physical
commodities does not constitute qualifying income for this purpose. In addition,
to the extent that any physical commodity or contracts
relating to a physical commodity is considered to be an illiquid investment,
Rule 22e-4 generally limits the Fund’s purchases of illiquid investments to 15%
of its net assets. Other restrictions that could also limit a Fund’s investment
in physical commodities or contracts relating to physical commodities include
where that investment implicates a Fund’s diversification, concentration, or
securities-related issuer policies, and where the Fund would need to take
certain steps as set forth in its policies to avoid being considered to issue
any class of senior securities.
F.
CERTAIN INVESTMENT
STRATEGIES, RISKS AND CONSIDERATIONS
The
investment objective and principal investment strategies for each Fund are
discussed in that Fund’s prospectus.
Certain descriptions in a Fund’s prospectus and this SAI of a particular
investment practice or technique in which the Fund may engage or a financial
instrument that the Fund may purchase are meant to describe the spectrum of
investments that the Fund’s investment manager or sub-adviser(s), as applicable,
in its discretion, might, but is not required to, use in managing the Fund’s
portfolio assets in accordance with the Fund’s investment objective, policies
and restrictions. The investment manager or sub-adviser(s), as applicable, in
its discretion, may employ any such practice, technique or instrument for one or
more of the Funds, but not for all of the Funds, for which it serves as the
investment manager or sub-adviser, as applicable. It is possible that certain
types of financial instruments or techniques may not be available, permissible
or effective for their intended purposes in all markets.
Under the Commodity Exchange Act
(“CEA”) and the Commodity Futures Trading Commission (“CFTC”) regulations
thereunder, HFMC must either operate within certain guidelines and restrictions
with respect to a Fund’s use of futures, options on such futures, commodity
options and certain swaps, or be subject to registration with the CFTC as a
“commodity pool operator” (“CPO”) with respect to the Fund and be required to
operate the Fund in compliance with certain disclosure, reporting, and
recordkeeping requirements.
Under
current CFTC rules, the investment adviser of a registered investment company
may claim an exemption from registration as a CPO
only if the registered investment company that it advises uses futures
contracts, options on such futures, commodity options and certain swaps solely
for “bona fide hedging purposes,” or limits its use of such instruments for
non-bona fide hedging purposes to certain de minimis amounts.
HFMC
currently operates each Fund listed below as a commodity pool as of March 1,
2023 (each a
“Registered Fund”).
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Emerging Markets Local Debt
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HFMC has
elected to claim an exclusion from the definition of CPO with respect to each
Fund, other than the Registered Funds listed
above.
Each
Fund, including each Registered Fund, may choose to change its election at any
time. In the
event that a Fund for which HFMC is not currently registered with or regulated
by the CFTC engages in transactions that require registration as a CPO in the
future, HFMC will comply with applicable regulations. If a Fund operates subject
to CFTC regulation, it may incur additional expenses.
INVESTMENT
RISKS
The
information
below does not describe every type of investment, technique or risk to which a
Fund may be exposed. The tables and discussion set forth below provide
descriptions of some of the types of investments and investment strategies that
one or more of the Funds may use, and the risks and considerations associated
with those investments and investment strategies. Information contained in this
section about the risks and considerations associated with a Fund’s investments
and/or investment strategies applies only to those Funds specifically identified
in the tables below as making each type of investment or using each investment
strategy (each, a “Covered Fund”). Information that does not apply to a Covered
Fund does not form a part of that Covered Fund’s SAI and should not be relied on
by investors in that Covered Fund. Only information that is clearly identified
as applicable to a Covered Fund is considered to form a part of the Covered
Fund’s SAI. However, unless a strategy or investment described below is
specifically prohibited by a Fund’s investment restrictions as set forth in the
prospectus or under “Fundamental Investment Restrictions of the Funds” in this
SAI, a Fund may engage in any of the strategies or make any of the investments
described below (either as a principal or a non-principal strategy or
investment). Subject to the foregoing, the Funds may engage in any of the
investment strategies or purchase any of the investments described below
directly, through its investment in one or more other investment companies, or
through hybrid instruments, structured investments, or other derivatives,
described below. With
