio management teams and Fund sub-advisers given their deep
knowledge of investee companies.
For any proxy vote, portfolio management teams and Investment Product advisers
and sub-advisers may make a case
to vote against the ISS or Allspring
Proxy Governance Committee’s recommendation (which is described
under Voting Procedures above). Any portfolio management team’s or Investment
Product adviser’s or sub-adviser’s
opinion should be documented in a brief write-up for consideration by the DDWG
who will determine, or escalate
to the Allspring
Proxy Governance Committee, the final voting decision.
Consistent
Voting
Proxies
will be voted consistently on the same matter when securities of an issuer are
held by multiple client accounts
unless there are special circumstances such as, for example, proposals
concerning corporate actions such as mergers,
tender offers, and acquisitions or as reasonably necessary to implement
specified proxy voting guidelines
as established by a client (e.g. Taft Hartley ISS Guidelines or custom proxy
guidelines).
Governance
and Oversight
Allspring
Top-of-House Proxy Voting Principles/Guidelines.
The
following reflects Allspring’s
Top-of-House Voting Principles in effect as of the date of these Policies and
Procedures.
Allspring
has put in place a custom voting policy with ISS to implement these voting
principles.
We believe
that Boards of Directors of investee companies should have strong, independent
leadership and should adopt
structures and practices that enhance their effectiveness. We recognize that the
optimal board size and governance
structure can vary by company size, industry, region of operations, and
circumstances specific to the company.
■ |
We
generally vote for the election of Directors in uncontested elections. We
reserve the right to vote on a case-by-case
basis when directors fail to meet their duties as a board member, such as
failing to act in the best economic
interest of shareholders; failing to maintain independent audit,
compensation, nominating committees; and
failing to attend at least 75% of meetings,
etc. |
■ |
We
generally vote for an independent board that has a majority of outside
directors who are not affiliated with the top
executives and have minimal or no business dealings with the company to
avoid potential conflicts of interests. |
■ |
Generally
speaking, we believe Directors serving on an excessive number of boards
could result in time constraints
and an inability to fulfill their duties. |
■ |
We
generally support adopting a declassified board structure for public
operating and holding companies. We reserve
the right to vote on a case-by-case basis when companies have certain
long-term business commitments. |
■ |
We
generally support annual election of directors of public operating and
holding companies. We reserve the right to
vote on a case-by-case basis when companies have certain long-term
business commitments. |
■ |
We
believe a well-composed board should embody multiple dimensions of
diversity in order to bring personal and professional
experiences to bear and create a constructive debate of competing
perspectives and opinions in the boardroom.
Diversity should consider factors such as gender, ethnicity, and age as
well as professional factors such
as area of expertise, industry experience and geographic
location. |
We believe
it is the responsibility of the Board of Directors to create, enhance, and
protect shareholder value and that
companies should strive to maximize shareholder rights and
representation.
■ |
We
believe that companies should adopt a one-share, one-vote standard and
avoid adopting share structures that |
|
create
unequal voting rights among their shareholders. We will normally support
proposals seeking to establish that
shareholders are entitled to voting rights in proportion to their economic
interests |
■ |
We
believe that directors of public operating and holding companies should be
elected by a majority of the shares voted.
We reserve the right to vote on a case-by-case basis when companies have
certain long-term business commitments.
This ensures that directors of public operating and holding companies who
are not broadly supported
by shareholders are not elected to serve as their representatives. We will
normally support proposals seeking
to introduce bylaws requiring a majority vote standard for director
elections. |
■ |
We
believe a simple majority voting standard should be required to pass
proposals. We will normally support proposals
seeking to introduce bylaws requiring a simple majority
vote. |
■ |
We
believe that shareholders who own a meaningful stake in the company and
have owned such stake for a sufficient
period of time should have, in the form of proxy access, the ability to
nominate directors to appear on the
management ballot at shareholder meetings. In general we support
market-standardized proxy access proposals
and we will analyze them based on various criteria such as threshold
ownership levels, a minimum holding
period, and the % and/or number of directors that are subject to
nomination. |
■ |
We
believe that shareholders should have the right to call a special meeting
and not wait for company management
to schedule a meeting if there is sufficiently high shareholder support
for doing so on issues of substantial
importance. In general we support the right to call a special meeting if
there is balance between a reasonable
threshold of shareholders and a hurdle high enough to also avoid the waste
of corporate resources for narrowly
supported interests. We will evaluate the issues of importance on the
basis of serving all shareholders well
and not structured for the benefit of a dominant shareholder over
others. |
Practical
Limitations to Proxy Voting
While
Allspring
uses its reasonable best efforts to vote proxies, in certain circumstances, it
may be impractical or impossible
for Allspring
to vote proxies (e.g., limited value or unjustifiable costs).
Securities
on Loan
As a
general matter, securities on loan will not be recalled to facilitate proxy
voting (in which case the borrower of the
security shall be entitled to vote the proxy). However, as it relates to
portfolio holdings of the Investment Products,
if the Allspring
Proxy Governance Committee is aware of an item in time to recall the security
and has determined
in good faith that the importance of the matter to be voted upon outweighs the
loss in lending revenue that would
result from recalling the security (e.g., if there is a controversial upcoming
merger or acquisition, or some other
significant matter), the security will be recalled for voting.
Share
Blocking
Proxy
voting in certain countries requires ‘share blocking’. Shareholders wishing to
vote their proxies must deposit their
shares with a designated depositary before the date of the meeting.
Consequently, the shares may not be sold in the
period preceding the proxy vote. Absent compelling reasons, Allspring
believes that the benefit derived from voting
these shares is outweighed by the burden of limited trading. Therefore, if share
blocking is required in certain markets,
Allspring
will not participate and refrain from voting proxies for those clients impacted
by share blocking.
Conflicts
of Interest
We always
seek to place the interests of our clients first and to identify and manage any
conflicts of interest, including
those that arise from proxy voting or engagement. Allspring
acts as a fiduciary with respect to its asset management
activities and therefore we must act in the best interest of our clients and
address conflicts that arise.
Conflicts
of interest are identified and managed through a strict and objective
application of our voting policy and procedures.
Allspring
may have a conflict of interest regarding a proxy to be voted upon if, for
example, Allspring
or its
affiliates (such as a sub-adviser or principal underwriter) have other
relationships with the issuer of the proxy. This type of
conflict is generally mitigated by the information barriers between Allspring
and its affiliates and our commitment
as a fiduciary to independent judgement. However, when the Allspring
Proxy Governance Committee becomes
aware of a conflict of interest (that gets uncovered through the Allspring
Proxy Voting Policy and Procedures),
it takes additional steps to mitigate the conflict, by using any of the
following methods:
|
1.
Instructing ISS to vote in accordance with its
recommendation; |
|
2.
Disclosing the conflict to the relevant Board and obtaining its consent
before voting; |
|
3.
Submitting the matter to the relevant Board to exercise its authority to
vote on such matter; |
|
4.
Engaging an independent fiduciary who will direct the vote on such
matter, |
|
5.
Consulting with Legal and Compliance and, if necessary, outside legal
counsel for guidance on resolving the conflict
of interest, |
|
6.
Voting in proportion to other shareholders (“mirror voting”) following
consultation with the Board of the Funds if the conflict
pertains to a matter involving a portfolio holding of the Funds;
or |
|
7.
Voting in other ways that are consistent with Allspring’s
obligation to vote in the best interests of its
clients. |
Vendor
Oversight
The
Allspring
Proxy Administrator monitors the ISS proxy process against specific criteria in
order to identify potential
issues relating to account reconciliation, unknown and rejected ballot reviews,
upcoming proxy reviews, share
reconciliation oversight, etc. With respect to ISS’s management of its potential
conflicts of interest with corporate
issuers, ISS provides institutional clients such as Allspring
with its “Policy and disclosure of Significant ISS Relationships”
and tools to provide transparency of those relationships.
Other
Provisions
Policy
Review and Ad Hoc Meetings
The
Allspring
Proxy Governance Committee meets at least annually to review this Policy and
consider any appropriate
changes. Meetings may be convened more frequently (for example, to discuss a
specific proxy agenda or
proposal) as requested by the Manager of Proxy Administrator, any member of the
Allspring
Proxy Governance Committee,
or Allspring’s
Chief Compliance Officer. The Allspring
Proxy Governance Committee includes representation
from Portfolio Management, Operations, Investment Analytics and, in a non-voting
consultative capacity,
Compliance.
Records
Retention
The
Allspring
Proxy Administrator will maintain the following records relating to the
implementation of the Policies and
Procedures:
■ |
A
copy of these proxy voting policies and
procedures; |
■ |
Proxy
statements received for client securities (which will be satisfied by
relying on ISS); |
■ |
Records
of votes cast on behalf of Investment Products and separate account
clients (which ISS maintains on behalf
of Allspring);
and |
■ |
Any
documents prepared by Allspring
or ISS that were material to making a proxy voting
decision. |
Such proxy
voting books and records shall be maintained at an office of Allspring
in an easily accessible place for a period of
six years.
Compliance
with Regional Regulations and Client Delegation Arrangements
U.S.
Regulation
These
Policies and Procedures have been written in compliance with Rule 206(4)-6 of
the Investment Advisers Act of 1940. Proxy
voting records for Allspring’s
mutual funds are disclosed on Form N-PX annually, as required by Section
30 and Rule
30b1-4 of the Investment Company Act of 1940, to the Securities and Exchange
Commission (“SEC”).
E.U.
Regulation
These
Policies and Procedures have been established, implemented and maintained, as
they apply to Allspring
Luxemburg
and Allspring
UK, in accordance the EU Shareholder Rights Directive II (EU 2017/828) (“SRD
II”). Specific to
Allspring
Luxemburg, the Policies and Procedures also comply with Article 23 of CSSF
Regulation No. 10-4, and the CSSF
Circular 18/698.
Disclosure
of policies and procedures
A summary
of the proxy voting policy and procedures are disclosed on Allspring’s
website.
In
addition, Allspring
will disclose to its separate clients (i.e. proxy votes for assets managed on
behalf of Allspring’s
other
clients as per a delegation arrangement) a summary description of its proxy
voting policy and procedures via mail.
Disclosure
of proxy voting results
Allspring
will provide to clients proxy statements and any records as to how Allspring
voted proxies on behalf of
clients,
quarterly or upon request. For assistance, clients may contact their
relationship manager to request a record of proxies
voted on their behalf.
Allspring
will publish high-level proxy voting statistics in periodic reports. However,
except as otherwise required by law,
Allspring
has a general policy of not disclosing to any issuer specific or third party how
its separate account client
proxies are voted.
1. |
Where
provisions of the Investment Company Act of 1940 (the “1940 Act”) specify
the manner in which items for any third party registered investment
companies
(e.g., mutual funds, exchange-traded funds and closed-end funds) and
business development companies (as defined in Section 2(a)(48) of the
1940
Act) (“Third Party Fund Holding Voting Matters”) held by the Trusts or
series thereof, Allspring shall vote the Third Party Fund Holding Voting
Matter on
behalf of the Trusts or series thereof
accordingly. |
2. |
The
Allspring Proxy Governance Committee may determine that additional review
of a Top-of-House voting matter is warranted. For example, voting
matters
for declassified boards or annual election of directors of public
operating and holding companies that have certain long-term business
commitments
(e.g., developing proprietary technology; or having an important strategic
alliance in place) may warrant referral to the DDWG (or escalation
to
the Proxy Governance Committee) for case-by-case review and vote
determination. |
3. |
The
term “high importance” is defined as those items designated Proxy Level 6
or 5 by ISS, which include proxy contests, significant transactions such
as mergers
and acquisitions. |
4. |
ISS’s
Sustainability Voting Guidelines seeks to promote support for recognized
global governing bodies encouraging sustainable business practices
advocating
for stewardship of environment, fair labor practices, non-discrimination,
and the protection of human rights. |
5. |
The
Investment Analytics team comprises of approximately 35 team members,
focused on equity and fixed income risk analytics, mutual fund risk
analytics,
counterparty risk analytics, model documentation, scientific learning and
portfolio analytics (including portfolio characteristics, portfolio
construction
research, multi-asset class risk analytics, and ESG analytics). The team
and its processes serve a similar function as an investment risk
committee
and reports into the Allspring Chief Investment
Officer(s). |
6. |
The
voting of proxies for Taft Hartley clients may incorporate the use of
ISS’s Taft Hartley voting guidelines. |
Policies and Procedures for Disclosure of
Fund Portfolio Holdings
I.
Scope of Policies and
Procedures. The
following policies and procedures (the “Procedures”) govern the disclosure
of
portfolio holdings and any ongoing arrangements to make available information
about portfolio holdings for the separate
series of Allspring
Funds Trust (“Funds Trust”), Allspring
Master Trust (“Master Trust”), Allspring
Variable Trust
(“Variable Trust”) (each of Funds Trust, Master Trust and Variable Trust are
referred to collectively herein as the “Funds” or
individually as the “Fund”) now existing or hereafter created.
II.
Disclosure
Philosophy. The Funds
have adopted these Procedures to ensure that the disclosure of a Fund’s
portfolio
holdings is accomplished in a manner that is consistent with a Fund’s fiduciary
duty to its shareholders. For purposes of
these Procedures, the term “portfolio holdings” means the stock, bond and
derivative positions held by a Fund and
includes the cash investments held by the Fund.
Under no
circumstances shall Allspring
Funds Management, LLC (“Allspring
Funds Management”), Allspring
Global Investments
(“Allspring”)
or the Funds receive any compensation in return for the disclosure of
information about a Fund’s
portfolio holdings or for any ongoing arrangements to make available information
about a Fund’s portfolio holdings.
III.
Disclosure of Fund Portfolio
Holdings. The
complete portfolio holdings and top ten holdings information referenced
below (except for the Funds of Master Trust (“Master Portfolios”) and Funds of
Variable Trust) will be available
on the Funds’ website until updated for the next applicable period. Allspring
Funds Management may withhold
any portion of a Fund’s portfolio holdings from online disclosure when deemed to
be in the best interest of the Fund.
Once holdings information has been posted on the website, it may be further
disseminated without restriction.
A.
Complete Holdings. The
complete portfolio holdings for each Fund (except for Money Market Funds and
Alternative
Funds and Master Portfolios) shall be made publicly available monthly on the
Funds’ website (www.allspringglobal.com),
on a one-month delayed basis. Money Market Fund portfolio holdings shall be made
publicly
available on the Funds’ website, on a 1-day delayed basis. In addition to the
foregoing, each Money Market Fund shall
post on its website such portfolio holdings and other information required by
Rule 2a-7 under the Investment
Company Act of 1940, as amended. The categories of information included on the
website may differ slightly
from what is included in the Funds’ financial statements.
B.
Top Ten Holdings. Top ten
holdings information (excluding derivative positions) for each Fund (except for
Money Market
Funds, Alternative Funds and Master Portfolios) shall be made publicly available
on the Funds’ website on a monthly,
seven-day or more delayed basis.
C.
Fund of Funds
Structures.
1. The
underlying funds held by a Fund that operates as a fund of funds and invests
exclusively in multiple affiliated underlying
funds or multiple unaffiliated underlying funds or in a combination of
affiliated and unaffiliated underlying
funds (“fund of funds”) shall be posted to the Funds’ website on a monthly,
one-month delayed basis.
2. The
individual holdings of the underlying master funds held by Funds that operate as
a feeder fund in a master-feeder
structure shall be posted to the Funds’ website on a monthly, one-month delayed
basis.
3. A change
to the underlying funds held by a fund of funds or changes in fund of funds’
target allocations between or among
its fixed-income and/or equity investments may be posted to the Funds’ website
simultaneous with the occurrence
of the change.
D.
Alternative
Funds.
The
following holdings disclosure policy applies to Alternative
Funds:
1.
Complete Holdings as of Fiscal Quarter
Ends. As of each
fiscal quarter end, each Alternative Fund’s complete portfolio
holdings shall be made publicly available quarterly on the Funds’ website, on a
one-month delayed basis.
2.
Holdings as of Other Month
Ends. As of each
month end other than a month end that coincides with a fiscal quarter
end, each Alternative Fund shall make publicly available monthly on the Funds’
website, on a one-month delayed
basis, the following: (i) all portfolio holdings held long other than any put
options on equity securities; (ii) portfolio
holdings held short other than short positions in equity securities of single
issuers; and (iii) the aggregate dollar
value of each of the following: (a) equity securities of single issuers held
short, and (b) any put options on equity
securities held long.
3.
Top Ten Holdings. Each
Alternative Fund shall make publicly available on the Funds’ website on a
monthly, seven-day
or more delayed basis information about its top ten holdings information,
provided that the following holdings
shall be excluded: (i) derivative positions; and (ii) equity securities of
single issuers held short.
E.
Master
Portfolios.
1. The
complete portfolio holdings of Master Portfolios shall be posted to the Funds’
website on a semi-annual, one-month
delayed basis.
Furthermore,
each Fund shall file such forms and portfolio holdings information in filings
made with the SEC in the manner
specified on such forms and with such frequency as required by such forms and
applicable SEC rules and regulations.
IV.
List of Approved
Recipients. The
following list identifies the third parties that are authorized to receive or
have access to a
Fund’s portfolio holdings information in advance of the monthly release on the
Funds’ website. Recipients
are included on this list based on a determination that such advance disclosure
is supported by a legitimate
business purpose and that the recipients, where feasible, are subject to an
independent duty or contractual
obligation not to disclose or trade on the nonpublic information.
A.
Allspring Holdings
Affiliates. Allspring
Holdings Affiliates. Employees of Allspring Global Investments Holdings,
LLC and its
affiliates who perform risk management functions and provide other services to
the Fund(s), as well as third-party
service providers utilized by them to perform such functions and provide such
services, shall have full daily
access to the portfolio holdings of the Fund(s).
B.
Wells Fargo
Affiliates. Team
members of Wells Fargo & Co. (“Wells Fargo”) and its affiliates who provide
certain services to
the Fund(s), as well as the third-party service providers utilized by them to
provide such services, shall have full
daily access to the portfolio holdings of the Fund(s).
C.
Sub-Advisers.
Sub-advisers shall have full daily access to fund holdings for the Fund(s) for
which they have direct management
responsibility. Sub-advisers may also release to and discuss portfolio holdings
with various broker/dealers
for purposes of analyzing the impact of existing and future market changes on
the prices, availability/demand and
liquidity of such securities, as well as for the purpose of assisting portfolio
managers in the trading of such
securities.
A new Fund
sub-adviser may periodically receive full portfolio holdings information for
such Fund from the date of Board
approval through the date upon which they take over day-to-day investment
management activities. Such disclosure
will be subject to confidential treatment.
D.
Money Market Portfolio Management
Team. The money
market portfolio management team at Allspring
Global Investments,
LLC (“Allspring
Investments”) shall have full daily access to daily transaction information
across the Allspring
Funds for purposes of anticipating money market sweep activity which in turn
helps to enhance liquidity management
within the money market funds.
E.
Allspring Funds
Management/Allspring Funds Distributor, LLC (“Funds
Distributor”).
1.
Allspring
Funds Management personnel that deal directly with the processing,
settlement, review, control, auditing,
reporting, and/or valuation of portfolio trades shall have full daily access to
Fund portfolio holdings through access to
the fund accountant’s system.
2.
Allspring
Funds Management personnel that deal directly with investment review and
analysis of the Funds shall have full
daily access to Fund portfolio holdings through Factset, a program that is used,
among other things, to evaluate
portfolio characteristics against available benchmarks.
3.
Allspring
Funds Management and Funds Distributor personnel may be given advance
disclosure of any changes to the
underlying funds in a fund of funds structure or changes in a Fund’s target
allocations that result in a shift between or
among asset classes.
F.
External Servicing
Agents. Portfolio
holdings may be disclosed to servicing agents in connection with the
day-to-day
operations and management of the Funds. These recipients include, but are not
limited to: a Fund’s auditors; a
Fund’s custodians; a Fund’s accountants; proxy voting service providers; class
action processing service providers;
pricing service vendors; prime brokers; securities lending agents; counsel to a
Fund or its independent Trustees;
regulatory authorities; third parties that assist in the review, processing
and/or analysis of Fund portfolio transactions,
portfolio accounting and reconciliation, portfolio performance, trade order
management, portfolio data analytics,
electronic order matching and other analytical or operational systems and
services in connection with supporting
a fund’s operations; a Fund’s insurers; financial printers; and providers of
electronic systems providing access to
materials for meetings of a Fund’s board of Trustees.
G.
Rating Agencies. Nationally
Recognized Statistical Ratings Organizations may receive full Fund holdings for
rating purposes.
H.
Reorganizations. Entities
hired as trading advisors that assist with the analysis and trading associated
with transitioning
portfolios may receive full portfolio holdings of both the target fund and the
acquiring fund. In addition, the
portfolio managers of the target fund and acquiring fund may receive full
portfolio holdings of the acquiring fund and
target fund, respectively, in order to assist with aligning the portfolios prior
to the closing date of the reorganization.
I.
Investment Company
Institute. The
Investment Company Institute may receive information about full money
market Fund
holdings concurrently at the time each money market Fund files with the SEC a
report containing such information.
J.
In-Kind
Redemptions. In
connection with satisfying in-kind redemption requests made to Funds, the
redeeming shareholders
and their advisers and service providers may receive full Fund holdings as
reasonably necessary to operationally
process such redemptions.
V.
Additions to List of Approved
Recipients. Any
additions to the list of approved recipients require approval by the
President,
Chief Legal Officer and Chief Compliance Officer of the Funds based on a review
of: (i) the type of fund involved;
(ii) the purpose for receiving the holdings information; (iii) the intended use
of the information; (iv) the frequency
of the information to be provided; (v) the length of the lag, if any, between
the date of the information and the date on
which the information will be disclosed; (vi) the proposed recipient’s
relationship to the Funds; (vii) the ability of
Allspring
Funds Management to monitor that such information will be used by the
proposed recipient in accordance
with the stated purpose for the disclosure; (viii) whether a confidentiality
agreement will be in place with such
proposed recipient; and (ix) whether any potential conflicts exist regarding
such disclosure between the interests
of Fund shareholders, on the one hand, and those of the Fund’s investment
adviser, principal underwriter, or any
affiliated person of the Fund.
VI.
Commentaries. Allspring Funds
Management and
Allspring
may disclose any views, opinions, judgments, advice or
commentary, or any analytical, statistical, performance or other information in
connection with or relating to a Fund or its
portfolio holdings (including historical holdings information), or any changes
to the portfolio holdings of a
Fund. The
portfolio commentary and statistical information may be provided to members of
the press, shareholders in the
Funds, persons considering investment in the Funds or representatives of such
shareholders or potential shareholders.
The content and nature of the information provided to each of these persons may
differ.
Certain of
the information described above will be included in periodic fund commentaries
(e.g., quarterly, monthly, etc.) and
will contain information that includes, among other things, top
contributors/detractors from fund performance
and significant portfolio changes during the relevant period (e.g., calendar
quarter, month, etc.). This information
will be posted contemporaneously with their distribution on the Funds’
website.
No person
shall receive any of the information described above if, in the sole judgment of
Allspring
Funds Management and
Allspring,
the information could be used in a manner that would be harmful to the
Funds.
VII.
Other Investment Products.
Allspring
Funds Management, Allspring
and/or their affiliates manage other investment
products, including investment companies, offshore funds, and separate accounts.
Many of these other investment
products have strategies that are the same or substantially similar to those of
the Funds and thus may have the
same or substantially similar portfolio holdings. The provision of the portfolio
holdings of these other investment
products is excluded from these procedures. Similarly, the provision of a model
or reference portfolio to clients,
investors and, in some cases, third-party sponsors, in connection with the
management or other investment products is
excluded from these procedures, even if the model or reference portfolio is the
same as or substantially similar to
that of a Fund, provided (1) the model or reference portfolio is not
characterized or otherwise identified to the
recipient, explicitly or implicitly, as being the portfolio of a Fund and (2)
the degree of overlap with the Fund’s portfolio
or with any portion thereof is not communicated, identified or confirmed to the
recipient.
VIII.
Board Approval. The Board
shall review these Procedures, including the list of approved recipients, as
often as they deem
appropriate, but not less often than annually, and will consider for approval
any changes that they deem appropriate.
IX.
Education
Component. In order
to promote strict compliance with these Procedures, Allspring
Funds Management has
informed its employees, and other parties possessing Fund portfolio holdings
information (such as sub-advisers,
the fund accounting agent and the custodian), of the limited circumstances in
which the Funds’ portfolio
holdings may be disclosed in advance of the monthly disclosure on the Funds’
website and the ramifications,
including possible dismissal, if disclosure is made in contravention of these
Procedures.
BROKERAGE
The Trust
has no obligation to deal with any broker-dealer or group of broker-dealers in
the execution of transactions in
portfolio securities. Subject to the supervision of the Board and the
supervision of the Manager, the Sub-Adviser is responsible
for the Funds’ portfolio decisions and the placing of portfolio transactions. In
placing orders, it is the policy of
the Sub-Adviser to obtain the best overall results taking into account various
factors, including, but not limited to,
the size and type of transaction involved; the broker-dealer’s risk in
positioning the securities involved; the nature and
character of the market for the security; the confidentiality, speed and
certainty of effective execution required
for the transaction, the general execution and operational capabilities of the
broker-dealer; the reputation, reliability,
experience and financial condition of the firm, the value and quality of the
services rendered by the firm in this and
other transactions; and the reasonableness of the spread or commission. While
the Sub-Adviser generally seeks
reasonably competitive spreads or commissions, the Funds will not necessarily be
paying the lowest spread or commission
available.
Purchases
and sales of non-equity securities usually will be principal transactions.
Portfolio securities normally will be
purchased or sold from or to broker-dealers serving as market makers for the
securities at a net price. The Funds also will
purchase portfolio securities in underwritten offerings and may purchase
securities directly from the issuer. Generally,
municipal obligations and taxable money market securities are traded on a net
basis and do not involve brokerage
commissions. The cost of executing a Fund’s portfolio securities transactions
will consist primarily of broker-dealer
spreads and underwriting commissions. Under the 1940 Act, persons affiliated
with the Trust are prohibited
from dealing with the Trust as a principal in the purchase and sale of
securities unless an exemptive order allowing
such transactions is obtained from the SEC or an exemption is otherwise
available. The Fund may purchase securities
from underwriting syndicates of which the Distributor or Allspring Funds
Management is a member under
certain
conditions in accordance with the provisions of a rule adopted under the 1940
Act and in compliance with procedures
adopted by the Trustees. However, the Funds and Allspring Funds Management have
adopted a policy pursuant to
Rule 12b-1(h) under the 1940 Act that prohibits the Funds from directing
portfolio brokerage to brokers who sell
Fund shares as compensation for such selling efforts.
In placing
orders for portfolio securities of the Fund, the Fund’s Sub-Adviser is required
to give primary consideration to
obtaining the most favorable price and efficient execution. This means that the
Sub-Adviser will seek to execute each
transaction at a price and commission, if any, that provide the most favorable
total cost or proceeds reasonably attainable
in the circumstances. Commission rates are established pursuant to negotiations
with the broker-dealer based, in
part, on the quality and quantity of execution services provided by the
broker-dealer and in the light of generally
prevailing rates. Furthermore, the Adviser oversees the trade execution
procedures of the Sub-Adviser to ensure that
such procedures are in place, that they are adhered to, and that adjustments are
made to the procedures to address
ongoing changes in the marketplace.
The
Sub-Adviser may, in circumstances in which two or more broker-dealers are in a
position to offer comparable results for
a portfolio transaction, give preference to a broker-dealer that has provided
statistical or other research services to
the Sub-Adviser. In selecting a broker-dealer under these circumstances, the
Sub-Adviser will consider, in addition to
the factors listed above, the quality of the research provided by the
broker-dealer.
The
Sub-Adviser may pay higher commissions than those obtainable from other
broker-dealers in exchange for such research
services. The research services generally include: (1) furnishing advice as to
the value of securities, the advisability
of investing in, purchasing, or selling securities, and the advisability of
securities or purchasers or sellers of
securities; (2) furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends,
portfolio strategy, and the performance of accounts; and (3) effecting
securities transactions and performing functions
incidental thereto. By allocating transactions in this manner, a Sub-Adviser is
able to supplement its research
and analysis with the views and information of securities firms. Information so
received will be in addition to, and not
in lieu of, the services required to be performed by the Sub-Adviser under the
advisory contracts, and the expenses of
the Sub-Adviser will not necessarily be reduced as a result of the receipt of
this supplemental research information.
Furthermore, research services furnished by broker-dealers through which a
sub-adviser places securities
transactions for a Fund may be used by the Sub-Adviser in servicing its other
accounts, and not all of these
services may be used by the Sub-Adviser in connection with advising the
Funds.
Brokerage
Commissions.
The Funds paid
no brokerage commissions during the fiscal period ended January 31,
2022.
Securities of Regular
Broker-Dealers.
The Funds are
required to identify any securities of their
“regular brokers or dealers”
(as defined under Rule 10b-1 of the 1940 Act) or of their
parents that the Funds may
hold at the close of their most
recent fiscal year. As of January 31,
2022, the Funds held
no securities of their
regular broker-dealers or of their
parents.
DETERMINATION
OF NET ASSET VALUE
We
determine the NAV of each Fund’s shares each business day. We determine the NAV
by subtracting a Fund Class’ liabilities
from its total assets. Expenses and fees, including advisory fees, are accrued
daily and are taken into account for
the purpose of determining the NAV of the Funds’ shares.
Determination
of Net Asset Values of Stable NAV Money Market Funds
The
following Funds seek to maintain a stable net asset value per share (“Stable NAV
Fund”):
■ |
Allspring
Government Money Market Fund |
■ |
Allspring
Money Market Fund |
■ |
Allspring
National Tax-Free Money Market Fund |
■ |
Allspring
Treasury Plus Money Market Fund |
■ |
Allspring
100% Treasury Money Market Fund |
Each Stable
NAV Fund uses the amortized cost method to determine the value of its portfolio
securities pursuant to Rule 2a-7
under the 1940 Act. The amortized cost method involves valuing a security at its
cost and amortizing any
discount or
premium over the period until maturity, regardless of the impact of fluctuating
interest rates on the market
value of the security. While this method provides certainty in valuation, it may
result in periods during which the value,
as determined by amortized cost, is higher or lower than the price that the
Stable NAV Fund would receive if the
security were sold. During these periods the yield to a shareholder may differ
somewhat from that which could be obtained
from a similar fund that uses a method of valuation based upon market prices.
Thus, during periods of declining
interest rates, if the use of the amortized cost method resulted in a lower
value of the Stable NAV Fund’s portfolio
on a particular day, a prospective investor in the Stable NAV Fund would be able
to obtain a somewhat higher
yield than would result from investment in a fund using solely market values,
and existing Stable NAV Fund shareholders
would receive correspondingly less income. The converse would apply during
periods of rising interest rates.
Rule 2a-7
permits a Stable NAV Fund to value its assets on the basis of amortized cost
only so long as the Board believes
that this valuation method fairly reflects the market-based NAV per share. The
Stable NAV Funds have adopted
procedures that, among other things, enable each of the Stable NAV Funds to
maintain a stable per share NAV for
purposes of the sale and redemption of the Stable NAV Fund’s shares pursuant to
Rule 2a-7 under the 1940 Act.
Pursuant to Rule 2a-7, the Board is also required to establish procedures
designed to stabilize, to the extent reasonably
possible, a Stable NAV Fund’s price per share as computed for the purpose of
sales and redemptions at $1.00 per
share. The extent of any deviation from $1.00 per share will be examined by the
Board. If such deviation exceeds 1/2
of 1%, the Board will promptly consider what action, if any, will be initiated.
In the event the Board determines
that a deviation exists that may result in material dilution or other unfair
results to investors or existing shareholders,
the Board will take such corrective action as it regards as necessary and
appropriate, including the sale of
portfolio instruments prior to maturity to realize capital gains or losses or to
shorten average portfolio maturity,
withholding dividends or establishing a NAV per share by using available market
quotations. It is the intention
of the Stable NAV Funds to maintain a per share NAV of $1.00, but there can be
no assurance that each Stable NAV
Fund will do so.
It is
expected that each Stable NAV Fund will have a positive net income at the time
of each determination thereof. If, for any
reason, the net income of a Stable NAV Fund determined at any time is a negative
amount, which could occur, for
instance, during a low or negative interest rate environment, the Board may
authorize the Stable NAV Fund to take
certain measures to seek to maintain a stable NAV per share at $1.00. These
measures may include, among others, the
implementation of “reverse distributions,” reverse share splits or other
mechanisms to offset the impact of the
negative net income on a Stable NAV Fund’s NAV per share, thereby allowing the
Stable NAV Fund to maintain a stable
NAV per share at $1.00. In a reverse distribution, the number of shares
outstanding would be reduced on a pro rata
basis from each shareholder. More specifically, the number of full and
fractional shares outstanding in the account of
each shareholder would be reduced by the number of full and fractional shares
which represents such shareholder’s
pro rata portion of the negative net income, with such reduction resulting in an
automatic cancellation in the
number of shares outstanding equal to the amount of the reduction. Depending on
the specific measures taken,
these measures may result in shareholders not receiving a dividend, holding
fewer shares of the Stable NAV Fund and/or
experiencing a loss in the aggregate value of their investment in the Stable NAV
Fund. In each case, measures
authorized by the Board in an effort to stabilize the NAV per share at $1.00 are
subject to applicable law and the
provisions of the Stable NAV Fund’s organizational documents. Investments in a
Stable NAV Fund are subject to the
potential that the Board may authorize such measures. Accordingly, each
shareholder is deemed to have agreed to
the implementation of such measures in these circumstances by his or her
investment in the Stable NAV Fund. There
is no assurance that such measures will result in a stable NAV per share at
$1.00. As an alternative to authorizing
such measures, the Board may determine to discontinue the practice of seeking to
maintain a stable NAV per share
for any Stable NAV Fund and establish a fluctuating NAV per share rounded to
four decimal places by using available
market quotations.
Determination
of Net Asset Values of Floating NAV Money Market Funds
The
following Funds do not seek to maintain a stable net asset value per share and
instead computes its NAV using market-based
NAV, rounded to the fourth decimal place (“Floating NAV Fund”):
■ |
Allspring
Heritage Money Market Fund |
■ |
Allspring
Municipal Cash Management Money Market
Fund |
The Board
has established a Valuation Committee comprised exclusively of Trustees, and has
delegated to it the authority
to take any action regarding the valuation of portfolio securities that the
Valuation Committee deems necessary
or appropriate, including, but not limited to, determining the fair value of
portfolio securities.
The NAV of
each class of each Floating NAV Fund will be determined at specified times
throughout the day on each day the
Floating NAV Fund is open for business, unless the Board determines otherwise.
The Valuation Committee shall have
the authority to approve deviations from the designated NAV calculation time(s)
to address unusual or unexpected
circumstances on any given day.
A Floating
NAV Fund’s assets will be valued at the bid price provided by an independent
pricing service or, if a reliable
price is not available, the quoted bid price from an independent broker-dealer.
We are required to depart from these
general valuation methods and use fair value pricing methods to determine the
values of certain investments
if we believe that a closing price or the quoted bid price of a security,
including a security that trades primarily
on a foreign exchange, does not accurately reflect its current market value at
the time as of which a Floating
NAV Fund calculates its NAV. The closing price or the quoted bid price of a
security may not reflect is current
market value if, among other things, a significant event occurs after the
closing price or quoted bid price but before the
time as of which a Floating NAV Fund calculates its NAV that materially affects
the value of the security. We use
various criteria, including a systemic evaluation of U.S. market moves after the
close of foreign markets in deciding
whether a foreign security’s market price is still reliable and, if not, what
fair market value to assign to the security.
In addition, we use fair value pricing to determine the value of investments in
securities and other assets, including
illiquid securities, for which current market quotations or evaluated prices
from a pricing service or broker-dealer
are not readily available.
The fair
value of a Floating NAV Fund’s securities and other assets is determined in good
faith pursuant to policies and
procedures adopted by the Board. In light of the judgment involved in making
fair value decisions, there can be no
assurance that a fair value assigned to a particular security is accurate or
that it reflects the price that the Floating NAV Fund
could obtain for such security if it were to sell the security at the time as of
which fair value pricing is determined.
Such fair value pricing may result in NAVs that are higher or lower than NAVs
based on the closing price or quoted
bid price.
ADDITIONAL
PURCHASE AND REDEMPTION INFORMATION
Shares of
the Funds may be purchased on any day a Fund is open for business. Generally,
each Fund is open for business
each day the New York Stock Exchange (“NYSE”) is open for trading (a “Business
Day”). However, the Funds may elect
to remain open following an early close of the NYSE or to remain open on days
when the Federal Reserve is open and
the NYSE is closed, and on days when the NYSE is closed and the
Securities Industry and Financial Markets
Association (“SIFMA”) recommends that the bond markets remain open. Likewise,
the Funds may elect to close or
close early on days that SIFMA recommends that the securities markets
close or close early. The NYSE is currently
closed in observance of New Year’s Day, Martin Luther King Jr. Day, Washington’s
Birthday, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day (each a
“Holiday”). When any Holiday
falls on a weekend, the NYSE typically is closed on the weekday immediately
before or after such Holiday. The Federal
Reserve is closed on all days listed above (except Good Friday), as well as
Columbus Day and Veterans Day.
Payment for
shares may, in the discretion of the Manager, be made in the form of securities
that are permissible investments
for the Fund. For further information about this form of payment, please contact
the Distributor. In connection
with an in-kind securities payment, the Funds will require, among other things,
that the securities be valued on
the day of purchase in accordance with the pricing methods used by a Fund and
that such Fund receives satisfactory
assurances that (i) it will have good and marketable title to the securities
received by it; (ii) that the securities
are in proper form for transfer to the Fund; and (iii) adequate information will
be provided concerning the basis and
other matters relating to the securities.
In lieu of
making cash payments, the Fund reserves the right to determine in its sole
discretion, including under stressed
market conditions, to satisfy one or more redemption requests by making payments
in securities. In addition,
the Fund may redeem shares involuntarily to reimburse the Fund for any losses
sustained by reason of the failure of
a shareholder to make full payment for shares purchased or to collect any charge
relating to a transaction
effected
for the benefit of a shareholder which is applicable to shares of the Fund as
provided from time to time in the
Prospectuses.
Online Purchases and Redemptions for Existing
Allspring Funds Account Holders. All
shareholders with an existing Allspring
Funds account may purchase additional shares of funds or classes of funds within
the Allspring family of funds that
they already own and redeem existing shares online. For purchases, such account
holders must have a bank
account linked to their Allspring Funds account. Redemptions may be deposited
into a linked bank account or mailed via
check to the shareholder’s address of record. Online account access is available
for institutional clients. Shareholders
should contact Investor Services at 1-800-222-8222 or log on at
allspringglobal.com for further details. Shareholders
who hold their shares in a brokerage account should contact their selling
agent.
Extraordinary Circumstances Affecting
Redemptions. Under the
extraordinary circumstances discussed under Section
22(e) under the 1940 Act, we may suspend the right of redemption or postpone the
date of payment of a redemption
for longer than one day or for longer than seven days for each Fund. Generally,
those extraordinary circumstances
are when: (i) the NYSE is closed or trading thereon is restricted; (ii) an
emergency exists which makes the
disposal by a Fund of securities it owns, or the fair determination of the value
of the Fund’s net assets not reasonable
or practical; or (iii) the SEC, by order, permits the suspension of the right of
redemption for the protection of
shareholders.
Purchases and Redemptions Through Brokers
and/or Their Affiliates. A broker
may charge transaction fees on the purchase
and/or sale of Fund shares in addition to those fees described in the
Prospectuses. The Trust has authorized
one or more brokers to receive on its behalf purchase and redemption orders, and
such brokers are authorized
to designate other intermediaries to receive purchase and redemption orders on
the Trust’s behalf.
Minimum Initial Investment Waivers for
Institutional, Premier, Service, and Administrator Class
shares. Upon
approval by
Allspring Funds Management, the minimum initial investment amounts for
Institutional, Service, Premier and Administrator
Class shares of the Funds may be waived for purchases made under the following
circumstances:
■ |
Former
Strong money market fund shareholders who received shares of a Fund as a
result of the reorganization of the
Strong Funds into the Allspring Funds and whose Allspring money market
fund account record remains active on
the Fund’s transfer agency system. An account remains on the transfer
agency system indefinitely if a balance is
maintained or for a period of at least six months for zero-balance
accounts. |
Related
shareholders or shareholder accounts of the same Fund may be aggregated in order
to meet the minimum initial
investment requirement for Institutional, Service, Premier, Administrator, and
Select Class shares. The following
are examples of relationships that may qualify for aggregation:
■ |
Related
business entities, including; (i) Corporations and their subsidiaries;
(ii) General and limited partners; and iii) Other
business entities under common ownership or
control. |
■ |
Shareholder
accounts that share a common tax-identification
number. |
■ |
Accounts
over which the shareholder has individual or shared authority to buy or
sell shares on behalf of the account
(i.e., a trust account or a solely owned business
account). |
Any of the
minimum initial investment waivers listed above may be modified or discontinued
at any time.
Waiver of Investor Eligibility Requirements
and Minimum Initial and Subsequent Investment Amounts for All Share
Classes for Special Operational
Accounts. Shares of
any and all share classes of the Allspring Funds may be acquired in special
operational accounts (as defined below) without meeting the applicable
eligibility requirements or minimum
initial or subsequent investment amounts as stated in the Prospectus. Special
operational accounts are designated
accounts held by Allspring Funds Management or an affiliate that are used for
seeding purposes or for addressing
operational matters related to shareholder accounts, such as testing of account
functions.
Compensation to Financial Professionals and
Intermediaries. Set forth
below is a list of the member firms of FINRA to which the
Manager, the Distributor or their affiliates made payments out of their revenues
in connection with the sale and
distribution of shares of the Funds or for services to the Funds and their
shareholders in the year ending December
31, 2021 (“Additional Payments”). (Such payments are in addition to any amounts
paid to such FINRA firms in
the form of dealer reallowances or fees for shareholder servicing or
distribution. The payments are discussed in further
detail in the Prospectuses under the title “Compensation to Financial
Professionals and Intermediaries”).
Any
additions, modifications, or deletions to the member firms identified in this
list that have occurred since December
31, 2021, are not reflected:
FINRA member firms
■ |
Alight
Financial Solutions, LLC |
■ |
Ameriprise
Financial Services, LLC |
■ |
Broadridge
Business Process Outsourcing, LLC |
■ |
Charles
Schwab & Co., Inc. |
■ |
Citigroup
Global Markets, Inc. |
■ |
Fidelity
Brokerage Services LLC |
■ |
Goldman,
Sachs & Co. LLC |
■ |
Hightower
Securities, LLC |
■ |
Institutional
Bond Network, LLC |
■ |
Institutional
Cash Distributors, LLC |
■ |
Janney
Montgomery Scott LLC |
■ |
J.P.
Morgan Securities LLC |
■ |
Merrill
Lynch, Pierce, Fenner & Smith,
Incorporated |
■ |
Mid
Atlantic Clearing & Settlement
Corporation |
■ |
Nationwide
Investment Services Corporation |
■ |
Newedge
Securities, Inc. |
■ |
OneAmerica
Securities, Inc. |
■ |
PNC
Capital Markets LLC |
■ |
Raymond
James & Associates, Inc. |
■ |
Raymond
James Financial Services, Inc. |
■ |
RBC
Capital Markets, LLC |
■ |
Robert
W. Baird & Co. Incorporated |
■ |
State
Street Global Markets, LLC |
■ |
Stifel,
Nicolaus & Company, Incorporated |
■ |
UBS
Financial Services Inc. |
■ |
VALIC
Financial Advisors, Inc. |
■ |
Wells
Fargo Clearing Services, LLC |
■ |
Wells
Fargo Securities, LLC |
In addition
to member firms of FINRA, Additional Payments are also made to other selling and
shareholder servicing agents, and
to affiliates of selling and shareholder servicing agents that sell shares of or
provide services to the Funds and
their shareholders, such as banks, insurance companies and plan administrators.
These firms are not included on
the list above, although they may be affiliated with companies on the above
list.
U.S.
FEDERAL INCOME TAXES
The
following information supplements and should be read in conjunction with the
section in each Prospectus entitled
“Taxes.” Each Prospectus generally describes the U.S. federal income tax
treatment of distributions by the
Funds. This
section of the SAI provides additional information concerning certain material
U.S. federal income taxes. It is based
on the Internal Revenue Code of 1986, as amended (the “Code”), applicable
Treasury Regulations, judicial authority,
and administrative rulings and practice, all as of the date of this SAI and all
of which are subject to change, including
changes with retroactive effect. Except as specifically set forth below, the
following discussion does not address any
state, local or foreign tax matters.
A
shareholder’s tax treatment may vary depending upon the shareholder’s particular
situation. Except as specifically set forth
below, this discussion applies only to U.S. individual shareholders holding Fund
shares as capital assets within the
meaning of Section 1221 of the Code. A shareholder may also be subject to
special rules not discussed below if
they are a certain kind of shareholder, including, but not limited to: an
insurance company; a tax-exempt organization;
a shareholder holding a Fund’s shares through tax-advantaged accounts (such as
an individual retirement
account (an “IRA”), a 401(k) plan account or other qualified retirement
account); a financial institution or broker-dealer;
a person who is neither a citizen nor resident of the United States or entity
that is not organized under the laws of
the United States or political subdivision thereof; a shareholder who holds Fund
shares as part of a hedge,
straddle or conversion transaction; a shareholder subject to the alternative
minimum tax; or an entity taxable as a
partnership for U.S. federal income tax purposes and investors in such an
entity. The summary discussion that follows may
not be considered to be individual tax advice and may not be relied upon by any
shareholder.
The Trust
has not requested and will not request an advance ruling from the Internal
Revenue Service (the “IRS”) as to the U.S.
federal income tax matters described below. The IRS could adopt positions
contrary to those discussed below and
such positions could be sustained. In addition, the following discussion and the
discussions in each Prospectus
applicable to each shareholder address only some of the material U.S. federal
income tax considerations generally
affecting investments in the Funds.
On December
22, 2017, new tax legislation was enacted which includes significant changes in
tax rates, restrictions on
miscellaneous itemized deductions, changes to the dividends received deduction,
restrictions on the deduction of interest
and the international operations of domestic businesses. Certain changes have
sunset provisions, which are
important to note. Because the tax legislation is recently enacted, and Treasury
Regulations and additional guidance
interpreting the legislation are continuing to be issued, there is still
uncertainty in how the legislation will affect the
Fund’s investments and shareholders and whether such legislation could have an
adverse effect on a Fund’s
investments or the taxation of the shareholders of a Fund. Shareholders are
urged and advised to consult their own
tax advisor with respect to the impact of this legislation.
Prospective
shareholders are urged to consult their own tax advisers and financial planners
regarding the U.S. federal
tax consequences of an investment in a Fund, the application of state, local or
foreign laws, and the effect of any
possible changes in applicable tax laws on their investment in the
Funds.
Qualification as a Regulated Investment
Company. It is
intended that each Fund qualify as a regulated investment company
(“RIC”) under Subchapter M of Subtitle A, Chapter 1 of the Code. Each Fund will
be treated as a separate entity for
U.S. federal income tax purposes. Thus, the provisions of the Code applicable to
RICs generally will apply separately
to each Fund even though each Fund is a series of the Trust. Furthermore, each
Fund will separately determine
its income, gains, losses and expenses for U.S. federal income tax
purposes.
In order to
qualify as a RIC under the Code, each Fund must, among other things, derive at
least 90% of its gross income each
taxable year generally from (i) dividends, interest, certain payments with
respect to securities loans, gains from
the sale or other disposition of stock, securities or foreign currencies, and
other income attributable to its business of
investing in such stock, securities or foreign currencies (including, but not
limited to, gains from options, futures or
forward contracts) and (ii) net income derived from an interest in a qualified
publicly traded partnership, as defined
in the Code (together with (i) the “qualifying income requirement”). Future U.S.
Treasury regulations may (possibly
retroactively) exclude from qualifying income foreign currency gains that are
not directly related to a Fund’s
principal business of investing in stock, securities or options and futures with
respect to stock or securities. In general,
for purposes of this 90% gross income requirement, income derived from a
partnership, except a qualified publicly
traded 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.
Each Fund
must also diversify its holdings so that, at the end of each quarter of the
Fund’s taxable year: (i) at least 50% of the
fair market value of its assets consists of (A) cash and cash items (including
receivables), U.S. government
securities
and securities of other RICs, and (B) securities of any one issuer (other than
those described in clause (A)) to the
extent such securities do not exceed 5% of the value of the Fund’s total assets
and do not exceed 10% of the outstanding
voting securities of such issuer, and (ii) not more than 25% of the value of the
Fund’s total assets consists of
the securities of any one issuer (other than those described in clause (i)(A)),
the securities of two or more issuers the
Fund controls and which are engaged in the same, similar or related trades or
businesses, or the securities
of one or more qualified publicly traded partnerships (together with (i), the
“diversification requirement”). In
addition, for purposes of meeting this diversification requirement, the term
“outstanding voting securities of such issuer”
includes the equity securities of a qualified publicly traded partnership. The
qualifying income and diversification
requirements applicable to a Fund may limit the extent to which it can engage in
transactions in options,
futures contracts, forward contracts and swap agreements.
If a Fund
fails to satisfy the qualifying income or diversification requirements in any
taxable year, such Fund may be eligible
for relief provisions if the failures are due to reasonable cause and not
willful neglect and if a penalty tax is paid with
respect to each failure to satisfy the applicable requirements. Additionally,
relief is provided for certain de minimis
failures of the diversification requirements where the Fund corrects the failure
within a specified period. If the
applicable relief provisions are not available or cannot be met, such Fund will
be taxed in the same manner as an ordinary
corporation, described below.
In
addition, with respect to each taxable year, each Fund generally must distribute
to its shareholders at least 90% of its
investment company taxable income, which generally includes its ordinary income
and the excess of any net short-term
capital gain over net long-term capital loss, and at least 90% of its net
tax-exempt interest income earned for the
taxable year. If a Fund meets all of the RIC qualification requirements, it
generally will not be subject to U.S. federal
income tax on any of the investment company taxable income and net capital gain
(i.e., the excess of net long-term
capital gain over net short-term capital loss) it distributes to its
shareholders. For this purpose, a Fund generally
must make the distributions in the same year that it realizes the income and
gain, although in certain circumstances,
a Fund may make the distributions in the following taxable year. Shareholders
generally are taxed on any
distributions from a Fund in the year they are actually distributed. However, if
a Fund declares a distribution to shareholders
of record in October, November or December of one year and pays the distribution
by January 31 of the
following year, the Fund and its shareholders will be treated as if the Fund
paid the distribution by December 31 of the
first taxable year. Each Fund intends to distribute its net income and gain in a
timely manner to maintain its status as a
RIC and eliminate fund-level U.S. federal income taxation of such income and
gain. However, no assurance
can be given that a Fund will not be subject to U.S. federal income
taxation.
Moreover,
the Funds may retain for investment all or a portion of their net capital gain.
If a Fund retains any net capital
gain, it will be subject to a tax at regular corporate rates on the amount
retained, but may report the retained amount as
undistributed capital gain in a written statement furnished to its shareholders,
who (i) will be required to include in
income for U.S. federal income tax purposes, as long-term capital gain, their
shares of such undistributed amount, and
(ii) will be entitled to credit their proportionate shares of the tax paid by
the Fund on such undistributed amount
against their U.S. federal income tax liabilities, if any, and to claim refunds
to the extent the credit exceeds such
liabilities. For U.S. federal income tax purposes, the tax basis of shares owned
by a shareholder of the Fund will be
increased by an amount equal to the difference between the amount of
undistributed capital gain included in the shareholder’s
gross income and the tax deemed paid by the shareholder under clause (ii) of the
preceding sentence. A Fund is
not required to, and there can be no assurance that it will, make this
designation if it retains all or a portion of its net
capital gain in a taxable year.
If, for any
taxable year, a Fund fails to qualify as a RIC, and is not eligible for relief
as described above, it will be taxed in the same
manner as an ordinary corporation without any deduction for its distributions to
shareholders, and all distributions
from the Fund’s current and accumulated earnings and profits (including any
distributions of its net tax-exempt
income and net long-term capital gain) to its shareholders will be taxable as
dividend income. To re-qualify
to be taxed as a RIC in a subsequent year, the Fund may be required to
distribute to its shareholders its earnings
and profits attributable to non-RIC years reduced by an interest charge on 50%
of such earnings and profits payable by
the Fund to the IRS. In addition, if a Fund initially qualifies as a RIC but
subsequently fails to qualify as a RIC for a
period greater than two taxable years, the Fund generally would be required to
recognize and pay tax on any net
unrealized gain (the excess of aggregate gain, including items of income, over
aggregate loss that would
have been
realized if the Fund had been liquidated) or, alternatively, be subject to tax
on such unrealized gain recognized
for a period of five years, in order to re-qualify as a RIC in a subsequent
year.
Equalization
Accounting. Each Fund
may use the so-called “equalization method” of accounting to allocate a portion
of its
“earnings and profits,” which generally equals a Fund’s undistributed investment
company taxable income and net capital
gain, with certain adjustments, to redemption proceeds. This method permits a
Fund to achieve more balanced
distributions for both continuing and redeeming shareholders. Although using
this method generally will not affect
a Fund’s total returns, it may reduce the amount that the Fund would otherwise
distribute to continuing shareholders
by reducing the effect of redemptions of Fund shares on Fund distributions to
shareholders. However, the IRS may
not have expressly sanctioned the particular equalization method used by a Fund,
and, thus, a Fund’s use of this
method may be subject to IRS scrutiny.
Capital Loss
Carry-Forwards. For net
capital losses realized in taxable years beginning before January 1, 2011, a
Fund is
permitted to carry forward a net capital loss to offset its capital gain, if
any, realized during the eight years following
the year of the loss, and such capital loss carry-forward is treated as a
short-term capital loss in the year to which it is
carried. For net capital losses realized in taxable years beginning on or after
January 1, 2011, a Fund is permitted
to carry forward a net capital loss to offset its capital gain indefinitely. For
capital losses realized in taxable years
beginning after January 1, 2011, the excess of a Fund’s net short-term capital
loss over its net long-term capital gain is
treated as a short-term capital loss arising on the first day of the Fund’s next
taxable year and the excess of a Fund’s net
long-term capital loss over its net short-term capital gain is treated as a
long-term capital loss arising on the first
day of the Fund’s next taxable year. If future capital gain is offset by
carried-forward capital losses, such future
capital gain is not subject to fund-level U.S. federal income tax, regardless of
whether it is distributed to shareholders.
Accordingly, the Funds do not expect to distribute any such offsetting capital
gain. The Funds cannot carry back
or carry forward any net operating losses.
If a Fund
engages in a reorganization, either as an acquiring fund or acquired fund, its
capital loss carry-forwards (if any), its
unrealized losses (if any), and any such losses of other funds participating in
the reorganization may be subject to
limitations that could make such losses, in particular losses realized in
taxable years beginning before January 1,
2011, substantially unusable. Various Funds in the Fund Complex have engaged in
reorganizations in the past and/or
may engage in reorganizations in the future.
As of a
Fund’s most recent fiscal year end, the Fund had capital loss carry-forwards
approximating the amount indicated
for U.S. federal income tax purposes in the table set forth below, expiring in
the year indicated (if applicable):
|
|
|
Post-January
1, 2011 Capital Loss Carry-Forwards |
Fund |
Short-Term |
Long-Term |
Heritage
Money Market Fund |
$3,735,218 |
- |
Money
Market Fund |
$551,901 |
- |
Excise Tax. If a Fund
fails to distribute by December 31 of each calendar year at least the sum of 98%
of its ordinary income for
that year (excluding capital gains and losses), 98.2% of its capital gain net
income (adjusted for certain net
ordinary losses) for the 12-month period ending on October 31 of that year, and
any of its ordinary income and capital
gain net income from previous years that was not distributed during such years,
the Fund will be subject to a nondeductible
4% U.S federal excise tax on the undistributed amounts (other than to the extent
of its tax-exempt interest
income, if any). For these purposes, a Fund will be treated as having
distributed any amount on which it is subject to
corporate level U.S. federal income tax for the taxable year ending within the
calendar year. Each Fund generally
intends to actually, or be deemed to, distribute substantially all of its
ordinary income and capital gain net income, if
any, by the end of each calendar year and thus expects not to be subject to the
excise tax. However, no assurance
can be given that a Fund will not be subject to the excise tax. Moreover, each
Fund reserves the right to pay an
excise tax rather than make an additional distribution when circumstances
warrant (for example, the amount of excise
tax to be paid by a Fund is determined to be de minimis).
Investment through Master
Portfolio. A Fund
that invests its assets through one or more master portfolios will seek to
continue to
qualify as a RIC. Each master portfolio will be treated as a non-publicly traded
partnership (or, in the
event that
a Fund is the sole investor in the corresponding master portfolio, as
disregarded from the Fund) for U.S. federal
income tax purposes rather than as a RIC or a corporation under the Code. Under
the rules applicable to a non-publicly
traded partnership (or disregarded entity), a proportionate share of any
interest, dividends, gains and losses of a
master portfolio will be deemed to have been realized (i.e., “passed-through”)
by its investors, including the
corresponding Fund, regardless of whether any amounts are actually distributed
by the master portfolio. Each investor in
a master portfolio will be taxed on such share, as determined in accordance with
the governing instruments
of the particular master portfolio, the Code and U.S. Treasury regulations, in
determining such investor’s U.S.
federal income tax liability. Therefore, to the extent a master portfolio were
to accrue but not distribute any income or
gains, the corresponding Fund would be deemed to have realized its proportionate
share of such income or gains
without receipt of any corresponding distribution. However, each of the master
portfolios will seek to minimize
recognition by its investors (such as a corresponding Fund) of income and gains
without a corresponding distribution.
Furthermore, each master portfolio intends to manage its assets, income and
distributions in such a way that an
investor in a master portfolio will be able to continue to qualify as a RIC by
investing its assets through the master
portfolio.
Taxation of
Investments. In
general, realized gains or losses on the sale of securities held by a Fund will
be treated as capital
gains or losses, and long-term capital gains or losses if the Fund has held the
disposed securities for more than one
year at the time of disposition.
If a Fund
purchases a debt obligation with original issue discount (“OID”) (generally, a
debt obligation with a purchase
price at original issuance less than its principal amount, such as a zero-coupon
bond), which generally includes
“payment-in-kind” or “PIK” bonds, the Fund generally is required to annually
include in its taxable income a portion of
the OID as ordinary income, even though the Fund may not receive cash payments
attributable to the OID until a
later date, potentially until maturity or disposition of the obligation. A
portion of the OID includible in income with
respect to certain high-yield corporate discount obligations may be treated as a
dividend for U.S. federal income tax
purposes. Similarly, if a Fund purchases a debt obligation with market discount
(generally a debt obligation
with a purchase price after original issuance less than its principal amount
(reduced by any OID)) and a Fund elects
to include market discount in income as it accrues, the Fund generally is
required to annually include in its taxable
income a portion of the market discount as ordinary income, even though the
Acquiring Fund may not receive
cash payments attributable to the market discount until a later date,
potentially until maturity or disposition of the
obligation. A Fund generally will be required to make cash distributions to
shareholders representing the OID or market
discount income on debt obligations that is currently includible in income, even
though the cash representing
such income may not have been received by a Fund. Cash to pay such distributions
may be obtained from sales
proceeds of securities held by the Fund which a Fund otherwise might have
continued to hold; obtaining such cash
might be disadvantageous for the Fund.
If a Fund
invests in distressed debt obligations or obligations of issuers that later
become distressed, including debt obligations
of issuers not currently paying interest or who are in default, special tax
issues may exist for the Fund. U.S.
federal income 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, and how
payments received on obligations in default should be allocated between
principal and income. A Fund may be
required to include in income certain fees that are treated as OID and required
to be included in income for financial
statement purposes when received (rather than when accrued into income under
current law). These and other
related issues will be addressed by a Fund when, as, and if it invests in such
securities, in order to seek to ensure that
it distributes sufficient income to not become subject to U.S. federal income or
excise tax.
If an
option granted by a Fund is sold, lapses or is otherwise terminated through a
closing transaction, such as a repurchase
by the Fund of the option from its holder, the Fund will realize a short-term
capital gain or loss, depending
on whether the premium income is greater or less than the amount paid by the
Fund in the closing transaction.
Some capital losses realized by a Fund in the sale, exchange, exercise, or other
disposition of an option may be
deferred if they result from a position that is part of a “straddle,” discussed
below. If securities are sold by a Fund
pursuant to the exercise of a covered call option granted by it, the Fund
generally will add the premium received to
the sale price of the securities delivered in determining the amount of gain or
loss on the sale. If securities
are purchased by a Fund pursuant to the exercise of a put option granted by it,
the Fund generally will subtract
the premium received from its cost basis in the securities
purchased.
Some
regulated futures contracts, certain foreign currency contracts, and non-equity,
listed options used by a Fund will be
deemed “Section 1256 contracts.” A Fund will be required to “mark-to-market” any
such contracts held at the end of the
taxable year by treating them as if they had been sold on the last day of that
year at market value. Provided
such positions are held as capital assets and are not part of a “hedging
transaction” nor part of a “straddle,” 60% of any
net gain or loss realized on all dispositions of Section 1256 contracts,
including deemed dispositions under the
“mark-to-market” rule, generally will be treated as long-term capital gain or
loss, and the remaining 40% will be
treated as short-term capital gain or loss (although certain foreign currency
gains and losses from such contracts
may be treated as ordinary income or loss (as described below)). These
provisions may require a Fund to recognize
income or gains without a concurrent receipt of cash. Transactions that qualify
as designated hedges are exempt from
the mark-to-market rule and the “60%/40%” rule and may require the Fund to defer
the recognition of losses on
certain futures contracts, foreign currency contracts and non-equity
options.
Foreign
currency gains and losses realized by a Fund in connection with certain
transactions involving foreign currency-denominated
debt obligations, certain options, futures contracts, forward contracts, and
similar instruments
relating to foreign currency, 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 or loss and may affect the amount and timing of recognition of the Fund’s
income. Under future U.S. Treasury
regulations, any such transactions that are not directly related to a Fund’s
investments in stock or securities (or its
options contracts or futures contracts with respect to stock or securities) may
have to be limited in order to enable the
Fund to satisfy the 90% income test described above. If the net foreign currency
loss exceeds a Fund’s net
investment company taxable income (computed without regard to such loss) for a
taxable year, the resulting ordinary
loss for such year will not be deductible by the Fund or its shareholders in
future years.
Offsetting
positions held by a Fund involving certain derivative instruments, such as
financial forward, futures, and options
contracts, may be considered, for U.S. federal income tax purposes, to
constitute “straddles.” “Straddles” are defined to
include “offsetting positions” in actively traded personal property. The tax
treatment of “straddles” is governed by
Section 1092 of the Code which, in certain circumstances, overrides or modifies
the provisions of Section
1256. If a Fund is treated as entering into a “straddle” and at least one (but
not all) of the Fund’s positions in derivative
contracts comprising a part of such straddle is governed by Section 1256 of the
Code, described above, then such
straddle could be characterized as a “mixed straddle.” A Fund may make one or
more elections with respect to
“mixed straddles.” Depending upon which election is made, if any, the results
with respect to a Fund may differ.
Generally, to the extent the straddle rules apply to positions established by a
Fund, losses realized by the Fund may be
deferred to the extent of unrealized gain in any offsetting positions. Moreover,
as a result of the straddle rules,
short-term capital loss on straddle positions may be recharacterized as
long-term capital loss, and long-term capital
gain may be characterized as short-term capital gain. In addition, the existence
of a straddle may affect the holding
period of the offsetting positions. As a result, the straddle rules could cause
distributions that would otherwise
constitute qualified dividend income (defined below) to fail to satisfy the
applicable holding period requirements
(described below) and therefore to be taxed as ordinary income. Furthermore, the
Fund may be required to
capitalize, rather than deduct currently, any interest expense and carrying
charges applicable to a position
that is part of a straddle, including any interest expense on indebtedness
incurred or continued to purchase or carry
any positions that are part of a straddle. Because the application of the
straddle rules may affect the character
and timing of gains and losses from affected straddle positions, the amount
which must be distributed to shareholders,
and which will be taxed to shareholders as ordinary income or long-term capital
gain, may be increased
or decreased substantially as compared to the situation where a Fund had not
engaged in such transactions.
If a Fund
enters into a “constructive sale” of any appreciated financial position in
stock, a partnership interest, or certain
debt instruments, the Fund will be treated as if it had sold and immediately
repurchased the property and must
recognize gain (but not loss) with respect to that position. A constructive sale
of an appreciated financial position
occurs when a Fund enters into certain offsetting transactions with respect to
the same or substantially identical
property, including: (i) a short sale; (ii) an offsetting notional principal
contract; (iii) a futures or forward contract;
or (iv) other transactions identified in future U.S. Treasury regulations. The
character of the gain from constructive
sales will depend upon a Fund’s holding period in the appreciated financial
position. Losses realized from a sale
of a position that was previously the subject of a constructive sale will be
recognized when the position is
subsequently
disposed of. The character of such losses will depend upon a Fund’s holding
period in the position and the
application of various loss deferral provisions in the Code. Constructive sale
treatment does not apply to certain closed
transactions, including if such a transaction is closed on or before the 30th
day after the close of the Fund’s taxable
year and the Fund holds the appreciated financial position unhedged throughout
the 60-day period beginning
with the day such transaction was closed.
The amount
of long-term capital gain a Fund may recognize from certain derivative
transactions with respect to interests
in certain pass-through entities is limited under the Code’s constructive
ownership rules. The amount of long-term
capital gain is limited to the amount of such gain a Fund would have had if the
Fund directly invested in the
pass-through entity during the term of the derivative contract. Any gain in
excess of this amount is treated as ordinary
income. An interest charge is imposed on the amount of gain that is treated as
ordinary income.
In
addition, a Fund’s transactions in securities and certain types of derivatives
(e.g., options, futures contracts, forward
contracts, and swap agreements) may be subject to other special tax rules, such
as the wash sale rules or the short
sale rules, the effect of which may be to accelerate income to the Fund, defer
losses to the Fund, cause adjustments
to the holding periods of the Fund’s securities, convert long-term capital gains
into short-term capital gains,
and/or convert short-term capital losses into long- term capital losses. These
rules could therefore affect the amount,
timing, and character of distributions to shareholders.
Rules
governing the U.S. federal income tax aspects of derivatives, including swap
agreements, are not entirely clear in certain
respects, particularly in light of IRS revenue rulings that held that income
from a derivative contract with respect to
a commodity index is not qualifying income for a RIC. Accordingly, while each
Fund intends to account for such
transactions in a manner it deems appropriate, the IRS might not accept such
treatment. If the IRS did not accept such
treatment, the status of a Fund as a RIC might be jeopardized. Certain
requirements that must be met under the
Code in order for each Fund to qualify as a RIC may limit the extent to which a
Fund will be able to engage in
derivatives transactions.
Certain
Funds may invest in a wholly-owned subsidiary classified as a controlled foreign
corporation, or “CFC,” for federal
income tax purposes. As a result, a Fund may be required to include in its gross
income for federal income tax
purposes all or a significant portion of the income of such subsidiary, referred
to as subpart F income, whether or not the
subsidiary makes a distribution to such Fund. Distributions by a CFC to a Fund
will not be taxable to such Fund to the
extent that the Fund has previously recognized subpart F income. This subpart F
income is generally treated as
ordinary income, regardless of the character of the CFC’s underlying
income.
In 2016,
the IRS and Treasury issued proposed regulations that require a passive foreign
investment company or a CFC,
including those that invest in certain commodities investments, to distribute
income in order for the income to satisfy the
Qualifying Income Requirement. Therefore, to the extent a Fund invests directly
in a CFC of PFIC, the IRS may contest
the Fund’s characterization of the income produced by such assets as qualifying
income which, if successful,
could cause the Fund to fail to qualify as a RIC. Each Fund and its investment
manager plan to direct investments
of the Fund’s assets in conformance with the proposed regulations, IRS guidance,
and the advice of counsel. In
addition, a Fund may not have more than 25% of the value of its assets invested
in a subsidiary to meet the
Diversification Requirement. The value of a Fund’s subsidiary may be volatile
and it may be difficult for such Fund to continue
to have less than 25% of the value of its assets invested in a subsidiary.
Accordingly, each Fund’s ability to invest
in a subsidiary may be limited by the Qualifying Income Requirement or
Diversification Requirement. Each Fund will
account for its investments in a subsidiary in a manner it deems to be
appropriate. However, the IRS might not accept
such treatment. If the IRS did not accept such treatment, the status of such
Fund as a RIC might be jeopardized.
A Fund may
invest in real estate investment trusts (“REITs”). Investments in REIT equity
securities may require a Fund to accrue
and distribute income not yet received. To generate sufficient cash to make the
requisite distributions, the Fund may be
required to sell securities in its portfolio (including when it is not
advantageous to do so) that it otherwise
would have continued to hold. A Fund’s investments in REIT equity securities may
at other times result in the Fund’s
receipt of cash in excess of the REIT’s earnings. If the Fund distributes these
amounts, these distributions could
constitute a return of capital to Fund shareholders for U.S. federal income tax
purposes. Dividends received by the Fund
from a REIT generally will not constitute qualified dividend income and will not
qualify for the dividends-received
deduction. In addition, between 2018 and 2025, a direct REIT shareholder may
claim a 20%
“qualified
business income” deduction for ordinary REIT dividends, and proposed regulations
issued in January 2019 (on which
taxpayers may currently rely) permit a RIC to pass through to its shareholders
the special character of this income.
Ordinary dividends received by a Fund from a REIT will generally not constitute
qualified dividend income, which would
be eligible for tax at a reduced rate.
A Fund may
invest directly or indirectly in residual interests in real estate mortgage
investment conduits (“REMICs”) or in other
interests that may be treated as taxable mortgage pools (“TMPs”) for U.S.
federal income tax purposes. Under IRS
guidance, a Fund must allocate “excess inclusion income” received directly or
indirectly from REMIC residual
interests or TMPs to its shareholders in proportion to dividends paid to such
shareholders, with the same consequences
as if the shareholders had invested in the REMIC residual interests or TMPs
directly.
In general,
excess inclusion income allocated to shareholders (i) cannot be offset by net
operating losses (subject to a limited
exception for certain thrift institutions), (ii) constitutes unrelated business
taxable income to Keogh, 401(k) and
qualified pension plans, as well as investment retirement accounts and certain
other tax exempt entities, thereby
potentially requiring such an entity, which otherwise might not be required to
file a tax return, to file a tax return and
pay tax on such income, and (iii) in the case of a foreign shareholder, does not
qualify for any reduction, by treaty
or otherwise, in the 30% U.S. federal withholding tax. In addition, if at any
time during any taxable year a “disqualified
organization” (as defined in the Code) is a record holder of a share in a Fund,
then the Fund will be subject to
a tax equal to that portion of its excess inclusion income for the taxable year
that is allocable to the disqualified
organization, multiplied by the highest federal corporate income tax rate. To
the extent permitted under the 1940
Act, a Fund may elect to specially allocate any such tax to the applicable
disqualified organization, and thus reduce
such shareholder’s distributions for the year by the amount of the tax that
relates to such shareholder’s interest in
the Fund. The Funds have not yet determined whether such an election will be
made.
“Passive
foreign investment companies” (“PFICs”) are generally defined as foreign
corporations with respect to which at
least 75% of their gross income for their taxable year is income from passive
sources (such as interest, dividends,
certain rents and royalties, or capital gains) or at least 50% of their assets
on average produce such passive
income. If a Fund acquires any equity interest in a PFIC, the Fund could be
subject to U.S. federal income tax and
interest charges on “excess distributions” received from the PFIC or on gain
from the sale of such equity interest in the
PFIC, even if all income or gain actually received by the Fund is timely
distributed to its shareholders. Excess distributions
will be characterized as ordinary income even though, absent the application of
PFIC rules, some excess
distributions may have been classified as capital gain.
A Fund will
not be permitted to pass through to its shareholders any credit or deduction for
taxes and interest charges
incurred with respect to PFICs. Elections may be available that would ameliorate
these adverse tax consequences,
but such elections could require a Fund to recognize taxable income or gain
without the concurrent receipt of
cash. Investments in PFICs could also result in the treatment of associated
capital gains as ordinary income. The
Funds may attempt to limit and/or manage their holdings in PFICs to minimize
their tax liability or maximize
their returns from these investments but there can be no assurance that they
will be able to do so. Moreover,
because it is not always possible to identify a foreign corporation as a PFIC in
advance of acquiring shares in the
corporation, a Fund may incur the tax and interest charges described above in
some instances. Dividends paid by PFICs
will not be eligible to be treated as qualified dividend income.
In addition
to the investments described above, prospective shareholders should be aware
that other investments made by the
Funds may involve complex tax rules that may result in income or gain
recognition by the Funds without
corresponding current cash receipts. Although the Funds seek to avoid
significant non-cash income, such non-cash
income could be recognized by the Funds, in which case the Funds may distribute
cash derived from other sources in
order to meet the minimum distribution requirements described above. In this
regard, the Funds could be required at
times to liquidate investments prematurely in order to satisfy their minimum
distribution requirements.
Taxation of
Distributions. Except for
exempt-interest dividends (defined below) paid out by “Tax-Free Funds”,
distributions
paid out of a Fund’s current and accumulated earnings and profits (as determined
at the end of the year),
whether paid in cash or reinvested in the Fund, generally are deemed to be
taxable distributions and must be reported by
each shareholder who is required to file a U.S. federal income tax return.
Dividends and distributions on a Fund’s
shares are generally subject to U.S. 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 acquired at a time when
the Fund’s net asset value reflects gains that are either unrealized, or
realized but not distributed. For U.S.
federal income tax purposes, a Fund’s earnings and profits, described above, are
determined at the end of the Fund’s
taxable year and are allocated pro rata to distributions paid over the entire
year. Distributions in excess of a Fund’s
current and accumulated earnings and profits will first be treated as a return
of capital up to the amount of a shareholder’s
tax basis in the shareholder’s Fund shares and then as capital gain. A Fund may
make distributions in excess of
its earnings and profits, from time to time.
For U.S.
federal income tax purposes, distributions of investment income are generally
taxable as ordinary income, and
distributions of gains from the sale of investments that a Fund owned for one
year or less will be taxable as ordinary
income. Distributions properly designated by a Fund as capital gain dividends
will be taxable to shareholders
as long-term capital gain (to the extent such distributions do not exceed the
Fund’s net capital gain for the taxable
year), regardless of how long a shareholder has held Fund shares, and do not
qualify as dividends for purposes of
the dividends-received deduction or as qualified dividend income. Each Fund will
report capital gain dividends,
if any, in a written statement furnished to its shareholders after the close of
the Fund’s taxable year.
Fluctuations
in foreign currency exchange rates may result in foreign exchange gain or loss
on transactions in foreign
currencies, foreign currency-denominated debt obligations, and certain foreign
currency options, futures contracts
and forward contracts. Such gains or losses are generally characterized as
ordinary income or loss for tax purposes.
The Fund must make certain distributions in order to not become subject to U.S.
federal income or excise tax, and
the timing of and character of transactions such as foreign currency-related
gains and losses may result in the fund
paying a distribution treated as a return of capital. Such distribution is
nontaxable to the extent of the recipient’s
basis in its shares.
Sales and Exchanges of Fund
Shares. If a
shareholder sells, pursuant to a cash or in-kind redemption, or exchanges
the
shareholder’s Fund shares, subject to the discussion below, the shareholder
generally will recognize a taxable capital
gain or loss on the difference between the amount received for the shares (or
deemed received in the case of an
exchange) and the shareholder’s tax basis in the shares. This gain or loss will
be long-term capital gain or loss if the
shareholder has held such Fund shares for more than one year at the time of the
sale or exchange, and short-term
otherwise.
If a
shareholder sells or exchanges Fund shares within 90 days of having acquired
such shares and if, before January 31 of the
calendar year following the calendar year of the sale or exchange, as a result
of having initially acquired those
shares, the shareholder subsequently pays a reduced sales charge on a new
purchase of shares of the Fund or a different
RIC, the sales charge previously incurred in acquiring the Fund’s shares
generally shall not be taken into account (to
the extent the previous sales charges do not exceed the reduction in sales
charges on the new purchase)
for the purpose of determining the amount of gain or loss on the disposition,
but generally will be treated as having
been incurred in the new purchase. Also, if a shareholder recognizes a loss on a
disposition of Fund shares, the loss
will be disallowed under the “wash sale” rules to the extent the shareholder
purchases substantially identical shares
within the 61-day period beginning 30 days before and ending 30 days after the
disposition. Any disallowed loss
generally will be reflected in an adjustment to the tax basis of the purchased
shares.
If a
shareholder receives a capital gain dividend with respect to any Fund share and
such Fund share is held for six months or
less, then (unless otherwise disallowed) any loss on the sale or exchange of
that Fund share will be treated as a
long-term capital loss to the extent of the capital gain dividend. If such loss
is incurred from the redemption of shares
pursuant to a periodic redemption plan then U.S. Treasury regulations may permit
an exception to this six-month
rule. No such regulations have been issued as of the date of this
SAI.
In
addition, if a shareholder of a Tax-Free Fund holds such Fund shares for six
months or less, any loss on the sale or exchange of
those shares will be disallowed to the extent of the amount of exempt-interest
dividends (defined below)
received with respect to the shares. If such loss is incurred from the
redemption of shares pursuant to a periodic
redemption plan then U.S. Treasury regulations may permit an exception to this
six-month rule. Such a loss will also
not be disallowed where the loss is incurred with respect to shares of a Fund
that declares exempt-interest dividends
on a daily basis in an amount equal to at least 90% of its net-tax exempt
interest and distributes such dividends
on a monthly, or more frequent, basis. Additionally, where a Fund regularly
distributes at least 90% of its net
tax-exempt interest, if any, the Treasury Department is authorized to issue
regulations reducing the six month
holding
period requirement to a period of not less than the greater of 31 days or the
period between regular distributions.
No such regulations have been issued as of the date of this filing.
Foreign Taxes. Amounts
realized by a Fund from sources within foreign countries may be subject to
withholding and other taxes
imposed by such countries. Although in some countries a portion of these taxes
is recoverable by the Fund, the
unrecovered portion of foreign withholding taxes will reduce the income received
from such securities. If more than
50% of the value of a Fund’s total assets at the close of its taxable year
consists of securities of foreign corporations,
the Fund will be eligible to file an annual election with the IRS pursuant to
which the Fund may pass-through
to its shareholders on a pro rata basis certain foreign income and similar taxes
paid by the Fund, and such taxes
may be claimed, subject to certain limitations, either as a tax credit or
deduction by the shareholders. However,
even if a Fund qualifies for the election for any year, it may decide not to
make the election for such year. If a Fund does
not so elect, then shareholders will not be entitled to claim a credit or
deduction with respect to foreign taxes paid
or withheld. If a Fund does elect to “pass through” its foreign taxes paid in a
taxable year, the Fund will furnish a
written statement to its shareholders reporting such shareholders proportionate
share of the Funds’ foreign taxes
paid.
Even if a
Fund qualifies for the election, foreign income and similar taxes will only pass
through to the Fund’s shareholders
if the Fund and its shareholders meet certain holding period requirements.
Specifically, (i) the shareholders
must have held the Fund shares for at least 16 days during the 31-day period
beginning 15 days prior to the date
upon which the shareholders became entitled to receive Fund distributions
corresponding with the pass through of
such foreign taxes paid by the Fund, and (ii) with respect to dividends received
by the Fund on foreign shares
giving rise to such foreign taxes, the Fund must have held the shares for at
least 16 days during the 31-day period
beginning 15 days prior to the date upon which the Fund became entitled to the
dividend. These holding periods
increase for certain dividends on preferred stock. A Fund may choose not to make
the election if the Fund has not
satisfied its holding requirement.
If a Fund
makes the election, the Fund will not be permitted to claim a credit or
deduction for foreign taxes paid in that year,
and the Fund’s dividends-paid deduction will be increased by the amount of
foreign taxes paid that year. Fund
shareholders that have satisfied the holding period requirements and certain
other requirements shall include their
proportionate share of the foreign taxes paid by the Fund in their gross income
and treat that amount as paid by them for
the purpose of the foreign tax credit or deduction. If the shareholder claims a
credit for foreign taxes paid, the
credit will be limited to the extent it exceeds the shareholder’s federal income
tax attributable to foreign source
taxable income. If the credit is attributable, wholly or in part, to qualified
dividend income (as defined below), special
rules will be used to limit the credit in a manner that reflects any resulting
dividend rate differential.
In general,
an individual with $300 ($600 if married filing jointly) or less of
creditable foreign taxes may elect to be exempt from
the foreign source taxable income and qualified dividend income limitations if
the individual has no foreign
source income other than qualified passive income. A deduction for foreign
taxes paid may only be claimed by
shareholders that itemize their deductions. Notably, for tax years between 2018
and 2025, miscellaneous itemized
deductions are suspended for non-corporate taxpayers. Accordingly, during this
time period, individuals may be more
likely to take advantage of a foreign tax credit. Shareholders should consult
their tax advisers regarding the impact
of these changes on their personal situation.
U.S. Federal Income Tax
Rates.
Noncorporate Fund shareholders (i.e., individuals, trusts and estates) currently
are taxed at a
maximum rate of 37% on ordinary income and 20% on long-term capital
gain.
In
general, “qualified dividend income” realized by noncorporate Fund
shareholders is taxable at the same rate as net capital
gain. Generally, qualified dividend income is dividend income attributable to
certain U.S. and foreign corporations,
as long as certain holding period requirements are met. All dividend income,
other than qualified dividend
income, generally will be taxed at the same rate as ordinary income. If 95% or
more of a Fund’s gross income
(excluding net long-term capital gain over net short-term capital loss)
constitutes qualified dividend income, all of its
distributions (other than capital gain dividends) will be generally treated as
qualified dividend income in the hands of
individual shareholders, as long as they have owned their Fund shares for at
least 61 days during the 121-day
period beginning 60 days before the Fund’s ex-dividend date (or, in the case of
certain preferred stock, 91 days during
the 181-day period beginning 90 days before such date). In general, if less than
95% of a Fund’s income is
attributable to qualified dividend income, then only the portion of the Fund’s
distributions that is attributable to
qualified
dividend income and designated as such in a timely manner will be so treated in
the hands of individual shareholders.
Payments received by a Fund from securities lending, repurchase, and other
derivative transactions ordinarily
will not qualify as qualified dividend income. The rules attributable to the
qualification of Fund distributions
as qualified dividend income are complex, including the holding period
requirements. Individual Fund shareholders
therefore are urged to consult their own tax advisers and financial planners.
Income and bond Funds typically
do not distribute significant amounts of “qualified dividend income” eligible
for reductions in individual U.S. federal
income tax rates.
The maximum
stated corporate U.S. federal income tax rate applicable to ordinary income and
net capital gain currently
is 21%. Actual marginal tax rates may be higher for some shareholders, for
example, through reductions in deductions.
Subject to limitations and other rules, a corporate shareholder of a Fund may
not be eligible for the dividends
received deduction on Fund distributions attributable to dividends received by
the Fund from domestic corporations,
which, if received directly by the corporate shareholder, would qualify for such
a deduction. For eligible
corporate shareholders, the dividends-received deduction may be subject to
certain reductions, and a distribution
by a Fund attributable to dividends of a domestic corporation will be eligible
for the deduction only if certain
holding period and other requirements are met. These requirements are complex;
therefore, corporate shareholders
of the Funds are urged to consult their own tax advisers and financial planners.
The amount of tax payable by
any taxpayer will be affected by a combination of tax laws covering, for
example, deductions, credits, deferrals,
exemptions, sources of income and other matters.
Noncorporate
Fund shareholders with income exceeding $200,000 ($250,000 if married and filing
jointly) generally will be
subject to a 3.8% tax on their “net investment income,” which ordinarily
includes taxable distributions received
from the Funds and taxable gain on the disposition of Fund shares.
Backup Withholding. A Fund is
generally required to withhold and remit to the U.S. Treasury, subject to
certain exemptions
(such as for certain corporate or foreign shareholders), an amount equal to 24%
of all distributions and redemption
proceeds (including proceeds from exchanges and redemptions in-kind) paid or
credited to a Fund shareholder
if (i) the shareholder fails to furnish the Fund with a correct “taxpayer
identification number” (“TIN”), (ii) the
shareholder fails to certify under penalties of perjury that the TIN provided is
correct, (iii) the shareholder fails to make
certain other certifications, or (iv) the IRS notifies the Fund that the
shareholder’s TIN is incorrect or that the shareholder
is otherwise subject to backup withholding. Backup withholding is not an
additional tax imposed on the shareholder.
The shareholder may apply amounts withheld as a credit against the shareholder’s
U.S. federal income tax
liability and may obtain a refund of any excess amounts withheld, provided that
the required information is furnished
to the IRS. If a shareholder fails to furnish a valid TIN upon request, the
shareholder can also be subject to IRS
penalties. A shareholder may generally avoid backup withholding by furnishing a
properly completed IRS Form W-9. State
backup withholding may also be required to be withheld by the Funds under
certain circumstances.
Foreign
Shareholders. For
purposes of this discussion, “foreign shareholders” include: (i) nonresident
alien individuals,
(ii) foreign trusts (i.e., a trust other than a trust with respect to which a
U.S. court is able to exercise primary
supervision over administration of that trust and one or more U.S. persons have
authority to control substantial
decisions of that trust), (iii) foreign estates (i.e., the income of which is
not subject to U.S. tax regardless of source),
and (iv) foreign corporations.
Distributions
made to foreign shareholders attributable to net investment income generally are
subject to U.S. federal
income tax withholding at a 30% rate (or such lower rate provided under an
applicable income tax treaty). Notwithstanding
the foregoing, if a distribution described above is effectively connected with
the conduct of a trade or business
carried on by a foreign shareholder within the United States (or, if an income
tax treaty applies, is attributable
to a permanent establishment in the United States), federal income tax
withholding and exemptions attributable
to foreign persons will not apply. Instead, the distribution will be subject to
withholding at the highest applicable
U.S. tax rate (currently 37% in the case of individuals and 21% in the case of
corporations) and the foreign shareholder
will be subject to federal income tax reporting requirements generally
applicable to U.S. persons described
above.
Under U.S.
federal tax law, a foreign shareholder is not, in general, subject to federal
income tax or withholding tax on capital
gains (and is not allowed a deduction for losses) realized on the sale of shares
of the Funds and on long-term
capital gains dividends, provided that the Funds obtain a properly completed and
signed certificate of
foreign
status, unless (i) such gains or distributions are effectively connected with
the conduct of a trade or business carried on
by the foreign shareholder within the United States (or, if an income tax treaty
applies, are attributable to a permanent
establishment in the United States of the foreign shareholder); (ii) in the case
of an individual foreign shareholder,
the shareholder is present in the United States for a period or periods
aggregating 183 days or more during the
year of the sale and certain other conditions are met; or (iii) the shares of
the Funds constitute U.S. real property
interests (“USRPIs”), as described below.
Under
current law, if a Fund is considered to be a “United States Real Property
Holding Corporation” (as defined in the Code
and Treasury Regulations), then distributions attributable to certain underlying
real estate investment trust (“REIT”)
investments and redemption proceeds paid to a foreign shareholder that owns at
least 5% of a Fund, generally
will cause the foreign shareholder to treat such gain or distribution as income
effectively connected with a trade or
business in the United States, subject to such gain or distribution withholding
tax and cause the foreign shareholder
to be required to file a federal income tax return. In addition, in any year
when at least 50% of a Fund’s assets are
USRPIs (as defined in the Code and Treasury Regulations), distributions of the
Fund that are attributable to gains from
the sale or exchange of shares in USRPIs may be subject to U.S. withholding tax
(regardless of such shareholder’s
percentage interest in the Fund) and may require the foreign shareholder to file
a U.S. federal income tax return
in order to receive a refund (if any) of the withheld amount.
Subject to
the additional rules described herein, federal income tax withholding will apply
to distributions attributable
to dividends and other investment income distributed by the Funds. The federal
income tax withholding rate may be
reduced (and, in some cases, eliminated) under an applicable tax treaty between
the United States and the foreign
shareholder’s country of residence or incorporation. In order to qualify for
treaty benefits, a foreign shareholder
must comply with applicable certification requirements relating to its foreign
status (generally by providing a
Fund with a properly completed Form W-8BEN).
Pursuant to
the Foreign Account Tax Compliance Act (“FATCA”), a 30% withholding tax
generally is imposed on payments of
interest and dividends to (i) foreign financial institutions including non-U.S.
investment funds and (ii) certain
other foreign entities, unless the foreign financial institution or foreign
entity provides the withholding agent with
documentation sufficient to show that it is compliant with FATCA (generally by
providing the Fund with a properly
completed Form W-8BEN or Form W-8BEN-E, as applicable). If the payment is
subject to the 30% withholding
tax under FATCA, a foreign shareholder will not be subject to the 30%
withholding tax described above on the same
income. Under proposed regulations, FATCA withholding on the gross proceeds of
share redemptions and certain
capital gain distributions, scheduled to take effect beginning January 1, 2019,
has been eliminated. Such proposed
regulations are subject to change.
Before
investing in a Fund’s shares, a prospective foreign shareholder should consult
with its own tax advisors, including
whether the shareholder’s investment can qualify for benefits under an
applicable income tax treaty.
Tax-Deferred Plans. Shares of
the Funds may be available for a variety of tax-deferred retirement and other
tax-advantaged
plans and accounts. However, shares of a Tax-Free Fund may not be suitable for
tax-deferred, retirement
and other tax-advantaged plans and accounts, since such plans and accounts are
generally tax-exempt and,
therefore, would not benefit from the tax-exempt status of certain distributions
from the Tax-Free Fund (discussed
below). Such distributions may ultimately be taxable to the beneficiaries when
distributed to them.
Prospective
investors should contact their tax advisers and financial planners regarding the
tax consequences to them of
holding Fund shares through such plans and/or accounts.
Tax-Exempt
Shareholders. Shares of
a Tax-Free Fund may not be suitable for tax-exempt shareholders since such
shareholders
generally would not benefit from the tax-exempt status of distributions from the
Tax-Free Funds (discussed
below). Tax-exempt shareholders should contact their tax advisers and financial
planners regarding the tax
consequences to them of an investment in the Funds.
Any
investment in residual interests of a collateralized mortgage obligation that
has elected to be treated as a REMIC can create
complex U.S. federal income tax consequences, especially if a Fund has state or
local governments or other
tax-exempt organizations as shareholders.
Special tax
consequences apply to charitable remainder trusts (“CRTs”) (as defined in
Section 664 of the Code) that invest in
RICs that invest directly or indirectly in residual interests in REMICs or
equity interests in TMPs. CRTs are urged to
consult their own tax advisers and financial planners concerning these special
tax consequences.
Foreign Bank and Financial Accounts and
Foreign Financial Assets Reporting Requirements. A
shareholder that owns directly or
indirectly more than 50% by vote or value of the Fund, is urged and advised to
consult its own tax adviser regarding
its filing obligations with respect to IRS Form FinCEN114, Report of Foreign
Bank and Financial Accounts.
Also, under
recently enacted rules, subject to exceptions, individuals (and, to the extent
provided in forthcoming future U.S.
Treasury regulations, certain domestic entities) must report annually their
interests in “specified foreign financial
assets” on their U.S. federal income tax returns. It is currently unclear
whether and under what circumstances
stockholders would be required to report their indirect interests in the Fund’s
“specified foreign financial
assets” (if any) under these new rules.
Shareholders
may be subject to substantial penalties for failure to comply with these
reporting requirements. Shareholders
are urged and advised to consult their own tax advisers to determine whether
these reporting requirements
are applicable to them.
Tax Shelter Reporting
Regulations. Generally,
under U.S. Treasury regulations, if an individual shareholder recognizes
a loss of
$2 million or more or if a corporate shareholder recognizes a loss of $10
million or more, the shareholder must file
with the IRS a disclosure statement on Form 8886. The fact that a loss is
reportable under these regulations does not
affect the legal determination of whether the taxpayer’s treatment of the loss
is proper. Shareholders should
consult their own tax advisers to determine the applicability of these
regulations in light of their individual circumstances.
Additional Considerations for the Tax-Free
Funds. If at
least 50% of the value of a Fund’s total assets at the close of each
quarter of its taxable years consists of debt obligations that generate interest
exempt from U.S. federal income tax under
Section 103 of the Internal Revenue Code, then the Fund may qualify to pass
through to its shareholders the
tax-exempt character of its income from such debt obligations by paying
exempt-interest dividends. The Tax-Free
Funds intend to so qualify and are designed to provide shareholders with income
exempt from U.S. federal income tax
in the form of exempt-interest dividends. “Exempt-interest dividends” are
dividends (other than capital gain
dividends) paid by a RIC that are properly reported as such in a written
statement furnished to shareholders.
Each
Tax-Free Fund will report to its shareholders the portion of the distributions
for the taxable year that constitutes exempt-interest
dividends. The designated portion cannot exceed the excess of the amount of
interest excludable from gross
income under Section 103 of the Internal Revenue Code received by a Tax-Free
Fund during the taxable year over
any amounts disallowed as deductions under Sections 265 and 171(a)(2) of the
Internal Revenue Code. Interest on
indebtedness incurred to purchase or carry shares of the Tax-Free Funds will not
be deductible to the extent that
the Tax-Free Funds’ distributions are exempt from U.S. federal income tax. In
addition, an investment in a Tax-Free
Fund may result in liability for U.S. federal alternative minimum tax (“AMT”)
for noncorporate shareholders. Certain
deductions and exemptions have been designated “tax preference items” which must
be added back to taxable
income for purposes of calculating the U.S. federal AMT for noncorporate
shareholders. Tax preference items include
tax-exempt interest on certain “private activity bonds.” To the extent a
Tax-Free Fund invests in certain private
activity bonds, its shareholders will be required to report that portion of the
Fund’s distributions attributable to income
from the bonds as a tax preference item in determining noncorporate
shareholders’ U.S. federal AMT, if any.
Shareholders will be notified of the tax status of distributions made by a
Tax-Free Fund.
Persons who
may be “substantial users” (or “related persons” of substantial users) of
facilities financed by private activity
bonds should consult their tax advisers before purchasing shares in a Tax-Free
Fund. Furthermore, noncorporate
shareholders will not be permitted to deduct any of their share of a Tax-Free
Fund’s expenses in computing
their U.S. federal AMT. As of the date of this filing, individuals are subject
to the U.S. federal AMT at a maximum
rate of 28%. Corporations are not subject to the U.S. federal AMT for taxable
years beginning after December
31, 2017. Shareholders with questions or concerns about the U.S. federal AMT
should consult own their own tax
advisers.
The IRS is
paying increased attention to whether debt obligations intended to produce
interest exempt from U.S. federal
income tax in fact meet the requirements for such exemption. Ordinarily, the
Tax-Free Funds rely on opinions
from the
issuer’s bond counsel that interest on the issuer’s debt obligation will be
exempt from U.S. federal income tax.
However, no assurance can be given that the IRS will not successfully challenge
such exemption, which could cause
interest on the debt obligation to be taxable and could jeopardize a Tax-Free
Fund’s ability to pay any exempt-interest
dividends. Similar challenges may occur as to state-specific
exemptions.
A
shareholder who receives Social Security or railroad retirement benefits should
consult the shareholder’s own tax adviser to
determine what effect, if any, an investment in a Tax-Free Fund may have on the
U.S. federal taxation of such
benefits. Exempt-interest dividends are included in income for purposes of
determining the amount of benefits that are
taxable.
Distributions
of a Tax-Free Fund’s income other than exempt-interest dividends generally will
be taxable to shareholders.
Gains realized by a Tax-Free Fund on the sale or exchange of investments that
generate tax-exempt income will
also be taxable to shareholders.
Although
exempt-interest dividends are generally exempt from U.S. federal income tax,
there may not be a similar exemption
under the laws of a particular state or local taxing jurisdiction. Thus,
exempt-interest dividends may be subject to
state and local taxes. You should consult your own tax advisor to discuss the
tax consequences of your investment
in a Tax-Free Fund.
Legislative
Proposals.
Prospective shareholders should recognize that the present U.S. federal income
tax treatment of the
Funds and their shareholders may be modified by legislative, judicial or
administrative actions at any time, which may
be retroactive in effect. The rules dealing with U.S. federal income taxation
are constantly under review by
Congress, the IRS and the Treasury Department, and statutory changes as well as
promulgation of new regulations,
revisions to existing statutes, and revised interpretations of established
concepts occur frequently. You should
consult your advisors concerning the status of legislative proposals that may
pertain to holding Fund shares.
Cost Basis Reporting
Each Fund
or its delegate is required to report cost basis information for
shareholders who are individuals and S Corporations
to the Internal Revenue Service for redemptions of Fund shares acquired on or
after January 1, 2012. This
information will also be reported to a shareholder on Form 1099-B and the IRS
each year. If a shareholder is a
corporation and has not instructed a Fund that it is a C corporation by written
instruction, the Fund will treat the shareholder
as an S corporation and file a Form 1099-B.
Fund
shareholders should consult their tax advisors to obtain more information about
how the new cost basis rules apply to
them and determine which cost basis method allowed by the Internal Revenue
Service is best for their tax situation.
Methods allowed by the IRS include, but are not limited to:
■ |
Average
Cost. The
cost per share is determined by dividing the aggregate cost amount by the
total shares in the account.
The basis of the shares redeemed is determined by multiplying the shares
redeemed by the cost per share.
Starting in 2012, accounts may maintain two separate average costs: one
average for covered shares and a separate
average for noncovered shares. Under the Average Cost method, noncovered
shares are generally depleted
first. |
■ |
First
in first out (FIFO).
Shares acquired first in the shareholder’s account are the first shares
depleted and determine
the shareholder’s cost basis. The basis of the shares redeemed is
determined by the adjusted purchase price
of each date the shares were acquired. |
■ |
Specific
Identification. A
shareholder selects the shares to be redeemed from any of the purchase
lots that still have
shares remaining. The basis of the shares redeemed is determined by the
adjusted purchase price of each date
the shares were acquired. |
In the
absence of a shareholder method election, the Fund will apply its default
method, Average Cost. If the Average
Cost method is applied either by default or at the shareholder’s election, the
shareholder’s ability to change such
election once a sale occurs will be limited under the IRS rules. After an
election has been made, but before a disposition
of shares occurs, a shareholder may make a retroactive change to an alternate
method. The cost basis method a
shareholder elects may not be changed with respect to a redemption of shares
after the settlement date of the
redemption. At any time, a shareholder may designate a new election for future
purchases.
Redemptions
of shares acquired prior to January 1, 2012 will continue to be reported using
the Average Cost method, if
available, and will not be reported to the IRS.
Money Market Fund
Shares. The cost
basis reporting rules described above do not apply to shares in money market
funds.
Beginning in 2016, pursuant to SEC rules, certain money market funds began using
a floating net asset value rather than
a stable net asset value. However, the IRS has issued regulations that permit
taxpayers to utilize a simplified
method of accounting for gains and losses from redemptions of shares in money
market funds that have a floating
net asset value (the “NAV method”). If taxpayers properly elect the NAV method,
taxpayers will not compute gain or
loss for each redemption. Instead, taxpayers utilizing the NAV method, will
aggregate the gains and losses for a period
and report the aggregate gain or loss on an annual basis. If taxpayers do not
elect the NAV method, the wash sales
rules shall not apply to losses generated by the redemption of money market
shares. Any capital gains or losses
reported utilizing the NAV method will be short-term capital gains or
losses.
CONTROL
PERSONS AND PRINCIPAL FUND HOLDERS
The Funds
are seven
series of the Trust in the Allspring family of funds. The Trust was organized as
a Delaware statutory
trust on March 10, 1999.
Most of the
Trust’s series are authorized to issue multiple classes of shares, one class
generally subject to a front-end sales
charge and, in some cases, classes subject to a CDSC, that are offered to retail
investors. Certain of the Trust’s series also
are authorized to issue other classes of shares, which are sold primarily to
institutional investors. Each share in a
series represents an equal, proportionate interest in the series with all other
shares. Shareholders bear their pro
rata portion of a series’ operating expenses, except for certain class-specific
expenses (e.g., any state securities
registration fees, shareholder servicing fees or distribution fees that may be
paid under Rule 12b-1) that are
allocated to a particular class. Please contact Investor Services at
1-800-222-8222 if you would like additional information
about other series or classes of shares offered.
With
respect to matters affecting one class but not another, shareholders vote as a
class; for example, the approval of a Plan.
Subject to the foregoing, all shares of a Fund have equal voting rights and will
be voted in the aggregate, and not by
series, except where voting by a series is required by law or where the matter
involved only affects one series. For
example, a change in a Fund’s fundamental investment policy affects only one
series and would be voted upon only
by shareholders of the Fund involved. Additionally, approval of an advisory
agreement, since it affects only one Fund,
is a matter to be determined separately by each series. Approval by the
shareholders of one series is effective
as to that series whether or not sufficient votes are received from the
shareholders of the other series to approve the
proposal as to those series.
As used in
the Prospectus(es) and in this SAI, the term “majority,” when referring to
approvals to be obtained from shareholders
of a class of shares of a Fund means the vote of the lesser of (i) 67% of the
shares of the class represented
at a meeting if the holders of more than 50% of the outstanding shares of the
class are present in person or
by proxy, or (ii) more than 50% of the outstanding shares of the class of the
Fund. The term “majority,” when
referring to approvals to be obtained from shareholders of the Fund, means the
vote of the lesser of (i) 67% of the shares
of the Fund represented at a meeting if the holders of more than 50% of the
outstanding shares of the Fund are
present in person or by proxy, or (ii) more than 50% of the outstanding shares
of the Fund. The term “majority,”
when referring to the approvals to be obtained from shareholders of the Trust as
a whole, means the vote of the
lesser of (i) 67% of the Trust’s shares represented at a meeting if the holders
of more than 50% of the Trust’s outstanding
shares are present in person or by proxy, or (ii) more than 50% of the Trust’s
outstanding shares.
Shareholders
are not entitled to any preemptive rights. All shares are issued in
uncertificated form only, and, when issued will
be fully paid and non-assessable by the Trust. The Trust may dispense with an
annual meeting of shareholders
in any year in which it is not required to elect Trustees under the 1940
Act.
Each share
of a class of a Fund represents an equal proportional interest in the Fund with
each other share of the same class
and is entitled to such dividends and distributions out of the income earned on
the assets belonging to the Fund as
are declared in the discretion of the Trustees. In the event of the liquidation
or dissolution of the Trust, shareholders
of a Fund are entitled to receive the assets attributable to that Fund that are
available for distribution,
and a
distribution of any general assets not attributable to a particular Fund that
are available for distribution in such manner and
on such basis as the Trustees in their sole discretion may
determine.
From time
to time, the Manager and/or its affiliates may invest seed capital in a Fund.
These investments are generally
intended to enable the Fund to commence investment operations and/or achieve
sufficient scale. The Manager
and/or its affiliates may redeem some or all of its seed capital investment in a
Fund at any time and without prior
notice, including at a time when such Fund has not otherwise achieved sufficient
scale. The redemption of seed
capital may adversely affect a Fund and its shareholders, including by causing
the Fund to realize gains that will be
distributed and may be taxable to remaining shareholders of the Fund, increasing
the Fund’s operating expense ratio and
transaction costs and leaving the Fund with remaining assets that are
insufficient to support the Fund’s continued
operation.
Set forth
below as of May 2,
2022, the following owned of record and/or beneficially 5% or more of the
outstanding shares of a
class or 25% or more of the outstanding shares of a Fund, as applicable.
Additionally, as of May 2,
2022, the
Trustees and Officers of the Trust, as a group, beneficially owned less than 1%
of the outstanding shares of the Trust.
|
|
Principal
Fund Holders |
|
Government
Money Market Fund Fund
Level |
|
Wells
Fargo Bank Sweep
Dept Operations 3440
Walnut Avenue Building A Fremont,
CA 94538-2210 |
65.93% |
Wells
Fargo Bank Sweep
Dept Operations 3440
Walnut Avenue Building A Fremont,
CA 94538-2210 |
26.64% |
Wells
Fargo Bank Sweep
Dept Operations 3440
Walnut Avenue Building A Fremont,
CA 94538-2210 |
47.90% |
Wells
Fargo Bank Sweep
Dept Operations 3440
Walnut Avenue Building A Fremont,
CA 94538-2210 |
26.07% |
Government
Money Market Fund Class
A |
|
John
Hancock Trust Company LLC 690
Canton St Suite 100 Westwood,
MA 02090-2324 |
90.38% |
Government
Money Market Fund Administrator
Class |
|
Wells
Fargo Bank Sweep
Dept Operations 3440
Walnut Ave Building A Fremont,
CA 94538-2210 |
45.05% |
Wells
Fargo Bank Sweep
Dept Operations 3440
Walnut Ave Building A Fremont,
CA 94538-2210 |
40.00% |
Principal
Bank 711
High St Des
Moines, IA 50392-0001 |
5.93% |
Government
Money Market Fund Institutional
Class |
|
|
|
Principal
Fund Holders |
|
Wells
Fargo Bank Sweep
Dept Operations 3440
Walnut Ave Building A Fremont,
CA 94538-2210 |
40.15% |
Wells
Fargo Bank Sweep
Dept Operations 3440
Walnut Ave Building A Fremont,
CA 94538-2210 |
16.22% |
Principal
Bank 711
High St Des
Moines, IA 50392-0001 |
11.89% |
Wells
Fargo Bank NA Attn
Cash Sweep Dept 550 S
4th Street Minneapolis,
MN 55415-1529 |
11.54% |
Hare
& Co Attn
STIF Operations PO
Box 223910 Pittsburgh,
PA 15251-2910 |
5.95% |
Government
Money Market Fund Service
Class |
|
Wells
Fargo Bank NA Attn
Cash Sweep Dept 550 S
4th Street Minneapolis,
MN 55415-1529 |
76.74% |
Principal
Bank 711
High St Des
Moines, IA 50392-0001 |
14.84% |
Government
Money Market Fund Select
Class |
|
Wells
Fargo Bank Account For The Exclusive
Benefit of Customers Attn
Money Funds 1525
W WT Harris Blvd Charlotte,
NC 28262-8522 |
47.01% |
Wells
Fargo Bank Sweep
Dept Operations MAC
Mail: A0246-029 3440
Walnut Avenue Building A Fremont,
CA 94538-2210 |
13.62% |
Wells
Fargo Bank Sweep
Dept Operations MAC
Mail: A0246-029 3440
Walnut Avenue Building A Fremont,
CA 94538-2210 |
7.41% |
Wells
Fargo Bank NA Attn
Cash Sweep Dept 550 S
4th Street Minneapolis,
MN 55415-1529 |
6.94% |
Principal
Bank 711
High St Des
Moines, IA 50392-0001 |
6.27% |
Government
Money Market Fund Sweep
Class |
|
Wells
Fargo Clearing Services Money
Market Omnibus Account One
North Jefferson Saint
Louis, MO 63103-2254 |
100.00% |
Heritage
Money Market Fund Fund
Level |
|
|
|
Principal
Fund Holders |
|
Wells
Fargo Bank Account For
the Exclusive Benefit of Customers Attn:
Money Funds 1525
West WT Harris Blvd Charlotte,
NC 28262-8522 |
59.37% |
Heritage
Money Market Fund Administrator
Class |
|
Wells
Fargo Bank Account For
the Exclusive Benefit of Customers Attn:
Money Funds Mail
Code D1109-010 1525
West WT Harris Blvd. Charlotte,
NC 28262-8522 |
30.48% |
Alvin
B Chan Inc 5
Beaconsfield Ct Orinda,
CA 94563-4203 |
6.92% |
Heritage
Money Market Fund Institutional
Class |
|
Wells
Fargo Bank Account For The Exclusive
Benefit of Customers Attn
Money Funds 1525
W WT Harris Blvd Charlotte,
NC 28262-8522 |
41.54% |
BNBuilders
Inc Attn:
Richard Finlay 2601
4th Ave, Ste 350 Seattle,
WA 98121-1283 |
9.22% |
Outlook
Therapeutics Inc Attn
Lawrence A Kenyon CFO 485
Route 1 South Building
F, Suite 320 Iselin,
NJ 08830 |
8.27% |
Burn3
LLC C/O
Mark Dalton PO
Box 748 Forked
River, NJ 08731-0748 |
5.18% |
Heritage
Money Market Fund Select
Class |
|
Wells
Fargo Bank Account For
the Exclusive Benefit of Customers Attn:
Money Funds 1525
West WT Harris Blvd. Charlotte,
NC 28262-8522 |
71.04% |
Heritage
Money Market Fund Service
Class |
|
Band
& Co C/O
US Bank Attn:
Willy Bloom PO
Box 1787 Milwaukee,
WI 53201-1787 |
15.25% |
Wells
Fargo Bank Account for the Exclusive
Benefit of Customers Attn:
Money Funds 1525
West WT Harris Blvd Charlotte,
NC 28262-8522 |
14.42% |
Jackson
National Life Distributors
LLC Attn:
Jnld Accounting 300
Innovation Dr Franklin,
TN 37067-6011 |
11.85% |
|
|
Principal
Fund Holders |
|
Wells
Fargo Clearing Services 2801
Market St Saint
Louis, MO 63103-2523 |
7.29% |
Money
Market Fund Fund
Level |
|
Wells
Fargo Clearing Services LLC Special
Custody Acct for the Exclusive
Benefit of Customer 2801
Market St Saint
Louis, MO 63103-2523 |
82.77% |
Money
Market Fund Class
A |
|
Wells
Fargo Clearing Services LLC Special
Custody Acct For The Exclusive
Benefit of Customer 2801
Market Street Saint
Louis, MO 63103-2523 |
10.05% |
Money
Market Fund Class
C |
|
Wells
Fargo Clearing Services LLC Special
Custody Account For The Exclusive
Benefit Of Customers 2801
Market Street Saint
Louis, MO 63103-2523 |
26.75% |
Raymond
James Omnibus
for Mutual Funds Attn
Courtney Waller 880
Carillon Pkwy St
Petersburg, FL 33716-1100 |
11.96% |
UMB
Bank NA Cust
for the Rollover IRA of Charles
N Ubil 34
Somerset Rd Huntingdon VY,
PA 19006-6721 |
11.15% |
UMB
Bank NA Cust
For The SEP IRA of Douglas
L Cassman 7219
Marlow Pl University
Pk, FL 34201-2269 |
10.75% |
UMB
Bank NA Cust
for the Rollover IRA of Deborah
L Gray 1701
Creekside Dr Apt 6101 Folsom,
CA 95630-3880 |
10.14% |
Charles
Schwab & Co Inc Special
Custody A/C FBO Customers Attn
Mutual Funds 211
Main Street San
Francisco, CA 94105-1901 |
9.01% |
Money
Market Fund Premier
Class |
|
Wells
Fargo Clearing Services LLC Special
Custody Acct for the Exclusive
Benefit of Customer 2801
Market St Saint
Louis, MO 63103-2523 |
96.80% |
Municipal
Cash Management Money Market Fund Fund
Level |
|
|
|
Principal
Fund Holders |
|
State
Street Bank Attn:
Cash Sweeps 1776
Heritage Drive North
Quincy, MA 02171-2197 |
76.27% |
Municipal
Cash Management Money Market Fund Administrator
Class |
|
Win-Con
Enterprses Inc Attn:
Dan Reed 483 N
West End Ave New
Braunfels, TX 78130-6917 |
62.99% |
Philip
A Gianatasio TTEE Philip
A Gianatasio 2012 Revocable Trust PO
Box 45 Marblehead,
MA 01945-0045 |
32.92% |
Municipal
Cash Management Money Market Fund Institutional
Class |
|
State
Street Bank Attn:
Cash Sweeps 1776
Heritage Drive North
Quincy, MA 02171-2197 |
82.50% |
Wells
Fargo Bank Account For The Exclusive
Benefit of Customers Attn
Money Funds 1525
W WT Harris Blvd Charlotte,
NC 28262-8522 |
12.34% |
Municipal
Cash Management Money Market Fund Service
Class |
|
Wells
Fargo Clearing Services LLC Special
Custody Acct for the Exclusive
Benefit of Customer 2801
Market St Saint
Louis, MO 63103-2523 |
59.59% |
Band
& Co. c/o
US Bank Attn:
Willy Bloom PO
Box 1787 Milwaukee,
WI 53201-1787 |
36.85% |
National
Tax-Free Money Market Fund Fund
Level |
|
Wells
Fargo Clearing Services LLC Special
Custody Acct for the Exclusive
Benefit of Customer 2801
Market St Saint
Louis, MO 63103-2523 |
34.63% |
National
Tax-Free Money Market Fund Class
A |
|
Gary
R Kramer & Lida
Kramer JTWROS 5519
Ashleigh Road Fairfax,
VA 22030-7246 |
11.03% |
Wells
Fargo Clearing Services LLC Special
Custody Account For The Exclusive
Benefit Of Customers 2801
Market Street Saint
Louis, MO 63103-2523 |
9.16% |
National
Tax-Free Money Market Fund Administrator
Class |
|
|
|
Principal
Fund Holders |
|
Andrew
S Rosen Sheri
L Rosen POA Kainos
Capital 2100
McKinney Avenue Suite 1600 Dallas,
TX 75201-2171 |
24.91% |
Alfred
Mallard & Alfred
Mallard JTWROS 12
Scenic Ridge Dr Brewster,
NY 10509-4303 |
7.79% |
Scott
C Moore & Lynnae
Joslin-Moore JTWROS N64W19967
Mill Rd Menomonee
Falls, WI 53051-4813 |
5.05% |
National
Tax-Free Money Market Fund Premier
Class |
|
Wells
Fargo Clearing Services LLC Special
Custody Account For The Exclusive
Benefit Of Customers 2801
Market Street Saint
Louis, MO 63103-2523 |
52.07% |
Wells
Fargo Bank NA FBO Ellis
J R and Amy C TIC L M - AGY PO
Box 1533 Minneapolis,
MN 55480-1533 |
40.77% |
National
Tax-Free Money Market Fund Service
Class |
|
Wells
Fargo Bank NA Attn
Cash Sweep Dept MAC
N9310-130 550 S
4th Street Minneapolis,
MN 55415-1529 |
76.61% |
Kevin
W Hanley 3360
2nd St Boulder,
CO 80304-2153 |
5.64% |
Treasury
Plus Money Market Fund Class
A |
|
Wells
Fargo Bank Sweep
Dept Operations 3440
Walnut Avenue Building A Fremont,
CA 94538-2210 |
62.07% |
Wells
Fargo Bank Sweep
Dept Operations 3440
Walnut Avenue Building A Fremont,
CA 94538-2210 |
31.01% |
Treasury
Plus Money Market Fund Administrator
Class |
|
Wells
Fargo Bank Account For
the Exclusive Benefit of Customers Attn:
Money Funds 1525
West WT Harris Blvd. Charlotte,
NC 28262-8522 |
59.00% |
Santa
Catalina School Attn:
Ronald Kellermann 1500
Mark Thomas Dr Monterey,
CA 93940-5291 |
25.25% |
Stein
Industries Inc Attn
Lexyj.Wikenheiser 7153
Northland Dr N Brooklyn
Park, MN 55428-1514 |
5.31% |
|
|
Principal
Fund Holders |
|
Treasury
Plus Money Market Fund Institutional
Class |
|
Wells
Fargo Bank Sweep
Dept Operations 3440
Walnut Avenue Building A Freemont,
CA 94538-2210 |
32.09% |
Wells
Fargo Bank NA Attn
Cash Sweep Dept 550 S
4th Street Minneapolis,
MN 55415-1529 |
17.55% |
Principal
Bank 711
High St Des
Moines, IA 50392-0001 |
16.21% |
Wells
Fargo Bank Sweep
Dept Operations 3440
Walnut Avenue Building A Freemont,
CA 94538-2210 |
13.02% |
Wells
Fargo Bank Account For The Exclusive
Benefit of Customers Attn
Money Funds 1525
W WT Harris Blvd Charlotte,
NC 28262-8522 |
7.09% |
Treasury
Plus Money Market Fund Select
Class |
|
Wells
Fargo Bank NA Attn
Cash Sweep Dept 550 S
4th Street Minneapolis,
MN 55415-1529 |
43.01% |
Wells
Fargo Bank Account For The Exclusive
Benefit of Customers Attn
Money Funds 1525
W WT Harris Blvd Charlotte,
NC 28262-8522 |
27.42% |
Pricewaterhousecoopers
LLP Attn:
Treasury Dept 4040
W Boy Scout Blvd Tampa,
FL 33607-5750 |
14.41% |
Treasury
Plus Money Market Fund Service
Class |
|
Wells
Fargo Bank Sweep
Dept Operations 3440
Walnut Avenue Building A Fremont,
CA 94538-2210 |
43.56% |
Wells
Fargo Bank, N.A. FBO Attn
Cash Sweep Dept 550 S
4th Street Minneapolis,
MN 55415-1529 |
20.69% |
Wells
Fargo Bank Sweep
Dept Operations 3440
Walnut Avenue Building A Fremont,
CA 94538-2210 |
20.91% |
Principal
Bank 711
High St Des
Moines, IA 50392-0001 |
9.01% |
100%
Treasury Money Market Fund Class
A |
|
|
|
Principal
Fund Holders |
|
Wells
Fargo Clearing Services, LLC Special
Custody Acct For The Exclusive
Benefit of Customers 2801
Market Street Saint
Louis, MO 63103-2523 |
52.69% |
100%
Treasury Money Market Fund Administrator
Class |
|
Attn:
NPIO Trade Desk DCGT
As TTEE and/or Cust FBO
PLIC Various Retirement Plans Omnibus 711
High St Des
Moines, IA 50392-0001 |
24.47% |
Wells
Fargo Bank Account For The Exclusive
Benefit of Customes Attn
Money Funds 1525
W WT Harris Blvd. Charlotte,
NC 28262-8522 |
18.33% |
Principal
Bank 711
High St Des
Moines, IA 50392-0001 |
15.82% |
Wells
Fargo Clearing Services Special
Custody Account For The Exclusive
Benefit Of Customers 2801
Market Street Saint
Louis, MO 63103-2523 |
9.43% |
Wells
Fargo Bank NA Attn
Cash Sweep Dept 550 S
4th Street Minneapolis,
MN 55415-1529 |
8.54% |
Union
Bank TR Nominee
FBO Portal Omnibus/Reinvest Attn:
Linda Brown PO
Box 85484 San
Diego, CA 92186-5484 |
7.24% |
100%
Treasury Money Market Fund Institutional
Class |
|
Wells
Fargo Bank NA Attn
Cash Sweep Dept 550 S
4th Street Minneapolis,
MN 55480-1533 |
30.97% |
Wells
Fargo Bank Account For The Exclusive
Benefit of Customers Attn
Money Funds 1525
W WT Harris Blvd Charlotte,
NC 28262-8522 |
23.73% |
Wells
Fargo Clearing Services LLC Special
Custody Acct for the Exclusive
Benefit of Customer 2801
Market Street Saint
Louis, MO 63103-2523 |
17.19% |
Principal
Bank 711
High St Des
Moines, IA 50392-0001 |
6.38% |
Hare
& Co Attn
STIF Operations PO
Box 223910 Pittsburgh,
PA 15251-2910 |
5.93% |
100%
Treasury Money Market Fund Service
Class |
|
|
|
Principal
Fund Holders |
|
Wells
Fargo Bank NA Sweep
Dept Operations 3440
Walnut Avenue Building A Fremont,
CA 94538-2210 |
46.70% |
Wells
Fargo Bank NA Sweep
Dept Operations 3440
Walnut Avenue Building A Fremont,
CA 94538-2210 |
31.03% |
Wells
Fargo Bank NA Attn:
Cash Sweep Dept 550 S
4th Street Minneapolis,
MN 55415-1529 |
17.22% |
For
purposes of the 1940 Act, any person who owns directly or through one or more
controlled companies more than 25% of
the voting securities of a company is presumed to “control” such company.
Accordingly, to the extent that a
person identified in the foregoing table is identified as the beneficial owner
of more than 25% of a Fund, or is identified
as the record owner of more than 25% of a Fund and has voting and/or investment
powers, it may be presumed to
control such Fund. A controlling person’s vote could have a more significant
effect on matters presented
to shareholders for approval than the vote of other Fund
shareholders.