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Investment Management |
Statement of Additional Information
John Hancock Capital Series
John Hancock Investment Trust
John Hancock Investment Trust II
March 1, 2023 (as revised
October 3, 2023)
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A |
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C |
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I |
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R2 |
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R4 |
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R5 |
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R6 |
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NAV |
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John Hancock Capital Series |
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John Hancock Classic Value Fund |
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PZFVX |
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JCVCX |
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JCVIX |
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JCVSX |
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JCVVX |
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JCVWX |
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N/A |
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John Hancock U.S. Global Leaders Growth Fund |
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USGLX |
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USLCX |
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USLIX |
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USLYX |
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N/A |
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N/A |
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UGLSX |
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N/A |
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John Hancock Investment Trust |
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John Hancock Balanced Fund |
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SVBAX |
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SVBCX |
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SVBIX |
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JBATX |
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JBAFX |
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JBAVX |
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JBAWX |
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N/A |
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John Hancock Disciplined Value International Fund |
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JDIBX |
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JDICX |
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JDVIX |
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JDISX |
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JDITX |
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JDIUX |
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JDIVX |
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John Hancock Diversified Macro Fund |
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JDJAX |
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JDJCX |
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JDJIX |
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N/A |
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N/A |
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N/A |
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JDJRX |
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John Hancock Emerging Markets Equity Fund |
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JEMQX |
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JEMZX |
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JEMMX |
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JEMKX |
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JEMNX |
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N/A |
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JEMGX |
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John Hancock ESG International Equity Fund |
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JTQAX |
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JTQIX |
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N/A |
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JTQRX |
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John Hancock ESG Large Cap Core Fund |
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JHJAX |
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JHJCX |
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JHJIX |
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N/A |
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JHJRX |
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John Hancock Fundamental Large Cap Core Fund |
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TAGRX |
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JHLVX |
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JLVIX |
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JLCYX |
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JLCFX |
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JLCVX |
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JLCWX |
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JLCNX |
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John Hancock Global Environmental Opportunities Fund |
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JABZX |
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JABYX |
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JABVX |
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N/A |
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N/A |
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N/A |
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JACDX |
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John Hancock Global Thematic Opportunities Fund |
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JTKAX |
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JTKCX |
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JTKIX |
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N/A |
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N/A |
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N/A |
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JTKRX |
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JTKNX |
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John Hancock Infrastructure Fund |
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JEEBX |
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JEEFX |
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JEEIX |
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N/A |
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N/A |
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N/A |
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JEEDX |
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John Hancock International Dynamic Growth Fund |
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JIJAX |
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JIJCX |
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JIJIX |
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N/A |
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N/A |
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N/A |
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JIJRX |
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John Hancock Seaport Long/Short Fund |
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JSFBX |
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JSFTX |
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JSFDX |
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N/A |
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N/A |
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N/A |
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JSFRX |
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John Hancock Small Cap Core Fund |
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JCCAX |
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N/A |
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JCCIX |
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N/A |
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N/A |
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N/A |
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JORSX |
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John Hancock Investment Trust II |
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John Hancock Financial Industries Fund |
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FIDAX |
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FIDCX |
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JFIFX |
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N/A |
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N/A |
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N/A |
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JFDRX |
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John Hancock Regional Bank Fund |
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FRBAX |
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FRBCX |
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JRBFX |
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N/A |
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N/A |
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N/A |
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JRGRX |
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N/A |
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This Statement of Additional Information (SAI) provides information about each fund listed above (each a
fund and collectively, the funds). Each fund is a series of the Trust indicated above. The information in this SAI is in addition to the information that is contained in each funds prospectus dated March 1, 2023,
as amended and supplemented from time to time (collectively, the Prospectus). The funds may offer other share classes that are described in separate prospectuses and SAIs.
This SAI is not a prospectus. It should be read in conjunction with the Prospectus. This SAI incorporates by reference the financial statements of each fund
for the period ended October 31, 2022, as well as the related opinion of the funds independent registered public accounting firm, as included in the funds most recent annual report to shareholders (each an Annual
Report). The financial statements of each fund for the fiscal period ended October 31, 2022 are available through the link(s) in the following table:
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Form N-CSR filed December 23, 2022 for: |
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John Hancock Capital Series |
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https://www.sec.gov/Archives/edgar/data/45291/000168386322007976/f12679d1.htm |
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Form N-CSR filed December 23, 2022 for: |
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John Hancock Investment Trust |
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https://www.sec.gov/Archives/edgar/data/22370/000168386322007974/f12678d1.htm |
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Form N-CSR filed December 23, 2022 for: |
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John Hancock Investment Trust II |
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https://www.sec.gov/Archives/edgar/data/743861/000168386322007975/f12677d1.htm |
Manulife, Manulife Investment Management, Stylized M Design, and Manulife Investment Management & Stylized M Design
are trademarks of The Manufacturers Life Insurance Company and are used by its affiliates under license.
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A company of |
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Investment Management |
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JH1031SAI |
A copy of a Prospectus or an Annual Report can be obtained free of charge by contacting:
John Hancock Signature Services, Inc.
P.O. Box 219909
Kansas City, MO 64121-9909
800-225-5291
jhinvestments.com
Table of contents
1
GLOSSARY
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Term |
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Definition |
1933 Act |
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the Securities Act of 1933, as amended |
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1940 Act |
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the Investment Company Act of 1940, as amended |
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Advisers Act |
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the Investment Advisers Act of 1940, as amended |
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Advisor |
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John Hancock Investment Management LLC (formerly, John Hancock Advisers, LLC), 200 Berkeley Street, Boston, Massachusetts 02116 |
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Advisory Agreement |
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an investment advisory agreement or investment management contract between the Trust and the Advisor |
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Affiliated Subadvisors |
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Manulife Investment Management (North America) Limited and Manulife Investment Management (US) LLC, as applicable |
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affiliated underlying funds |
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underlying funds that are advised by John Hancocks investment advisor or its affiliates |
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BDCs |
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business development companies |
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Board |
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Board of Trustees of the Trust |
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Bond Connect |
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Mutual Bond Market Access between Mainland China and Hong Kong |
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Brown Brothers Harriman |
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Brown Brothers Harriman & Co. |
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CATS |
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Certificates of Accrual on Treasury Securities |
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CBOs |
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Collateralized Bond Obligations |
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CCO |
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Chief Compliance Officer |
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CDSC |
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Contingent Deferred Sales Charge |
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CEA |
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the Commodity Exchange Act, as amended |
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China A-Shares |
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Chinese stock exchanges |
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CIBM |
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China interbank bond market |
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CLOs |
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Collateralized Loan Obligations |
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CMOs |
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Collateralized Mortgage Obligations |
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Code |
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the Internal Revenue Code of 1986, as amended |
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COFI floaters |
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Cost of Funds Index |
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CPI |
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Consumer Price Index |
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CPI-U |
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Consumer Price Index for Urban Consumers |
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CPO |
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Commodity Pool Operator |
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CFTC |
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Commodity Futures Trading Commission |
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Citibank |
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Citibank, N.A., 388 Greenwich Street, New York, NY 10013 |
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Distributor |
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John Hancock Investment Management Distributors LLC (formerly, John Hancock Funds, LLC), 200 Berkeley Street, Boston, Massachusetts 02116 |
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EMU |
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Economic and Monetary Union |
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ETFs |
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Exchange-Traded Funds |
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ETNs |
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Exchange-Traded Notes |
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EU |
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European Union |
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Fannie Mae |
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Federal National Mortgage Association |
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FHFA |
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Federal Housing Finance Agency |
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FHLBs |
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Federal Home Loan Banks |
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FICBs |
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Federal Intermediate Credit Banks |
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Fitch |
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Fitch Ratings |
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Freddie Mac |
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Federal Home Loan Mortgage Corporation |
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funds or series |
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The John Hancock funds within this SAI as noted on the front cover and as the context may require |
2
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Term |
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Definition |
funds of funds |
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funds that seek to achieve their investment objectives by investing in underlying funds, as permitted by Section 12(d) of the 1940 Act and the rules thereunder |
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GNMA |
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Government National Mortgage Association |
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HKSCC |
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Hong Kong Securities Clearing Company |
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IOs |
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Interest-Only |
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IRA |
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Individual Retirement Account |
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IRS |
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Internal Revenue Service |
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JHCT |
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John Hancock Collateral Trust |
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JH Distributors |
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John Hancock Distributors, LLC |
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JHLICO New York |
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John Hancock Life Insurance Company of New York |
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JHLICO U.S.A. |
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John Hancock Life Insurance Company (U.S.A.) |
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LOI |
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Letter of Intention |
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LIBOR |
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London Interbank Offered Rate |
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MAAP |
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Monthly Automatic Accumulation Program |
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Manulife Financial or MFC |
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Manulife Financial, a publicly traded company based in Toronto, Canada |
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Manulife IM (NA) |
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Manulife Investment Management (North America) Limited (formerly, John Hancock Asset Management a Division of Manulife Asset Management (North America) Limited) |
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Manulife IM (US) |
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Manulife Investment Management (US) LLC (formerly, John Hancock Asset Management a Division of Manulife Asset Management (US) LLC) |
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MiFID II |
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Markets in Financial Instruments Directive |
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Moodys |
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Moodys Investors Service, Inc |
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NAV |
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Net Asset Value |
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NRSRO |
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Nationally Recognized Statistical Rating Organization |
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NYSE |
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New York Stock Exchange |
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OID |
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Original Issue Discount |
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OTC |
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Over-The-Counter |
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PAC |
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Planned Amortization Class |
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PFS |
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Personal Financial Services |
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POs |
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Principal-Only |
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PRC |
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Peoples Republic of China |
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REITs |
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Real Estate Investment Trusts |
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RIC |
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Regulated Investment Company |
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RPS |
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John Hancock Retirement Plan Services |
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SARSEP |
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Salary Reduction Simplified Employee Pension Plan |
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SEC |
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Securities and Exchange Commission |
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SEP |
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Simplified Employee Pension |
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SIMPLE |
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Savings Incentive Match Plan for Employees |
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S&P |
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S&P Global Ratings |
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SLMA |
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Student Loan Marketing Association |
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SPACs |
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Special Purpose Acquisition Companies |
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State Street |
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State Street Bank and Trust Company, State Street Financial Center, One Lincoln Street, Boston, Massachusetts 02111 |
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Stock Connect |
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Hong Kong Stock Connect Program |
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subadvisor |
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Any subadvisors employed by John Hancock within this SAI as noted in Appendix B and as the context may require |
3
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Term |
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Definition |
TAC |
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Target Amortization Class |
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TIGRs |
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Treasury Receipts, Treasury Investors Growth Receipts |
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Trust |
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John Hancock Bond Trust |
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John Hancock California Tax-Free Income Fund |
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John Hancock Capital Series |
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John Hancock Current Interest |
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John Hancock Exchange-Traded Fund Trust |
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John Hancock Funds II |
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John Hancock Funds III |
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John Hancock Investment Trust |
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John Hancock Investment Trust II |
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John Hancock Municipal Securities Trust |
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John Hancock Sovereign Bond Fund |
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John Hancock Strategic Series |
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John Hancock Variable Insurance Trust |
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TSA |
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Tax-Sheltered Annuity |
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unaffiliated underlying funds |
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underlying funds that are advised by an entity other than John Hancocks investment advisor or its affiliates |
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underlying funds |
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funds in which the funds of funds invest |
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UK |
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United Kingdom |
4
ORGANIZATION OF THE TRUSTS
Each Trust is organized as a Massachusetts business
trust under the laws of The Commonwealth of Massachusetts and is an open-end management investment company registered under the 1940 Act. Each fund is a diversified series of its respective Trust, as that term
is used in the 1940 Act, and as interpreted or modified by regulatory authority having jurisdiction, from time to time. The following table sets forth the date each Trust was organized:
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Trust |
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Date of Organization |
John Hancock Capital Series |
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October 5, 1984 |
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John Hancock Investment Trust |
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December 21, 1984 |
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John Hancock Investment Trust II |
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March 30, 1984 |
Diversified Macro Fund (the Parent fund) presently has a single wholly-owned subsidiary, John Hancock Diversified
Macro Offshore Subsidiary Fund, Ltd. (the Subsidiary). The Subsidiary is organized under the laws of the Cayman Islands as an exempt company, which is a corporation that is exempt from taxation in the Cayman Islands but may
not trade in the Cayman Islands with any person, firm or corporation except in furtherance of business carried on outside the Cayman Islands. Diversified Macro Fund is the sole owner of its Subsidiary.
The Advisor is a Delaware limited liability company whose principal offices are located at 200 Berkeley Street, Boston, Massachusetts 02116. The Advisor is
registered as an investment advisor under the Advisers Act. The Advisor is an indirect principally owned subsidiary of JHLICO U.S.A. JHLICO U.S.A. and its subsidiaries today offer a broad range of financial products, including life insurance,
annuities, 401(k) plans, long-term care insurance, college savings, and other forms of business insurance. Additional information about John Hancock may be found on the Internet at johnhancock.com. The ultimate controlling parent of the Advisor is
MFC, a publicly traded company based in Toronto, Canada. MFC is the holding company of The Manufacturers Life Insurance Company and its subsidiaries, collectively known as Manulife Financial.
The Advisor has retained for each fund a subadvisor that is responsible for providing investment advice to the fund subject to the review of the Board and the
overall supervision of the Advisor.
Manulife Financial is a leading international financial services group with principal operations in Asia, Canada, and
the United States. Operating primarily as John Hancock in the United States and Manulife elsewhere, it provides financial protection products and advice, insurance, as well as wealth and asset management services through its extensive network of
solutions for individuals, groups, and institutions. Its global headquarters are in Toronto, Canada, and it trades as MFC on the Toronto Stock Exchange, NYSE, and the Philippine Stock Exchange, and under 945 in Hong Kong.
Manulife Financial can be found on the Internet at manulife.com.
The following table sets forth each funds inception date:
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Fund |
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Commencement of Operations |
Balanced Fund |
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October 5, 1992 |
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Classic Value Fund |
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June 24, 1996 |
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Disciplined Value International Fund |
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December 30, 2011 (predecessor fund inception date; became a series of Investment Trust on September 29, 2014) |
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Diversified Macro Fund |
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July 29, 2019 |
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Emerging Markets Equity Fund |
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June 16, 2015 |
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ESG Large Cap Core Fund |
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June 6, 2016 |
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ESG International Equity Fund |
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December 14, 2016 |
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Financial Industries Fund |
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March 14, 1996 |
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Fundamental Large Cap Core Fund |
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September 30, 1984 |
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Global Environmental Opportunities Fund |
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July 21, 2021 |
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Global Thematic Opportunities Fund |
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December 14, 2018 |
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Infrastructure Fund |
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December 20, 2013 |
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International Dynamic Growth Fund |
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April 17, 2019 |
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Regional Bank Fund |
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October 4, 1985 |
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Seaport Long/Short Fund |
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December 20, 2013 |
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Small Cap Core Fund |
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December 20, 2013 |
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U.S. Global Leaders Growth Fund |
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September 29, 1995 |
If a fund or share class has been in operation for a period that is shorter than the three-year fiscal period covered in this
SAI, information is provided for the period the fund or share class, as applicable, was in operation.
5
ADDITIONAL INVESTMENT POLICIES AND OTHER INSTRUMENTS
The principal strategies and risks of investing in each fund are described in the applicable Prospectus. Unless otherwise stated in the applicable Prospectus
or this SAI, the investment objective and policies of the funds may be changed without shareholder approval. Each fund may invest in the instruments below, and such instruments and investment policies apply to each fund, but only if and to the
extent that such policies are consistent with and permitted by a funds investment objective and policies. Each fund may also have indirect exposure to the instruments described below through derivative contracts, if applicable. By owning
shares of the underlying funds, each fund of funds indirectly invests in the securities and instruments held by the underlying funds and bears the same risks of such underlying funds.
Asset-Backed Securities
The securitization techniques
used to develop mortgage securities also are being applied to a broad range of other assets. Through the use of trusts and special purpose corporations, automobile and credit card receivables are being securitized in pass-through structures similar
to mortgage pass-through structures or in a pay-through structure similar to the CMO structure.
Generally, the
issuers of asset-backed bonds, notes or pass-through certificates are special purpose entities and do not have any significant assets other than the receivables securing such obligations. In general, the collateral supporting asset-backed securities
is of a shorter maturity than that of mortgage loans. As a result, investment in these securities should be subject to less volatility than mortgage securities. Instruments backed by pools of receivables are similar to mortgage-backed securities in
that they are subject to unscheduled prepayments of principal prior to maturity. When the obligations are prepaid, a fund must reinvest the prepaid amounts in securities with the prevailing interest rates at the time. Therefore, a funds
ability to maintain an investment including high-yielding asset-backed securities will be affected adversely to the extent that prepayments of principal must be reinvested in securities that have lower yields than the prepaid obligations. Moreover,
prepayments of securities purchased at a premium could result in a realized loss. Unless otherwise stated in its Prospectus, a fund will only invest in asset-backed securities rated, at the time of purchase, AA or better by S&P or
Fitch or Aa or better by Moodys. Seaport Long/Short Fund may, from time to time, invest in lower-rated asset-backed securities.
As with
mortgage securities, asset-backed securities are often backed by a pool of assets representing the obligation of a number of different parties and use similar credit enhancement techniques. For a description of the types of credit enhancement that
may accompany asset-backed securities, see Types of Credit Support below. When a fund invests in asset-backed securities, it will not limit its investments in asset-backed securities to those with credit enhancements. Although
asset-backed securities are not generally traded on a national securities exchange, such securities are widely traded by brokers and dealers, and will not be considered illiquid securities for the purposes of the investment restriction on illiquid
securities under the sub-section Illiquid Securities in this section below.
Types of Credit
Support. To lessen the impact of an obligors failure to make payments on underlying assets, mortgage securities and asset-backed securities may contain elements of credit support. Such credit support falls into two categories:
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liquidity protection; and |
Liquidity protection refers to the provision of advances, generally by the entity administering the pool of assets, to ensure that the pass-through of payments
due on the underlying pool of assets occurs in a timely fashion. Default protection provides protection against losses resulting from ultimate default and enhances the likelihood of ultimate payment of the obligations on at least a portion of the
assets in the pool. This protection may be provided through guarantees, insurance policies or letters of credit obtained by the issuer or sponsor from third parties, through various means of structuring the transaction or through a combination of
such approaches. A fund will not pay any additional fees for such credit support, although the existence of credit support may increase the price of a security.
Some examples of credit support include:
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senior-subordinated securities (multiple class securities with one or more classes subordinate to
other classes as to the payment of principal thereof and interest thereon, with the result that defaults on the underlying assets are borne first by the holders of the subordinated class); |
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creation of reserve funds (where cash or investments, sometimes funded from a portion of the payments
on the underlying assets, are held in reserve against future losses); and |
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over-collateralization (where the scheduled payments on, or the principal amount of, the underlying
assets exceed those required to make payment on the securities and pay any servicing or other fees). |
The ratings of mortgage-backed
securities and asset-backed securities for which third-party credit enhancement provides liquidity protection or default protection are generally dependent upon the continued creditworthiness of the provider of the credit enhancement. The ratings of
these securities could be reduced in the event of deterioration in the creditworthiness of the credit enhancement provider even in cases where the delinquency and loss experienced on the underlying pool of assets is better than expected.
The degree of credit support provided for each issue is generally based on historical information concerning the level of credit risk associated with the
underlying assets. Delinquency or loss greater than anticipated could adversely affect the return on an investment in mortgage securities or asset-backed securities.
Collateralized Debt Obligations. CBOs, CLOs, other collateralized debt obligations, and other similarly structured securities (collectively,
CDOs) are types of asset-backed securities. A CBO is a trust that is often backed by a diversified pool of high risk, below investment grade fixed-income securities. The collateral can be from many different types of fixed-income
securities such as high yield debt, residential privately issued mortgage-
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related securities, commercial privately issued mortgage-related securities, trust preferred securities and emerging market debt. A CLO is a trust typically collateralized by a pool of loans,
which may include, among others, domestic and foreign senior secured loans, senior unsecured loans, and subordinate corporate loans, including loans that may be rated below investment grade or equivalent unrated loans. Other CDOs are trusts backed
by other types of assets representing obligations of various parties. CDOs may charge management fees and administrative expenses.
In a CDO structure,
the cash flows from the trust are split into two or more portions, called tranches, varying in risk and yield. The riskiest portion is the equity tranche which bears the bulk of defaults from the bonds or loans in the trust and serves to
protect the other, more senior tranches from default in all but the most severe circumstances. Since it is partially protected from defaults, a senior tranche from a CDO trust typically has a higher rating and lower yield than its underlying
securities, and can be rated investment grade. Despite the protection from the equity tranche, CDO tranches can experience substantial losses due to actual defaults, increased sensitivity to defaults due to collateral default and disappearance of
protecting tranches, market anticipation of defaults, as well as aversion to CDO securities as a class. In the case of all CDO tranches, the market prices of and yields on tranches with longer terms to maturity tend to be more volatile than those of
tranches with shorter terms to maturity due to the greater volatility and uncertainty of cash flows.
Brady Bonds
Brady Bonds are debt securities issued under the framework of the Brady Plan, an initiative announced by former U.S. Treasury Secretary Nicholas F.
Brady in 1989 as a mechanism for debtor nations to restructure their outstanding external commercial bank indebtedness. The Brady Plan framework, as it has developed, involves the exchange of external commercial bank debt for newly issued bonds
(Brady Bonds). Brady Bonds also may be issued in respect of new money being advanced by existing lenders in connection with the debt restructuring. Brady Bonds issued to date generally have maturities between 15 and 30 years from the
date of issuance and have traded at a deep discount from their face value. In addition to Brady Bonds, investments in emerging market governmental obligations issued as a result of debt restructuring agreements outside of the scope of the Brady Plan
are available.
Agreements implemented under the Brady Plan to date are designed to achieve debt and debt-service reduction through specific options
negotiated by a debtor nation with its creditors. As a result, the financial packages offered by each country differ. The types of options have included:
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the exchange of outstanding commercial bank debt for bonds issued at 100% of face value that carry a below-market
stated rate of interest (generally known as par bonds); |
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bonds issued at a discount from face value (generally known as discount bonds); |
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bonds bearing an interest rate which increases over time; and |
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bonds issued in exchange for the advancement of new money by existing lenders. |
Discount bonds issued to date under the framework of the Brady Plan have generally borne interest computed semiannually at a rate equal to 13/16th of one
percent above current six-month LIBOR. Regardless of the stated face amount and interest rate of the various types of Brady Bonds, when investing in Brady Bonds, a fund will purchase Brady Bonds in secondary
markets in which the price and yield to the investor reflect market conditions at the time of purchase.
Certain sovereign bonds are entitled to
value recovery payments in certain circumstances, which in effect constitute supplemental interest payments but generally are not collateralized. Certain Brady Bonds have been collateralized as to principal due at maturity (typically 15
to 30 years from the date of issuance) by U.S. Treasury zero coupon bonds with a maturity equal to the final maturity of such Brady Bonds, although the collateral is not available to investors until the final maturity of the Brady Bonds. Collateral
purchases are financed by the International Monetary Fund (the IMF), the World Bank and the debtor nations reserves. In addition, interest payments on certain types of Brady Bonds may be collateralized by cash or high-grade
securities in amounts that typically represent between 12 and 18 months of interest accruals on these instruments, with the balance of the interest accruals being uncollateralized.
A fund may purchase Brady Bonds with no or limited collateralization, and must rely for payment of interest and (except in the case of principal
collateralized Brady Bonds) principal primarily on the willingness and ability of the foreign government to make payment in accordance with the terms of the Brady Bonds.
Brady Bonds issued to date are purchased and sold in secondary markets through U.S. securities dealers and other financial institutions and are generally
maintained through European transactional securities depositories. A substantial portion of the Brady Bonds and other sovereign debt securities in which a fund invests are likely to be acquired at a discount.
Canadian and Provincial Government and Crown Agency Obligations
Canadian Government Obligations. Canadian government obligations are debt securities issued or guaranteed as to principal or interest by the government
of Canada pursuant to authority granted by the Parliament of Canada and approved by the Governor in Council, where necessary. These securities include treasury bills, notes, bonds, debentures and marketable government of Canada loans.
Canadian Crown Obligations. Canadian Crown agency obligations are debt securities issued or guaranteed by a Crown corporation, company or agency
(Crown Agencies) pursuant to authority granted by the Parliament of Canada and approved by the Governor in Council, where necessary. Certain Crown Agencies are by statute agents of Her Majesty in right of Canada, and their obligations,
when properly authorized, constitute direct obligations of the government of Canada. These obligations include, but are not limited to, those issued or guaranteed by the:
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Export Development Corporation; |
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Farm Credit Corporation; |
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Federal Business Development Bank; and |
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Canada Post Corporation. |
In addition, certain Crown Agencies that are not, by law, agents of Her Majesty may issue obligations that, by statute, the Governor in Council may authorize
the Minister of Finance to guarantee on behalf of the government of Canada. Other Crown Agencies that are not, by law, agents of Her Majesty may issue or guarantee obligations not entitled to be guaranteed by the government of Canada. No assurance
can be given that the government of Canada will support the obligations of Crown Agencies that are not agents of Her Majesty, which it has not guaranteed, since it is not obligated to do so by law.
Provincial Government Obligations. Provincial Government obligations are debt securities issued or guaranteed as to principal or interest by the
government of any province of Canada pursuant to authority granted by the provincial Legislature and approved by the Lieutenant Governor in Council of such province, where necessary. These securities include treasury bills, notes, bonds and
debentures.
Provincial Crown Agency Obligations. Provincial Crown Agency obligations are debt securities issued or guaranteed by a provincial
Crown corporation, company or agency (Provincial Crown Agencies) pursuant to authority granted by the provincial Legislature and approved by the Lieutenant Governor in Council of such province, where necessary. Certain Provincial Crown
Agencies are by statute agents of Her Majesty in right of a particular province of Canada, and their obligations, when properly authorized, constitute direct obligations of such province. Other Provincial Crown Agencies that are not, by law, agents
of Her Majesty in right of a particular province of Canada may issue obligations that, by statute, the Lieutenant Governor in Council of such province may guarantee, or may authorize the Treasurer thereof to guarantee, on behalf of the government of
such province. Finally, other Provincial Crown Agencies that are not, by law, agencies of Her Majesty may issue or guarantee obligations not entitled to be guaranteed by a provincial government. No assurance can be given that the government of any
province of Canada will support the obligations of Provincial Crown Agencies that are not agents of Her Majesty and that it has not guaranteed, as it is not obligated to do so by law. Provincial Crown Agency obligations described above include, but
are not limited to, those issued or guaranteed by a:
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provincial railway corporation; |
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provincial hydroelectric or power commission or authority; |
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provincial municipal financing corporation or agency; and |
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provincial telephone commission or authority. |
Certificates of Deposit, Time Deposits and Bankers Acceptances
Certificates of Deposit. Certificates of deposit are certificates issued against funds deposited in a bank or a savings and loan. They are issued for a
definite period of time and earn a specified rate of return.
Time Deposits. Time deposits are
non-negotiable deposits maintained in banking institutions for specified periods of time at stated interest rates.
Bankers Acceptances. Bankers acceptances are short-term credit instruments evidencing the obligation of a bank to pay a draft which has
been drawn on it by a customer. These instruments reflect the obligations both of the bank and of the drawer to pay the face amount of the instrument upon maturity. They are primarily used to finance the import, export, transfer or storage of goods.
They are accepted when a bank guarantees their payment at maturity.
These obligations are not insured by the Federal Deposit Insurance
Corporation.
Certificates of deposit and bankers acceptances acquired by Classic Value Fund and U.S. Global Leaders Growth Fund will be
dollar-denominated obligations of domestic banks, savings and loan associations or financial institutions which, at the time of purchase, have capital, surplus and undivided profits in excess of $100 million (including assets of both domestic
and foreign branches), based on latest published reports, or less than $100 million if the principal amount of such bank obligations are fully insured by the U.S. government.
Commercial Paper and Short-Term Notes
Commercial paper
consists of unsecured promissory notes issued by corporations. Issues of commercial paper and short-term notes will normally have maturities of less than nine months and fixed rates of return, although such instruments may have maturities of up to
one year.
Fundamental Large Cap Core Fund may invest in commercial paper rated at least P-1 by
Moodys or A-1 by S&P. Classic Value Fund and U.S. Global Leaders Growth Fund may invest in commercial paper consisting of issues rated at the time of purchase A-2 or higher by S&P, P-1 or P-2 by Moodys, or similarly rated by another NRSRO or, if
unrated, will be determined by the subadvisor to be of comparable quality. These ratings symbols are described in Appendix A.
Variable Amount Master
Demand Notes (Each fund other than Balanced Fund, Classic Value Fund, Financial Industries Fund, Fundamental Large Cap Core Fund, Regional Bank Fund, and U.S. Global Leaders Growth Fund). Commercial paper obligations may include variable amount
master demand notes. Variable amount master demand notes are obligations that permit the investment of fluctuating amounts at varying rates of interest pursuant to direct arrangements between a fund, as lender, and the borrower. These notes permit
daily changes in the amounts borrowed. The investing (i.e., lending) fund has the right to increase the amount under the note at any time up to the full amount provided by the note agreement, or to decrease the amount, and the borrower
may prepay up to the full amount of the note without penalty. Because variable amount master demand notes are direct lending arrangements between the lender and borrower, it is not generally contemplated that such instruments will be traded. There
is no secondary market for these notes, although they are redeemable (and thus immediately repayable by the borrower) at face value, plus accrued interest, at any time.
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A subadvisor will only invest in variable amount master demand notes issued by companies that, at the date of
investment, have an outstanding debt issue rated Aaa or Aa by Moodys or AAA or AA by S&P or Fitch, and that the subadvisor has determined present minimal risk of loss. A subadvisor will look
generally at the financial strength of the issuing company as backing for the note and not to any security interest or supplemental source, such as a bank letter of credit. A variable amount master demand note will be valued on each day
a NAV is determined. The NAV generally will be equal to the face value of the note plus accrued interest unless the financial position of the issuer is such that its ability to repay the note when due is in question.
Conversion of Debt Securities
In the event debt
securities held by a fund are converted to or exchanged for equity securities, the fund may continue to hold such equity securities, but only if and to the extent consistent with and permitted by its investment objective and policies.
Convertible Securities
Convertible securities may
include corporate notes or preferred securities. Investments in convertible securities are not subject to the rating criteria with respect to non-convertible debt obligations. As with all debt securities, the
market value of convertible securities tends to decline as interest rates increase and, conversely, to increase as interest rates decline. The market value of convertible securities can also be heavily dependent upon the changing value of the equity
securities into which such securities are convertible, depending on whether the market price of the underlying security exceeds the conversion price. Convertible securities generally rank senior to common stocks in an issuers capital structure
and consequently entail less risk than the issuers common stock. However, the extent to which such risk is reduced depends upon the degree to which the convertible security sells above its value as a fixed-income security.
Corporate Obligations
Corporate obligations are bonds
and notes issued by corporations to finance long-term credit needs.
Depositary Receipts
Securities of foreign issuers may include American Depositary Receipts, European Depositary Receipts, Global Depositary Receipts, International Depositary
Receipts, and Non-Voting Depositary Receipts (ADRs, EDRs, GDRs, IDRs, and NVDRs, respectively, and collectively, Depositary Receipts).
Depositary Receipts are certificates typically issued by a bank or trust company that give their holders the right to receive securities issued by a foreign or domestic corporation.
ADRs are U.S. dollar-denominated securities backed by foreign securities deposited in a U.S. securities depository. ADRs are created for trading in the U.S.
markets. The value of an ADR will fluctuate with the value of the underlying security and will reflect any changes in exchange rates. An investment in ADRs involves risks associated with investing in foreign securities. Issuers of unsponsored ADRs
are not contractually obligated to disclose material information in the United States, and, therefore, there may not be a correlation between that information and the market value of an unsponsored ADR.
EDRs, GDRs, IDRs, and NVDRs are receipts evidencing an arrangement with a foreign bank or exchange affiliate similar to that for ADRs and are designed for use
in foreign securities markets. EDRs, GDRs, IDRs, and NVDRs are not necessarily quoted in the same currency as the underlying security. NVDRs do not have voting rights.
Each fund may invest in ADRs, each fund other than U.S. Global Leaders Growth Fund may invest in EDRs, and each fund other than Classic Value Fund and U.S.
Global Leaders Growth Fund may invest in GDRs, IDRs, and NVDRs, in each case as described in its investment policies. U.S. Global Leaders Growth Fund treats ADRs as interests in the underlying securities for purposes of its investment policies.
Exchange-Traded Notes
ETNs are senior, unsecured,
unsubordinated debt securities the returns of which are linked to the performance of a particular market benchmark or strategy, minus applicable fees. ETNs are traded on an exchange (e.g., the NYSE) during normal trading hours; however, investors
also can hold ETNs until they mature. At maturity, the issuer pays to the investor a cash amount equal to the principal amount, subject to the days market benchmark or strategy factor. ETNs do not make periodic coupon payments or provide
principal protection. ETNs are subject to credit risk, including the credit risk of the issuer, and the value of the ETN may drop due to a downgrade in the issuers credit rating, despite the underlying market benchmark or strategy remaining
unchanged. The value of an ETN also may be influenced by time to maturity, level of supply and demand for the ETN, volatility and lack of liquidity in underlying assets, changes in the applicable interest rates, changes in the issuers credit
rating, and economic, legal, political, or geographic events that affect the referenced underlying asset. When a fund invests in ETNs, it will bear its proportionate share of any fees and expenses borne by the ETN. A decision by a fund to sell ETN
holdings may be limited by the availability of a secondary market. In addition, although an ETN may be listed on an exchange, the issuer may not be required to maintain the listing, and there can be no assurance that a secondary market will exist
for an ETN.
ETNs also are subject to tax risk. No assurance can be given that the IRS will accept, or a court will uphold, how a fund characterizes and
treats ETNs for tax purposes.
An ETN that is tied to a specific market benchmark or strategy may not be able to replicate and maintain exactly the
composition and relative weighting of securities, commodities or other components in the applicable market benchmark or strategy. Some ETNs that use leverage can, at times, be relatively illiquid, and thus they may be difficult to purchase or sell
at a fair price. Leveraged ETNs are subject to the same risk as other instruments that use leverage in any form. The market value of ETNs may differ from their market benchmark or strategy. This difference in price may be due to the fact that the
supply and demand in the market for ETNs at any point in time is not always identical to the supply and demand in the market for the securities, commodities or other components underlying the market benchmark or strategy that the ETN seeks to track.
As a result, there may be times when an ETN trades at a premium or discount to its market benchmark or strategy.
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Fixed-Income Securities
Investment grade bonds are rated at the time of purchase in the four highest rating categories by a NRSRO, such as those rated Aaa, Aa,
A and Baa by Moodys, or AAA, AA, A and BBB by S&P or Fitch. Obligations rated in the lowest of the top four rating categories (such as Baa by Moodys
or BBB by S&P or Fitch) may have speculative characteristics and changes in economic conditions or other circumstances are more likely to lead to a weakened capacity to make principal and interest payments, including a greater
possibility of default or bankruptcy of the issuer, than is the case with higher grade bonds. Subsequent to its purchase by a fund, an issue of securities may cease to be rated or its rating may be reduced below the minimum required for purchase by
a fund. In addition, it is possible that Moodys, S&P, Fitch and other NRSROs might not timely change their ratings of a particular issue to reflect subsequent events. None of these events will require the sale of the securities by a fund,
although a subadvisor will consider these events in determining whether it should continue to hold the securities.
In general, the ratings of
Moodys, S&P, and Fitch represent the opinions of these agencies as to the quality of the securities that they rate. It should be emphasized however, that ratings are relative and subjective and are not absolute standards of quality. These
ratings will be used by a fund as initial criteria for the selection of portfolio securities. Among the factors that will be considered are the long-term ability of the issuer to pay principal and interest and general economic trends. Appendix A
contains further information concerning the ratings of Moodys, S&P, and Fitch and their significance.
Foreign Government Securities
Foreign government securities include securities issued or guaranteed by foreign governments (including political subdivisions) or their authorities, agencies,
or instrumentalities or by supra-national agencies. Different kinds of foreign government securities have different kinds of government support. For example, some foreign government securities are supported by the full faith and credit of a foreign
national government or political subdivision and some are not. Foreign government securities of some countries may involve varying degrees of credit risk as a result of financial or political instability in those countries and the possible inability
of a fund to enforce its rights against the foreign government issuer. As with other fixed income securities, sovereign issuers may be unable or unwilling to make timely principal or interest payments. Supra-national agencies are agencies whose
member nations make capital contributions to support the agencies activities.
High Yield (High Risk) Domestic Corporate Debt Securities
High yield corporate debt securities (also known as junk bonds) include bonds, debentures, notes, bank loans, credit-linked notes and commercial
paper. Most of these debt securities will bear interest at fixed rates, except bank loans, which usually have floating rates. Bonds also may have variable rates of interest, and debt securities may involve equity features, such as equity warrants or
convertible outright and participation features (i.e., interest or other payments, often in addition to a fixed rate of return, that are based on the borrowers attainment of specified levels of revenues, sales or profits and thus enable the
holder of the security to share in the potential success of the venture). Today, much high yield debt is used for general corporate purposes, such as financing capital needs or consolidating and paying down bank lines of credit.
The secondary market for high yield U.S. corporate debt securities is concentrated in relatively few market makers and is dominated by institutional
investors, including funds, insurance companies and other financial institutions. Accordingly, the secondary market for such securities is not as liquid as, and is more volatile than, the secondary market for higher-rated securities. In addition,
market trading volume for high yield U.S. corporate debt securities is generally lower and the secondary market for such securities could shrink or disappear suddenly and without warning as a result of adverse market or economic conditions,
independent of any specific adverse changes in the condition of a particular issuer. The lack of sufficient market liquidity may cause a fund to incur losses because it will be required to effect sales at a disadvantageous time and then only at a
substantial drop in price. These factors may have an adverse effect on the market price and a funds ability to dispose of particular portfolio investments. A less liquid secondary market also may make it more difficult for a fund to obtain
precise valuations of the high yield securities in its portfolio.
A fund is not obligated to dispose of securities whose issuers subsequently are in
default or that are downgraded below the rating requirements that the fund imposes at the time of purchase.
Hybrid Instruments
Hybrid instruments (a type of potentially high-risk derivative) combine the elements of futures contracts or options with those of debt, preferred equity or a
depository instrument.
Characteristics of Hybrid Instruments. Generally, a hybrid instrument is a debt security, preferred stock, depository
share, trust certificate, certificate of deposit or other evidence of indebtedness on which a portion of or all interest payments, and/or the principal or stated amount payable at maturity, redemption or retirement, is determined by reference to the
following:
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prices, changes in prices, or differences between prices of securities, currencies, intangibles, goods, articles
or commodities (collectively, underlying assets); or |
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an objective index, economic factor or other measure, such as interest rates, currency exchange rates, commodity
indices, and securities indices (collectively, benchmarks). |
Hybrid instruments may take a variety of forms, including, but
not limited to:
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debt instruments with interest or principal payments or redemption terms determined by reference to the value of
a currency or commodity or securities index at a future point in time; |
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preferred stock with dividend rates determined by reference to the value of a currency; or |
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convertible securities with the conversion terms related to a particular commodity. |
Uses of Hybrid Instruments. Hybrid instruments provide an efficient means of creating exposure to a particular market, or segment of a market, with the
objective of enhancing total return. For example, a fund may wish to take advantage of expected declines in interest rates in several European countries, but avoid the transaction costs associated with buying and currency-hedging the foreign bond
positions.
One approach is to purchase a U.S. dollar-denominated hybrid instrument whose redemption price is linked to the average three-year interest
rate in a designated group of countries. The redemption price formula would provide for payoffs of greater than par if the average interest rate was lower than a specified level, and payoffs of less than par if rates were above the specified level.
Furthermore, the investing fund could limit the downside risk of the security by establishing a minimum redemption price so that the principal paid at maturity could not be below a predetermined minimum level if interest rates were to rise
significantly.
The purpose of this type of arrangement, known as a structured security with an embedded put option, is to give a fund the desired
European bond exposure while avoiding currency risk, limiting downside market risk, and lowering transactions costs. Of course, there is no guarantee that such a strategy will be successful and the value of a fund may decline if, for example,
interest rates do not move as anticipated or credit problems develop with the issuer of the hybrid instrument.
Structured Notes. Structured notes
include investments in an entity, such as a trust, organized and operated solely for the purpose of restructuring the investment characteristics of various securities. This type of restructuring involves the deposit or purchase of specified
instruments and the issuance of one or more classes of securities backed by, or representing interests, in the underlying instruments. The cash flow on the underlying instruments may be apportioned among the newly issued structured notes to create
securities with different investment characteristics, such as varying maturities, payment priorities or interest rate provisions. The extent of the income paid by the structured notes is dependent on the cash flow of the underlying instruments.
Commodity-Linked Notes. Certain structured products may provide exposure to the commodities markets. These are derivative securities with one or more
commodity-linked components that have payment features similar to commodity futures contracts, commodity options, or similar instruments. Commodity-linked structured products may be either equity or debt securities, leveraged or unleveraged, and
have both security and commodity-like characteristics. A portion of the value of these instruments may be derived from the value of a commodity, futures contract, index or other economic variable.
Illiquid Securities
A fund may not invest more than 15%
of its net assets in securities that cannot be sold or disposed of in seven calendar days or less without the sale or disposition significantly changing the market value of the investment (illiquid securities). Investment in illiquid
securities involves the risk that, because of the lack of consistent market demand for such securities, a fund may be forced to sell them at a discount from the last offer price. To the extent that an investment is deemed to be an illiquid
investment or a less liquid investment, a fund can expect to be exposed to greater liquidity risk.
Illiquid securities may include, but are not limited
to: (a) securities (except for Section 4(a)(2) Commercial Paper, discussed below) that are not eligible for resale pursuant to Rule 144A under the 1933 Act; (b) repurchase agreements maturing in more than seven days (except for those
that can be terminated after a notice period of seven days or less); (c) IOs and POs of non-governmental issuers; (d) time deposits maturing in more than seven days; (e) federal fund loans maturing
in more than seven days; (f) bank loan participation interests; (g) foreign government loan participations; (h) municipal leases and participations therein; and (i) any other securities or other investments for which a liquid
secondary market does not exist.
Each Trust has implemented a written liquidity risk management program (the LRM Program) and related
procedures to manage the liquidity risk of a fund in accordance with Rule 22e-4 under the 1940 Act (Rule 22e-4). Rule
22e-4 defines liquidity risk as the risk that a fund could not meet requests to redeem shares issued by the fund without significant dilution of the remaining investors interests in the fund.
The Board has designated the Advisor to serve as the administrator of the LRM Program and the related procedures. As a part of the LRM Program, the Advisor is responsible to identify illiquid investments and categorize the relative liquidity of a
funds investments in accordance with Rule 22e-4. Under the LRM Program, the Advisor assesses, manages, and periodically reviews a funds liquidity risk, and is responsible to make periodic reports
to the Board and the SEC regarding the liquidity of a funds investments, and to notify the Board and the SEC of certain liquidity events specified in Rule 22e-4. The liquidity of a funds portfolio
investments is determined based on relevant market, trading and investment-specific considerations under the LRM Program.
Commercial paper issued in
reliance on Section 4(a)(2) of the 1933 Act (Section 4(a)(2) Commercial Paper) is restricted as to its disposition under federal securities law, and generally is sold to institutional investors, such as the funds, who agree
that they are purchasing the paper for investment purposes and not with a view to public distribution. Any resale by the purchaser must be made in an exempt transaction. Section 4(a)(2) Commercial Paper normally is resold to other institutional
investors, like the funds, through or with the assistance of the issuer or investment dealers who make a market in Section 4(a)(2) Commercial Paper, thus providing liquidity.
If the Advisor determines, pursuant to the LRM Program and related procedures, that specific Section 4(a)(2) Commercial Paper or securities that are
restricted as to resale but for which a ready market is available pursuant to an exemption provided by Rule 144A under the 1933 Act or other exemptions from the registration requirements of the 1933 Act are liquid, they will not be subject to a
funds limitation on investments in illiquid securities. Investing in Section 4(a)(2) Commercial Paper could have the effect of increasing the level of illiquidity in a fund if qualified institutional buyers become for a time uninterested
in purchasing these restricted securities.
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Index-Related Securities (Equity Equivalents)
A fund may invest in certain types of securities that enable investors to purchase or sell shares in a basket of securities that seeks to track the performance
of an underlying index or a portion of an index. Such Equity Equivalents include, among others DIAMONDS (interests in a basket of securities that seeks to track the performance of the Dow Jones Industrial Average), SPDRs or S&P Depositary
Receipts (an exchange-traded fund that tracks the S&P 500 Index). Such securities are similar to index mutual funds, but they are traded on various stock exchanges or secondary markets. The value of these securities is dependent upon the
performance of the underlying index on which they are based. Thus, these securities are subject to the same risks as their underlying indices as well as the securities that make up those indices. For example, if the securities comprising an index
that an index-related security seeks to track perform poorly, the index-related security will lose value.
Equity Equivalents may be used for several
purposes, including to simulate full investment in the underlying index while retaining a cash balance for portfolio management purposes, to facilitate trading, to reduce transaction costs or to seek higher investment returns where an Equity
Equivalent is priced more attractively than securities in the underlying index. Because the expense associated with an investment in Equity Equivalents may be substantially lower than the expense of small investments directly in the securities
comprising the indices they seek to track, investments in Equity Equivalents may provide a cost-effective means of diversifying a funds assets across a broad range of securities.
To the extent a fund invests in securities of other investment companies, including Equity Equivalents, fund shareholders would indirectly pay a portion of
the operating costs of such companies in addition to the expenses of its own operations. These costs include management, brokerage, shareholder servicing and other operational expenses. Indirectly, if a fund invests in Equity Equivalents,
shareholders may pay higher operational costs than if they owned the underlying investment companies directly. Additionally, a funds investments in such investment companies are subject to limitations under the 1940 Act and market
availability.
The prices of Equity Equivalents are derived and based upon the securities held by the particular investment company. Accordingly, the
level of risk involved in the purchase or sale of an Equity Equivalent is similar to the risk involved in the purchase or sale of traditional common stock, with the exception that the pricing mechanism for such instruments is based on a basket of
stocks. The market prices of Equity Equivalents are expected to fluctuate in accordance with both changes in the NAVs of their underlying indices and the supply and demand for the instruments on the exchanges on which they are traded. Substantial
market or other disruptions affecting Equity Equivalents could adversely affect the liquidity and value of the shares of a fund.
Indexed Securities
Indexed securities are instruments whose prices are indexed to the prices of other securities, securities indices, currencies, or other financial
indicators. Indexed securities typically, but not always, are debt securities or deposits whose value at maturity or coupon rate is determined by reference to a specific instrument or statistic.
Currency-indexed securities typically are short-term to intermediate-term debt securities whose maturity values or interest rates are determined by reference
to the values of one or more specified foreign currencies, and may offer higher yields than U.S. dollar-denominated securities. Currency-indexed securities may be positively or negatively indexed; that is, their maturity value may increase when the
specified currency value increases, resulting in a security that performs similarly to a foreign denominated instrument, or their maturity value may decline when foreign currencies increase, resulting in a security whose price characteristics are
similar to a put on the underlying currency. Currency-indexed securities also may have prices that depend on the values of a number of different foreign currencies relative to each other.
The performance of indexed securities depends to a great extent on the performance of the security, currency, or other instrument to which they are indexed,
and also may be influenced by interest rate changes in the United States and abroad. Indexed securities may be more volatile than the underlying instruments. Indexed securities also are subject to the credit risks associated with the issuer of the
security, and their values may decline substantially if the issuers creditworthiness deteriorates. Issuers of indexed securities have included banks, corporations, and certain U.S. government agencies. An indexed security may be leveraged to
the extent that the magnitude of any change in the interest rate or principal payable on an indexed security is a multiple of the change in the reference price.
Inflation-Indexed Bonds
Inflation-indexed bonds are debt
instruments whose principal and/or interest value are adjusted periodically according to a rate of inflation (usually a CPI). Two structures are most common. The U.S. Treasury and some other issuers use a structure that accrues inflation into the
principal value of the bond. Most other issuers pay out the inflation accruals as part of a semiannual coupon.
U.S. Treasury Inflation Protected
Securities (TIPS) currently are issued with maturities of five, ten, or thirty years, although it is possible that securities with other maturities will be issued in the future. The principal amount of TIPS adjusts for inflation,
although the inflation-adjusted principal is not paid until maturity. Semiannual coupon payments are determined as a fixed percentage of the inflation-adjusted principal at the time the payment is made.
If the rate measuring inflation falls, the principal value of inflation-indexed bonds will be adjusted downward, and consequently the interest payable on
these securities (calculated with respect to a smaller principal amount) will be reduced. At maturity, TIPS are redeemed at the greater of their inflation-adjusted principal or at the par amount at original issue. If an inflation-indexed bond does
not provide a guarantee of principal at maturity, the adjusted principal value of the bond repaid at maturity may be less than the original principal.
The value of inflation-indexed bonds is expected to change in response to changes in real interest rates. Real interest rates in turn are tied to the
relationship between nominal interest rates and the rate of inflation. For example, if inflation were to rise at a faster rate than nominal interest rates, real interest rates would likely decline, leading to an increase in value of
inflation-indexed bonds. In contrast, if nominal interest rates increase at a faster rate than inflation, real interest rates would likely rise, leading to a decrease in value of inflation-indexed bonds.
12
While these securities, if held to maturity, are expected to be protected from long-term inflationary trends,
short-term increases in inflation may lead to a decline in value. If nominal interest rates rise due to reasons other than inflation (for example, due to an expansion of non-inflationary economic activity),
investors in these securities may not be protected to the extent that the increase in rates is not reflected in the bonds inflation measure.
The
inflation adjustment of TIPS is tied to the CPI-U, which is calculated monthly by the U.S. Bureau of Labor Statistics. The CPI-U is a measurement of price changes in the
cost of living, made up of components such as housing, food, transportation, and energy. There can be no assurance that the CPI- U will accurately measure the real rate of inflation in the prices of goods and services.
Interfund Lending
Pursuant to an exemptive order issued
by the SEC, a fund may lend money to, and borrow money from, other funds advised by the Advisor or any other investment advisor under common control with the Advisor, subject to the fundamental restrictions on borrowing and lending applicable to the
fund. Balanced Fund, Disciplined Value International Fund, Diversified Macro Fund, Emerging Markets Equity Fund, ESG International Equity Fund, ESG Large Cap Core Fund, Fundamental Large Cap Core Fund, Global Environmental Opportunities Fund, Global
Thematic Opportunities Fund, Infrastructure Fund, International Dynamic Growth Fund, Seaport Long/Short Fund, Small Cap Core Fund, and U.S. Global Leaders Growth Fund are authorized to participate fully in this program. Classic Value Fund and
Financial Industries Fund are subject to a fundamental investment restriction that prohibits lending through the program. Regional Bank Fund is subject to fundamental investment restrictions that prohibit borrowing or lending through the program.
A fund will borrow through the program only when the costs are equal to or lower than the cost of bank loans, and a fund will lend through the program
only when the returns are higher than those available from an investment in overnight repurchase agreements. Interfund loans and borrowings normally extend overnight, but can have a maximum duration of seven days. Loans may be called on one
days notice. A fund may have to borrow from a bank at a higher interest rate if an interfund loan is called or not renewed. Any delay in repayment to a lending fund or from a borrowing fund could result in a lost investment opportunity or
additional borrowing costs.
Investment in Other Investment Companies
A fund may invest in other investment companies (including closed-end investment companies, unit investment trusts, open-end investment companies, investment companies exempted from registration under the 1940 Act pursuant to the rules thereunder and other pooled vehicles) to the extent permitted by federal securities laws,
including Section 12 of the 1940 Act, and the rules, regulations and interpretations thereunder. A fund may invest in other investment companies beyond the statutory limits set forth in Section 12 of the 1940 Act (statutory
limits) to the extent permitted by an exemptive rule adopted by the SEC or pursuant to an exemptive order obtained from the SEC.
In October 2020,
the SEC adopted Rule 12d1-4, which became effective on January 19, 2021, and permits a fund to invest in other investment companies beyond the statutory limits, subject to certain conditions. Compliance with
Rule 12d1-4 is required as of January 19, 2022.
Investing in other investment companies involves substantially
the same risks as investing directly in the underlying instruments, but the total return on such investments at the investment company-level may be reduced by the operating expenses and fees of such other investment companies, including advisory
fees. Certain types of investment companies, such as closed-end investment companies, issue a fixed number of shares that trade on a stock exchange or may involve the payment of substantial premiums above the
value of such investment companies portfolio securities when traded OTC or at discounts to their NAVs. Others are continuously offered at NAV, but also may be traded in the secondary market.
Investments in Creditors Claims
Creditors
claims in bankruptcy (Creditors Claims) are rights to payment from a debtor under the U.S. bankruptcy laws. Creditors Claims may be secured or unsecured. A secured claim generally receives priority in payment over unsecured
claims.
Sellers of Creditors Claims can either be: (i) creditors that have extended unsecured credit to the debtor company (most commonly
trade suppliers of materials or services); or (ii) secured creditors (most commonly financial institutions) that have obtained collateral to secure an advance of credit to the debtor. Selling a Creditors Claim offers the creditor an
opportunity to turn a claim that otherwise might not be satisfied for many years into liquid assets.
A Creditors Claim may be purchased directly
from a creditor although most are purchased through brokers. A Creditors Claim can be sold as a single claim or as part of a package of claims from several different bankruptcy filings. Purchasers of Creditors Claims may take an active
role in the reorganization process of the bankrupt company and, in certain situations in which a Creditors Claim is not paid in full, the claim may be converted into stock of the reorganized debtor.
Although Creditors Claims can be sold to other investors, the market for Creditors Claims is not liquid and, as a result, a purchaser of a
Creditors Claim may be unable to sell the claim or may have to sell it at a drastically reduced price. There is no guarantee that any payment will be received from a Creditors Claim, especially in the case of unsecured claims.
Lending of Securities
Each fund other than Regional Bank
Fund may lend its securities so long as such loans do not represent more than 331/3% of its total assets. As collateral for the loaned securities, the borrower gives the lending portfolio
collateral equal to at least 100% of the value of the loaned securities. The collateral will consist of cash (including U.S. dollars and foreign currency), cash equivalents or securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities. The borrower must also agree to increase the collateral if the value of the loaned securities increases. If the market value of the loaned securities declines, the borrower may request that some collateral be returned.
13
During the existence of the loan, a fund will receive from the borrower amounts equivalent to any dividends,
interest or other distributions on the loaned securities, as well as interest on such amounts. If the fund receives a payment in lieu of dividends (a substitute payment) with respect to securities on loan pursuant to a securities lending
transaction, such income will not be eligible for the dividends-received deduction (the DRD) for corporate shareholders or for treatment as qualified dividend income for individual shareholders. The DRD and qualified dividend income are
discussed more fully in this SAI under Additional Information Concerning Taxes.
As with other extensions of credit, there are risks that
collateral could be inadequate in the event of the borrower failing financially, which could result in actual financial loss, and risks that recovery of loaned securities could be delayed, which could result in interference with portfolio management
decisions or exercise of ownership rights. The collateral is managed by an affiliate of the Advisor, which may incentivize the Advisor to lend fund securities to benefit this affiliate. The Advisor maintains robust oversight of securities lending
activity and seeks to ensure that all lending activity undertaken by a fund is in the funds best interests. A fund will be responsible for the risks associated with the investment of cash collateral, including the risk that the fund may lose
money on the investment or may fail to earn sufficient income to meet its obligations to the borrower. In addition, a fund may lose its right to vote its shares of the loaned securities at a shareholder meeting if the subadvisor does not recall or
does not timely recall the loaned securities, or if the borrower fails to return the recalled securities in advance of the record date for the meeting.
Certain of the Trusts, on behalf of certain of their funds, have entered into an agency agreement for securities lending transactions (Securities
Lending Agreement) with Citibank and, separately, with Brown Brothers Harriman and National Financial Services LLC (Fidelity Agency Lending)(each, a Securities Lending Agent). Pursuant to each Securities Lending
Agreement, Citibank, Brown Brothers Harriman, or Fidelity Agency Lending acts as securities lending agent for the funds and administers each funds securities lending program. During the fiscal year, each Securities Lending Agent performed
various services for the funds, including the following: (i) lending portfolio securities, previously identified by the fund as available for loan, and held by the funds custodian (Custodian) on behalf of the fund, to
borrowers identified by the fund in the Securities Lending Agreement; (ii) instructing the Custodian to receive and deliver securities, as applicable, to effect such loans; (iii) locating borrowers; (iv) monitoring daily the market
value of loaned securities; (v) ensuring daily movement of collateral associated with loan transactions; (vi) marking to market loaned securities and non-cash collateral; (vii) monitoring
dividend activity with respect to loaned securities; (viii) negotiating loan terms with the borrowers; (ix) recordkeeping and account servicing related to securities lending activities; and (x) arranging for the return of loaned securities
at the termination of the loan. Under each Securities Lending Agreement, Citibank, Brown Brothers Harriman, or Fidelity Agency Lending, as applicable, generally will bear the risk that a borrower may default on its obligation to return loaned
securities.
Securities lending involves counterparty risk, including the risk that the loaned securities may not be returned or returned in a timely
manner and/or a loss of rights in the collateral if the borrower or the lending agent defaults or fails financially. This risk is increased when the funds loans are concentrated with a single or limited number of borrowers. There are no limits
on the number of borrowers to which the fund may lend securities and the fund may lend securities to only one or a small group of borrowers. In addition, under each Securities Lending Agreement, loans may be made to affiliates of Citibank, Brown
Brothers Harriman, or Fidelity Agency Lending, as applicable, as identified in the applicable Securities Lending Agreement.
Cash collateral may be
invested by a fund in JHCT, a privately offered 1940 Act registered institutional money market fund. Investment of cash collateral offers the opportunity for a fund to profit from income earned by this collateral pool, but also the risk of loss,
should the value of the funds shares in the collateral pool decrease below the NAV at which such shares were purchased.
For each fund that engaged
in securities lending activities during the fiscal period ended October 31, 2022, the following tables detail the amounts of income and fees/compensation related to such activities during the period. Any fund not listed below did not engage in
securities lending activities during the fiscal period ended October 31, 2022.
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund Name |
|
Balanced Fund |
|
|
Disciplined Value
International
Fund |
|
|
Financial
Industries Fund |
|
Gross Income from securities lending activities ($) |
|
|
497,680 |
|
|
|
473,420 |
|
|
|
2,249 |
|
Fees and/or compensation for securities lending activities and related services |
|
|
|
|
|
|
|
|
|
|
|
|
Fees paid to securities lending agent from a revenue split ($) |
|
|
20,802 |
|
|
|
46,553 |
|
|
|
198 |
|
Fees paid for any cash collateral management service (including fees deducted from a pooled cash
collateral reinvestment vehicle) that are not included in the revenue split ($) |
|
|
26,326 |
|
|
|
14,330 |
|
|
|
244 |
|
Administrative fees not included in revenue split |
|
|
|
|
|
|
|
|
|
|
|
|
Indemnification fee not included in revenue split |
|
|
|
|
|
|
|
|
|
|
|
|
Rebate (paid to borrower) ($) |
|
|
305,214 |
|
|
|
82,635 |
|
|
|
20 |
|
Other fees not included in revenue split (specify) |
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate fees/compensation for securities lending activities ($) |
|
|
352,342 |
|
|
|
143,518 |
|
|
|
462 |
|
Net Income from securities lending activities ($) |
|
|
145,338 |
|
|
|
329,902 |
|
|
|
1,787 |
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund Name |
|
Global Thematic Opportunities Fund |
|
|
Infrastructure Fund |
|
|
International Dynamic Growth Fund |
|
|
Seaport Long/ Short Fund |
|
Gross Income from securities lending activities ($) |
|
|
19,262 |
|
|
|
175,707 |
|
|
|
10,969 |
|
|
|
87,711 |
|
Fees and/or compensation for securities lending activities and related services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees paid to securities lending agent from a revenue split ($) |
|
|
1,046 |
|
|
|
17,737 |
|
|
|
800 |
|
|
|
10,521 |
|
Fees paid for any cash collateral management service (including fees deducted from a pooled cash
collateral reinvestment vehicle) that are not included in the revenue split ($) |
|
|
993 |
|
|
|
6,785 |
|
|
|
1,174 |
|
|
|
1,566 |
|
Administrative fees not included in revenue split |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indemnification fee not included in revenue split |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rebate (paid to borrower) ($) |
|
|
7,801 |
|
|
|
26,980 |
|
|
|
1,616 |
|
|
|
2,697 |
|
Other fees not included in revenue split (specify) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate fees/compensation for securities lending activities ($) |
|
|
9,840 |
|
|
|
51,502 |
|
|
|
3,590 |
|
|
|
14,784 |
|
Net Income from securities lending activities ($) |
|
|
9,422 |
|
|
|
124,205 |
|
|
|
7,379 |
|
|
|
72,927 |
|
Loans and Other Direct Debt Instruments
Direct debt instruments are interests in amounts owed by a corporate, governmental, or other borrower to lenders or lending syndicates (loans and loan
participations), to suppliers of goods or services (trade claims or other receivables), or to other parties. Direct debt instruments involve a risk of loss in case of default or insolvency of the borrower and may offer less legal protection to the
purchaser in the event of fraud or misrepresentation, or there may be a requirement that a fund supply additional cash to a borrower on demand. U.S. federal securities laws afford certain protections against fraud and misrepresentation in connection
with the offering or sale of a security, as well as against manipulation of trading markets for securities. It is unclear whether these protections are available to investments in loans and other forms of direct indebtedness under certain
circumstances, in which case such risks may be increased.
A fund may be in possession of material non-public
information about a borrower as a result of owning a floating rate instrument issued by such borrower. Because of prohibitions on trading in securities of issuers while in possession of such information, a fund might be unable to enter into a
transaction in a publicly traded security issued by that borrower when it would otherwise be advantageous to do so.
Loan Participations and
Assignments; Term Loans
Loan participations are loans or other direct debt instruments that are interests in amounts owned by a corporate,
governmental or other borrower to another party. They may represent amounts owed to lenders or lending syndicates to suppliers of goods or services, or to other parties. A fund will have the right to receive payments of principal, interest and any
fees to which it is entitled only from the lender selling the participation and only upon receipt by the lender of the payments from the borrower. In connection with purchasing participations, a fund generally will have no right to enforce
compliance by the borrower with the term of the loan agreement relating to loan, nor any rights of set-off against the borrower, and a fund may not directly benefit from any collateral supporting the loan in
which it has purchased the participation. As a result, the fund will assume the credit risk of both the borrower and the lender that is selling the participation. In the event of the insolvency of the lender selling a participation, a fund may be
treated as a general creditor of the lender and may not benefit from any set-off between the lender and the borrower.
When a fund purchases assignments from lenders it will acquire direct rights against the borrower on the loan. However, because assignments are arranged
through private negotiations between potential assignees and potential assignors, the rights and obligation acquired by a fund as the purchaser of an assignment may differ from, and be more limited than, those held by the assigning lender.
Investments in loan participations and assignments present the possibility that a fund could be held liable as a co-lender under emerging legal theories of lender liability. In addition, if the loan is
foreclosed, a fund could be part owner of any collateral and could bear the costs and liabilities of owning and disposing of the collateral. It is anticipated that such securities could be sold only to a limited number of institutional investors. In
addition, some loan participations and assignments may not be rated by major rating agencies and may not be protected by the securities laws.
15
A term loan is typically a loan in a fixed amount that borrowers repay in a scheduled series of repayments or a lump-sum payment at maturity. A delayed draw loan is a special feature in a term loan that permits the borrower to withdraw predetermined portions of the total amount borrowed at certain times. If a fund enters into
a commitment with a borrower regarding a delayed draw term loan or bridge loan, the fund will be obligated on one or more dates in the future to lend the borrower monies (up to an aggregate stated amount) if called upon to do so by the borrower.
Once repaid, a term loan cannot be drawn upon again.
Investments in loans and loan participations will subject a fund to liquidity risk. Loans and loan
participations may be transferable among financial institutions, but may not have the liquidity of conventional debt securities and are often subject to restrictions on resale, thereby making them potentially illiquid. For example, the purchase or
sale of loans requires, in many cases, the consent of either a third party (such as the lead or agent bank for the loan) or of the borrower, and although such consent is, in practice, infrequently withheld, the consent requirement can delay a
purchase or hinder a funds ability to dispose of its investments in loans in a timely fashion. In addition, in some cases, negotiations involved in disposing of indebtedness may require weeks to complete. Consequently, some indebtedness may be
difficult or impossible to dispose of readily at what a subadvisor believes to be a fair price.
Corporate loans that a fund may acquire or in which a
fund may purchase a loan participation are made generally to finance internal growth, mergers, acquisitions, stock repurchases, leveraged buy-outs, leverage recapitalizations and other corporate activities.
The highly leveraged capital structure of the borrowers in certain of these transactions may make such loans especially vulnerable to adverse changes in economic or market conditions and greater credit risk than other investments.
Certain of the loan participations or assignments acquired by a fund may involve unfunded commitments of the lenders or revolving credit facilities under
which a borrower may from time to time borrow and repay amounts up to the maximum amount of the facility. In such cases, a fund would have an obligation to advance its portion of such additional borrowings upon the terms specified in the loan
documentation. Such an obligation may have the effect of requiring a fund to increase its investment in a company at a time when it might not be desirable to do so (including at a time when the companys financial condition makes it unlikely
that such amounts will be repaid).
The borrower of a loan in which a fund holds an interest (including through a loan participation) may, either at its
own election or pursuant to the terms of the loan documentation, prepay amounts of the loan from time to time. The degree to which borrowers prepay loans, whether as a contractual requirement or at their election, may be affected by general business
conditions, the financial condition of the borrower and competitive conditions among lenders, among other things. As such, prepayments cannot be predicted with accuracy. Upon a prepayment, either in part or in full, the actual outstanding debt on
which a fund derives interest income will be reduced. The effect of prepayments on a funds performance may be mitigated by the receipt of prepayment fees, and the funds ability to reinvest prepayments in other loans that have similar or
identical yields. However, there is no assurance that a fund will be able to reinvest the proceeds of any loan prepayment at the same interest rate or on the same terms as those of the prepaid loan.
A fund may invest in loans that pay interest at fixed rates and loans that pay interest at rates that float or reset periodically at a margin above a
generally recognized base lending rate, such as the Prime Rate (the interest rate that banks charge their most creditworthy customers), LIBOR, or another generally recognized base lending rate. Most floating rate loans are senior in rank in the
event of bankruptcy to most other securities of the borrower such as common stock or public bonds. In addition, floating rate loans also are normally secured by specific collateral or assets of the borrower so that the holders of the loans will have
a priority claim on those assets in the event of default or bankruptcy of the issuer. While the seniority in rank and the security interest are helpful in reducing credit risk, such risk is not eliminated. Securities with floating interest rates can
be less sensitive to interest rate changes, but may decline in value if their interest rates do not rise as much as interest rates in general, or if interest rates decline. While, because of this interest rate reset feature, loans with resetting
interest rates provide a considerable degree of protection against rising interest rates, there is still potential for interest rates on such loans to lag changes in interest rates in general for some period of time. In addition, changes in interest
rates will affect the amount of interest income paid to a fund as the floating rate instruments adjust to the new levels of interest rates. In a rising base rate environment, income generation generally will increase. Conversely, during periods when
the base rate is declining, the income generating ability of the loan instruments will be adversely affected.
Investments in many loans have additional
risks that result from the use of agents and other interposed financial institutions. Many loans are structured and administered by a financial institution (e.g., a commercial bank) that acts as the agent of the lending syndicate. The agent
typically administers and enforces the loan on behalf of the other lenders in the lending syndicate. In addition, an institution, typically but not always the agent, holds the collateral, if any, on behalf of the lenders. A financial
institutions employment as an agent might be terminated in the event that it fails to observe a requisite standard of care or becomes insolvent. A successor agent would generally be appointed to replace the terminated agent, and assets held by
the agent under the loan agreement would likely remain available to holders of such indebtedness. However, if assets held by the agent for the benefit of a fund were determined to be subject to the claims of the agents general creditors, the
fund might incur certain costs and delays in realizing payment on a loan or loan participation and could suffer a loss of principal and/or interest. In situations involving other interposed financial institutions (e.g., an insurance company or
government agency) similar risks may arise.
Market Capitalization Weighted Approach
A funds structure may involve market capitalization weighting in determining individual security weights and, where applicable, country or region
weights. Market capitalization weighting means each security is generally purchased based on the issuers relative market capitalization. Market capitalization weighting may be adjusted by a subadvisor, for a variety of reasons. A fund may
deviate from market capitalization weighting to limit or fix the exposure to a particular country or issuer to a maximum portion of the assets of the fund. Additionally, a subadvisor may consider such factors as free float, momentum, trading
strategies, size, relative price, liquidity, profitability, investment characteristics and other factors determined to be appropriate by a subadvisor given market conditions. In assessing relative price, a subadvisor may consider additional factors
such as price to cash flow or price to earnings ratios. In assessing profitability, a subadvisor may consider different ratios, such as that of earnings or profits from
16
operations relative to book value or assets. The criteria a subadvisor uses for assessing relative price and profitability are subject to change from time to time. A subadvisor may exclude the
eligible security of a company that meets applicable market capitalization criterion if it determines, in its judgment, that the purchase of such security is inappropriate in light of other conditions. These adjustments will result in a deviation
from traditional market capitalization weighting. A further deviation may occur due to holdings in securities received in connection with corporate actions. A subadvisor may consider a small capitalization companys investment characteristics
with respect to other eligible companies when making investment decisions and may exclude a small capitalization company when the manager determines it to be appropriate. In assessing a companys investment characteristics, a subadvisor may
consider ratios such as recent changes in assets divided by total assets. Under normal circumstances, a fund will seek to limit such exclusion to no more than 5% of the eligible small capitalization company universe in each country that the fund
invests. The criteria a subadvisor uses for assessing a companys investment characteristics is subject to change from time to time.
Adjustment for
free float modifies market capitalization weighting to exclude the share capital of a company that is not freely available for trading in the public equity markets. For example, the following types of shares may be excluded: (i) those held by
strategic investors (such as governments, controlling shareholders and management); (ii) treasury shares; or (iii) shares subject to foreign ownership restrictions.
Furthermore, a subadvisor may reduce the relative amount of any security held in order to retain sufficient portfolio liquidity. A portion, but generally not
in excess of 20% of a funds assets, may be invested in interest-bearing obligations, such as money market instruments, thereby causing further deviation from market capitalization weighting. A further deviation may occur due to holdings in
securities received in connection with corporate actions.
Block purchases of eligible securities may be made at opportune prices, even though such
purchases exceed the number of shares that, at the time of purchase, would be purchased under a market capitalization weighted approach. Generally, changes in the composition and relative ranking (in terms of market capitalization) of the stocks
that are eligible for purchase take place with every trade when the securities markets are open for trading due, primarily, to price changes of such securities. On at least a semiannual basis, a subadvisor will identify companies whose stock is
eligible for investment by the fund. Additional investments generally will not be made in securities that have changed in value sufficiently to be excluded from a subadvisors then-current market capitalization requirement for eligible
portfolio securities. This may result in further deviation from market capitalization weighting. Such deviation could be substantial if a significant amount of holdings of a fund change in value sufficiently to be excluded from the requirement for
eligible securities but not by a sufficient amount to warrant their sale.
Country weights may be based on the total market capitalization of companies
within each country. The country weights may take into consideration the free float of companies within a country or whether these companies are eligible to be purchased for the particular strategy. In addition, to maintain a satisfactory level of
diversification, a subadvisor may limit or fix the exposure to a particular country or region to a maximum proportion of the assets of that vehicle. Country weights may also vary due to general day-to-day trading patterns and price movements. The weighting of countries may vary from their weighting in published international indices.
Money Market Instruments
Money market instruments (and
other securities as noted under each fund description) may be purchased for temporary defensive purposes or for short-term investment purposes. General overnight cash held in a funds portfolio may also be invested in JHCT, a privately offered
1940 Act registered institutional money market fund subadvised by Manulife IM (US), an affiliate of the Advisor, that is part of the same group of investment companies as the fund and that is offered exclusively to funds in the same group of
investment companies.
Mortgage Dollar Rolls
Under a
mortgage dollar roll, a fund sells mortgage-backed securities for delivery in the future (generally within 30 days) and simultaneously contracts to repurchase substantially similar securities (of the same type, coupon and maturity) on a specified
future date. During the roll period, a fund forgoes principal and interest paid on the mortgage-backed securities. A fund is compensated by the difference between the current sale price and the lower forward price for the future purchase (often
referred to as the drop), as well as by the interest earned on the cash proceeds of the initial sale. A fund also may be compensated by receipt of a commitment fee. A fund may only enter into covered rolls. Dollar roll
transactions involve the risk that the market value of the securities sold by a fund may decline below the repurchase price of those securities. A mortgage dollar roll may be considered a form of leveraging, and may, therefore, increase fluctuations
in a funds NAV per share. As further outlined in the Government Regulation of Derivatives section, the SEC adopted Rule 18f-4 (the Derivatives Rule) on October 28, 2020, and
in doing so announced it would rescind SEC releases, guidance and no-action letters related to funds coverage and asset segregation practices. Funds were required to comply with the Derivatives Rule
requirements by August 19, 2022. Covered rolls will be entered into in accordance with the regulatory requirements described in Government Regulation of Derivatives section. For financial reporting and tax purposes, the funds treat
mortgage dollar rolls as two separate transactions; one involving the purchase of a security and a separate transaction involving a sale.
Mortgage
Securities
Prepayment of Mortgages. Mortgage securities differ from conventional bonds in that principal is paid over the life of the
securities rather than at maturity. As a result, when a fund invests in mortgage securities, it receives monthly scheduled payments of principal and interest, and may receive unscheduled principal payments representing prepayments on the underlying
mortgages. When a fund reinvests the payments and any unscheduled prepayments of principal it receives, it may receive a rate of interest that is higher or lower than the rate on the existing mortgage securities. For this reason, mortgage securities
may be less effective than other types of debt securities as a means of locking in long term interest rates.
In addition, because the underlying mortgage
loans and assets may be prepaid at any time, if a fund purchases mortgage securities at a premium, a prepayment rate that is faster than expected will reduce yield to maturity, while a prepayment rate that is slower than expected will increase yield
to maturity. Conversely, if a fund purchases these securities at a discount, faster than expected prepayments will increase yield to maturity, while slower than expected payments will reduce yield to maturity.
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Adjustable Rate Mortgage Securities. Adjustable rate mortgage securities are similar to the fixed rate
mortgage securities discussed above, except that, unlike fixed rate mortgage securities, adjustable rate mortgage securities are collateralized by or represent interests in mortgage loans with variable rates of interest. These variable rates of
interest reset periodically to align themselves with market rates. Most adjustable rate mortgage securities provide for an initial mortgage rate that is in effect for a fixed period, typically ranging from three to twelve months. Thereafter, the
mortgage interest rate will reset periodically in accordance with movements in a specified published interest rate index. The amount of interest due to an adjustable rate mortgage holder is determined in accordance with movements in a specified
published interest rate index by adding a pre-determined increment or margin to the specified interest rate index. Many adjustable rate mortgage securities reset their interest rates based on
changes in:
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one-year, three-year and five-year constant maturity Treasury Bill rates;
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three-month or six-month Treasury Bill rates; |
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11th District Federal Home Loan Bank Cost of Funds; |
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National Median Cost of Funds; or |
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one-month, three-month, six-month
or one-year LIBOR and other market rates. |
During periods of increasing rates, a fund will not
benefit from such increase to the extent that interest rates rise to the point where they cause the current coupon of adjustable rate mortgages held as investments to exceed any maximum allowable annual or lifetime reset limits or cap
rates for a particular mortgage. In this event, the value of the mortgage securities held by a fund would likely decrease. During periods of declining interest rates, income to a fund derived from adjustable rate mortgages that remain in a
mortgage pool may decrease in contrast to the income on fixed rate mortgages, which will remain constant. Adjustable rate mortgages also have less potential for appreciation in value as interest rates decline than do fixed rate investments. Also, a
funds NAV could vary to the extent that current yields on adjustable rate mortgage securities held as investments are different than market yields during interim periods between coupon reset dates.
Privately Issued Mortgage Securities. Privately issued mortgage securities provide for the monthly principal and interest payments made by individual
borrowers to pass through to investors on a corporate basis, and in privately issued collateralized mortgage obligations, as further described below. Privately issued mortgage securities are issued by private originators of, or investors in,
mortgage loans, including:
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savings and loan associations; and |
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special purpose subsidiaries of the foregoing. |
Since privately issued mortgage certificates are not guaranteed by an entity having the credit status of GNMA or Freddie Mac, such securities generally are
structured with one or more types of credit enhancement. For a description of the types of credit enhancements that may accompany privately issued mortgage securities, see Types of Credit Support below. To the extent that a fund invests
in mortgage securities, it will not limit its investments in mortgage securities to those with credit enhancements.
Collateralized Mortgage
Obligations. CMOs generally are bonds or certificates issued in multiple classes that are collateralized by or represent an interest in mortgages. CMOs may be issued by single-purpose, stand-alone finance subsidiaries or trusts of financial
institutions, government agencies, investment banks or other similar institutions. Each class of CMOs, often referred to as a tranche, may be issued with a specific fixed coupon rate (which may be zero) or a floating coupon rate. Each
class of CMOs also has a stated maturity or final distribution date. Principal prepayments on the underlying mortgages may cause the CMOs to be retired substantially earlier than their stated maturities or final distribution dates. Interest is paid
or accrued on CMOs on a monthly, quarterly or semiannual basis.
The principal of and interest on the underlying mortgages may be allocated among the
several classes of a series of a CMO in many ways. The general goal sought to be achieved in allocating cash flows on the underlying mortgages to the various classes of a series of CMOs is to create tranches on which the expected cash flows have a
higher degree of predictability than the underlying mortgages. In creating such tranches, other tranches may be subordinated to the interests of these tranches and receive payments only after the obligations of the more senior tranches have been
satisfied. As a general matter, the more predictable the cash flow is on a CMO tranche, the lower the anticipated yield will be on that tranche at the time of issuance. As part of the process of creating more predictable cash flows on most of the
tranches in a series of CMOs, one or more tranches generally must be created that absorb most of the volatility in the cash flows on the underlying mortgages. The yields on these tranches are relatively higher than on tranches with more predictable
cash flows. Because of the uncertainty of the cash flows on these tranches, and the sensitivity of these transactions to changes in prepayment rates on the underlying mortgages, the market prices of and yields on these tranches tend to be highly
volatile. The market prices of and yields on tranches with longer terms to maturity also tend to be more volatile than tranches with shorter terms to maturity due to these same factors. To the extent the mortgages underlying a series of a CMO are so-called subprime mortgages (mortgages granted to borrowers whose credit history is not sufficient to obtain a conventional mortgage), the risk of default is higher, which increases the risk that one or
more tranches of a CMO will not receive its predicted cash flows.
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CMOs purchased by a fund may be:
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collateralized by pools of mortgages in which each mortgage is guaranteed as to payment of principal and
interest by an agency or instrumentality of the U.S. government; |
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collateralized by pools of mortgages in which payment of principal and interest is guaranteed by the
issuer and the guarantee is collateralized by U.S. government securities; or |
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securities for which the proceeds of the issuance are invested in mortgage securities and payment of the
principal and interest is supported by the credit of an agency or instrumentality of the U.S. government. |
Separate Trading of
Registered Interest and Principal of Securities. Separately traded interest components of securities may be issued or guaranteed by the U.S. Treasury. The interest components of selected securities are traded independently under the Separate
Trading of Registered Interest and Principal of Securities program. Under the Separate Trading of Registered Interest and Principal of Securities program, the interest components are individually numbered and separately issued by the U.S. Treasury
at the request of depository financial institutions, which then trade the component parts independently.
Stripped Mortgage Securities. Stripped
mortgage securities are derivative multi-class mortgage securities. Stripped mortgage securities may be issued by agencies or instrumentalities of the U.S. government, or by private issuers, including savings and loan associations, mortgage banks,
commercial banks, investment banks and special purpose subsidiaries of the foregoing. Stripped mortgage securities have greater volatility than other types of mortgage securities in which a fund invests. Although stripped mortgage securities are
purchased and sold by institutional investors through several investment banking firms acting as brokers or dealers, the market for such securities has not yet been fully developed. Accordingly, stripped mortgage securities may be illiquid and,
together with any other illiquid investments, will not exceed a funds limitation on investments in illiquid securities.
Stripped mortgage
securities are usually structured with two classes that receive different proportions of the interest and principal distributions on a pool of mortgage assets. A common type of stripped mortgage security will have one class receiving some of the
interest and most of the principal from the mortgage assets, while the other class will receive most of the interest and the remainder of the principal. In the most extreme case, one class will receive all of the interest (the interest only or
IO class), while the other class will receive all of the principal (the principal only or PO class). The yield to maturity on an IO class is extremely sensitive to changes in prevailing interest rates and the rate of
principal payments (including prepayments) on the related underlying mortgage assets. A rapid rate of principal payments may have a material adverse effect on an investing funds yield to maturity. If the underlying mortgage assets experience
greater than anticipated prepayments of principal, the fund may fail to fully recoup its initial investment in these securities even if the securities are rated highly.
As interest rates rise and fall, the value of IOs tends to move in the same direction as interest rates. The value of the other mortgage securities described
in the Prospectus and this SAI, like other debt instruments, will tend to move in the opposite direction to interest rates. Accordingly, investing in IOs, in conjunction with the other mortgage securities described in the Prospectus and this SAI, is
expected to contribute to the relative stability of a funds NAV.
Similar securities such as Super Principal Only (SPO) and Levered
Interest Only (LIO) are more volatile than POs and IOs. Risks associated with instruments such as SPOs are similar in nature to those risks related to investments in POs. Risks associated with LIOs and IOettes (a.k.a. high coupon
bonds) are similar in nature to those associated with IOs. Other similar instruments may develop in the future.
Under the Code, POs may generate
taxable income from the current accrual of original issue discount, without a corresponding distribution of cash to a fund.
Inverse Floaters.
Inverse floaters may be issued by agencies or instrumentalities of the U.S. government, or by private issuers, including savings and loan associations, mortgage banks, commercial banks, investment banks and special purpose subsidiaries of the
foregoing. Inverse floaters have greater volatility than other types of mortgage securities in which a fund invests (with the exception of stripped mortgage securities and there is a risk that the market value will vary from the amortized cost).
Although inverse floaters are purchased and sold by institutional investors through several investment banking firms acting as brokers or dealers, the market for such securities has not yet been fully developed. Accordingly, inverse floaters may be
illiquid. Any illiquid inverse floaters, together with any other illiquid investments, will not exceed a funds limitation on investments in illiquid securities.
Inverse floaters are derivative mortgage securities that are structured as a class of security that receives distributions on a pool of mortgage assets.
Yields on inverse floaters move in the opposite direction of short-term interest rates and at an accelerated rate.
Types of Credit Support.
Mortgage securities are often backed by a pool of assets representing the obligations of a number of different parties. To lessen the impact of an obligors failure to make payments on underlying assets, mortgage securities may contain
elements of credit support. A discussion of credit support is included in Asset-Backed Securities.
Municipal Obligations
The two principal classifications of municipal obligations are general obligations and revenue obligations. General obligations are secured by the
issuers pledge of its full faith, credit and taxing power for the payment of principal and interest. Revenue obligations are payable only from the revenues derived from a particular facility or class of facilities or in some cases from the
proceeds of a special excise or other tax. For example, industrial development and pollution control bonds are in most cases revenue obligations since payment of principal and interest is dependent solely on the ability of the user of the facilities
financed or the guarantor to meet its financial obligations, and in certain cases, the pledge of real and personal property as security for payment.
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Issuers of municipal obligations are subject to the provisions of bankruptcy, insolvency and other laws affecting
the rights and remedies of creditors, such as the Federal Bankruptcy Act, and laws, if any, that may be enacted by Congress or state legislatures extending the time for payment of principal or interest or both, or imposing other constraints upon
enforcement of such obligations. There also is the possibility that as a result of litigation or other conditions, the power or ability of any one or more issuers to pay when due the principal of and interest on their municipal obligations may be
affected.
Municipal Bonds. Municipal bonds are issued to obtain funding for various public purposes, including the construction of a wide range of
public facilities such as airports, highways, bridges, schools, hospitals, housing, mass transportation, streets and water and sewer works. Other public purposes for which municipal bonds may be issued include refunding outstanding obligations,
obtaining funds for general operating expenses and obtaining funds to lend to other public institutions and facilities. In addition, certain types of industrial development bonds are issued by or on behalf of public authorities to obtain funds for
many types of local, privately operated facilities. Such debt instruments are considered municipal obligations if the interest paid on them is exempt from federal income tax. The payment of principal and interest by issuers of certain obligations
purchased may be guaranteed by a letter of credit, note repurchase agreement, insurance or other credit facility agreement offered by a bank or other financial institution. Such guarantees and the creditworthiness of guarantors will be considered by
a subadvisor in determining whether a municipal obligation meets investment quality requirements. No assurance can be given that a municipality or guarantor will be able to satisfy the payment of principal or interest on a municipal obligation.
The yields or returns of municipal bonds depend on a variety of factors, including general market conditions, effective marginal tax rates, the financial
condition of the issuer, general conditions of the municipal bond market, the size of a particular offering, the maturity of the obligation, and the rating (if any) of the issue. The ratings of S&P, Moodys and Fitch represent their
opinions as to the quality of various municipal bonds that they undertake to rate. It should be emphasized, however, that ratings are not absolute standards of quality. For example, depending on market conditions, municipal bonds with the same
maturity and stated interest rate, but with different ratings, may nevertheless have the same yield. See Appendix A for a description of ratings. Many issuers of securities choose not to have their obligations rated. Although unrated securities
eligible for purchase must be determined to be comparable in quality to securities having certain specified ratings, the market for unrated securities may not be as broad as for rated securities since many investors rely on rating organizations for
credit appraisal. Yield disparities may occur for reasons not directly related to the investment quality of particular issues or the general movement of interest rates, due to such factors as changes in the overall demand or supply of various types
of municipal bonds.
The costs associated with combating the coronavirus (COVID-19) pandemic and the negative
impact on tax revenues has adversely affected the financial condition of many states and their political subdivisions. The effects of this pandemic could affect the ability of states and their political subdivisions to make payments on debt
obligations when due and could adversely impact the value of their bonds, which could negatively impact the performance of the fund.
Municipal Bonds
Issued by the Commonwealth of Puerto Rico. Municipal obligations issued by the Commonwealth of Puerto Rico and its agencies, or other U.S. territories, generally are tax-exempt.
Adverse economic, market, political, or other conditions within Puerto Rico may negatively affect the value of a funds holdings in municipal obligations
issued by the Commonwealth of Puerto Rico and its agencies. The spread of COVID-19 and the related governmental and public responses have had, and may continue to have an adverse effect on Puerto Ricos
economy.
Puerto Rico has faced and continues to face significant fiscal challenges, including persistent government budget deficits, underfunded public
pension benefit obligations, underfunded government retirement systems, sizable debt service obligations and a high unemployment rate. In recent years, several rating organizations have downgraded a number of securities issued in Puerto Rico to
below investment-grade or placed them on negative watch. Puerto Rico has previously missed payments on its general obligation debt. As a result of Puerto Ricos fiscal challenges, it entered into a process analogous to a bankruptcy
proceeding in U.S. courts. Recently, Puerto Rico received court approval to be released from bankruptcy through a large restructuring of its U.S. municipal debt. The restructuring was recommended by an oversight board, an unelected body that shares
power with elected officials, that is federally mandated to oversee Puerto Ricos finances. Pursuant to federal law, the oversight board will remain intact and can only disband after Puerto Rico experiences four consecutive years of balanced
budgets. The coronavirus (COVID-19) pandemic, any future defaults, or actions by the oversight board, among other factors, could have a negative impact on the marketability, liquidity, or value of certain
investments held by a fund and could reduce a funds performance.
Municipal Notes. Municipal notes are short-term obligations of
municipalities, generally with a maturity ranging from six months to three years. The principal types of such notes include tax, bond and revenue anticipation notes, project notes and construction loan notes.
Municipal Commercial Paper. Municipal commercial paper is a short-term obligation of a municipality, generally issued at a discount with a maturity of
less than one year. Such paper is likely to be issued to meet seasonal working capital needs of a municipality or interim construction financing. Municipal commercial paper is backed in many cases by letters of credit, lending agreements, note
repurchase agreements or other credit facility agreements offered by banks and other institutions.
Organization and Management of Subsidiary
The Subsidiary invests in commodity-linked swap agreements and other commodity-linked derivative instruments, but may also invest in the securities and other
instruments in which its Parent fund is permitted to invest. The Subsidiary is an exempted company organized under the laws of the Cayman Islands, whose registered office is located at the offices of Maples Corporate Services Limited, PO Box 309,
Ugland House, Grand Cayman, KY1-1104, Cayman Islands. The Subsidiarys custodian is Citibank. The Subsidiarys affairs are overseen by a board currently consisting of three Directors: Andrew G. Arnott, Philip J. Fontana, and Charles A.
Rizzo. Each of the Directors is an employee of the Advisor.
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The Subsidiary has entered into a separate contract with the Advisor whereby the Advisor provides investment
advisory services to the Subsidiary (the Subsidiary Advisory Agreement). In turn, the Advisor has entered into a separate contract with the funds subadvisor whereby the subadvisor provides day-to-day management of the Subsidiarys investments, subject to the supervision of the Advisor (the Subsidiary Subadvisory Agreement). The Subsidiary Advisory Agreement continues in effect
for so long as its Parent funds advisory agreement is effective, and will terminate automatically upon the termination of the funds advisory agreement or in the event that the Advisor no longer serves as investment advisor to the fund.
Similarly, the Subsidiary Subadvisory Agreement continues in effect for so long as its Parent funds subadvisory agreement is effective, and will terminate automatically upon the termination of the funds subadvisory agreement or in the
event that the Subadvisor no longer serves as investment subadvisor to the fund. The Directors of the Subsidiary may terminate either Agreement at any time, without the payment of any penalty. Either Subsidiary Advisory Agreement or Subsidiary
Subadvisory Agreement will automatically terminate, without payment of any penalty, in the event of its assignment (as defined in the 1940 Act). The Advisor and Subadvisor to the Subsidiary comply with provisions of the 1940 Act relating
to investment advisory contracts (Section 15) as an investment adviser to a fund under Section 2(a)(20) of the 1940 Act.
The Subsidiary will bear
the fees and expenses incurred in connection with the custody, transfer agency, and audit services that it receives. The fund expects that the expenses borne by the Subsidiary will not be material in relation to the value of its assets.
The Subsidiary has adopted compliance policies and procedures that are substantially similar to the policies and procedures adopted by the fund. The
Subsidiary is operated in accordance with the 1940 Act investment restrictions that apply to the fund (including provisions related to affiliated transactions and custody), but is not subject to provisions of the Code, although, pursuant to the
Subsidiary Subadvisory Agreement, the funds subadvisor agrees to work collaboratively with the Advisor to cause the fund to comply with the requirements of Subchapter M of the Code for qualification as a RIC. The fund will comply with
provisions of the 1940 Act governing investment policies and capital structure and leverage on an aggregate basis with its Subsidiary. The Trusts Chief Compliance Officer oversees implementation of the Subsidiarys policies and
procedures, and makes periodic reports to the Board regarding the Subsidiarys compliance with its policies and procedures. In testing compliance of the fund and its Subsidiary with applicable investment restrictions, the assets of the fund are
aggregated with those of its Subsidiary, except with respect to borrowings.
Participation Interests
Participation interests, that may take the form of interests in, or assignments of certain loans, are acquired from banks that have made these loans or are
members of a lending syndicate. The funds investments in participation interests are subject to its 15% limitation on investments in illiquid securities.
Preferred Stocks
Preferred stock generally has a
preference to dividends and, upon liquidation, over an issuers common stock but ranks junior to debt securities in an issuers capital structure. Preferred stock generally pays dividends in cash (or additional shares of preferred stock)
at a defined rate but, unlike interest payments on debt securities, preferred stock dividends are payable only if declared by the issuers board of directors. Dividends on preferred stock may be cumulative, meaning that, in the event the issuer
fails to make one or more dividend payments on the preferred stock, no dividends may be paid on the issuers common stock until all unpaid preferred stock dividends have been paid. Preferred stock also may be subject to optional or mandatory
redemption provisions.
Repurchase Agreements, Reverse Repurchase Agreements, and Sale-Buybacks
Repurchase agreements are arrangements involving the purchase of an obligation and the simultaneous agreement to resell the same obligation on demand or at a
specified future date and at an agreed-upon price. A repurchase agreement can be viewed as a loan made by a fund to the seller of the obligation with such obligation serving as collateral for the sellers agreement to repay the amount borrowed
with interest. Repurchase agreements provide the opportunity to earn a return on cash that is only temporarily available. Repurchase agreements may be entered with banks, brokers, or dealers. However, a repurchase agreement will only be entered with
a broker or dealer if the broker or dealer agrees to deposit additional collateral should the value of the obligation purchased decrease below the resale price.
Generally, repurchase agreements are of a short duration, often less than one week but on occasion for longer periods. Securities subject to repurchase
agreements will be valued every business day and additional collateral will be requested if necessary so that the value of the collateral is at least equal to the value of the repurchase obligation, including the interest accrued thereon.
A subadvisor shall engage in a repurchase agreement transaction only with those banks or broker dealers who meet the subadvisors quantitative and
qualitative criteria regarding creditworthiness, asset size and collateralization requirements. The Advisor also may engage in repurchase agreement transactions on behalf of the funds. The counterparties to a repurchase agreement transaction are
limited to a:
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Federal Reserve System member bank; |
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primary government securities dealer reporting to the Federal Reserve Bank of New Yorks Market Reports
Division; or |
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broker dealer that reports U.S. government securities positions to the Federal Reserve Board.
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Disciplined Value International Fund, Diversified Macro Fund, Emerging Markets Equity Fund, Global Environmental Opportunities Fund,
Global Thematic Opportunities Fund, Infrastructure Fund, International Dynamic Growth Fund, Seaport Long/Short Fund, and Small Cap Core Fund also may participate in repurchase agreement transactions utilizing the settlement services of clearing
firms that meet the subadvisors creditworthiness requirements.
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The Advisor and the subadvisors will continuously monitor repurchase agreement transactions to ensure that the
collateral held with respect to a repurchase agreement equals or exceeds the amount of the obligation.
The risk of a repurchase agreement transaction is
limited to the ability of the seller to pay the agreed-upon sum on the delivery date. In the event of bankruptcy or other default by the seller, the instrument purchased may decline in value, interest payable on the instrument may be lost and there
may be possible difficulties and delays in obtaining collateral and delays and expense in liquidating the instrument. If an issuer of a repurchase agreement fails to repurchase the underlying obligation, the loss, if any, would be the difference
between the repurchase price and the underlying obligations market value. A fund also might incur certain costs in liquidating the underlying obligation. Moreover, if bankruptcy or other insolvency proceedings are commenced with respect to the
seller, realization upon the underlying obligation might be delayed or limited.
Under a reverse repurchase agreement, a fund sells a debt security and
agrees to repurchase it at an agreed-upon time and at an agreed-upon price. The fund retains record ownership of the security and the right to receive interest and principal payments thereon. At an agreed-upon future date, the fund repurchases the
security by remitting the proceeds previously received, plus interest. The difference between the amount the fund receives for the security and the amount it pays on repurchase is payment of interest. In certain types of agreements, there is no
agreed-upon repurchase date and interest payments are calculated daily, often based on the prevailing overnight repurchase rate. A reverse repurchase agreement may be considered a form of leveraging and may, therefore, increase fluctuations in a
funds NAV per share.
A fund may effect simultaneous purchase and sale transactions that are known as sale-buybacks. A sale-buyback is
similar to a reverse repurchase agreement, except that in a sale-buyback, the counterparty that purchases the security is entitled to receive any principal or interest payments made on the underlying security pending settlement of the funds
repurchase of the underlying security.
Subject to the requirements noted under Government Regulation of Derivatives, a fund will either treat
reverse repurchase agreements and similar financings, including sale-buybacks, as derivatives subject to the Derivatives Rule limitations or not as derivatives and treat reverse repurchase agreements and similar financings transactions as senior
securities equivalent to bank borrowings subject to asset coverage requirements of Section 18 of the 1940 Act. A fund will ensure that its repurchase agreement transactions are fully collateralized by maintaining in a custodial
account cash, Treasury bills, other U.S. government securities, or certain other liquid assets having an aggregate value at least equal to the amount of such commitment to repurchase including accrued interest, until payment is made.
Fund-Specific Policies Regarding Reverse Repurchase Agreements (Balanced Fund, Classic Value Fund, Financial Industries Fund, Fundamental Large Cap Core
Fund, Regional Bank Fund, and U.S. Global Leaders Growth Fund). A fund may enter into reverse repurchase agreements that involve the sale of government securities held in its portfolio to a bank. Balanced Fund and Fundamental Large Cap Core Fund
also may enter into reverse repurchase agreements that involve the sale of such securities to a securities firm. Each of Balanced Fund and Fundamental Large Cap Core Fund will not enter into reverse repurchase agreements and other borrowings
exceeding in the aggregate 331⁄3% of the market value of its total assets. Each of Classic Value Fund, Financial Industries Fund, Regional Bank Fund, and U.S.
Global Leaders Growth Fund will not enter into reverse repurchase agreements and other borrowings except from banks as a temporary measure for extraordinary emergency purposes in amounts not to exceed 331⁄3% of its total assets (including the amount borrowed) taken at market value.
Each of Financial Industries Fund and
Regional Bank Fund may not purchase securities while outstanding borrowings (other than reverse repurchase agreements) exceed 5% of its total assets. Classic Value Fund, Financial Industries Fund, Regional Bank Fund, and U.S. Global Leaders Growth
Fund will not use leverage to attempt to increase total return.
Foreign Repurchase Agreements. Foreign repurchase agreements involve an agreement
to purchase a foreign security and to sell that security back to the original seller at an agreed-upon price in either U.S. dollars or foreign currency. Unlike typical U.S. repurchase agreements, foreign repurchase agreements may not be fully
collateralized at all times. The value of a security purchased may be more or less than the price at which the counterparty has agreed to repurchase the security. In the event of default by the counterparty, a fund may suffer a loss if the value of
the security purchased is less than the agreed-upon repurchase price, or if it is unable to successfully assert a claim to the collateral under foreign laws. As a result, foreign repurchase agreements may involve higher credit risks than repurchase
agreements in U.S. markets, as well as risks associated with currency fluctuations. In addition, as with other emerging market investments, repurchase agreements with counterparties located in emerging markets, or relating to emerging markets, may
involve issuers or counterparties with lower credit ratings than typical U.S. repurchase agreements.
Short Sales
A fund may engage in short sales and short sales against the box. In a short sale against the box, a fund borrows securities from a broker-dealer
and sells the borrowed securities, and at all times during the transaction, a fund either owns or has the right to acquire the same securities at no extra cost. If the price of the security has declined at the time a fund is required to deliver the
security, a fund will benefit from the difference in the price. If the price of a security has increased, the funds will be required to pay the difference. Each fund other than Regional Bank Fund and Seaport/Long Short Fund can engage in short sales
against the box.
In addition, each of Balanced Fund, Disciplined Value International Fund, Diversified Macro Fund, Emerging Markets Equity Fund, ESG
International Equity Fund, ESG Large Cap Core Fund, Financial Industries Fund, Fundamental Large Cap Core Fund, Global Environmental Opportunities Fund, Global Thematic Opportunities Fund, International Dynamic Growth Fund, and Seaport Long/Short
Fund may make short sales of securities that the fund does not own in anticipation of a decline in the market value of that security (a short sale). To complete such a transaction, a fund must borrow the security to make delivery to the
buyer. The fund is then obligated to replace the security borrowed by purchasing it at market price at the time of
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replacement. The price at such time may be more or less than the price at which the security was sold by the fund. Until the security is replaced, the fund is required to pay the lender any
dividends or interest which accrues during the period of the loan. To borrow the security, the fund also may be required to pay a premium, which would increase the cost of the security sold. The proceeds of the short sale are typically retained by
the broker to meet margin requirements until the short position is closed out. Until a fund replaces a borrowed security, the fund will adhere to requirements outlined in the Government Regulation of Derivatives section. The SEC adopted
the Derivatives Rule on October 28, 2020, and in doing so announced it would rescind SEC releases, guidance and no-action letters related to funds coverage and asset segregation practices. Funds
were required to comply with the Derivatives Rule requirements by August 19, 2022. Except for short sales against-the-box, the amount of a funds net assets
that may be committed to short sales is limited and the securities in which short sales are made must be listed on a national securities exchange.
A fund
will incur a loss as a result of the short sale if the price of the security increases between the date of the short sale and the date on which the fund replaced the borrowed security and theoretically the funds loss could be unlimited. A fund
will generally realize a gain if the security declines in price between those dates. This result is the opposite of what one would expect from a cash purchase of a long position in a security. The amount of any gain will be decreased, and the amount
of any loss increased, by the amount of any premium, dividends or interest the fund may be required to pay in connection with a short sale. Short selling may amplify changes in a funds NAV. Short selling also may produce higher than normal
portfolio turnover, which may result in increased transaction costs to a fund.
Fund-Specific Policies Regarding Short Sales. Each of Balanced Fund
and Fundamental Large Cap Core Fund does not intend to enter into short sales (other than those against-the-box) if, immediately after such sale, the aggregate value of
all the securities sold short exceeds the value of 15% of the Funds net assets. Regional Bank Fund may not engage in short sales or short sales against the box. Seaport Long/Short Fund may not engage in short sales against the box. Classic
Value Fund, Global Leaders Growth Fund, Infrastructure Fund and Small Cap Core Fund may engage in short sales against the box but not short sales.
Synthetic Short Exposures
Seaport Long/Short Fund will
gain synthetic short exposure through a forward commitment through a swap agreement. If the price of the reference security has increased during this time, then the fund will incur a loss equal to the increase in price from the time that the short
exposure was entered into plus any transaction costs (i.e., premiums and interest) paid to the broker-dealer to borrow securities. Therefore, synthetic short exposures involve the risk that losses may be exaggerated, potentially losing more money
than the actual cost of the investment. Seaport Long/Short Fund is subject to a non-fundamental investment restriction that prohibits it from physically shorting securities, e.g., via prime brokerage
agreements.
Short-Term Trading
Short-term trading
means the purchase and subsequent sale of a security after it has been held for a relatively brief period of time. If and to the extent consistent with and permitted by its investment objective and policies, a fund may engage in short-term trading
in response to stock market conditions, changes in interest rates or other economic trends and developments, or to take advantage of yield disparities between various fixed-income securities in order to realize capital gains or improve income.
Short-term trading may have the effect of increasing portfolio turnover rate. A high rate of portfolio turnover (100% or greater) involves correspondingly greater brokerage transaction expenses and may make it more difficult for a fund to qualify as
a RIC for federal income tax purposes (for additional information about qualification as a RIC under the Code, see Additional Information Concerning Taxes in this SAI). See specific fund details in the Portfolio Turnover
section of this SAI.
Sovereign Debt Obligations
Sovereign debt obligations are issued or guaranteed by foreign governments or their agencies. Sovereign debt may be in the form of conventional securities or
other types of debt instruments such as loan or loan participations. Typically, sovereign debt of developing countries may involve a high degree of risk and may be in default or present the risk of default, however, sovereign debt of developed
countries also may involve a high degree of risk and may be in default or present the risk of default. Governments rely on taxes and other revenue sources to pay interest and principal on their debt obligations, and governmental entities responsible
for repayment of the debt may be unable or unwilling to repay principal and pay interest when due and may require renegotiation or rescheduling of debt payments. The payment of principal and interest on these obligations may be adversely affected by
a variety of factors, including economic results, changes in interest and exchange rates, changes in debt ratings, a limited tax base or limited revenue sources, natural disasters, or other economic or credit problems. In addition, prospects for
repayment and payment of interest may depend on political as well as economic factors. Defaults in sovereign debt obligations, or the perceived risk of default, also may impair the market for other securities and debt instruments, including
securities issued by banks and other entities holding such sovereign debt, and negatively impact the funds.
Structured or Hybrid Notes
The distinguishing feature of a structured or hybrid note is that the amount of interest and/or principal payable on the note is based
on the performance of a benchmark asset or market other than fixed income securities or interest rates. Examples of these benchmarks include stock prices, currency exchange rates and physical commodity prices. Investing in a structured note allows a
fund to gain exposure to the benchmark market while fixing the maximum loss that a fund may experience in the event that the market does not perform as expected. Depending on the terms of the note, a fund may forgo all or part of the interest and
principal that would be payable on a comparable conventional note; the funds loss cannot exceed this forgone interest and/or principal. An investment in structured or hybrid notes involves risks similar to those associated with a direct
investment in the benchmark asset.
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U.S. Government and Government Agency Obligations
U.S. Government Obligations. U.S. government obligations are debt securities issued or guaranteed as to principal or interest by the U.S. Treasury.
These securities include treasury bills, notes and bonds.
GNMA Obligations. GNMA obligations are mortgage-backed securities guaranteed by the
GNMA, which guarantee is supported by the full faith and credit of the U.S. government.
U.S. Agency Obligations. U.S. government agency
obligations are debt securities issued or guaranteed as to principal or interest by an agency or instrumentality of the U.S. government pursuant to authority granted by Congress. U.S. government agency obligations include, but are not limited to:
U.S. Instrumentality Obligations. U.S. instrumentality obligations include, but are not limited to, those issued by the Export-Import Bank and Farmers
Home Administration.
Some obligations issued or guaranteed by U.S. government agencies or instrumentalities are supported by the right of the issuer to
borrow from the U.S. Treasury or the Federal Reserve Banks, such as those issued by FICBs. Others, such as those issued by Fannie Mae, FHLBs and Freddie Mac, are supported by discretionary authority of the U.S. government to purchase certain
obligations of the agency or instrumentality. In addition, other obligations, such as those issued by the SLMA, are supported only by the credit of the agency or instrumentality. There also are separately traded interest components of securities
issued or guaranteed by the U.S. Treasury.
No assurance can be given that the U.S. government will provide financial support for the obligations of such
U.S. government-sponsored agencies or instrumentalities in the future, since it is not obligated to do so by law. In this SAI, U.S. government securities refers not only to securities issued or guaranteed as to principal or interest by
the U.S. Treasury but also to securities that are backed only by their own credit and not the full faith and credit of the U.S. government.
It is
possible that the availability and the marketability (liquidity) of the securities discussed in this section could be adversely affected by actions of the U.S. government to tighten the availability of its credit. In 2008, FHFA, an agency of the
U.S. government, placed Fannie Mae and Freddie Mac into conservatorship, a statutory process with the objective of returning the entities to normal business operations. The FHFA will act as the conservator to operate Fannie Mae and Freddie Mac until
they are stabilized. It is unclear what effect this conservatorship will have on the securities issued or guaranteed by Fannie Mae or Freddie Mac.
Variable and Floating Rate Obligations
Investments in
floating or variable rate securities normally will involve industrial development or revenue bonds, which provide that the rate of interest is set as a specific percentage of a designated base rate, such as rates of Treasury Bonds or Bills or the
prime rate at a major commercial bank. In addition, a bondholder can demand payment of the obligations on behalf of the investing fund on short notice at par plus accrued interest, which amount may be more or less than the amount the bondholder paid
for them. The maturity of floating or variable rate obligations (including participation interests therein) is deemed to be the longer of: (i) the notice period required before a fund is entitled to receive payment of the obligation upon
demand; or (ii) the period remaining until the obligations next interest rate adjustment. If not redeemed by the investor through the demand feature, the obligations mature on a specified date, which may range up to thirty years from the
date of issuance.
Warrants
Warrants may trade
independently of the underlying securities. Warrants are rights to purchase securities at specific prices and are valid for a specific period of time. Warrant prices do not necessarily move parallel to the prices of the underlying securities, and
warrant holders receive no dividends and have no voting rights or rights with respect to the assets of an issuer. The price of a warrant may be more volatile than the price of its underlying security, and a warrant may offer greater potential for
capital appreciation as well as capital loss. Warrants cease to have value if not exercised prior to the expiration date. These factors can make warrants more speculative than other types of investments.
When-Issued/Delayed Delivery/Forward Commitment Securities
Balanced Fund, Classic Value Fund, Financial Industries Fund, Fundamental Large Cap Core Fund, Regional Bank Fund, and U.S. Global Leaders Growth fund may
purchase securities on a when-issued or forward-commitment basis. Each other fund may purchase or sell debt or equity securities on a when-issued, delayed-delivery, or forward-commitment
basis. When-issued, delayed-delivery or forward-commitment transactions involve a commitment to purchase or sell securities at a predetermined price or yield in which payment and delivery take place after the customary settlement for such securities
(which is typically one month or more after trade date). When purchasing securities in one of these types of transactions, payment for the securities is not required until the delivery date, however, the purchaser assumes the rights and risks of
ownership, including the risks of price and yield fluctuations and the risk that the security will not be delivered. When a fund has sold securities pursuant to one of these transactions, it will not participate in further gains or losses with
respect to that security. At the time of delivery, the value of when-issued, delayed-delivery or forward commitment securities may be more or less than the transaction price, and the yields then available in the market may be higher or lower than
those obtained in the transaction.
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Under normal circumstances, when a fund purchases securities on a when-issued or forward commitment basis, it
will take delivery of the securities, but a fund may, if deemed advisable, sell the securities before the settlement date. Forward contracts may settle in cash between the counterparty and the fund or by physical settlement of the underlying
securities, and a fund may renegotiate or roll over a forward commitment transaction. In general, a fund does not pay for the securities, or start earning interest on them, or deliver or take possession of securities until the obligations are
scheduled to be settled. In such transactions, no cash changes hands on the trade date, however, if the transaction is collateralized, the exchange of margin may take place between the fund and the counterparty according to an agreed-upon schedule.
A fund does, however, record the transaction and reflect the value each day of the securities in determining its NAV.
As further outlined in the
Government Regulation of Derivatives section, the SEC adopted the Derivatives Rule on October 28, 2020, and in doing so announced it would rescind SEC releases, guidance and no-action letters
related to funds coverage and asset segregation practices. Funds were required to comply with the Derivatives Rule requirements by August 19, 2022. When-issued or forward settling securities transactions physically settling within 35-days are deemed not to involve a senior security. When-issued or forward settling securities transactions that do not physically settle within 35-days are required to be
treated as derivatives transactions in compliance with the Derivatives Rule as outlined in the Government Regulation of Derivatives section.
Yield Curve Notes
Inverse floating rate securities
include, but are not limited to, an inverse floating rate class of a government agency-issued yield curve note. A yield curve note is a fixed-income security that bears interest at a floating rate that is reset periodically based on an interest rate
benchmark. The interest rate resets on a yield curve note in the opposite direction from the interest rate benchmark.
Zero Coupon Securities, Deferred
Interest Bonds and Pay-In-Kind Bonds
Each fund other than Fundamental
Large Cap Core Fund and U.S. Global Leaders Growth Fund may invest in zero coupon securities. Each fund other than Classic Value Fund, Fundamental Large Cap Core Fund, and U.S. Global Leaders Growth Fund may invest in deferred interest bonds and pay-in-kind bonds. Zero coupon securities, deferred interest bonds and pay-in-kind bonds
involve special risk considerations. Zero coupon securities and deferred interest bonds are debt securities that pay no cash income but are sold at substantial discounts from their value at maturity. While zero coupon bonds do not require the
periodic payment of interest, deferred interest bonds provide for a period of delay before the regular payment of interest begins. When a zero coupon security or a deferred interest bond is held to maturity, its entire return, which consists of the
amortization of discount, comes from the difference between its purchase price and its maturity value. This difference is known at the time of purchase, so that investors holding these securities until maturity know at the time of their investment
what the return on their investment will be. Pay-in-kind bonds are bonds that pay all or a portion of their interest in the form of debt or equity securities.
Zero coupon securities, deferred interest bonds and pay-in-kind bonds are
subject to greater price fluctuations in response to changes in interest rates than ordinary interest-paying debt securities with similar maturities. The value of zero coupon securities and deferred interest bonds usually appreciates during periods
of declining interest rates and usually depreciates during periods of rising interest rates.
Issuers of Zero Coupon Securities and Pay-In-Kind Bonds. Zero coupon securities and pay-in-kind bonds may be issued by a wide
variety of corporate and governmental issuers. Although zero coupon securities and pay-in-kind bonds are generally not traded on a national securities exchange, these
securities are widely traded by brokers and dealers and, to the extent they are widely traded, will not be considered illiquid for the purposes of the investment restriction under Illiquid Securities.
Tax Considerations. Current federal income tax law requires the holder of a zero coupon security or certain pay-in-kind bonds to accrue income with respect to these securities prior to the receipt of cash payments. To maintain its qualification as a RIC under the Code and avoid
liability for federal income and excise taxes, a fund may be required to distribute income accrued with respect to these securities and may have to dispose of portfolio securities under disadvantageous circumstances in order to generate cash to
satisfy these distribution requirements.
RISK FACTORS
The risks of investing in certain types of securities
are described below. Risks are only applicable to a fund if and to the extent that corresponding investments, or indirect exposures to such investments through derivative contracts, are consistent with and permitted by the funds investment
objectives and policies. The value of an individual security or a particular type of security can be more volatile than the market as a whole and can perform differently than the value of the market as a whole. By owning shares of the underlying
funds, each fund of funds indirectly invests in the securities and instruments held by the underlying funds and bears the same risks of such underlying funds.
Cash Holdings Risk
A fund may be subject to delays in
making investments when significant purchases or redemptions of fund shares cause the fund to have an unusually large cash position. When the fund has a higher than normal cash position, it may incur cash drag, which is the opportunity
cost of holding a significant cash position. This significant cash position might cause the fund to miss investment opportunities it otherwise would have benefited from if fully invested, or might cause the fund to pay more for investments in a
rising market, potentially reducing fund performance.
Collateralized Debt Obligations
The risks of an investment in a CDO depend largely on the quality of the collateral securities and the class of the instrument in which a fund invests.
Normally, CDOs are privately offered and sold, and thus, are not registered under the securities laws. As a result, investments in CDOs may be characterized by a fund as illiquid, however an active dealer market may exist for CDOs allowing them to
qualify for treatment as liquid under Rule 144A transactions. In addition to the normal risks associated with fixed-income securities discussed elsewhere in this SAI and the Prospectus (e.g., interest rate risk and default risk), CDOs carry risks
including, but are not limited to the possibility that: (i) distributions from collateral securities will not be adequate to make interest or other payments; (ii) the quality of the collateral may decline in value or default; (iii) a
fund may invest in CDO classes that are subordinate to other classes of the CDO; and (iv) the complex structure of the CDO may not be fully understood at the time of investment and may produce disputes with the issuer or unexpected investment
results.
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Commodity-Linked Instruments
The value of commodities investments will generally be affected by overall market movements and factors specific to a particular industry or commodity, which
may include weather, embargoes, tariffs, and health, political, international and regulatory developments. Economic and other events (whether real or perceived) can reduce the demand for commodities, which may reduce market prices and cause the
value of shares of the fund to fall. The frequency and magnitude of such changes cannot be predicted. Exposure to commodities and commodities markets may subject a fund to greater volatility than investments in traditional securities. No active
trading market may exist for certain commodities investments, which may impair the ability of a fund to sell or to realize the full value of such investments in the event of the need to liquidate such investments. In addition, adverse market
conditions may impair the liquidity of actively traded commodities investments. Certain types of commodities instruments (such as total return swaps and commodity-linked notes) are subject to the risk that the counterparty to the instrument will not
perform or will be unable to perform in accordance with the terms of the instrument. To the extent commodity-related investments are held through the Subsidiary, the Subsidiary is not subject to U.S. laws (including securities laws) and their
protections. The Subsidiary is subject to the laws of the Cayman Islands, a foreign jurisdiction, and can be affected by developments in that jurisdiction.
Certain commodities are subject to limited pricing flexibility because of supply and demand factors. Others are subject to broad price fluctuations as a
result of the volatility of the prices for certain raw materials and the instability of supplies of other materials. These additional variables may create additional investment risks and result in greater volatility than investments in traditional
securities. The commodities that underlie commodity futures contracts and commodity swaps may be subject to additional economic and non-economic variables, such as drought, floods, weather, livestock disease,
embargoes, tariffs, and international economic, political and regulatory developments. Unlike the financial futures markets, in the commodity futures markets there are costs of physical storage associated with purchasing the underlying commodity.
The price of the commodity futures contract will reflect the storage costs of purchasing the physical commodity, including the time value of money invested in the physical commodity. To the extent that the storage costs for an underlying commodity
change while the fund is invested in futures contracts on that commodity, the value of the futures contract may change proportionately.
In the commodity
futures markets, producers of the underlying commodity may decide to hedge the price risk of selling the commodity by selling futures contracts today to lock in the price of the commodity at delivery tomorrow. In order to induce speculators to
purchase the other side of the same futures contract, the commodity producer generally must sell the futures contract at a lower price than the expected future spot price. Conversely, if most hedgers in the futures market are purchasing futures
contracts to hedge against a rise in prices, then speculators will only sell the other side of the futures contract at a higher futures price than the expected future spot price of the commodity. The changing nature of the hedgers and speculators in
the commodity markets will influence whether futures prices are above or below the expected future spot price, which can have significant implications for a fund. If the nature of hedgers and speculators in futures markets has shifted when it is
time for a fund to reinvest the proceeds of a maturing contract in a new futures contract, the fund might reinvest at higher or lower futures prices, or choose to pursue other investments.
Commodities markets generally, and the energy sector specifically, had been adversely impacted by the reduced demand for oil and other commodities as a result
of the slowdown in economic activity resulting from the spread of the coronavirus (COVID-19) pandemic in 2020. Global oil prices declined significantly at the beginning of the coronavirus (COVID-19) pandemic and have experienced significant price volatility, including a period where an oil-price futures contract fell into negative territory for the first time
in history, as demand for oil had slowed and oil storage facilities had reached their storage capacities. The impact on such commodities markets from varying levels of demand may continue to be volatile for an extended period of time.
Equity Securities
Equity securities include common,
preferred and convertible preferred stocks and securities the values of which are tied to the price of stocks, such as rights, warrants and convertible debt securities. Common and preferred stocks represent equity ownership in a company. Stock
markets are volatile. The price of equity securities will fluctuate and can decline and reduce the value of a funds investment in equities. The price of equity securities fluctuates based on changes in a companys financial condition and
overall market and economic conditions. The value of equity securities purchased by a fund could decline if the financial condition of the issuers of these securities declines or if overall market and economic conditions deteriorate. Even funds that
invest in high quality or blue chip equity securities or securities of established companies with large market capitalizations (which generally have strong financial characteristics) can be negatively impacted by poor overall market and
economic conditions. Companies with large market capitalizations also may have less growth potential than smaller companies and may be able to react less quickly to change in the marketplace.
ESG Integration Risk
Certain subadvisors may integrate
research on environmental, social and governance (ESG) factors into a funds investment process. Such subadvisors may consider ESG factors that it deems relevant or additive, along with other material factors and analysis, when
managing a fund. ESG factors may include, but are not limited to, matters regarding board diversity, climate change policies, and supply chain and human rights policies. Incorporating ESG criteria and making investment decisions based on certain ESG
characteristics, as determined by a subadvisor, carries the risk that a fund may perform differently, including underperforming, funds that do not utilize ESG criteria, or funds that utilize different ESG criteria. Integration of ESG factors into a
funds investment process may result in a subadvisor making different investment decisions for a fund than for a fund with a similar investment universe and/or investment style that does not incorporate such considerations in its investment
strategy or processes, and a funds investment performance may be affected. Integration of ESG factors into a funds investment process does not preclude a fund from including companies with low ESG characteristics or excluding companies
with high ESG characteristics in a funds investments.
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The ESG characteristics utilized in a funds investment process may change over time, and different ESG
characteristics may be relevant to different investments. Successful integration of ESG factors will depend on a subadvisors skill in researching, identifying, and applying these factors, as well as on the availability of relevant data. The
method of evaluating ESG factors and subsequent impact on portfolio composition, performance, proxy voting decisions and other factors, is subject to the interpretation of a subadvisor in accordance with the funds investment objective and
strategies. ESG factors may be evaluated differently by different subadvisors, and may not carry the same meaning to all investors and subadvisors. The regulatory landscape with respect to ESG investing in the United States is evolving and any
future rules or regulations may require a fund to change its investment process with respect to ESG integration.
European Risk
Countries in Europe may be significantly affected by fiscal and monetary controls implemented by the EU and EMU, which require member countries to comply with
restrictions on inflation rates, deficits, interest rates, debt levels and fiscal and monetary controls. Decreasing imports or exports, changes in governmental or other regulations on trade, changes in the exchange rate or dissolution of the Euro,
the default or threat of default by one or more EU member countries on its sovereign debt, and/or an economic recession in one or more EU member countries may have a significant adverse effect on other European economies and major trading partners
outside Europe.
In recent years, the European financial markets have experienced volatility and adverse trends due to concerns about economic downturns,
rising government debt levels and the possible default of government debt in several European countries. The European Central Bank and IMF have previously bailed-out several European countries. There is no
guarantee that these institutions will continue to provide financial support, and markets may react adversely to any reduction in financial support. A default or debt restructuring by any European country can adversely impact holders of that
countrys debt and sellers of credit default swaps linked to that countrys creditworthiness, which may be located in countries other than those listed above, and can affect exposures to other EU countries and their financial companies as
well.
Uncertainties surrounding the sovereign debt of a number of EU countries and the viability of the EU have disrupted and may in the future disrupt
markets in the United States and around the world. If one or more countries leave the EU or the EU dissolves, the global securities markets likely will be significantly disrupted. On January 31, 2020, the UK left the EU, commonly referred to as
Brexit, and the UK ceased to be a member of the EU. Following a transition period during which the EU and the UK Government engaged in a series of negotiations regarding the terms of the UKs future relationship with the EU, the EU
and the UK Government signed an agreement regarding the economic relationship between the UK and the EU. While the full impact of Brexit is unknown, Brexit has already resulted in volatility in European and global markets. There remains significant
market uncertainty regarding Brexits ramifications, and the range and potential implications of possible political, regulatory, economic, and market outcomes are difficult to predict. The uncertainty resulting from the transition period may
affect other countries in the EU and elsewhere, cause volatility within the EU, or trigger prolonged economic downturns in certain countries within the EU. It is also possible that various countries within the UK, such as Scotland or Northern
Ireland, could seek to separate and remain a part of the EU. Other secessionist movements including countries seeking to abandon the Euro or withdraw from the EU may cause volatility and uncertainty in the EU.
The UK has one of the largest economies in Europe and is a major trading partner with the EU countries and the United States. Brexit might negatively affect
The City of Londons economy, which is heavily dominated by financial services, as banks might be forced to move staff and comply with two separate sets of rules or lose business to banks in Continental Europe. In addition, Brexit may create
additional and substantial economic stresses for the UK, including a contraction of the UK economy and price volatility in UK stocks, decreased trade, capital outflows, devaluation of the British pound, wider corporate bond spreads due to
uncertainty and declines in business and consumer spending as well as foreign direct investment. Brexit may also adversely affect UK-based financial firms that have counterparties in the EU or participate in
market infrastructure (trading venues, clearing houses, settlement facilities) based in the EU. Additionally, the spread of the coronavirus (COVID-19) pandemic is likely to continue to stretch the resources
and deficits of many countries in the EU and throughout the world, increasing the possibility that countries may be unable to make payments on their sovereign debt. These events and the resulting market volatility may have an adverse effect on the
performance of the fund.
Investing in the securities of Eastern European issuers is highly speculative and involves risks not usually associated with
investing in the more developed markets of Western Europe. Securities markets of Eastern European countries typically are less efficient and have lower trading volume, lower liquidity, and higher volatility than more developed markets. Eastern
European economies also may be particularly susceptible to disruption in the international credit market due to their reliance on bank related inflows of capital.
To the extent that a fund invests in European securities, it may be exposed to these risks through its direct investments in such securities, including
sovereign debt, or indirectly through investments in money market funds and financial institutions with significant investments in such securities. In addition, Russias increasing international assertiveness could negatively impact EU and
Eastern European economic activity. Please see Market Events for additional information regarding risks related to sanctions imposed on Russia.
Fixed-Income Securities
Fixed-income securities are
generally subject to two principal types of risk: (1) interest-rate risk; and (2) credit quality risk. Fixed-income securities are also subject to liquidity risk.
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Interest Rate Risk. Fixed-income securities are affected by changes in interest rates. When interest rates
decline, the market value of the fixed-income securities generally can be expected to rise. Conversely, when interest rates rise, the market value of fixed-income securities generally can be expected to decline. Recent and potential future changes
in government monetary policy may affect interest rates.
The longer a fixed-income securitys duration, the more sensitive it will be to changes in
interest rates. Similarly, a fund with a longer average portfolio duration will be more sensitive to changes in interest rates than a fund with a shorter average portfolio duration. Duration is a measure used to determine the sensitivity of a
securitys price to changes in interest rates that incorporates a securitys yield, coupon, final maturity, and call features, among other characteristics. All other things remaining equal, for each one percentage point increase in
interest rates, the value of a portfolio of fixed-income investments would generally be expected to decline by one percent for every year of the portfolios average duration above zero. For example, the price of a bond fund with an average
duration of eight years would be expected to fall approximately 8% if interest rates rose by one percentage point. The maturity of a security, another commonly used measure of price sensitivity, measures only the time until final payment is due,
whereas duration takes into account the pattern of all payments of interest and principal on a security over time, including how these payments are affected by prepayments and by changes in interest rates, as well as the time until an interest rate
is reset (in the case of variable-rate securities).
Beginning in March 2022, the U.S. Federal Reserve (the Fed) began increasing interest
rates and has signaled the potential for further increases. It is difficult to accurately predict the pace at which the Fed will increase interest rates any further, or the timing, frequency or magnitude of any such increases, and the evaluation of
macro-economic and other conditions could cause a change in approach in the future. Any such increases generally will cause market interest rates to rise, and could cause the value of a funds investments, and the funds NAV, to decline,
potentially suddenly and significantly. As a result, the fund may experience high redemptions and, as a result, increased portfolio turnover, which could increase the costs that the fund incurs and may negatively impact the funds performance.
The fixed-income securities market has been and may continue to be negatively affected by the coronavirus
(COVID-19) pandemic. As with other serious economic disruptions, governmental authorities and regulators responded with significant fiscal and monetary policy changes, including considerably lowering interest
rates, which, in some cases could result in negative interest rates. These actions, including their reversal or potential ineffectiveness, could further increase volatility in securities and other financial markets and reduce market liquidity. To
the extent the fund has a bank deposit or holds a debt instrument with a negative interest rate to maturity, the fund would generate a negative return on that investment. Similarly, negative rates on investments by money market funds and similar
cash management products could lead to losses on investments, including on investments of the funds uninvested cash.
Credit Quality Risk.
Fixed-income securities are subject to the risk that the issuer of the security will not repay all or a portion of the principal borrowed and will not make all interest payments. If the credit quality of a fixed-income security deteriorates
after a fund has purchased the security, the market value of the security may decrease and lead to a decrease in the value of the funds investments. Funds that may invest in lower rated fixed-income securities are riskier than funds that may
invest in higher rated fixed-income securities.
Liquidity Risk. Liquidity risk may result from the lack of an active market, the reduced number of
traditional market participants, or the reduced capacity of traditional market participants to make a market in fixed-income securities. The capacity of traditional dealers to engage in fixed-income trading has not kept pace with the bond
markets growth. As a result, dealer inventories of corporate bonds, which indicate the ability to make markets, i.e., buy or sell a security at the quoted bid and ask price, respectively, are at or near historic lows relative to
market size. Because market makers provide stability to fixed-income markets, the significant reduction in dealer inventories could lead to decreased liquidity and increased volatility, which may become exacerbated during periods of economic or
political stress. In addition, liquidity risk may be magnified in a rising interest rate environment in which investor redemptions from fixed-income funds may be higher than normal; the selling of fixed-income securities to satisfy shareholder
redemptions may result in an increased supply of such securities during periods of reduced investor demand due to a lack of buyers, thereby impairing the funds ability to sell such securities. The secondary market for certain tax-exempt securities tends to be less well-developed or liquid than many other securities markets, which may adversely affect a funds ability to sell such securities at attractive prices.
Foreign Securities
Currency Fluctuations.
Investments in foreign securities may cause a fund to lose money when converting investments from foreign currencies into U.S. dollars. A fund may attempt to lock in an exchange rate by purchasing a foreign currency exchange contract prior to
the settlement of an investment in a foreign security. However, the fund may not always be successful in doing so, and it could still lose money.
Political and Economic Conditions. Investments in foreign securities subject a fund to the political or economic conditions of the foreign country.
These conditions could cause a funds investments to lose value if these conditions deteriorate for any reason. This risk increases in the case of emerging market countries which are more likely to be politically unstable. Political instability
could cause the value of any investment in the securities of an issuer based in a foreign country to decrease or could prevent or delay a fund from selling its investment and taking the money out of the country.
Removal of Proceeds of Investments from a Foreign Country. Foreign countries, especially emerging market countries, often have currency controls or
restrictions that may prevent or delay a fund from taking money out of the country or may impose additional taxes on money removed from the country. Therefore, a fund could lose money if it is not permitted to remove capital from the country or if
there is a delay in taking the assets out of the country, since the value of the assets could decline during this period, or the exchange rate to convert the assets into U.S. dollars could worsen.
Nationalization of Assets. Investments in foreign securities subject a fund to the risk that the company issuing the security may be nationalized. If
the company is nationalized, the value of the companys securities could decrease in value or even become worthless.
Settlement of Sales.
Foreign countries, especially emerging market countries, also may have problems associated with settlement of sales. Such problems could cause a fund to suffer a loss if a security to be sold declines in value while settlement of the sale is
delayed.
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Investor Protection Standards. Foreign countries, especially emerging market countries, may have less
stringent investor protection and disclosure standards than the U.S. Therefore, when making a decision to purchase a security for a fund, a subadvisor may not be aware of problems associated with the company issuing the security and may not enjoy
the same legal rights as those provided in the U.S.
Securities of Emerging Market Issuers or Countries. The risks described above apply to an even
greater extent to investments in emerging markets. The securities markets of emerging countries are generally smaller, less developed, less liquid, and more volatile than the securities markets of the United States and developed foreign countries.
In addition, the securities markets of emerging countries may be subject to a lower level of monitoring and regulation. Government enforcement of existing securities regulations also has been extremely limited, and any such enforcement may be
arbitrary and the results difficult to predict with any degree of certainty. Many emerging countries have experienced substantial, and in some periods extremely high, rates of inflation for many years. Inflation and rapid fluctuations in inflation
rates have had and may continue to have very negative effects on the economies and securities markets of some emerging countries. Economies in emerging markets generally are heavily dependent upon international trade and, accordingly, have been and
may continue to be affected adversely by trade barriers, exchange controls, managed adjustments in relative currency values, and other protectionist measures imposed or negotiated by the countries with which they trade. Economies in emerging markets
also have been and may continue to be adversely affected by economic conditions in the countries with which they trade. The economies of countries with emerging markets also may be predominantly based on only a few industries or dependent on
revenues from particular commodities. In many cases, governments of emerging market countries continue to exercise significant control over their economies, and government actions relative to the economy, as well as economic developments generally,
may affect the capacity of issuers of debt instruments to make payments on their debt obligations, regardless of their financial condition.
Restrictions on Investments. There may be unexpected restrictions on investments in companies located in certain foreign countries. For example, on
November 12, 2020, the President of the United States signed an Executive Order prohibiting U.S. persons from purchasing or investing in publicly-traded securities of companies identified by the U.S. government as Communist Chinese military
companies, or in instruments that are derivative of, or are designed to provide investment exposure to, such securities. In addition, to the extent that a fund holds such a security, one or more fund intermediaries may decline to process
customer orders with respect to such fund unless and until certain representations are made by the fund or the prohibited holdings are divested. As a result of forced sales of a security, or inability to participate in an investment the manager
otherwise believes is attractive, a fund may incur losses.
Gaming-Tribal Authority Investments
The value of a funds investments in securities issued by gaming companies, including gaming facilities operated by Indian (Native American) tribal
authorities, is subject to legislative or regulatory changes, adverse market conditions, and/or increased competition affecting the gaming sector. Securities of gaming companies may be considered speculative, and generally exhibit greater volatility
than the overall market. The market value of gaming company securities may fluctuate widely due to unpredictable earnings, due in part to changing consumer tastes and intense competition, strong reaction to technological developments, and the threat
of increased government regulation.
Securities issued by Indian tribal authorities are subject to particular risks. Indian tribes enjoy sovereign
immunity, which is the legal privilege by which the United States federal, state, and tribal governments cannot be sued without their consent. In order to sue an Indian tribe (or an agency or instrumentality thereof), the tribe must have effectively
waived its sovereign immunity with respect to the matter in dispute. Certain Indian tribal authorities have agreed to waive their sovereign immunity in connection with their outstanding debt obligations. Generally, waivers of sovereign immunity have
been held to be enforceable against Indian tribes. Nevertheless, if a waiver of sovereign immunity is held to be ineffective, claimants, including investors in Indian tribal authority securities (such as a fund), could be precluded from judicially
enforcing their rights and remedies.
Further, in most commercial disputes with Indian tribes, it may be difficult or impossible to obtain federal court
jurisdiction. A commercial dispute may not present a federal question, and an Indian tribe may not be considered a citizen of any state for purposes of establishing diversity jurisdiction. The U.S. Supreme Court has held that jurisdiction in a
tribal court must be exhausted before any dispute can be heard in an appropriate federal court. In cases where the jurisdiction of the tribal forum is disputed, the tribal court first must rule as to the limits of its own jurisdiction. Such
jurisdictional issues, as well as the general view that Indian tribes are not considered to be subject to ordinary bankruptcy proceedings, may be disadvantageous to holders of obligations issued by Indian tribal authorities, including a fund.
Greater China Region Risk
Investments in the Greater
China region are subject to special risks, such as less developed or less efficient trading markets, restrictions on monetary repatriation and possible seizure, nationalization or expropriation of assets. Taiwans history of political
contention with China has resulted in ongoing tensions between the two countries and, at times, threats of military conflict. Investments in Taiwan could be adversely affected by its political and economic relationship with China. In addition, the
willingness of the government of the PRC to support the Mainland China and Hong Kong economies and markets is uncertain, and changes in government policy could significantly affect the markets in both Hong Kong and China. For example, a government
may restrict investment in companies or industries considered important to national interests, or intervene in the financial markets, such as by imposing trading restrictions, or banning or curtailing short selling. The PRC also maintains strict
currency controls and imposes repatriation restrictions in order to achieve economic, trade and political objectives and regularly intervenes in the currency market. The imposition of currency controls and repatriation restrictions may negatively
impact the performance and liquidity of a fund as capital may become trapped in the PRC. Chinese yuan currency exchange rates can be very volatile and can change quickly and unpredictably. A small number of companies and industries may generally
represent a relatively large portion of the Greater China market. Consequently, a fund may experience greater price volatility and significantly lower liquidity than a portfolio invested solely in equity securities of U.S. issuers. These companies
and industries also may be subject to greater sensitivity to adverse political, economic or regulatory developments generally affecting the market (see Risk Factors Foreign Securities).
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To the extent a fund invests in securities of Chinese issuers, it may be subject to certain risks associated with
variable interest entities (VIEs). VIEs are widely used by China-based companies where China restricts or prohibits foreign ownership in certain sectors, including telecommunications, technology, media, and education. In a typical VIE
structure, a shell company is set up in an offshore jurisdiction and enters into contractual arrangements with a China-based operating company. The VIE lists on a U.S. exchange and investors then purchase the stock issued by the VIE. The VIE
structure is designed to provide investors with economic exposure to the Chinese company that replicates equity ownership, without providing actual equity ownership.
VIE structures do not offer the same level of investor protections as direct ownership and investors may experience losses if VIE structures are altered,
contractual disputes emerge, or the legal status of the VIE structure is prohibited under Chinese law. Additionally, significant portions of the Chinese securities markets may also become rapidly illiquid, as Chinese issuers have the ability to
suspend the trading of their equity securities, and have shown a willingness to exercise that option in response to market volatility and other events.
The legal status of the VIE structure remains uncertain under Chinese law. There is risk that the Chinese government may cease to tolerate such VIE structures
at any time or impose new restrictions on the structure, in each case either generally or with respect to specific issuers. If new laws, rules or regulations relating to VIE structures are adopted, investors, including a fund, could suffer
substantial, detrimental, and possibly permanent losses with little or no recourse available.
In addition, VIEs may be delisted if they do not meet U.S.
accounting standards and auditor oversight requirements. Delisting would significantly decrease the liquidity and value of the securities of these companies, decrease the ability of a fund to invest in such securities and may increase the expenses
of a fund if it is required to seek alternative markets in which to invest in such securities.
High Yield (High Risk) Securities
General. A fund may invest in high yield (high risk) securities, consistent with its investment objectives and policies. High yield (high risk)
securities (also known as junk bonds) are those rated below investment grade and comparable unrated securities. These securities offer yields that fluctuate over time, but generally are superior to the yields offered by higher-rated
securities. However, securities rated below investment grade also have greater risks than higher-rated securities as described below.
Interest Rate
Risk. To the extent that a fund invests in fixed-income securities, the NAV of the funds shares can be expected to change as general levels of interest rates fluctuate. However, the market values of securities rated below investment grade
(and comparable unrated securities) tend to react less to fluctuations in interest rate levels than do those of higher-rated securities. Except to the extent that values are affected independently by other factors (such as developments relating to a
specific issuer) when interest rates decline, the value of a fixed-income fund generally rise. Conversely, when interest rates rise, the value of a fixed-income fund will decline.
Liquidity. The secondary markets for high yield corporate and sovereign debt securities are not as liquid as the secondary markets for investment grade
securities. The secondary markets for high yield debt securities are concentrated in relatively few market makers and participants are mostly institutional investors. In addition, the trading volume for high yield debt securities is generally lower
than for investment grade securities. Furthermore, the secondary markets could contract under adverse market or economic conditions independent of any specific adverse changes in the condition of a particular issuer.
These factors may have an adverse effect on the ability of funds investing in high yield securities to dispose of particular portfolio investments. These
factors also may limit funds that invest in high yield securities from obtaining accurate market quotations to value securities and calculate NAV. If a fund investing in high yield debt securities is not able to obtain precise or accurate market
quotations for a particular security, it will be more difficult for the subadvisor to value the funds investments.
Less liquid secondary markets
also may affect a funds ability to sell securities at their fair value. Each fund may invest in illiquid securities, subject to certain restrictions (see Additional Investment Policies and Other Instruments). These securities may
be more difficult to value and to sell at fair value. If the secondary markets for high yield debt securities are affected by adverse economic conditions, the proportion of a funds assets invested in illiquid securities may increase.
Below-Investment Grade Corporate Debt Securities. While the market values of securities rated below investment grade (and comparable unrated
securities) tend to react less to fluctuations in interest rate levels than do those of higher-rated securities, the market values of below-investment grade corporate debt securities tend to be more sensitive to individual corporate developments and
changes in economic conditions than higher-rated securities.
In addition, these securities generally present a higher degree of credit risk. Issuers of
these securities are often highly leveraged and may not have more traditional methods of financing available to them. Therefore, their ability to service their debt obligations during an economic downturn or during sustained periods of rising
interest rates may be impaired. The risk of loss due to default by such issuers is significantly greater than with investment grade securities because such securities generally are unsecured and frequently are subordinated to the prior payment of
senior indebtedness.
Below-Investment Grade Foreign Sovereign Debt Securities. Investing in below-investment grade foreign sovereign debt
securities will expose a fund to the consequences of political, social or economic changes in the developing and emerging market countries that issue the securities. The ability and willingness of sovereign obligors in these countries to pay
principal and interest on such debt when due may depend on general economic and political conditions within the relevant country. Developing and emerging market countries have historically experienced (and may continue to experience) high inflation
and interest rates, exchange rate trade difficulties, extreme poverty and unemployment. Many of these countries also are characterized by political uncertainty or instability.
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The ability of a foreign sovereign obligor to make timely payments on its external debt obligations also will be
strongly influenced by:
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the obligors balance of payments, including export performance; |
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the obligors access to international credits and investments; |
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fluctuations in interest rates; and |
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the extent of the obligors foreign reserves. |
Defaulted Securities. The risk of loss due to default may be considerably greater with lower-quality securities because they are generally unsecured
and are often subordinated to other debt of the issuer. The purchase of defaulted debt securities involves risks such as the possibility of complete loss of the investment where the issuer does not restructure to enable it to resume principal and
interest payments. If the issuer of a security in a funds portfolio defaults, the fund may have unrealized losses on the security, which may lower the funds NAV. Defaulted securities tend to lose much of their value before they default.
Thus, a funds NAV may be adversely affected before an issuer defaults. In addition, a fund may incur additional expenses if it must try to recover principal or interest payments on a defaulted security.
Defaulted debt securities may be illiquid and, as such, will be part of the percentage limits on investments in illiquid securities discussed under
Illiquid Securities.
Obligors Balance of Payments. A country whose exports are concentrated in a few commodities or whose
economy depends on certain strategic imports could be vulnerable to fluctuations in international prices of these commodities or imports. To the extent that a country receives payment for its exports in currencies other than dollars, its ability to
make debt payments denominated in dollars could be adversely affected.
Obligors Access to International Credits and Investments. If a
foreign sovereign obligor cannot generate sufficient earnings from foreign trade to service its external debt, it may need to depend on continuing loans and aid from foreign governments, commercial banks, and multilateral organizations, and inflows
of foreign investment. The commitment on the part of these entities to make such disbursements may be conditioned on the governments implementation of economic reforms and/or economic performance and the timely service of its obligations.
Failure in any of these efforts may result in the cancellation of these third parties lending commitments, thereby further impairing the obligors ability or willingness to service its debts on time.
Obligors Fluctuations in Interest Rates. The cost of servicing external debt is generally adversely affected by rising international interest
rates since many external debt obligations bear interest at rates that are adjusted based upon international interest rates.
Obligors Foreign
Reserves. The ability to service external debt also will depend on the level of the relevant governments international currency reserves and its access to foreign exchange. Currency devaluations may affect the ability of a sovereign
obligor to obtain sufficient foreign exchange to service its external debt.
The Consequences of a Default. As a result of the previously listed
factors, a governmental obligor may default on its obligations. If a default occurs, a fund holding foreign sovereign debt securities may have limited legal recourse against the issuer and/or guarantor. Remedies must, in some cases, be pursued in
the courts of the defaulting party itself, and the ability of the holder of the foreign sovereign debt securities to obtain recourse may be subject to the political climate in the relevant country. In addition, no assurance can be given that the
holders of commercial bank debt will not contest payments to the holders of other foreign sovereign debt obligations in the event of default under their commercial bank loan agreements.
Sovereign obligors in developing and emerging countries are among the worlds largest debtors to commercial banks, other governments, international
financial organizations and other financial institutions. These obligors have in the past experienced substantial difficulties in servicing their external debt obligations. This difficulty has led to defaults on certain obligations and the
restructuring of certain indebtedness. Restructuring arrangements have included, among other things:
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reducing and rescheduling interest and principal payments by negotiating new or amended credit agreements or
converting outstanding principal and unpaid interest to Brady Bonds; and |
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obtaining new credit to finance interest payments. |
Holders of certain foreign sovereign debt securities may be requested to participate in the restructuring of such obligations and to extend further loans to
their issuers. There can be no assurance that the Brady Bonds and other foreign sovereign debt securities in which a fund may invest will not be subject to similar restructuring arrangements or to requests for new credit that may adversely affect
the funds holdings. Furthermore, certain participants in the secondary market for such debt may be directly involved in negotiating the terms of these arrangements and may therefore have access to information not available to other market
participants.
Securities in the Lowest Rating Categories. Certain debt securities in which a fund may invest may have (or be considered comparable
to securities having) the lowest ratings for non-subordinated debt instruments (e.g., securities rated Caa or lower by Moodys, CCC or lower by S&P or Fitch). These securities
are considered to have the following characteristics:
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extremely poor prospects of ever attaining any real investment standing; |
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current identifiable vulnerability to default; |
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unlikely to have the capacity to pay interest and repay principal when due in the event of adverse business,
financial or economic conditions; |
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are speculative with respect to the issuers capacity to pay interest and repay principal in accordance with
the terms of the obligations; and/or |
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are in default or not current in the payment of interest or principal. |
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Accordingly, it is possible that these types of characteristics could, in certain instances, reduce the value of
securities held by a fund with a commensurate effect on the value of the funds shares.
Hong Kong Stock Connect Program and Bond Connect Program
Risk
A fund may invest in eligible renminbi-denominated class A shares of equity securities that are listed and traded on certain Chinese stock
exchanges (China A-Shares) through Stock Connect, a mutual market access program designed to, among others, enable foreign investment in the PRC; and in renminbi-denominated bonds issued in the PRC
by Chinese credit, government and quasi-governmental issuers (RMB Bonds), which are available on the CIBM to eligible foreign investors through, among others, the Mutual Bond Market Access between Mainland China and Hong Kong
(Bond Connect) program.
Trading in China A-Shares through Stock Connect and bonds through Bond
Connect is subject to certain restrictions and risks. A funds investment in China A-Shares may only be traded through Stock Connect and is not otherwise transferable. The list of securities eligible to
be traded on either program may change from time to time. Securities listed on either program may lose purchase eligibility, which could adversely affect a funds performance.
While Stock Connect is not subject to individual investment quotas, daily and aggregate investment quotas apply to all Stock Connect participants, which may
restrict or preclude a funds ability to invest in China A-Shares. For example, these quota limitations require that buy orders for China A-Shares be rejected once
the remaining balance of the relevant quota drops to zero or the daily quota is exceeded (although a fund will be permitted to sell China A-Shares regardless of the quota balance). These limitations may
restrict a fund from investing in China A-Shares on a timely basis, which could affect a funds ability to effectively pursue its investment strategy. Investment quotas are also subject to change. Bond
Connect is not subject to investment quotas.
Chinese regulations prohibit over-selling of China A-Shares. If a
fund intends to sell China A-shares it holds, it must transfer those securities to the accounts of a funds participant broker before the market opens. As a result, a fund may not be able to dispose of
its holdings of China A-Shares in a timely manner.
Stock Connect also is generally available only on business
days when both the exchange on which China A-Shares are offered and the Stock Exchange of Hong Kong are open and when banks in both markets are open on the corresponding settlement days. Therefore, an
investment in China A-Shares through Stock Connect may subject a fund to a risk of price fluctuations on days where Chinese stock markets are open, but Stock Connect is not operating. Similarly, Bond Connect
is only available on days when markets in both China and Hong Kong are open, which may limit a funds ability to trade when it would be otherwise attractive to do so.
Stock Connect launched in November 2014 and Bond Connect launched in July 2017. Therefore, trading through Stock Connect and Bond Connect is subject to
trading, clearance, and settlement procedures that may continue to develop as the programs mature, which could pose risks to a fund. Bond Connect is relatively new and its effects on the CIBM are uncertain. In addition, the trading, settlement and
information technology systems required for non-Chinese investors in Bond Connect are relatively new. In the event of systems malfunctions or extreme market conditions, trading via Bond Connect could be
disrupted. In addition, the rules governing the operation of Stock Connect and Bond Connect may be subject to further interpretation and guidance. There can be no assurance as to the programs continued existence or whether future developments
regarding the programs may restrict or adversely affect a funds investments or returns. Additionally, the withholding tax treatment of dividends, interest, and capital gains payable to overseas investors may be subject to change. Furthermore,
there is currently no specific formal guidance by the PRC tax authorities on the treatment of income tax and other tax categories payable in respect of trading in CIBM by eligible foreign institutional investors via Bond Connect. Any changes in PRC
tax law, future clarifications thereof, and/or subsequent retroactive enforcement by the PRC tax authorities of any tax may result in a material loss to a fund.
Stock Connect and Bond Connect regulations provide that investors, such as a fund, enjoy the rights and benefits of equities purchased through Stock Connect
and bonds purchased through Bond Connect. However, the nominee structure under Stock Connect requires that China A-Shares be held through the HKSCC as nominee on behalf of investors. For investments via Bond
Connect, the relevant filings, registration with Peoples Bank of China, and account opening have to be carried out via an onshore settlement agent, offshore custody agent, registration agent, or other third parties (as the case may be). As
such, a fund is subject to the risks of default or errors on the part of such third parties.
While a funds ownership of China A-Shares will be reflected on the books of the custodians records, a fund will only have beneficial rights in such A-Shares. The precise nature and rights of a fund as
the beneficial owner of the equities through the HKSCC as nominee is not well defined under the law of the PRC. Although the China Securities Regulatory Commission has issued guidance indicating that participants in Stock Connect will be able to
exercise rights of beneficial owners in the PRC, the exact nature and methods of enforcement of the rights and interests of a fund under PRC law is uncertain. In particular, the courts may consider that the nominee or custodian as registered holder
of China A-Shares, has full ownership over the securities rather than a fund as the underlying beneficial owner. The HKSCC, as nominee holder, does not guarantee the title to China A-Shares held through it and is under no obligation to enforce title or other rights associated with ownership on behalf of beneficial owners. Consequently, title to these securities, or the rights associated with
them, such as participation in corporate actions or shareholder meetings, cannot be assured.
While certain aspects of the Stock Connect trading process
are subject to Hong Kong law, PRC rules applicable to share ownership will apply. In addition, transactions using Stock Connect are not subject to the Hong Kong investor compensation fund, which means that a fund will be unable to make monetary
claims on the investor compensation fund that it might otherwise be entitled to with respect to investments in Hong Kong securities. Other risks associated with investments in PRC securities apply fully to China
A-Shares purchased through Stock Connect.
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Similarly, in China, the Hong Kong Monetary Authority Central Money Markets Unit holds Bond Connect securities on
behalf of ultimate investors (such as a fund) in accounts maintained with a China-based custodian (either the China Central Depository & Clearing Co. or the Shanghai Clearing House). This recordkeeping system subjects a fund to various
risks, including the risk that a fund may have a limited ability to enforce rights as a bondholder and the risks of settlement delays and counterparty default of the Hong Kong sub-custodian. In addition,
enforcing the ownership rights of a beneficial holder of Bond Connect securities is untested and courts in China have limited experience in applying the concept of beneficial ownership.
China A-Shares traded via Stock Connect and bonds trading through Bond Connect are subject to various risks associated
with the legal and technical framework of Stock Connect and Bond Connect, respectively. In the event that the relevant systems fail to function properly, trading through Stock Connect or Bond Connect could be disrupted. In the event of high trade
volume or unexpected market conditions, Stock Connect and Bond Connect may be available only on a limited basis, if at all. Both the PRC and Hong Kong regulators are permitted, independently of each other, to suspend Stock Connect in response to
certain market conditions. Similarly, in the event that the relevant Mainland Chinese authorities suspend account opening or trading on the CIBM via Bond Connect, a funds ability to invest in Chinese bonds will be adversely affected and
limited. In such event, a funds ability to achieve its investment objective will be negatively affected and, after exhausting other trading alternatives, a fund may suffer substantial losses as a result.
Hybrid Instruments
The risks of investing in hybrid
instruments are a combination of the risks of investing in securities, options, futures, swaps, and currencies. Therefore, an investment in a hybrid instrument may include significant risks not associated with a similar investment in a traditional
debt instrument with a fixed principal amount, is denominated in U.S. dollars, or that bears interest either at a fixed rate or a floating rate determined by reference to a common, nationally published benchmark. The risks of a particular hybrid
instrument will depend upon the terms of the instrument, but may include, without limitation, the possibility of significant changes in the benchmarks or the prices of underlying assets to which the instrument is linked. These risks generally depend
upon factors unrelated to the operations or credit quality of the issuer of the hybrid instrument and that may not be readily foreseen by the purchaser. Such factors include economic and political events, the supply and demand for the underlying
assets, and interest rate movements. In recent years, various benchmarks and prices for underlying assets have been highly volatile, and such volatility may be expected in the future. See Hedging and Other Strategic Transactions for a
description of certain risks associated with investments in futures, options, and forward contracts. The principal risks of investing in hybrid instruments are as follows:
Volatility. Hybrid instruments are potentially more volatile and carry greater market risks than traditional debt instruments. Depending
on the structure of the particular hybrid instrument, changes in a benchmark may be magnified by the terms of the hybrid instrument and have an even more dramatic and substantial effect upon the value of the hybrid instrument. Also, the prices of
the hybrid instrument and the benchmark or underlying asset may not move in the same direction or at the same time.
Leverage Risk.
Hybrid instruments may bear interest or pay preferred dividends at below market (or even relatively nominal) rates. Alternatively, hybrid instruments may bear interest at above market rates, but bear an increased risk of principal loss (or
gain). For example, an increased risk of principal loss (or gain) may result if leverage is used to structure a hybrid instrument. Leverage risk occurs when the hybrid instrument is structured so that a change in a benchmark or
underlying asset is multiplied to produce a greater value change in the hybrid instrument, thereby magnifying the risk of loss, as well as the potential for gain.
Liquidity Risk. Hybrid instruments also may carry liquidity risk since the instruments are often customized to meet the
needs of a particular investor. Therefore, the number of investors that would be willing and able to buy such instruments in the secondary market may be smaller than for more traditional debt securities. In addition, because the purchase and sale of
hybrid instruments could take place in an OTC market without the guarantee of a central clearing organization or in a transaction between a fund and the issuer of the hybrid instrument, the creditworthiness of the counterparty or issuer of the
hybrid instrument would be an additional risk factor, which the fund would have to consider and monitor.
Lack of U.S. Regulation.
Hybrid instruments may not be subject to regulation of the CFTC, which generally regulates the trading of swaps and commodity futures by U.S. persons, the SEC, which regulates the offer and sale of securities by and to U.S. persons, or any other
governmental regulatory authority.
Credit and Counterparty Risk. The issuer or guarantor of a hybrid instrument may be unable or
unwilling to make timely principal, interest or settlement payments, or otherwise honor its obligations. Funds that invest in hybrid instruments are subject to varying degrees of risk that the issuers of the securities will have their credit rating
downgraded or will default, potentially reducing a funds share price and income level.
The various risks discussed above with respect to hybrid
instruments particularly the market risk of such instruments, may cause significant fluctuations in the NAV of a fund that invests in such instruments.
Industry or Sector Investing
When a fund invests a
substantial portion of its assets in a particular industry or sector of the economy, the funds investments are not as varied as the investments of most funds and are far less varied than the broad securities markets. As a result, the
funds performance tends to be more volatile than other funds, and the values of the funds investments tend to go up and down more rapidly. In addition, to the extent that a fund invests significantly in a particular industry or sector,
it is particularly susceptible to the impact of market, economic, regulatory and other factors affecting that industry or sector. The principal risks of investing in certain sectors are described below.
Communication. Companies in the communication sector are subject to the additional risks of rapid obsolescence due to technological
advancement or development, lack of standardization or compatibility with existing technologies, an unfavorable regulatory environment, and a dependency on patent and copyright protection. The prices of the securities of companies in the
communication sector may fluctuate widely due to both federal and state regulations governing rates of return and services that may be offered, fierce competition for market share, and competitive challenges in the U.S. from foreign competitors
engaged in strategic joint ventures with U.S. companies, and in foreign markets from both U.S. and foreign competitors. In addition, recent industry consolidation trends may lead to increased regulation of communication companies in their primary
markets.
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Consumer Discretionary. The consumer discretionary sector may be affected by fluctuations in supply and
demand and may also be adversely affected by changes in consumer spending as a result of world events, political and economic conditions, commodity price volatility, changes in exchange rates, imposition of import controls, increased competition,
depletion of resources and labor relations.
For example, the coronavirus (COVID-19) pandemic led to materially
reduced consumer demand in certain sectors, a disruption in supply chains and an increase in market closures and retail company bankruptcies. The coronavirus (COVID-19) pandemic may affect certain countries,
industries, economic sectors, and companies more than others, may continue to exacerbate existing economic, political, or social tensions and may continue to increase the probability of an economic recession or depression. The impact on the consumer
discretionary market may last for an extended period of time.
Consumer Staples. Companies in the consumer staples sector may be affected by
general economic conditions, commodity production and pricing, consumer confidence and spending, consumer preferences, interest rates, product cycles, marketing, competition, and government regulation. Other risks include changes in global economic,
environmental and political events, and the depletion of resources. Companies in the consumer staples sector may also be negatively impacted by government regulations affecting their products. For example, government regulations may affect the
permissibility of using various food additives and production methods of companies that make food products, which could affect company profitability. Tobacco companies, in particular, may be adversely affected by new laws, regulations and
litigation. Companies in the consumer staples sector may also be subject to risks relating to the supply of, demand for, and prices of raw materials. The prices of raw materials fluctuate in response to a number of factors, including, changes in
exchange rates, import and export controls, changes in international agricultural and trading policies, and seasonal and weather conditions, among others. In addition, the success of food, beverage, household and personal product companies, in
particular, may be strongly affected by unpredictable factors, such as, demographics, consumer spending, and product trends.
Energy. Companies in
the energy sector may be affected by energy prices, supply and demand fluctuations including in energy fuels, energy conservation, liabilities arising from government or civil actions, environmental and other government regulations, and geopolitical
events including political instability and war. The market value of companies in the local energy sector is heavily impacted by the levels and stability of global energy prices, energy conservation efforts, the success of exploration projects,
exchange rates, interest rates, economic conditions, tax and other government regulations, increased competition and technological advances, as well as other factors. Companies in this sector may be subject to extensive government regulation and
contractual fixed pricing, which may increase the cost of doing business and limit these companies profits. A large part of the returns of these companies depends on few customers, including governmental entities and utilities. As a result,
governmental budget constraints may have a significant negative effect on the stock prices of energy sector companies. Energy companies may also operate in, or engage in, transactions involving countries with less developed regulatory regimes or a
history of expropriation, nationalization or other adverse policies. As a result, securities of companies in the energy field are subject to quick price and supply fluctuations caused by events relating to international politics. Other risks include
liability from accidents resulting in injury or loss of life or property, pollution or other environmental problems, equipment malfunctions or mishandling of materials and a risk of loss from terrorism, political strife and natural disasters. Energy
companies can also be heavily affected by the supply of, and demand for, their specific product or service and for energy products in general, and government subsidization. Energy companies may have high levels of debt and may be more likely to
restructure their businesses if there are downturns in energy markets or the economy as a whole.
Companies in the energy sector were adversely affected
by reduced demand for oil and other energy commodities as a result of the slowdown in economic activity resulting from the spread of the coronavirus (COVID-19) pandemic and by price competition among key oil
producing countries. Global oil prices declined significantly at the beginning of the coronavirus (COVID-19) pandemic and have experienced significant price volatility, including a period where an oil-price futures contract fell into negative territory for the first time in history, as demand for oil slowed and oil storage facilities had reached their storage capacities. The impact on such commodities markets
from varying levels of demand may continue to be volatile for an extended period of time.
Financial Services. To the extent that a fund invests
principally in securities of financial services companies, it is particularly vulnerable to events affecting that industry. Financial services companies may include, but are not limited to, commercial and industrial banks, savings and loan
associations and their holding companies, consumer and industrial finance companies, diversified financial services companies, investment banking, securities brokerage and investment advisory companies, leasing companies and insurance companies. The
types of companies that compose the financial services sector may change over time. These companies are all subject to extensive regulation, rapid business changes, volatile performance dependent upon the availability and cost of capital, prevailing
interest rates and significant competition. General economic conditions significantly affect these companies. Credit and other losses resulting from the financial difficulty of borrowers or other third parties have a potentially adverse effect on
companies in this sector. Investment banking, securities brokerage and investment advisory companies are particularly subject to government regulation and the risks inherent in securities trading and underwriting activities. In addition, all
financial services companies face shrinking profit margins due to new competitors, the cost of new technology, and the pressure to compete globally. Banking. Commercial banks (including money center regional and community banks),
savings and loan associations and holding companies of the foregoing are especially subject to adverse effects of volatile interest rates, concentrations of loans in particular industries (such as real estate or energy) and significant competition.
The profitability of these businesses is to a significant degree dependent upon the availability and cost of capital funds. Economic conditions in the real estate market may have a particularly strong effect on certain banks and savings
associations. Commercial banks and savings associations are subject to extensive federal and, in many instances, state regulation. Neither such extensive regulation nor the federal insurance of deposits ensures the solvency or profitability of
companies in this industry, and there is no assurance against losses in securities issued by such companies.
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Insurance. Insurance companies are particularly subject to government regulation and rate setting,
potential anti-trust and tax law changes, and industry-wide pricing and competition cycles. Property and casualty insurance companies also may be affected by weather and other catastrophes. Life and health insurance companies may be affected by
mortality and morbidity rates, including the effects of epidemics. Individual insurance companies may be exposed to reserve inadequacies, problems in investment portfolios (for example, due to real estate or junk bond holdings) and
failures of reinsurance carriers.
Health Sciences. Companies in this sector are subject to the additional risks of increased competition within
the health care industry, changes in legislation or government regulations, reductions in government funding, product liability or other litigation and the obsolescence of popular products. The prices of the securities of health sciences companies
may fluctuate widely due to government regulation and approval of their products and services, which may have a significant effect on their price and availability. In addition, the types of products or services produced or provided by these
companies may quickly become obsolete. Moreover, liability for products that are later alleged to be harmful or unsafe may be substantial and may have a significant impact on a companys market value or share price.
Industrials. Companies in the industrials sector may be affected by general economic conditions, commodity production and pricing, supply and demand
fluctuations, environmental and other government regulations, geopolitical events, interest rates, insurance costs, technological developments, liabilities arising from governmental or civil actions, labor relations, import controls and government
spending. The value of securities issued by companies in the industrials sector may also be adversely affected by supply and demand related to their specific products or services and industrials sector products in general, as well as liability for
environmental damage and product liability claims and government regulations. For example, the products of manufacturing companies may face obsolescence due to rapid technological developments and frequent new product introduction. Certain companies
within this sector, particularly aerospace and defense companies, may be heavily affected by government spending policies because companies involved in this industry rely, to a significant extent, on government demand for their products and
services, and, therefore, the financial condition of, and investor interest in, these companies are significantly influenced by governmental defense spending policies, which are typically under pressure from efforts to control the U.S. (and other)
government budgets. In addition, securities of industrials companies in transportation may be cyclical and have occasional sharp price movements which may result from economic changes, fuel prices, labor relations and insurance costs, and
transportation companies in certain countries may also be subject to significant government regulation and oversight, which may adversely affect their businesses.
Internet-Related Investments. The value of companies engaged in Internet-related activities, which is a developing industry, is particularly vulnerable
to: (a) rapidly changing technology; (b) extensive government regulation; and (c) relatively high risk of obsolescence caused by scientific and technological advances. In addition, companies engaged in Internet-related activities are
difficult to value and many have high share prices relative to their earnings which they may not be able to maintain over the long-term. Moreover, many Internet companies are not yet profitable and will need additional financing to continue their
operations. There is no guarantee that such financing will be available when needed. Since many Internet companies are start-up companies, the risks associated with investing in small companies are heightened
for these companies. A fund that invests a significant portion of its assets in Internet-related companies should be considered extremely risky even as compared to other funds that invest primarily in small company securities.
Materials. Companies in the materials sector may be affected by general economic conditions, commodity production and prices, consumer preferences,
interest rates, exchange rates, product cycles, marketing, competition, resource depletion, and environmental, import/export and other government regulations. Other risks may include liabilities for environmental damage and general civil
liabilities, and mandated expenditures for safety and pollution control. The materials sector may also be affected by economic cycles, technological progress, and labor relations. At times, worldwide production of industrial materials has been
greater than demand as a result of over-building or economic downturns, leading to poor investment returns or losses. These risks are heightened for companies in the materials sector located in foreign markets.
Natural Resources. A funds investments in natural resources companies are especially affected by variations in the commodities markets (which may
be due to market events, regulatory developments or other factors that such fund cannot control) and such companies may lack the resources and the broad business lines to weather hard times. Natural resources companies can be significantly affected
by events relating to domestic or international political and economic developments, energy conservation efforts, the success of exploration projects, reduced availability of transporting, processing, storing or delivering natural resources, extreme
weather or other natural disasters, and threats of attack by terrorists on energy assets. Additionally, natural resource companies are subject to substantial government regulation, including environmental regulation and liability for environmental
damage, and changes in the regulatory environment for energy companies may adversely impact their profitability. At times, the performance of these investments may lag the performance of other sectors or the market as a whole.
Investments in certain commodity-linked instruments, such as crude oil and crude oil products, can be susceptible to negative prices due to a surplus in
production caused by global events, including restrictions or reductions in global travel. Exposure to such commodity-linked instruments may adversely affect an issuers returns or the performance of the fund.
The natural resources sector was adversely impacted by the reduced demand for oil and other natural resources as a result of the slowdown in economic activity
resulting from the spread of the coronavirus (COVID-19) pandemic. Global oil prices are susceptible to and have experienced significant volatility, including a period where an
oil-price futures contract fell into negative territory for the first time in history during the beginning of the coronavirus (COVID-19) pandemic, as demand for oil
slowed and oil storage facilities reached their storage capacities. The impact on the natural resources sector from varying levels of demand may continue to be volatile for an extended period of time.
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Technology. Technology companies rely heavily on technological advances and face intense competition, both
domestically and internationally, which may have an adverse effect on profit margins. Shortening of product cycle and manufacturing capacity increases may subject technology companies to aggressive pricing. Technology companies may have limited
product lines, markets, financial resources or personnel. The products of technology companies may face product obsolescence due to rapid technological developments and frequent new product introduction, unpredictable changes in growth rates and
competition for the services of qualified personnel. Technology companies may not successfully introduce new products, develop and maintain a loyal customer base or achieve general market acceptance for their products.
Stocks of technology companies, especially those of smaller, less-seasoned companies, tend to be more volatile than the overall market. Companies in the
technology sector are also heavily dependent on patent and intellectual property rights, the loss or impairment of which may adversely affect the profitability of these companies. Technology companies engaged in manufacturing, such as semiconductor
companies, often operate internationally which could expose them to risks associated with instability and changes in economic and political conditions, foreign currency fluctuations, changes in foreign regulations, competition from subsidized
foreign competitors with lower production costs and other risks inherent to international business.
Utilities. Companies in the utilities sector
may be affected by general economic conditions, supply and demand, financing and operating costs, rate caps, interest rates, liabilities arising from governmental or civil actions, consumer confidence and spending, competition, technological
progress, energy prices, resource conservation and depletion, man-made or natural disasters, geopolitical events, and environmental and other government regulations. The value of securities issued by companies
in the utilities sector may be negatively impacted by variations in exchange rates, domestic and international competition, energy conservation and governmental limitations on rates charged to customers. Although rate changes of a regulated utility
usually vary in approximate correlation with financing costs, due to political and regulatory factors rate changes usually happen only after a delay after the changes in financing costs. Deregulation may subject utility companies to increased
competition and can negatively affect their profitability as it permits utility companies to diversify outside of their original geographic regions and customary lines of business, causing them to engage in more uncertain ventures. Deregulation can
also eliminate restrictions on the profits of certain utility companies, but can simultaneously expose these companies to an increased risk of loss. Although opportunities may permit certain utility companies to earn more than their traditional
regulated rates of return, companies in the utilities industry may have difficulty obtaining an adequate return on invested capital, raising capital, or financing large construction projects during periods of inflation or unsettled capital markets.
Utility companies may also be subject to increased costs because of the effects of man-made or natural disasters. Current and future regulations or legislation can make it more difficult for utility companies
to operate profitably. Government regulators monitor and control utility revenues and costs, and thus may restrict utility profits. There is no assurance that regulatory authorities will grant rate increases in the future, or that those increases
will be adequate to permit the payment of dividends on stocks issued by a utility company. Because utility companies are faced with the same obstacles, issues and regulatory burdens, their securities may react similarly and more in unison to these
or other market conditions.
Initial Public Offerings (IPOs)
IPOs may have a magnified impact on the performance of a fund with a small asset base. The impact of IPOs on a funds performance likely will decrease as
the funds asset size increases, which could reduce the funds returns. IPOs may not be consistently available to a fund for investment, particularly as the funds asset base grows. IPO shares frequently are volatile in price due to
the absence of a prior public market, the small number of shares available for trading and limited information about the issuer. Therefore, a fund may hold IPO shares for a very short period of time. This may increase the turnover of a fund and may
lead to increased expenses for a fund, such as commissions and transaction costs. In addition, IPO shares can experience an immediate drop in value if the demand for the securities does not continue to support the offering price.
Investment Companies
The funds may invest in shares of
other investment companies, including both open- and closed-end investment companies (including single country funds, ETFs, and BDCs). When making such an investment, a fund will be indirectly exposed to all
the risks of such investment companies. In general, the investing funds will bear a pro rata portion of the other investment companys fees and expenses, which will reduce the total return in the investing funds. Certain types of investment
companies, such as closed-end investment companies, issue a fixed number of shares that trade on a stock exchange and may involve the payment of substantial premiums above the value of such investment
companies portfolio securities when traded OTC or at discounts to their NAVs. Others are continuously offered at NAV, but also may be traded in the secondary market.
In addition, the funds may invest in private investment funds, vehicles, or structures. A fund also may invest in debt-equity conversion funds, which are
funds established to exchange foreign bank debt of countries whose principal repayments are in arrears into a portfolio of listed and unlisted equities, subject to certain repatriation restrictions.
Exchange-Traded Funds. A fund may invest in ETFs, which are a type of security bought and sold on a securities exchange. A fund could purchase shares
of an ETF to gain exposure to a portion of the U.S. or a foreign market. The risks of owning shares of an ETF include the risks of directly owning the underlying securities and other instruments the ETF holds. A lack of liquidity in an ETF (e.g.,
absence of an active trading market) could result in the ETF being more volatile than its underlying securities. The existence of extreme market volatility or potential lack of an active trading market for an ETFs shares could result in the
ETFs shares trading at a significant premium or discount to its NAV. An ETF has its own fees and expenses, which are indirectly borne by the fund. A fund may also incur brokerage and other related costs when it purchases and sells ETFs. Also,
in the case of passively-managed ETFs, there is a risk that an ETF may fail to closely track the index or market segment that it is designed to track due to delays in the ETFs implementation of changes to the composition of the index or other
factors.
Business Development Companies. A BDC is a less-common type of closed-end investment company that
more closely resembles an operating company than a typical investment company. BDCs typically invest in and lend to small- and medium-sized private and certain public companies that may not have access to
public equity markets to raise capital. BDCs invest in such diverse industries as health care, chemical and manufacturing, technology and service companies. BDCs generally invest in less mature private companies, which involve greater risk than
well-established, publicly
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traded companies. BDCs are unique in that at least 70% of their investments must be made in private and certain
public U.S. businesses, and BDCs are required to make available significant managerial assistance to their portfolio companies. Generally, little public information exists for private and thinly traded companies, and there is a risk that investors
may not be able to make a fully informed investment decision. With investments in debt instruments issued by such portfolio companies, there is a risk that the issuer may default on its payments or declare bankruptcy.
Investment Grade Fixed-Income Securities in the Lowest Rating Category
Investment grade fixed-income securities in the lowest rating category (i.e., rated Baa by Moodys and BBB by S&P or Fitch,
and comparable unrated securities) involve a higher degree of risk than fixed-income securities in the higher rating categories. While such securities are considered investment grade quality and are deemed to have adequate capacity for payment of
principal and interest, such securities lack outstanding investment characteristics and have speculative characteristics as well. For example, changes in economic conditions or other circumstances are more likely to lead to a weakened capacity to
make principal and interest payments than is the case with higher grade securities.
Investments in the Subsidiary
The Subsidiary is organized under the laws of the Cayman Islands, and is overseen by three Directors affiliated with the Advisor. The Parent fund is the sole
shareholder of its Subsidiary, and it is not currently expected that shares of the Subsidiary will be sold or offered to other investors. The Subsidiary expects to invest primarily in commodity-linked derivative instruments, including swap
agreements, commodity options, futures and options on futures, backed by a portfolio of inflation-indexed securities and other fixed-income securities and is also permitted to invest in any other investments permitted by its Parent fund. To the
extent that the fund invests in its Subsidiary, the fund will be subject to the risks associated with those derivative instruments and other securities, which are discussed elsewhere in the Prospectus and this SAI.
While the Subsidiary may be operated similarly to its Parent fund, it is not registered under the 1940 Act and, unless otherwise noted in the Prospectus and
this SAI, is not subject to the investor protections of the 1940 Act and other U.S. regulations. Changes in the laws of the U.S. and/or the Cayman Islands could result in the inability of the fund and/or its Subsidiary to operate as described in the
Prospectus and this SAI and could negatively affect the Parent fund and its shareholders.
LIBOR Discontinuation Risk
Certain debt securities, derivatives and other financial instruments may utilize LIBOR as the reference or benchmark rate for interest rate calculations.
However, following allegations of manipulation and concerns regarding liquidity, in July 2017 the U.K. Financial Conduct Authority, which regulates LIBOR, announced that it would cease its active encouragement of banks to provide the quotations
needed to sustain LIBOR. The ICE Benchmark Administration Limited, the administrator of LIBOR, ceased publishing certain LIBOR maturities, including some U.S. LIBOR maturities, on December 31, 2021, and is expected to cease publishing the
remaining and most liquid U.S. LIBOR maturities on June 30, 2023. It is expected that market participants have or will transition to the use of alternative reference or benchmark rates prior to the applicable LIBOR publication cessation date.
Additionally, although regulators have encouraged the development and adoption of alternative rates such as the Secured Overnight Financing Rate (SOFR), the future utilization of LIBOR or of any particular replacement rate remains
uncertain.
Although the transition process away from LIBOR has become increasingly well-defined in advance of the anticipated discontinuation dates, the
impact on certain debt securities, derivatives and other financial instruments remains uncertain. It is expected that market participants will adopt alternative rates such as SOFR or otherwise amend financial instruments referencing LIBOR to include
fallback provisions and other measures that contemplate the discontinuation of LIBOR or other similar market disruption events, but neither the effect of the transition process nor the viability of such measures is known. Further, uncertainty and
risk remain regarding the willingness and ability of issuers and lenders to include alternative rates and revised provisions in new and existing contracts or instruments. To facilitate the transition of legacy derivatives contracts referencing
LIBOR, the International Swaps and Derivatives Association, Inc. launched a protocol to incorporate fallback provisions. However, there are obstacles to converting certain longer term securities and transactions to a new benchmark or benchmarks and
the effectiveness of one alternative reference rate versus multiple alternative reference rates in new or existing financial instruments and products has not been determined. Certain proposed replacement rates to LIBOR, such as SOFR, which is a
broad measure of secured overnight U.S. Treasury repo rates, are materially different from LIBOR, and changes in the applicable spread for financial instruments transitioning away from LIBOR will need to be made to accommodate the differences.
Furthermore, the risks associated with the expected discontinuation of LIBOR and transition to replacement rates may be exacerbated if an orderly transition to an alternative reference rate is not completed in a timely manner.
As market participants transition away from LIBOR, LIBORs usefulness may deteriorate and these effects could be experienced until the permanent
cessation of the majority of U.S. LIBOR rates in 2023. The transition process may lead to increased volatility and illiquidity in markets that currently rely on LIBOR to determine interest rates. LIBORs deterioration may adversely affect the
liquidity and/or market value of securities that use LIBOR as a benchmark interest rate, including securities and other financial instruments held by the fund. Further, the utilization of an alternative reference rate, or the transition process to
an alternative reference rate, may adversely affect the funds performance.
Alteration of the terms of a debt instrument or a modification of the
terms of other types of contracts to replace LIBOR or another interbank offered rate (IBOR) with a new reference rate could result in a taxable exchange and the realization of income and gain/loss for U.S. federal income tax purposes.
The IRS has issued final regulations regarding the tax consequences of the transition from IBOR to a new reference rate in debt instruments and non-debt contracts. Under the final regulations, alteration or
modification of the terms of a debt instrument to replace an operative rate that uses a discontinued IBOR with a qualified rate (as defined in the final regulations) including true up payments equalizing the fair market value of contracts before and
after such IBOR transition, to add a qualified rate as a fallback rate to a contract whose operative rate uses a discontinued IBOR or to replace a fallback rate that uses a discontinued IBOR with a qualified rate would not be taxable. The IRS may
provide additional guidance, with potential retroactive effect.
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Lower Rated Fixed-Income Securities
Lower rated fixed-income securities are defined as securities rated below-investment grade (e.g., rated Ba and below by Moodys, or
BB and below by S&P or Fitch). The principal risks of investing in these securities are as follows:
Risk to Principal
and Income. Investing in lower rated fixed-income securities is considered speculative. While these securities generally provide greater income potential than investments in higher rated securities, there is a greater risk that principal and
interest payments will not be made. Issuers of these securities may even go into default or become bankrupt.
Price Volatility. The price of lower
rated fixed-income securities may be more volatile than securities in the higher rating categories. This volatility may increase during periods of economic uncertainty or change. The price of these securities is affected more than higher rated
fixed-income securities by the markets perception of their credit quality especially during times of adverse publicity. In the past, economic downturns or an increase in interest rates have, at times, caused more defaults by issuers of these
securities and may do so in the future. Economic downturns and increases in interest rates have an even greater effect on highly leveraged issuers of these securities.
Liquidity. The market for lower rated fixed-income securities may have more limited trading than the market for investment grade fixed-income
securities. Therefore, it may be more difficult to sell these securities and these securities may have to be sold at prices below their market value in order to meet redemption requests or to respond to changes in market conditions.
Dependence on Subadvisors Own Credit Analysis. While a subadvisor to a fund may rely on ratings by established credit rating agencies, it also
will supplement such ratings with its own independent review of the credit quality of the issuer. Therefore, the assessment of the credit risk of lower rated fixed-income securities is more dependent on a subadvisors evaluation than the
assessment of the credit risk of higher rated securities.
Additional Risks Regarding Lower Rated Corporate Fixed-Income Securities. Lower rated
corporate debt securities (and comparable unrated securities) tend to be more sensitive to individual corporate developments and changes in economic conditions than higher-rated corporate fixed-income securities.
Issuers of lower rated corporate debt securities also may be highly leveraged, increasing the risk that principal and income will not be repaid.
Additional Risks Regarding Lower Rated Foreign Government Fixed-Income Securities. Lower rated foreign government fixed-income securities are subject
to the risks of investing in emerging market countries described under Risk FactorsForeign Securities. In addition, the ability and willingness of a foreign government to make payments on debt when due may be affected by the
prevailing economic and political conditions within the country. Emerging market countries may experience high inflation, interest rates and unemployment as well as exchange rate fluctuations that adversely affect trade and political uncertainty or
instability. These factors increase the risk that a foreign government will not make payments when due.
Market Events
Events in certain sectors historically have resulted, and may in the future result, in an unusually high degree of volatility in the financial markets, both
domestic and foreign. These events have included, but are not limited to: bankruptcies, corporate restructurings, and other similar events; governmental efforts to limit short selling and high frequency trading; measures to address U.S. federal and
state budget deficits; social, political, and economic instability in Europe; economic stimulus by the Japanese central bank; dramatic changes in energy prices and currency exchange rates; and Chinas economic slowdown. Interconnected global
economies and financial markets increase the possibility that conditions in one country or region might adversely impact issuers in a different country or region. Both domestic and foreign equity markets have experienced increased volatility and
turmoil, with issuers that have exposure to the real estate, mortgage, and credit markets particularly affected. Financial institutions could suffer losses as interest rates rise or economic conditions deteriorate.
In addition, relatively high market volatility and reduced liquidity in credit and fixed-income markets may adversely affect many issuers worldwide. Actions
taken by the U.S. Federal Reserve (the Fed) or foreign central banks to stimulate or stabilize economic growth, such as interventions in currency markets, could cause high volatility in the equity and fixed-income markets. Reduced
liquidity may result in less money being available to purchase raw materials, goods, and services from emerging markets, which may, in turn, bring down the prices of these economic staples. It may also result in emerging-market issuers having more
difficulty obtaining financing, which may, in turn, cause a decline in their securities prices.
Beginning in March 2022, the Fed began increasing
interest rates and has signaled the potential for further increases. As a result, risks associated with rising interest rates are currently heightened. It is difficult to accurately predict the pace at which the Fed will increase interest rates any
further, or the timing, frequency or magnitude of any such increases, and the evaluation of macro-economic and other conditions could cause a change in approach in the future. Any such increases generally will cause market interest rates to rise and
could cause the value of a funds investments, and the funds NAV, to decline, potentially suddenly and significantly. As a result, the fund may experience high redemptions and, as a result, increased portfolio turnover, which could
increase the costs that the fund incurs and may negatively impact the funds performance.
In addition, as the Fed increases the target Fed funds
rate, any such rate increases, among other factors, could cause markets to experience continuing high volatility. A significant increase in interest rates may cause a decline in the market for equity securities. These events and the possible
resulting market volatility may have an adverse effect on a fund.
Political turmoil within the United States and abroad may also impact a fund. Although
the U.S. government has honored its credit obligations, it remains possible that the United States could default on its obligations. While it is impossible to predict the consequences of such an unprecedented event, it is likely that a default by
the United States would be highly disruptive to the U.S. and global securities markets and could significantly impair the value of a funds investments. Similarly, political events within the United States at times have resulted, and may in the
future result, in a shutdown of government services, which could negatively affect the U.S. economy, decrease the value of many fund investments, and increase uncertainty in or impair the operation of the U.S. or other securities markets. In recent
years, the U.S. renegotiated many of its global trade relationships and imposed or threatened to impose significant import tariffs. These actions could lead to price volatility and overall declines in U.S. and global investment markets.
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Uncertainties surrounding the sovereign debt of a number of EU countries and the viability of the EU have
disrupted and may in the future disrupt markets in the United States and around the world. If one or more countries leave the EU or the EU dissolves, the global securities markets likely will be significantly disrupted. On January 31, 2020, the
UK left the EU, commonly referred to as Brexit, and the UK ceased to be a member of the EU. Following a transition period during which the EU and the UK Government engaged in a series of negotiations regarding the terms of the UKs
future relationship with the EU, the EU and the UK Government signed an agreement regarding the economic relationship between the UK and the EU. While the full impact of Brexit is unknown, Brexit has already resulted in volatility in European and
global markets. There remains significant market uncertainty regarding Brexits ramifications, and the range and potential implications of possible political, regulatory, economic, and market outcomes are difficult to predict. This uncertainty
may affect other countries in the EU and elsewhere, and may cause volatility within the EU, triggering prolonged economic downturns in certain countries within the EU. Despite the influence of the lockdowns, and the economic bounce back, Brexit has
had a material impact on the UKs economy. Additionally, trade between the UK and the EU did not benefit from the global rebound in trade in 2021, and remained at the very low levels experienced at the start of the coronavirus (COVID-19) pandemic in 2020, highlighting Brexits potential long-term effects on the UK economy.
In addition,
Brexit may create additional and substantial economic stresses for the UK, including a contraction of the UK economy and price volatility in UK stocks, decreased trade, capital outflows, devaluation of the British pound, wider corporate bond spreads
due to uncertainty and declines in business and consumer spending as well as foreign direct investment. Brexit may also adversely affect UK-based financial firms that have counterparties in the EU or
participate in market infrastructure (trading venues, clearing houses, settlement facilities) based in the EU. Additionally, the spread of the coronavirus (COVID-19) pandemic is likely to continue to stretch
the resources and deficits of many countries in the EU and throughout the world, increasing the possibility that countries may be unable to make timely payments on their sovereign debt. These events and the resulting market volatility may have an
adverse effect on the performance of the fund.
A widespread health crisis such as a global pandemic could cause substantial market volatility, exchange
trading suspensions and closures, which may lead to less liquidity in certain instruments, industries, sectors or the markets generally, and may ultimately affect fund performance. For example, the coronavirus
(COVID-19) pandemic has resulted and may continue to result in significant disruptions to global business activity and market volatility due to disruptions in market access, resource availability, facilities
operations, imposition of tariffs, export controls and supply chain disruption, among others. The impact of a health crisis and other epidemics and pandemics that may arise in the future, could affect the global economy in ways that cannot
necessarily be foreseen at the present time. A health crisis may exacerbate other pre-existing political, social and economic risks. Any such impact could adversely affect the funds performance,
resulting in losses to your investment.
The United States responded to the coronavirus (COVID-19) pandemic and
resulting economic distress with fiscal and monetary stimulus packages. In late March 2020, the government passed the Coronavirus Aid, Relief, and Economic Security Act, a stimulus package providing for over $2.2 trillion in resources to small
businesses, state and local governments, and individuals adversely impacted by the coronavirus (COVID-19) pandemic. In late December 2020, the government also passed a spending bill that included
$900 billion in stimulus relief for the coronavirus (COVID-19) pandemic. Further, in March 2021, the government passed the American Rescue Plan Act of 2021, a $1.9 trillion stimulus bill to accelerate the
United States recovery from the economic and health effects of the coronavirus (COVID-19) pandemic. In addition, in mid-March 2020 the Fed cut interest rates to
historically low levels and promised unlimited and open-ended quantitative easing, including purchases of corporate and municipal government bonds. The Fed also enacted various programs to support liquidity operations and funding in the financial
markets, including expanding its reverse repurchase agreement operations, adding $1.5 trillion of liquidity to the banking system, establishing swap lines with other major central banks to provide dollar funding, establishing a program to support
money market funds, easing various bank capital buffers, providing funding backstops for businesses to provide bridging loans for up to four years, and providing funding to help credit flow in asset-backed securities markets. The Fed also extended
credit to small- and medium-sized businesses.
Political and military events, including in Ukraine, North Korea,
Russia, Venezuela, Iran, Syria, and other areas of the Middle East, and nationalist unrest in Europe and South America, also may cause market disruptions.
As a result of continued political tensions and armed conflicts, including the Russian invasion of Ukraine commencing in February of 2022, the extent and
ultimate result of which are unknown at this time, the United States and the EU, along with the regulatory bodies of a number of countries, have imposed economic sanctions on certain Russian corporate entities and individuals, and certain sectors of
Russias economy, which may result in, among other things, the continued devaluation of Russian currency, a downgrade in the countrys credit rating, and/or a decline in the value and liquidity of Russian securities, property or interests.
These sanctions could also result in the immediate freeze of Russian securities and/or funds invested in prohibited assets, impairing the ability of a fund to buy, sell, receive or deliver those securities and/or assets. These sanctions or the
threat of additional sanctions could also result in Russia taking counter measures or retaliatory actions, which may further impair the value and liquidity of Russian securities. The United States and other nations or international organizations may
also impose additional economic sanctions or take other actions that may adversely affect Russia-exposed issuers and companies in various sectors of the Russian economy. Any or all of these potential results could lead Russias economy into a
recession. Economic sanctions and other actions against Russian institutions, companies, and individuals resulting from the ongoing conflict may also have a substantial negative impact on other economies and securities markets both regionally and
globally, as well as on companies with operations in the conflict region, the extent to which is unknown at this time. The United States and the EU have also imposed similar sanctions on Belarus for its support of Russias invasion of Ukraine.
Additional sanctions may be imposed on Belarus and other countries that support Russia. Any such sanctions could present substantially similar risks as those resulting from the sanctions imposed on Russia, including substantial negative impacts on
the regional and global economies and securities markets.
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In addition, there is a risk that the prices of goods and services in the United States and many foreign
economies may decline over time, known as deflation. Deflation may have an adverse effect on stock prices and creditworthiness and may make defaults on debt more likely. If a countrys economy slips into a deflationary pattern, it could last
for a prolonged period and may be difficult to reverse. Further, there is a risk that the present value of assets or income from investments will be less in the future, known as inflation. Inflation rates may change frequently and drastically as a
result of various factors, including unexpected shifts in the domestic or global economy, and a funds investments may be affected, which may reduce a funds performance. Further, inflation may lead to the rise in interest rates, which may
negatively affect the value of debt instruments held by the fund, resulting in a negative impact on a funds performance. Generally, securities issued in emerging markets are subject to a greater risk of inflationary or deflationary forces, and
more developed markets are better able to use monetary policy to normalize markets.
Master Limited Partnership (MLP) Risk
Investing in MLPs involves certain risks related to investing in the underlying assets of MLPs and risks associated with pooled investment vehicles. MLPs
holding credit-related investments are subject to interest-rate risk and the risk of default on payment obligations by debt securities. In addition, investments in the debt and securities of MLPs involve certain other risks, including risks related
to limited control and limited rights to vote on matters affecting MLPs, risks related to potential conflicts of interest between an MLP and the MLPs general partner, cash flow risks, dilution risks and risks related to the general
partners right to require unit-holders to sell their common units at an undesirable time or price. A funds investments in MLPs may be subject to legal and other restrictions on resale or may be less liquid than publicly traded
securities. Certain MLP securities may trade in lower volumes due to their smaller capitalizations, and may be subject to more abrupt or erratic price movements and may lack sufficient market liquidity to enable the fund to effect sales at an
advantageous time or without a substantial drop in price. If a fund is one of the largest investors in an MLP, it may be more difficult for the fund to buy and sell significant amounts of such investments without an unfavorable impact on prevailing
market prices. Larger purchases or sales of MLP investments by a fund in a short period of time may cause abnormal movements in the market price of these investments. As a result, these investments may be difficult to dispose of at an advantageous
price when a fund desires to do so. During periods of interest rate volatility, these investments may not provide attractive returns, which may adversely impact the overall performance of a fund. MLPs in which a fund may invest operate oil, natural
gas, petroleum, or other facilities within the energy sector. As a result, a fund will be susceptible to adverse economic, environmental, or regulatory occurrences impacting the energy sector.
Reduced demand for oil and other energy commodities as a result of the slowdown in economic activity resulting from the spread of the coronavirus (COVID-19) pandemic adversely impacted MLPs. Global oil prices declined significantly at the beginning of the coronavirus (COVID-19) pandemic and have experienced significant
price volatility, including a period where an oil-price futures contract fell into negative territory for the first time in history, as demand for oil slowed and oil storage facilities reached their storage
capacities. Varying levels of demand and production and continued oil price volatility may continue to adversely impact MLPs and energy infrastructure companies.
To the extent a distribution received by a fund from an MLP is treated as a return of capital, the funds adjusted tax basis in the interests of the MLP
may be reduced, which will result in an increase in an amount of income or gain (or decrease in the amount of loss) that will be recognized by the fund for tax purposes upon the sale of any such interests or upon subsequent distributions in respect
of such interests. After a funds tax basis in an MLP has been reduced to zero, subsequent distributions from the MLP will be treated as ordinary income. Changes in the tax character of MLP distributions, as well as late or corrected tax
reporting by MLPs, may result in a fund issuing corrected 1099s to its shareholders.
Mortgage-Backed and Asset-Backed Securities
Mortgage-Backed Securities. Mortgage-backed securities represent participating interests in pools of residential mortgage loans that are guaranteed by
the U.S. government, its agencies or instrumentalities. However, the guarantee of these types of securities relates to the principal and interest payments and not the market value of such securities. In addition, the guarantee only relates to the
mortgage-backed securities held by a fund and not the purchase of shares of the fund.
Mortgage-backed securities are issued by lenders such as mortgage
bankers, commercial banks, and savings and loan associations. Such securities differ from conventional debt securities, which provide for the periodic payment of interest in fixed amounts (usually semiannually) with principal payments at maturity or
on specified dates. Mortgage-backed securities provide periodic payments that are, in effect, a pass-through of the interest and principal payments (including any prepayments) made by the individual borrowers on the pooled mortgage
loans. A mortgage-backed security will mature when all the mortgages in the pool mature or are prepaid. Therefore, mortgage-backed securities do not have a fixed maturity, and their expected maturities may vary when interest rates rise or fall.
When interest rates fall, homeowners are more likely to prepay their mortgage loans. An increased rate of prepayments on a funds mortgage-backed
securities will result in an unforeseen loss of interest income to the fund as the fund may be required to reinvest assets at a lower interest rate. Because prepayments increase when interest rates fall, the prices of mortgage-backed securities do
not increase as much as other fixed-income securities when interest rates fall.
When interest rates rise, homeowners are less likely to prepay their
mortgage loans. A decreased rate of prepayments lengthens the expected maturity of a mortgage-backed security. Therefore, the prices of mortgage-backed securities may decrease more than prices of other fixed-income securities when interest rates
rise.
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The yield of mortgage-backed securities is based on the average life of the underlying pool of mortgage loans.
The actual life of any particular pool may be shortened by unscheduled or early payments of principal and interest. Principal prepayments may result from the sale of the underlying property or the refinancing or foreclosure of underlying mortgages.
The occurrence of prepayments is affected by a wide range of economic, demographic and social factors and, accordingly, it is not possible to accurately predict the average life of a particular pool. The actual prepayment experience of a pool of
mortgage loans may cause the yield realized by a fund to differ from the yield calculated on the basis of the average life of the pool. In addition, if a fund purchases mortgage-backed securities at a premium, the premium may be lost in the event of
early prepayment, which may result in a loss to the fund.
Prepayments tend to increase during periods of falling interest rates and decline during
periods of rising interest rates. Monthly interest payments received by a fund have a compounding effect, which will increase the yield to shareholders as compared to debt obligations that pay interest semiannually. Because of the reinvestment of
prepayments of principal at current rates, mortgage-backed securities may be less effective than Treasury bonds of similar maturity at maintaining yields during periods of declining interest rates. Also, although the value of debt securities may
increase as interest rates decline, the value of these pass-through type of securities may not increase as much due to their prepayment feature.
The
mortgage-backed securities market has been and may continue to be negatively affected by the coronavirus (COVID-19) pandemic. The U.S. government, its agencies or its instrumentalities may implement
initiatives in response to the economic impacts of the coronavirus (COVID-19) pandemic applicable to federally backed mortgage loans. These initiatives could involve forbearance of mortgage payments or
suspension or restrictions of foreclosures and evictions. The fund cannot predict with certainty the extent to which such initiatives or the economic effects of the pandemic generally may affect rates of prepayment or default or adversely impact the
value of the funds investments in securities in the mortgage industry as a whole.
Collateralized Mortgage Obligations. CMOs are
mortgage-backed securities issued in separate classes with different stated maturities. As the mortgage pool experiences prepayments, the pool pays off investors in classes with shorter maturities first. By investing in CMOs, a fund may manage the
prepayment risk of mortgage-backed securities. However, prepayments may cause the actual maturity of a CMO to be substantially shorter than its stated maturity.
Asset-Backed Securities. Asset-backed securities include interests in pools of debt securities, commercial or consumer loans, or other receivables. The
value of these securities depends on many factors, including changes in interest rates, the availability of information concerning the pool and its structure, the credit quality of the underlying assets, the markets perception of the servicer
of the pool, and any credit enhancement provided. In addition, asset-backed securities have prepayment risks similar to mortgage-backed securities.
Multinational Companies Risk
To the extent that a fund
invests in the securities of companies with foreign business operations, it may be riskier than funds that focus on companies with primarily U.S. operations. Multinational companies may face certain political and economic risks, such as foreign
controls over currency exchange; restrictions on monetary repatriation; possible seizure, nationalization or expropriation of assets; and political, economic or social instability. These risks are greater for companies with significant operations in
developing countries.
Natural Disasters, Adverse Weather Conditions, and Climate Change
Certain areas of the world may be exposed to adverse weather conditions, such as major natural disasters and other extreme weather events, including
hurricanes, earthquakes, typhoons, floods, tidal waves, tsunamis, volcanic eruptions, wildfires, droughts, windstorms, coastal storm surges, heat waves, and rising sea levels, among others. Some countries and regions may not have the infrastructure
or resources to respond to natural disasters, making them more economically sensitive to environmental events. Such disasters, and the resulting damage, could have a severe and negative impact on a funds investment portfolio and, in the longer
term, could impair the ability of issuers in which a fund invests to conduct their businesses in the manner normally conducted. Adverse weather conditions also may have a particularly significant negative effect on issuers in the agricultural sector
and on insurance companies that insure against the impact of natural disasters.
Climate change, which is the result of a change in global or regional
climate patterns, may increase the frequency and intensity of such adverse weather conditions, resulting in increased economic impact, and may pose long-term risks to a funds investments. The future impact of climate change is difficult to
predict but may include changes in demand for certain goods and services, supply chain disruption, changes in production costs, increased legislation, regulation, international accords and compliance-related costs, changes in property and security
values, availability of natural resources and displacement of peoples.
Legal, technological, political and scientific developments regarding climate
change may create new opportunities or risks for issuers in which a fund invests. These developments may create demand for new products or services, including, but not limited to, increased demand for goods that result in lower emissions, increased
demand for generation and transmission of energy from alternative energy sources and increased competition to develop innovative new products and technologies. These developments may also decrease demand for existing products or services, including,
but not limited to, decreased demand for goods that produce significant greenhouse gas emissions and decreased demand for services related to carbon based energy sources, such as drilling services or equipment maintenance services.
Negative Interest Rates
Certain countries have recently
experienced negative interest rates on deposits and debt instruments have traded at negative yields. A negative interest rate policy is an unconventional central bank monetary policy tool where nominal target interest rates are set with a negative
value (i.e., below zero percent) intended to help create self-sustaining growth in the local economy. Negative interest rates may become more prevalent among non-U.S. issuers, and potentially within the U.S.
For example, if a bank charges negative interest, instead of receiving interest on deposits, a depositor must pay the bank fees to keep money with the bank.
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These market conditions may increase a funds exposures to interest rate risk. To the extent a fund has a
bank deposit or holds a debt instrument with a negative interest rate to maturity, the fund would generate a negative return on that investment. While negative yields can be expected to reduce demand for fixed-income investments trading at a
negative interest rate, investors may be willing to continue to purchase such investments for a number of reasons including, but not limited to, price insensitivity, arbitrage opportunities across fixed-income markets or rules-based investment
strategies. If negative interest rates become more prevalent in the market, it is expected that investors will seek to reallocate assets to other income-producing assets such as investment grade and high-yield debt instruments, or equity investments
that pay a dividend. This increased demand for higher yielding assets may cause the price of such instruments to rise while triggering a corresponding decrease in yield and the value of debt instruments over time.
Non-Diversification
A fund that is non-diversified is not limited as to the percentage of its assets that may be invested in any one
issuer, or as to the percentage of the outstanding voting securities of such issuer that may be owned, except by the funds own investment restrictions. In contrast, a diversified fund, as to at least 75% of the value of its total assets,
generally may not, except with respect to government securities and securities of other investment companies, invest more than five percent of its total assets in the securities, or own more than ten percent of the outstanding voting securities, of
any one issuer. In determining the issuer of a municipal security, each state, each political subdivision, agency, and instrumentality of each state and each multi-state agency of which such state is a member is considered a separate issuer. In the
event that securities are backed only by assets and revenues of a particular instrumentality, facility or subdivision, such entity is considered the issuer.
A fund that is non-diversified may invest a high percentage of its assets in the securities of a small number of
issuers, may invest more of its assets in the securities of a single issuer, and may be affected more than a diversified fund by a change in the financial condition of any of these issuers or by the financial markets assessment of any of these
issuers.
Operational and Cybersecurity Risk
With
the increased use of technologies, such as mobile devices and cloud-based service offerings and the dependence on the internet and computer systems to perform necessary business functions, a funds service providers are susceptible
to operational and information or cybersecurity risks that could result in losses to the fund and its shareholders. Cybersecurity breaches are either intentional or unintentional events that allow an unauthorized party to gain access to fund assets,
customer data, or proprietary information, or cause a fund or fund service provider to suffer data corruption or lose operational functionality. Intentional cybersecurity incidents include: unauthorized access to systems, networks, or devices (such
as through hacking activity or phishing); infection from computer viruses or other malicious software code; and attacks that shut down, disable, slow, or otherwise disrupt operations, business processes, or website access or
functionality. Cyberattacks can also be carried out in a manner that does not require gaining unauthorized access, such as causing denial-of-service attacks on the
service providers systems or websites rendering them unavailable to intended users or via ransomware that renders the systems inoperable until appropriate actions are taken. In addition, unintentional incidents can occur, such as
the inadvertent release of confidential information.
A cybersecurity breach could result in the loss or theft of customer data or funds, loss or theft of
proprietary information or corporate data, physical damage to a computer or network system, or costs associated with system repairs, any of which could have a substantial impact on a fund. For example, in a denial of service, fund shareholders could
lose access to their electronic accounts indefinitely, and employees of the Advisor, each subadvisor, or the funds other service providers may not be able to access electronic systems to perform critical duties for the funds, such as trading,
NAV calculation, shareholder accounting, or fulfillment of fund share purchases and redemptions. Cybersecurity incidents could cause a fund, the Advisor, each subadvisor, or other service provider to incur regulatory penalties, reputational damage,
compliance costs associated with corrective measures, litigation costs, or financial loss. They may also result in violations of applicable privacy and other laws. In addition, such incidents could affect issuers in which a fund invests, thereby
causing the funds investments to lose value.
Cyber-events have the potential to affect materially the funds and the advisors relationships
with accounts, shareholders, clients, customers, employees, products, and service providers. The funds have established risk management systems reasonably designed to seek to reduce the risks associated with cyber-events. There is no guarantee that
the funds will be able to prevent or mitigate the impact of any or all cyber-events.
The funds are exposed to operational risk arising from a number of
factors, including, but not limited to, human error, processing and communication errors, errors of the funds service providers, counterparties, or other third parties, failed or inadequate processes, and technology or system failures.
The Advisor, each subadvisor, and their affiliates have established risk management systems that seek to reduce cybersecurity and operational risks, and
business continuity plans in the event of a cybersecurity breach or operational failure. However, there are inherent limitations in such plans, including that certain risks have not been identified, and there is no guarantee that such efforts will
succeed, especially since none of the Advisor, each subadvisor, or their affiliates controls the cybersecurity or operations systems of the funds third-party service providers (including the funds custodian), or those of the issuers of
securities in which the funds invest.
In addition, other disruptive events, including (but not limited to) natural disasters and public health crises
(such as the coronavirus (COVID-19) pandemic), may adversely affect the funds ability to conduct business, in particular if the funds employees or the employees of its service providers are unable
or unwilling to perform their responsibilities as a result of any such event. Even if the funds employees and the employees of its service providers are able to work remotely, those remote work arrangements could result in the funds
business operations being less efficient than under normal circumstances, could lead to delays in its processing of transactions, and could increase the risk of cyber-events.
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Preferred and Convertible Securities Risk
Preferred stock generally has a preference as to dividends and liquidation over an issuers common stock but ranks junior to debt securities in an
issuers capital structure. Unlike interest payments on debt securities, preferred stock dividends are payable only if declared by the issuers board of directors. Also, preferred stock may be subject to optional or mandatory redemption
provisions. The market values of convertible securities tend to fall as interest rates rise and rise as interest rates fall. The value of convertible preferred stock can depend heavily upon the value of the security into which such convertible
preferred stock is converted, depending on whether the market price of the underlying security exceeds the conversion price.
Privately Held and Newly
Public Companies
Investments in the stocks of privately held companies and newly public companies involve greater risks than investments in stocks of
companies that have traded publicly on an exchange for extended time periods. Investments in such companies are less liquid and may be difficult to value. There may be significantly less information available about these companies business
models, quality of management, earnings growth potential, and other criteria used to evaluate their investment prospects. The extent (if at all) to which securities of privately held companies or newly public companies may be sold without negatively
impacting its market value may be impaired by reduced market activity or participation, legal restrictions, or other economic and market impediments. Funds that invest in securities of privately held companies tend to have a greater exposure to
liquidity risk than funds that do not invest in securities of privately held companies.
Rebalancing Risks Involving Funds of Funds
The funds of funds seek to achieve their investment objectives by investing in, among other things, other John Hancock funds, as permitted by Section 12
of the 1940 Act (affiliated underlying funds). In addition, a fund that is not a fund of funds may serve as an affiliated underlying fund for one or more funds of funds. The funds of funds will reallocate or rebalance assets among the affiliated
underlying funds (collectively, Rebalancings) on a daily basis. The following discussion provides information on the risks related to Rebalancings, which risks are applicable to the affiliated underlying funds undergoing Rebalancings, as
well as to those funds of funds that hold affiliated underlying funds undergoing Rebalancings.
From time to time, one or more of the affiliated
underlying funds may experience relatively large redemptions or investments due to Rebalancings, as effected by the funds of funds Affiliated Subadvisor. Shareholders should note that Rebalancings may adversely affect the affiliated underlying
funds. The affiliated underlying funds subject to redemptions by a fund of funds may find it necessary to sell securities, and the affiliated underlying funds that receive additional cash from a fund of funds will find it necessary to invest the
cash. The impact of Rebalancings is likely to be greater when a fund of funds owns, redeems, or invests in, a substantial portion of an affiliated underlying fund. Rebalancings could adversely affect the performance of one or more affiliated
underlying funds and, therefore, the performance of one or more funds of funds.
Possible adverse effects of Rebalancings on the affiliated underlying
funds include:
1 |
The affiliated underlying funds could be required to sell securities or to invest cash, at times when
they may not otherwise desire to do so. |
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Rebalancings may increase brokerage and/or other transaction costs of the affiliated underlying funds.
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When a fund of funds owns a substantial portion of an affiliated underlying fund, a large redemption by
the fund of funds could cause that affiliated underlying funds expenses to increase and could result in its portfolio becoming too small to be economically viable. |
4 |
Rebalancings could accelerate the realization of taxable capital gains in affiliated underlying funds
subject to large redemptions if sales of securities results in capital gains. |
The Advisor, which serves as the investment advisor to
both the funds of funds and the affiliated underlying funds, has delegated the day-to-day portfolio management of the funds of funds and many of the affiliated
underlying funds to the Affiliated Subadvisors, affiliates of the Advisor. The Advisor monitors both the funds and the affiliated underlying funds. The Affiliated Subadvisors manage the assets of both the funds and many of the affiliated underlying
funds (the Affiliated Subadvised Funds). The Affiliated Subadvisors may allocate up to all of a funds of funds assets to Affiliated Subadvised Funds and accordingly have an incentive to allocate more fund of funds assets to such
Affiliated Subadvised Funds. The Advisor and the Affiliated Subadvisors monitor the impact of Rebalancings on the affiliated underlying funds and attempt to minimize any adverse effect of the Rebalancings on the underlying funds, consistent with
pursuing the investment objective of the relevant affiliated underlying funds. Moreover, an Affiliated Subadvisor has a duty to allocate assets to an Affiliated Subadvised Fund only when such Subadvisor believes it is in the best interests of fund
of funds shareholders. Minimizing any adverse effect of the Rebalancings on the underlying funds may impact the redemption schedule in connection with a Rebalancing. As part of its oversight of the funds and the subadvisors, the Advisor will monitor
to ensure that allocations are conducted in accordance with these principles. This conflict of interest is also considered by the Independent Trustees when approving or replacing affiliated subadvisors and in periodically reviewing allocations to
Affiliated Subadvised Funds.
As discussed above, the funds of funds periodically reallocate their investments among underlying investments. In an effort
to be fully invested at all times and also to avoid temporary periods of under-investment, an affiliated underlying fund may buy securities and other instruments in anticipation of or with knowledge of future purchases of affiliated underlying fund
shares resulting from a reallocation of assets by the funds of funds to the affiliated underlying fund. Until such purchases of affiliated underlying fund shares by a fund of funds settle (normally between one and three days), the affiliated
underlying fund may have investment exposure in excess of its net assets. Shareholders who transact with the affiliated underlying fund during the period beginning when the affiliated underlying fund first starts buying securities in anticipation of
a purchase order from a fund until such purchase order settles may incur more loss or realize more gain than they otherwise might have in the absence of the excess investment exposure. The funds of funds may purchase and redeem shares of underlying
funds each business day through the use of an algorithm that operates pursuant to standing instructions to allocate purchase and redemption orders among underlying funds. Each day, pursuant to the algorithm, a fund of funds will purchase or redeem
shares of an underlying fund at the NAV for the underlying fund calculated that day. This algorithm is used solely for rebalancing a fund of funds investments in an effort to maintain previously determined allocation percentages.
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Restricted Securities
A fund may invest in restricted securities, which generally are securities that may be resold to the public only pursuant to an effective
registration statement under the 1933 Act or an exemption from registration. Regulation S under the 1933 Act is an exemption from registration that permits, under certain circumstances, the resale of restricted securities in offshore transactions,
subject to certain conditions, and Rule 144A under the 1933 Act is an exemption that permits the resale of certain restricted securities to qualified institutional buyers.
Since its adoption by the SEC in 1990, Rule 144A has facilitated trading of restricted securities among qualified institutional investors. To the extent
restricted securities held by a fund qualify under Rule 144A and an institutional market develops for those securities, the fund expects that it will be able to dispose of the securities without registering the resale of such securities under the
1933 Act. However, to the extent that a robust market for such 144A securities does not develop, or a market develops but experiences periods of illiquidity, investments in Rule 144A securities could increase the level of a funds illiquidity.
A fund might have to register restricted securities in order to dispose of them, resulting in additional expense and delay. Adverse market conditions could impede such a public offering of securities.
There is a large institutional market for certain securities that are not registered under the 1933 Act, which may include markets for repurchase agreements,
commercial paper, foreign securities, municipal securities, loans and corporate bonds and notes. Institutional investors depend on an efficient institutional market in which the unregistered security can be readily resold or on an issuers
ability to honor a demand for repayment. The fact that there are contractual or legal restrictions on resale to the general public or to certain institutions may not be indicative of the liquidity of such investments.
Russian Securities Risk
Throughout the past decade, the
United States, the EU, and other nations have imposed a series of economic sanctions on the Russian Federation. In addition to imposing new import and export controls on Russia and blocking financial transactions with certain Russian elites,
oligarchs, and political and national security leaders, the United States, the EU, and other nations have imposed sanctions on companies in certain sectors of the Russian economy, including the financial services, energy, metals and mining,
engineering, technology, and defense and defense-related materials sectors. These sanctions could impair a funds ability to continue to price, buy, sell, receive, or deliver securities of certain Russian issuers. For example, a fund may be
prohibited from investing in securities issued by companies subject to such sanctions. A fund could determine at any time that certain of the most affected securities have little or no value.
The extent and duration of Russias military actions and the global response to such actions are impossible to predict. More Russian companies could be
sanctioned in the future, and the threat of additional sanctions could itself result in further declines in the value and liquidity of certain securities. Widespread divestment of interests in Russia or certain Russian businesses could result in
additional declines in the value of Russian securities. Additionally, market disruptions could have a substantial negative impact on other economics and securities markets both regionally and globally, as well as global supply chains and inflation.
The Russian government may respond to these sanctions and others by freezing Russian assets held by a fund, thereby prohibiting the fund from selling or
otherwise transacting in these investments. In such circumstances, a fund might be forced to liquidate non-restricted assets in order to satisfy shareholder redemptions. Such liquidation of fund assets might
also result in a fund receiving substantially lower prices for its portfolio securities.
Securities Linked to the Real Estate Market
Investing in securities of companies in the real estate industry subjects a fund to the risks associated with the direct ownership of real estate. These risks
include, but are not limited to:
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declines in the value of real estate; |
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risks related to general and local economic conditions; |
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possible lack of availability of mortgage portfolios; |
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extended vacancies of properties; |
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increases in property taxes and operating expenses; |
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losses due to costs resulting from the clean-up of environmental
problems; |
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liability to third parties for damages resulting from environmental problems; |
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casualty or condemnation losses; |
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changes in neighborhood values and the appeal of properties to tenants; and |
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changes in interest rates. |
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Therefore, if a fund invests a substantial amount of its assets in securities of companies in the real estate
industry, the value of the funds shares may change at different rates compared to the value of shares of a fund with investments in a mix of different industries.
Securities of companies in the real estate industry have been and may continue to be negatively affected by the coronavirus
(COVID-19) pandemic. Potential impacts on the real estate market may include lower occupancy rates, decreased lease payments, defaults and foreclosures, among other consequences. These impacts could adversely
affect corporate borrowers and mortgage lenders, the value of mortgage-backed securities, the bonds of municipalities that depend on tax revenues and tourist dollars generated by such properties, and insurers of the property and/or of corporate,
municipal or mortgage-backed securities. It is not known how long such impacts, or any future impacts of other significant events, will last.
Securities
of companies in the real estate industry include REITs, including equity REITs and mortgage REITs. Equity REITs may be affected by changes in the value of the underlying property owned by the trusts, while mortgage REITs may be affected by the
quality of any credit extended. Further, equity and mortgage REITs are dependent upon management skills and generally may not be diversified. Equity and mortgage REITs also are subject to heavy cash flow dependency, defaults by borrowers or lessees,
and self-liquidations. In addition, equity, mortgage, and hybrid REITs could possibly fail to qualify for tax free pass-through of income under the Code, or to maintain their exemptions from registration under the 1940 Act. The above factors also
may adversely affect a borrowers or a lessees ability to meet its obligations to a REIT. In the event of a default by a borrower or lessee, a REIT may experience delays in enforcing its rights as a mortgagee or lessor and may incur
substantial costs associated with protecting its investments.
In addition, even the larger REITs in the industry tend to be small to medium-sized companies in relation to the equity markets as a whole. See Small and Medium Size and Unseasoned Companies for a discussion of the risks associated with investments in these companies.
Small and Medium Size and Unseasoned Companies
Survival of Small or Unseasoned Companies. Companies that are small or unseasoned (i.e., less than three years of operating history) are more likely
than larger or established companies to fail or not to accomplish their goals. As a result, the value of their securities could decline significantly. These companies are less likely to survive since they are often dependent upon a small number of
products and may have limited financial resources and a small management group.
Changes in Earnings and Business Prospects. Small or unseasoned
companies often have a greater degree of change in earnings and business prospects than larger or established companies, resulting in more volatility in the price of their securities.
Liquidity. The securities of small or unseasoned companies may have limited marketability. This factor could cause the value of a funds
investments to decrease if it needs to sell such securities when there are few interested buyers.
Impact of Buying or Selling Shares. Small or
unseasoned companies usually have fewer outstanding shares than larger or established companies. Therefore, it may be more difficult to buy or sell large amounts of these shares without unfavorably impacting the price of the security.
Publicly Available Information. There may be less publicly available information about small or unseasoned companies. Therefore, when making a decision
to purchase a security for a fund, a subadvisor may not be aware of problems associated with the company issuing the security.
Medium Size Companies.
Investments in the securities of medium sized companies present risks similar to those associated with small or unseasoned companies although to a lesser degree due to the larger size of the companies.
Special Purpose Acquisition Companies
A fund may invest
in stock, warrants, and other securities of SPACs or similar special purpose entities that pool funds to seek potential acquisition opportunities. SPACs are collective investment structures that allow public stock market investors to invest in
private equity type transactions (PIPE). Until an acquisition is completed, a SPAC generally invests its assets in US government securities, money market securities and cash. A fund may enter into a contingent commitment with a SPAC to
purchase PIPE shares if and when the SPAC completes its merger or acquisition.
Because SPACs and similar entities do not have an operating history or
ongoing business other than seeking acquisitions, the value of their securities is particularly dependent on the ability of the SPACs management to identify and complete a profitable acquisition. Some SPACs may pursue acquisitions only within
certain industries or regions, which may increase the volatility of their prices. An investment in a SPAC is subject to a variety of risks, including that (i) a significant portion of the monies raised by the SPAC for the purpose of identifying
and effecting an acquisition or merger may be expended during the search for a target transaction; (ii) an attractive acquisition or merger target may not be identified at all and the SPAC will be required to return any remaining monies to
shareholders; (iii) any proposed merger or acquisition may be unable to obtain the requisite approval, if any, of shareholders; (iv) an acquisition or merger once effected may prove unsuccessful and an investment in the SPAC may lose
value; (v) the warrants or other rights with respect to the SPAC held by a fund may expire worthless or may be repurchased or retired by the SPAC at an unfavorable price; (vi) a fund may be delayed in receiving any redemption or
liquidation proceeds from a SPAC to which it is entitled; (vii) an investment in a SPAC may be diluted by additional later offerings of interests in the SPAC or by other investors exercising existing rights to purchase shares of the SPAC;
(viii) no or only a thinly traded market for shares of or interests in a SPAC may develop, leaving a fund unable to sell its interest in a SPAC or to sell its interest only at a price below what the fund believes is the SPAC interests
intrinsic value; and (ix) the values of investments in SPACs may be highly volatile and may depreciate significantly over time.
Purchased PIPE
shares will be restricted from trading until the registration statement for the shares is declared effective. Upon registration, the shares can be freely sold; however, in certain circumstances, the issuer may have the right to temporarily suspend
trading of the shares in the first year after the merger. The securities issued by a SPAC, which are typically traded either in the over-the-counter market or on an
exchange, may be considered illiquid, more difficult to value, and/or be subject to restrictions on resale.
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Stripped Securities
Stripped securities are the separate income or principal components of a debt security. The risks associated with stripped securities are similar to those of
other debt securities, although stripped securities may be more volatile, and the value of certain types of stripped securities may move in the same direction as interest rates. U.S. Treasury securities that have been stripped by a Federal Reserve
Bank are obligations issued by the U.S. Treasury.
U.S. Government Securities
U.S. government securities include securities issued or guaranteed by the U.S. government or by an agency or instrumentality of the U.S. government. Not all
U.S. government securities are backed by the full faith and credit of the United States. Some are supported only by the credit of the issuing agency or instrumentality, which depends entirely on its own resources to repay the debt. U.S. government
securities that are backed by the full faith and credit of the United States include U.S. Treasuries and mortgage-backed securities guaranteed by GNMA. Securities that are only supported by the credit of the issuing agency or instrumentality include
those issued by Fannie Mae, the FHLBs and Freddie Mac.
REGULATION OF COMMODITY INTERESTS
The CFTC has adopted regulations that subject
registered investment companies and/or their investment advisors to regulation by the CFTC if the registered investment company invests more than a prescribed level of its NAV in commodity futures, options on commodities or commodity futures, swaps,
or other financial instruments regulated under the CEA (commodity interests), or if the registered investment company markets itself as providing investment exposure to such commodity interests. The Advisor is registered as a CPO under
the CEA and is a National Futures Association member firm; however, the Advisor acts in the capacity of a registered CPO only with respect to Diversified Macro Fund.
Although the Advisor is a registered CPO and is a National Futures Association member firm, the Advisor has claimed an exemption from CPO registration
pursuant to CFTC Rule 4.5 with respect to all of the funds other than Diversified Macro Fund (collectively, the Exempt Funds). To remain eligible for this exemption, each of the Exempt Funds must comply with certain limitations,
including limits on trading in commodity interests, and restrictions on the manner in which an Exempt Fund markets its commodity interests trading activities. These limitations may restrict an Exempt Funds ability to pursue its investment
strategy, increase the costs of implementing its strategy, increase its expenses and/or adversely affect its total return.
Under CFTC rules, certain
mandated disclosure, reporting and recordkeeping obligations will apply to the Advisor with respect to Diversified Macro Fund, but not the Exempt Funds. The Advisor is subject to dual regulation by the SEC and the CFTC with respect to the services
it provides to Diversified Macro Fund. As a result of harmonization rule amendments adopted by the CFTC in 2013, the Advisor expects to comply with substantially all CFTC regulations applicable to the operation of Diversified Macro Fund
through substituted compliance with SEC regulations, as provided in the harmonization amendments. Any changes to the CFTCs substituted compliance regime may restrict the ability of Diversified Macro Fund to pursue its
investment strategy, increase the costs of implementing its strategy, increase its expenses and/or may adversely affect its total return.
Please see
Government Regulation of Derivatives for more information regarding governmental regulations of derivatives and similar transactions.
HEDGING AND OTHER STRATEGIC TRANSACTIONS
Hedging refers to protecting against possible changes in the market value of securities or other assets that a fund already owns or plans to buy or protecting
unrealized gains in the fund. These strategies also may be used to gain exposure to a particular market. U.S. Global Leaders Growth Fund does not engage in hedging or other strategic transactions as described in this section, except that it may
engage in currency transactions for certain non-speculative purposes. The hedging and other strategic transactions that may be used by a fund, but only if and to the extent that such transactions are
consistent with its investment objective and policies, are described below:
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exchange-listed and OTC put and call options on securities, equity indices, volatility indices, financial futures
contracts, currencies, fixed-income indices and other financial instruments; |
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financial futures contracts (including stock index futures); |
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interest rate transactions;* |
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currency transactions;** |
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warrants and rights (including non-standard warrants and participatory
risks); |
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swaps (including interest rate, index, dividend, inflation, variance, equity, and volatility swaps, credit
default swaps, swap options and currency swaps); and |
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structured notes, including hybrid or index securities. |
* |
A funds interest rate transactions may take the form of swaps, caps, floors and collars.
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A funds currency transactions may take the form of currency forward contracts, currency futures
contracts, currency swaps and options on currencies or currency futures contracts. |
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Hedging and other strategic transactions may be used for the following purposes:
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to attempt to protect against possible changes in the market value of securities held or to be purchased by a
fund resulting from securities markets or currency exchange rate fluctuations; |
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to protect a funds unrealized gains in the value of its securities; |
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to facilitate the sale of a funds securities for investment purposes; |
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to manage the effective maturity or duration of a funds securities; |
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to establish a position in the derivatives markets as a method of gaining exposure to a particular geographic
region, market, industry, issuer, or security; or |
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to increase exposure to a foreign currency or to shift exposure to foreign currency fluctuations from one country
to another. |
To the extent that a fund uses hedging or another strategic transaction to gain, shift or manage exposure to a particular
geographic region, market, industry, issuer, security, currency, or other asset, the fund will be exposed to the risks of investing in that asset as well as the risks inherent in the specific hedging or other strategic transaction used to gain such
exposure.
For purposes of determining compliance with a funds investment policies, strategies and restrictions, the fund will generally consider
the market value of derivative instruments, unless the nature of the derivative instrument warrants the use of the instruments notional value to more accurately reflect the economic exposure represented by the derivative position.
Because of the uncertainties under federal tax laws as to whether income from commodity-linked derivative instruments and certain other instruments would
constitute qualifying income to a RIC, no fund is permitted to invest in such instruments unless a subadvisor obtains prior written approval from the Trusts CCO. The CCO, as a member of the Advisors Complex Securities
Committee, evaluates with the committee the appropriateness of the investment.
General Characteristics of Options
Put options and call options typically have similar structural characteristics and operational mechanics regardless of the underlying instrument on which they
are purchased or sold. Many hedging and other strategic transactions involving options are subject to the requirements outlined in the Government Regulation of Derivatives section.
Put Options. A put option gives the purchaser of the option, upon payment of a premium, the right to sell (and the writer the obligation to buy) the
underlying security, commodity, index, currency or other instrument at the exercise price. A funds purchase of a put option on a security, for example, might be designed to protect its holdings in the underlying instrument (or, in some cases,
a similar instrument) against a substantial decline in the market value of such instrument by giving a fund the right to sell the instrument at the option exercise price.
If, and to the extent authorized to do so, a fund may, for various purposes, purchase and sell put options on securities (whether or not it holds the
securities in its portfolio) and on securities indices, currencies and futures contracts. Disciplined Value International Fund will not sell put options if, as a result, more than 50% of the funds assets would be required to be segregated to
cover its potential obligations under put options other than those with respect to futures contracts.
Risk of Selling Put Options. In selling put
options, a fund faces the risk that it may be required to buy the underlying security at a disadvantageous price above the market price.
Call Options.
A call option, upon payment of a premium, gives the purchaser of the option the right to buy (and the seller the obligation to sell) the underlying instrument at the exercise price. A funds purchase of a call option on an underlying
instrument might be intended to protect a fund against an increase in the price of the underlying instrument that it intends to purchase in the future by fixing the price at which it may purchase the instrument. An American style put or
call option may be exercised at any time during the option period, whereas a European style put or call option may be exercised only upon expiration or during a fixed period prior to expiration. If and to the extent authorized to do so,
a fund may purchase and sell call options on securities (whether or not it holds the securities).
Partial Hedge or Income to a Fund. If a fund
sells a call option, the premium that it receives may serve as a partial hedge, to the extent of the option premium, against a decrease in the value of the underlying securities or instruments held by a fund or will increase a funds income.
Similarly, the sale of put options also can provide fund gains.
Covering of Options. All call options sold by a fund are subject to the
requirements outlined in the Government Regulation of Derivatives section.
Risk of Selling Call Options. Even though a fund will
receive the option premium to help protect it against loss, a call option sold by a fund will expose it during the term of the option to possible loss of the opportunity to sell the underlying security or instrument with a gain.
Exchange-listed Options. Exchange-listed options are issued by a regulated intermediary such as the Options Clearing Corporation (the OCC),
which guarantees the performance of the obligations of the parties to the options. The discussion below uses the OCC as an example, but also is applicable to other similar financial intermediaries.
OCC-issued and exchange-listed options, with certain exceptions, generally settle by physical delivery of the
underlying security or currency, although in the future, cash settlement may become available. Index options and Eurodollar instruments (which are described below under Eurodollar Instruments) are cash settled for the net amount, if any,
by which the option is in-the-money at the time the option is exercised.
In-the-money means the amount by which the value of the underlying instrument exceeds, in the case of a call option, or is less than, in the case of a put
option, the exercise price of the option. Frequently, rather than taking or making delivery of the underlying instrument through the process of exercising the option, listed options are closed by entering into offsetting purchase or sale
transactions that do not result in ownership of the new option.
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A funds ability to close out its position as a purchaser or seller of an
OCC-issued or exchange-listed put or call option is dependent, in part, upon the liquidity of the particular option market. Among the possible reasons for the absence of a liquid option market on an exchange
are:
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insufficient trading interest in certain options; |
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restrictions on transactions imposed by an exchange; |
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trading halts, suspensions or other restrictions imposed with respect to particular classes or series of options
or underlying securities, including reaching daily price limits; |
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interruption of the normal operations of the OCC or an exchange; |
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inadequacy of the facilities of an exchange or the OCC to handle current trading volume; or
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a decision by one or more exchanges to discontinue the trading of options (or a particular class or series of
options), in which event the relevant market for that option on that exchange would cease to exist, although any such outstanding options on that exchange would continue to be exercisable in accordance with their terms. |
The hours of trading for listed options may not coincide with the hours during which the underlying financial instruments are traded. To the extent that the
option markets close before the markets for the underlying financial instruments, significant price and rate movements can take place in the underlying markets that would not be reflected in the corresponding option markets.
OTC Options. OTC options are purchased from or sold to counterparties such as securities dealers or financial institutions through direct bilateral
agreement with the counterparty. In contrast to exchange-listed options, which generally have standardized terms and performance mechanics, all of the terms of an OTC option, including such terms as method of settlement, term, exercise price,
premium, guaranties and security, are determined by negotiation of the parties. It is anticipated that a fund authorized to use OTC options generally will only enter into OTC options that have cash settlement provisions, although it will not be
required to do so.
Unless the parties provide for it, no central clearing or guaranty function is involved in an OTC option. As a result, if a
counterparty fails to make or take delivery of the security, currency or other instrument underlying an OTC option it has entered into with a fund or fails to make a cash settlement payment due in accordance with the terms of that option, the fund
will lose any premium it paid for the option as well as any anticipated benefit of the transaction. Thus, a subadvisor must assess the creditworthiness of each such counterparty or any guarantor or credit enhancement of the counterpartys
credit to determine the likelihood that the terms of the OTC option will be met. A fund will enter into OTC option transactions only with U.S. government securities dealers recognized by the Federal Reserve Bank of New York as primary
dealers, or broker dealers, domestic or foreign banks, or other financial institutions that are deemed creditworthy by a subadvisor. In the absence of a change in the current position of the SECs staff, OTC options purchased by a fund
and the amount of the funds obligation pursuant to an OTC option sold by the fund (the cost of the sell-back plus the in-the-money amount, if any) will be deemed
illiquid.
Types of Options That May Be Purchased. A fund may purchase and sell call options on securities indices, currencies, and futures
contracts, as well as on Eurodollar instruments that are traded on U.S. and foreign securities exchanges and in the OTC markets.
General
Characteristics of Futures Contracts and Options on Futures Contracts
A fund may trade financial futures contracts (including stock index futures
contracts, which are described below) or purchase or sell put and call options on those contracts for the following purposes:
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as a hedge against anticipated interest rate, currency or market changes; |
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for duration management; |
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for risk management purposes; and |
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to gain exposure to a securities market. |
Futures contracts are generally bought and sold on the commodities exchanges where they are listed with payment of initial and variation margin as described
below. The sale of a futures contract creates a firm obligation by a fund, as seller, to deliver to the buyer the specific type of financial instrument called for in the contract at a specific future time for a specified price (or, with respect to
certain instruments, the net cash amount). Options on futures contracts are similar to options on securities except that an option on a futures contract gives the purchaser the right, in return for the premium paid, to assume a position in a futures
contract and obligates the seller to deliver that position.
A fund will only engage in transactions in futures contracts and related options subject to
complying with the Derivatives Rule. The Derivatives Rule requirements are outlined in the Government Regulation of Derivatives section. A fund will engage in transactions in futures contracts and related options only to the extent such
transactions are consistent with the requirements of the Code in order to maintain its qualification as a RIC for federal income tax purposes.
Margin.
Maintaining a futures contract or selling an option on a futures contract will typically require a fund to deposit with a financial intermediary, as security for its obligations, an amount of cash or other specified assets (initial
margin) that initially is from 1% to 10% of the face amount of the contract (but may be higher in some circumstances). Additional cash or assets (variation margin) may be required to be deposited thereafter daily as the mark-to-market value of the futures contract fluctuates. The purchase of an option on a financial futures contract involves payment of a premium for the option without any
further obligation on the part of a fund. If a fund exercises an option on a futures contract it will be obligated to post initial margin (and potentially variation margin) for the resulting futures position just as it would for any futures
position.
Settlement. Futures contracts and options thereon are generally settled by entering into an offsetting transaction, but no assurance can
be given that a position can be offset prior to settlement or that delivery will occur.
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Fund-Specific Policies Regarding Futures Contracts and Options on Futures Contracts (Balanced Fund, Classic
Value Fund, Financial Industries Fund, Fundamental Large Cap Core Fund, Regional Bank Fund, and U.S. Global Leaders Growth Fund). Futures contracts may be based on various securities, securities indices and other financial instruments and
indices. For Balanced Fund, Financial Industries Fund, Fundamental Large Cap Core Fund, Regional Bank Fund, and U.S. Global Leaders Growth Fund, futures contracts also may be based on foreign currencies. All futures contracts entered into by
Balanced Fund, Financial Industries Fund, Fundamental Large Cap Core Fund, Regional Bank Fund, and U.S. Global Leaders Growth Fund are traded on U.S. or foreign exchanges or boards of trade, and all futures contracts entered into by Classic Value
Fund are traded on U.S. exchanges or boards of trade, that are licensed, regulated or approved by the CFTC.
If and to the extent that a fund is using
futures and related options for hedging purposes, futures contracts will be sold to protect against a decline in the price of securities (or the currency in which they are quoted or denominated) that the fund owns or futures contracts will be
purchased to protect the fund against an increase in the price of securities (or the currency in which they are quoted or denominated) it intends to purchase. Prior to any such purchase, a fund will determine that the price fluctuations in any
futures contracts and options on futures used for hedging purposes are substantially related to price fluctuations in securities held by the fund or securities or instruments that it expects to purchase. As evidence of its hedging intent, each fund
expects that on 75% or more of the occasions on which it takes a long futures or option position (involving the purchase of futures contracts), the fund will have purchased, or will be in the process of purchasing, equivalent amounts of related
securities (or assets of the fund denominated in the related currency) in the cash market at the time when the futures or option position is closed out. However, in particular cases, when it is economically advantageous for a fund to do so, a long
futures position may be terminated or an option may expire without the corresponding purchase of securities or other assets. Although under some circumstances prices of securities in a funds portfolio may be more or less volatile than prices
of such futures contracts, the subadvisor will attempt to estimate the extent of this volatility difference based on historical patterns and compensate for any differential by having the fund enter into a greater or lesser number of futures
contracts or by attempting to achieve only a partial hedge against price changes affecting the funds portfolio securities.
If and to the extent
that a fund engages in nonhedging transactions in futures contracts and options on futures, the aggregate initial margin and premiums required to establish these nonhedging positions will not exceed 5% of the net asset value of the funds
portfolio after taking into account unrealized profits and losses on any such positions and excluding the amount by which such options were in-the-money at the time of
purchase.
Stock Index Futures
Definition. A
stock index futures contract (an Index Future) is a contract to buy a certain number of units of the relevant index at a specified future date at a price agreed upon when the contract is made. A unit is the value at a given time of the
relevant index.
Uses of Index Futures. Below are some examples of how a fund may use Index Futures:
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In connection with a funds investment in equity securities, a fund may invest in Index Futures while a
subadvisor seeks favorable terms from brokers to effect transactions in equity securities selected for purchase. |
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A fund also may invest in Index Futures when a subadvisor believes that there are not enough attractive equity
securities available to maintain the standards of diversity and liquidity set for the funds pending investment in such equity securities when they do become available. |
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Through the use of Index Futures, a fund may maintain a pool of assets with diversified risk without incurring
the substantial brokerage costs that may be associated with investment in multiple issuers. This may permit a fund to avoid potential market and liquidity problems (e.g., driving up or forcing down the price by quickly purchasing or selling shares
of a portfolio security) that may result from increases or decreases in positions already held by a fund. |
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A fund also may invest in Index Futures in order to hedge its equity positions. |
Hedging and other strategic transactions involving futures contracts, options on futures contracts and swaps will be purchased, sold or entered into primarily
for bona fide hedging, risk management (including duration management) or appropriate portfolio management purposes, including gaining exposure to a particular securities market.
Options on Securities Indices and Other Financial Indices
A fund may purchase and sell call and put options on securities indices and other financial indices (Options on Financial Indices). In so doing, a
fund may achieve many of the same objectives it would achieve through the sale or purchase of options on individual securities or other instruments.
Description of Options on Financial Indices. Options on Financial Indices are similar to options on a security or other instrument except that, rather
than settling by physical delivery of the underlying instrument, Options on Financial Indices settle by cash settlement. Cash settlement means that the holder has the right to receive, upon exercise of the option, an amount of cash if the closing
level of the index upon which the option is based exceeds, in the case of a call (or is less than, in the case of a put) the exercise price of the option. This amount of cash is equal to the excess of the closing price of the index over the exercise
price of the option, which also may be multiplied by a formula value. The seller of the option is obligated to make delivery of this amount. The gain or loss on an option on an index depends on price movements in the instruments comprising the
market or other composite on which the underlying index is based, rather than price movements in individual securities, as is the case for options on securities. In the case of an OTC option, physical delivery may be used instead of cash settlement.
By purchasing or selling Options on Financial Indices, a fund may achieve many of the same objectives it would achieve through the sale or purchase of options on individual securities or other instruments.
Fund-Specific Policies Regarding Options on Financial Indices (Balanced Fund, Classic Value Fund, Financial Industries Fund, Fundamental Large Cap Core
Fund, and Regional Bank Fund). Options on financial indices may be listed on national domestic securities exchanges or foreign securities exchanges or traded in the OTC market. Balanced Fund, Financial Industries Fund, Fundamental Large Cap Core
Fund and Regional Bank Fund may write covered put and call options and purchase put and call options to enhance total return, as a substitute for the
49
purchase or sale of securities or currency, or to protect against declines in the value of portfolio securities and against increases in the cost of securities to be acquired. Classic Value Fund
may write covered put and call options and purchase put and call options to enhance total return, as a substitute for the purchase or sale of securities or to protect against declines in the value of portfolio securities and against increases in the
cost of securities to be acquired.
Yield Curve Options
A fund also may enter into options on the spread, or yield differential, between two fixed-income securities, in transactions referred to as
yield curve options. In contrast to other types of options, a yield curve option is based on the difference between the yields of designated securities, rather than the prices of the individual securities, and is settled through cash
payments. Accordingly, a yield curve option is profitable to the holder if this differential widens (in the case of a call) or narrows (in the case of a put), regardless of whether the yields of the underlying securities increase or decrease.
Yield curve options may be used for the same purposes as other options on securities. Specifically, a fund may purchase or write such options for hedging
purposes. For example, a fund may purchase a call option on the yield spread between two securities, if it owns one of the securities and anticipates purchasing the other security and wants to hedge against an adverse change in the yield spread
between the two securities. A fund also may purchase or write yield curve options for other than hedging purposes (i.e., in an effort to increase its current income) if, in the judgment of a subadvisor, the fund will be able to profit from movements
in the spread between the yields of the underlying securities. The trading of yield curve options is subject to all of the risks associated with the trading of other types of options. In addition, however, such options present risk of loss even if
the yield of one of the underlying securities remains constant, if the spread moves in a direction or to an extent which was not anticipated. Yield curve options written by a fund will be covered. A call (or put) option is covered if a
fund holds another call (or put) option on the spread between the same two securities and owns liquid and unencumbered assets sufficient to cover the funds net liability under the two options. Therefore, a funds liability for such a
covered option is generally limited to the difference between the amounts of the funds liability under the option written by the fund less the value of the option held by it. Yield curve options also may be covered in such other manner as may
be in accordance with the requirements of the counterparty with which the option is traded and applicable laws and regulations and are subject to the requirements outlined in the Government Regulation of Derivatives section. Yield curve
options are traded OTC.
Currency Transactions
A
fund may be authorized to engage in currency transactions with counterparties to hedge the value of portfolio securities denominated in particular currencies against fluctuations in relative value, to gain exposure to a currency without purchasing
securities denominated in that currency, to facilitate the settlement of equity trades or to exchange one currency for another. If a fund enters into a currency hedging transaction, the fund will comply with the regulatory limitations outlined in
the Government Regulation of Derivatives section. Currency transactions may include:
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forward currency contracts; |
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exchange-listed currency futures contracts and options thereon (not including Classic Value Fund, Regional Bank
Fund, or U.S. Global Leaders Growth Fund); |
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exchange-listed and OTC options on currencies (not including Classic Value Fund or U.S. Global Leaders Growth
Fund); |
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currency swaps (not including Classic Value Fund, Financial Industries Fund, Fundamental Large Cap Core Fund,
Regional Bank Fund, or U.S. Global Leaders Growth Fund); and |
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spot transactions (i.e., transactions on a cash basis based on prevailing market rates). |
A forward currency contract involves a privately negotiated obligation to purchase or sell (with delivery generally required) a specific currency at a future
date at a price set at the time of the contract. A currency swap is an agreement to exchange cash flows based on the notional difference among two or more currencies and operates similarly to an interest rate swap, which is described under
Swap Agreements and Options on Swap Agreements. A fund may enter into currency transactions only with counterparties that are deemed creditworthy by a subadvisor. Nevertheless, engaging in currency transactions will expose a fund to
counterparty risk.
A funds dealings in forward currency contracts and other currency transactions such as futures contracts, options, options on
futures contracts and swaps may be used for hedging and similar purposes, possibly including transaction hedging, position hedging, cross hedging and proxy hedging. A fund also may use foreign currency options and foreign currency forward contracts
to increase exposure to a foreign currency, to shift exposure to foreign currency fluctuation from one country to another or to facilitate the settlement of equity trades. A fund may elect to hedge less than all of its foreign portfolio positions as
deemed appropriate by a subadvisor. Classic Value Fund and U.S. Global Leaders Growth Fund will not engage in speculative forward foreign currency exchange transactions.
Each fund other than Balanced Fund, Classic Value Fund, Financial Industries Fund, Fundamental Large Cap Core Fund, Regional Bank Fund, and U.S. Global
Leaders Growth Fund also may engage in non-deliverable forward transactions to manage currency risk or to gain exposure to a currency without purchasing securities denominated in that currency. A non-deliverable forward is a transaction that represents an agreement between a fund and a counterparty (usually a commercial bank) to buy or sell a specified (notional) amount of a particular currency at an
agreed-upon foreign exchange rate on an agreed-upon future date. Unlike other currency transactions, there is no physical delivery of the currency on the settlement of a non-deliverable forward transaction.
Rather, the fund and the counterparty agree to net the settlement by making a payment in U.S. dollars or another fully convertible currency that represents any differential between the foreign exchange rate agreed upon at the inception of the non-deliverable forward agreement and the actual exchange rate on the agreed-upon future date. Thus, the actual gain or loss of a given non-deliverable forward transaction is
calculated by multiplying the transactions notional amount by the difference between the agreed-upon forward exchange rate and the actual exchange rate when the transaction is completed.
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Since a fund generally may only close out a non-deliverable forward with
the particular counterparty, there is a risk that the counterparty will default on its obligation to pay under the agreement. If the counterparty defaults, the fund will have contractual remedies pursuant to the agreement related to the transaction,
but there is no assurance that contract counterparties will be able to meet their obligations pursuant to such agreements or that, in the event of a default, the fund will succeed in pursuing contractual remedies. The fund thus assumes the risk that
it may be delayed or prevented from obtaining payments owed to it pursuant to non-deliverable forward transactions.
In addition, where the currency exchange rates that are the subject of a given non-deliverable forward transaction do
not move in the direction or to the extent anticipated, a fund could sustain losses on the non-deliverable forward transaction. A funds investment in a particular
non-deliverable forward transaction will be affected favorably or unfavorably by factors that affect the subject currencies, including economic, political and legal developments that impact the applicable
countries, as well as exchange control regulations of the applicable countries. These risks are heightened when a non-deliverable forward transaction involves currencies of emerging market countries because
such currencies can be volatile and there is a greater risk that such currencies will be devalued against the U.S. dollar or other currencies.
Transaction Hedging. Transaction hedging involves entering into a currency transaction with respect to specific assets or liabilities of a fund, which
generally will arise in connection with the purchase or sale of the portfolio securities or the receipt of income from them.
Position Hedging.
Position hedging involves entering into a currency transaction with respect to portfolio securities positions denominated or generally quoted in that currency.
Cross Hedging. A fund may be authorized to cross-hedge currencies by entering into transactions to purchase or sell one or more currencies that are
expected to increase or decline in value relative to other currencies to which the fund has or in which the fund expects to have exposure.
Proxy
Hedging. To reduce the effect of currency fluctuations on the value of existing or anticipated holdings of its securities, a fund also may be authorized to engage in proxy hedging. Proxy hedging is often used when the currency to which a
funds holdings are exposed is generally difficult to hedge or specifically difficult to hedge against the dollar. Proxy hedging entails entering into a forward contract to sell a currency, the changes in the value of which are generally
considered to be linked to a currency or currencies in which some or all of a funds securities are or are expected to be denominated, and to buy dollars. The amount of the contract would not exceed the market value of the funds
securities denominated in linked currencies.
Combined Transactions
A fund may be authorized to enter into multiple transactions, including multiple options transactions, multiple futures transactions, multiple currency
transactions (including forward currency contracts), multiple interest rate transactions and any combination of futures, options, currency and interest rate transactions. A combined transaction usually will contain elements of risk that are present
in each of its component transactions. Although a fund normally will enter into combined transactions to reduce risk or otherwise more effectively achieve the desired portfolio management goal, it is possible that the combination will instead
increase the risks or hinder achievement of the funds investment objective.
Swap Agreements and Options on Swap Agreements
Among the hedging and other strategic transactions into which a fund may be authorized to enter are swap transactions, including, but not limited to, swap
agreements on interest rates, security or commodity indexes, specific securities and commodities, currency exchange rates, and credit and event-linked swaps. To the extent that a fund may invest in foreign currency-denominated securities, it also
may invest in currency exchange rate swap agreements.
A fund may enter into swap transactions for any legal purpose consistent with its investment
objective and policies, such as to attempt to obtain or preserve a particular return or spread at a lower cost than obtaining a return or spread through purchases and/or sales of instruments in other markets, to protect against currency
fluctuations, as a duration management technique, to protect against any increase in the price of securities the fund anticipates purchasing at a later date, or to gain exposure to certain markets in the most economical way possible.
OTC swap agreements are two-party contracts entered into primarily by institutional investors for periods ranging from
a few weeks to one or more years. In a standard swap transaction, two parties agree to exchange the returns (or differentials in rates of return) earned or realized on particular predetermined investments or instruments, which may be
adjusted for an interest factor. The gross returns to be exchanged or swapped between the parties are generally calculated with respect to a notional amount, i.e., the return on or increase in value of a particular dollar
amount invested at a particular interest rate, in a particular foreign currency, or in a basket of securities or commodities representing a particular index. A quanto or differential swap combines both an interest
rate and a currency transaction. Other forms of swap agreements include interest rate caps, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates exceed a specified rate, or
cap; interest rate floors, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates fall below a specified rate, or floor; and interest rate collars, under which a
party sells a cap and purchases a floor or vice versa in an attempt to protect itself against interest rate movements exceeding given minimum or maximum levels. Consistent with a funds investment objectives and general investment policies, a
fund may be authorized to invest in commodity swap agreements. For example, an investment in a commodity swap agreement may involve the exchange of floating-rate interest payments for the total return on a commodity index. In a total return
commodity swap, a fund will receive the price appreciation of a commodity index, a portion of the index, or a single commodity in exchange for paying an agreed-upon fee. If the commodity swap is for one period, a fund may pay a fixed fee,
established at the outset of the swap. However, if the term of the commodity swap is more than one period, with interim swap payments, a fund may pay an adjustable or floating fee. With a floating rate, the fee may be pegged to a base
rate, such as LIBOR, and is adjusted each period. Therefore, if interest rates increase over the term of the swap contract, a fund may be required to pay a higher fee at each swap reset date.
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A fund may be authorized to enter into options on swap agreements (Swap Options). A Swap Option is a
contract that gives a counterparty the right (but not the obligation) in return for payment of a premium, to enter into a new swap agreement or to shorten, extend, cancel or otherwise modify an existing swap agreement, at some designated future time
on specified terms. A fund also may be authorized to write (sell) and purchase put and call Swap Options.
Depending on the terms of the particular
agreement, a fund generally will incur a greater degree of risk when it writes a Swap Option than it will incur when it purchases a Swap Option. When a fund purchases a swap option, it risks losing only the amount of the premium it has paid should
it decide to let the option expire unexercised. However, when the fund writes a Swap Option, upon exercise of the option the fund will become obligated according to the terms of the underlying agreement. Most other types of swap agreements entered
into by a fund would calculate the obligations of the parties to the agreement on a net basis. Consequently, a funds current obligations (or rights) under a swap agreement generally will be equal only to the net amount to be paid
or received under the agreement based on the relative values of the positions held by each party to the agreement (the net amount). A funds current obligations under a swap agreement will be accrued daily (offset against any
amounts owed to the fund). A funds use of swap agreements or Swap Options are subject to the regulatory limitations outlined in the Government Regulation of Derivatives section.
Whether a funds use of swap agreements or Swap Options will be successful in furthering its investment objective will depend on a subadvisors
ability to predict correctly whether certain types of investments are likely to produce greater returns than other investments. Because OTC swaps are two-party contracts and because they may have terms of
greater than seven days, they may be considered to be illiquid. Moreover, a fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty. A fund
will enter into swap agreements only with counterparties that meet certain standards of creditworthiness. Certain restrictions imposed on a fund by the Code may limit its ability to use swap agreements. Current regulatory initiatives, described
below, and potential future regulation could adversely affect a funds ability to terminate existing swap agreements or to realize amounts to be received under such agreements. A fund will not enter into a swap agreement with any single party
if the net amount owed to the fund under existing contracts with that party would exceed 5% of the funds total assets.
Swaps are highly specialized
instruments that require investment techniques, risk analyses, and tax planning different from those associated with traditional investments. The use of a swap requires an understanding not only of the referenced asset, rate, or index but also of
the swap itself, without the benefit of observing the performance of the swap under all possible market conditions. Swap agreements may be subject to liquidity risk, which exists when a particular swap is difficult to purchase or sell. If a swap
transaction is particularly large or if the relevant market is illiquid (as is the case with many OTC swaps), it may not be possible to initiate a transaction or liquidate a position at an advantageous time or price, which may result in significant
losses. In addition, a swap transaction may be subject to a funds limitation on investments in illiquid securities.
Like most other investments,
swap agreements are subject to the risk that the market value of the instrument will change in a way detrimental to a funds interest. A fund bears the risk that a subadvisor will not accurately forecast future market trends or the values of
assets, reference rates, indexes, or other economic factors in establishing swap positions for it. If a subadvisor attempts to use a swap as a hedge against, or as a substitute for, an investment, the fund will be exposed to the risk that the swap
will have or will develop imperfect or no correlation with the investment. This could cause substantial losses for the fund. While hedging strategies involving swap instruments can reduce the risk of loss, they also can reduce the opportunity for
gain or even result in losses by offsetting favorable price movements in other investments.
The swaps market was largely unregulated prior to the
enactment of federal legislation known as the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act). Among other things, the Dodd-Frank Act sets forth a new regulatory framework for certain OTC derivatives, such
as swaps, in which the funds may be authorized to invest. The Dodd-Frank Act requires many swap transactions to be executed on registered exchanges or through swap execution facilities, cleared through a regulated clearinghouse, and publicly
reported. In addition, many market participants are now regulated as swap dealers and are, or will be, subject to certain minimum capital and margin requirements and business conduct standards. The statutory requirements of the Dodd-Frank Act are
being implemented primarily through rules and regulations adopted by the SEC and/ or the CFTC. There is a prescribed phase-in period during which most of the mandated rulemaking and regulations are being
implemented, and temporary exemptions from certain rules and regulations have been granted so that current trading practices will not be unduly disrupted during the transition period.
As of the date of this SAI, central clearing is required only for certain market participants trading certain instruments, although central clearing for
additional instruments is expected to be implemented by the CFTC until the majority of the swaps market is ultimately subject to central clearing. In addition, as described below, uncleared OTC swaps may be subject to regulatory collateral
requirements that could adversely affect a funds ability to enter into swaps in the OTC market. These developments could cause a fund to terminate new or existing swap agreements, realize amounts to be received under such instruments at an
inopportune time, or increase the costs associated with trading derivatives. Until the mandated rulemaking and regulations are implemented completely, it will not be possible to determine the complete impact of the Dodd-Frank Act and related
regulations on the funds. Swap dealers, major market participants, and swap counterparties may also experience other new and/or additional regulations, requirements, compliance burdens, and associated costs. The Dodd-Frank Act and rules promulgated
thereunder may exert a negative effect on a funds ability to meet its investment objective. The swap market could be disrupted or limited as a result of the legislation, and the new requirements may increase the cost of a funds
investments and of doing business, which could adversely affect the funds ability to buy or sell OTC derivatives. Prudential regulators issued final rules that will require banks subject to their supervision to exchange variation and initial
margin in respect of their obligations arising under uncleared swap agreements. The CFTC adopted similar rules that apply to CFTC-registered swap dealers that are not banks. Such rules generally require the funds to segregate additional assets in
order to meet the new variation and initial margin requirements when they enter into uncleared swap agreements. The variation margin requirements are now effective and the initial margin requirements are being
phased-in through 2022 based on average daily aggregate notional amount of covered swaps between swap dealers, and swap entities.
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In addition, regulations adopted by prudential regulators require certain banks to include in a range of
financial contracts, including derivative and short-term funding transactions terms delaying or restricting a counterpartys default, termination and other rights in the event that the bank and/or its affiliates become subject to certain types
of resolution or insolvency proceedings. The regulations could limit a funds ability to exercise a range of cross-default rights if its counterparty, or an affiliate of the counterparty, is subject to bankruptcy or similar proceedings. Such
regulations could further negatively impact the funds use of derivatives.
Additional information about certain swap agreements that the funds may
utilize is provided below.
Credit default swap agreements (CDS). CDS may have as reference obligations one or more securities that are
not currently held by a fund. The protection buyer in a CDS is generally obligated to pay the protection seller an upfront or a periodic stream of payments over the term of the CDS provided that no credit event, such as a
default, on a reference obligation has occurred. If a credit event occurs, the seller generally must pay the buyer the par value (full notional value) of the CDS in exchange for an equal face amount of deliverable obligations of the
reference entity described in the CDS, or the seller may be required to deliver the related net cash amount, if the CDS is cash settled. A fund may be either the buyer or seller in the transaction. If a fund is a buyer and no credit event occurs,
the fund may recover nothing if the CDS is held through its termination date. However, if a credit event occurs, the buyer generally may elect to receive the full notional value of the CDS in exchange for an equal face amount of deliverable
obligations of the reference entity whose value may have significantly decreased. As a seller, a fund generally receives an upfront payment or a fixed rate of income throughout the term of the CDS, provided that there is no credit event. As the
seller, a fund would effectively add leverage to the fund because, in addition to its total net assets, the fund would be subject to investment exposure on the notional amount of the CDS. If a fund enters into a CDS, the fund may be required to
report the CDS as a listed transaction for tax shelter reporting purposes on the funds federal income tax return. If the IRS were to determine that the CDS is a tax shelter, a fund could be subject to penalties under the Code.
Credit default swap indices are indices that reflect the performance of a basket of credit default swaps and are subject to the same risks as CDS. The
funds return from investment in a credit default swap index may not match the return of the referenced index. Further, investment in a credit default swap index could result in losses if the referenced index does not perform as expected.
Unexpected changes in the composition of the index may also affect performance of the credit default swap index. If a referenced index has a dramatic intraday move that causes a material decline in the funds net assets, the terms of the
funds credit default swap index may permit the counterparty to immediately close out the transaction. In that event, the fund may be unable to enter into another credit default swap index or otherwise achieve desired exposure, even if the
referenced index reverses all or a portion of its intraday move.
A fund also may be authorized to enter into credit default swaps on index tranches. CDS
on index tranches give the fund, as a seller of credit protection, the opportunity to take on exposures to specific segments of the CDS index default loss distribution. Each tranche has a different sensitivity to credit risk correlations among
entities in the index. One of the main benefits of index tranches is higher liquidity. This has been achieved mainly through standardization, yet it is also due to the liquidity in the single-name CDS and CDS index markets. In contrast, possibly
owing to the limited liquidity in the corporate bond market, securities referencing corporate bond indexes have not been traded actively.
CDS involve
greater risks than if a fund had invested in the reference obligation directly since, in addition to general market risks, CDS are subject to illiquidity risk, counterparty risk and credit risk. A fund will enter into CDS only with counterparties
that meet certain standards of creditworthiness. A buyer generally also will lose its investment and recover nothing should no credit event occur and the CDS is held to its termination date. If a credit event were to occur, the value of any
deliverable obligation received by the seller, coupled with the upfront or periodic payments previously received, may be less than the full notional value it pays to the buyer, resulting in a loss of value to the seller. A funds obligations
under a CDS will be accrued daily (offset against any amounts owing to the fund). A funds ability to be a buyer or seller of CDS is subject to the regulatory limitations outlined in the Government Regulation of
Derivatives section.
Dividend swap agreements. A dividend swap agreement is a financial instrument where two parties contract to exchange a
set of future cash flows at set dates in the future. One party agrees to pay the other the future dividend flow on a stock or basket of stocks in an index, in return for which the other party gives the first call options. Dividend swaps generally
are traded OTC rather than on an exchange.
Inflation swap agreements. An inflation swap agreement is a contract in which one party agrees to pay
the cumulative percentage increase in a price index (e.g., the CPI with respect to CPI swaps) over the term of the swap (with some lag on the inflation index), and the other pays a compounded fixed rate. Inflation swap agreements may be used to
protect a funds NAV against an unexpected change in the rate of inflation measured by an inflation index since the value of these agreements is expected to increase if unexpected inflation increases.
Interest rate swap agreements. An interest rate swap agreement involves the exchange of cash flows based on interest rate specifications and a
specified principal amount, often a fixed payment for a floating payment that is linked to an interest rate. An interest rate lock specifies a future interest rate to be paid. In an interest rate cap, one party receives payments at the end of each
period in which a specified interest rate on a specified principal amount exceeds an agreed-upon rate; conversely, in an interest rate floor, one party may receive payments if a specified interest rate on a specified principal amount falls below an
agreed-upon rate. Caps and floors have an effect similar to buying or writing options. Interest rate collars involve selling a cap and purchasing a floor, or vice versa, to protect a fund against interest rate movements exceeding given minimum or
maximum levels.
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Total return swap agreements. A total return swap agreement is a contract whereby one party agrees to make
a series of payments to another party based on the change in the market value of the assets underlying such contract (which can include a security, commodity, index or baskets thereof) during the specified period. In exchange, the other party to the
contract agrees to make a series of payments calculated by reference to an interest rate and/or some other agreed-upon amount (including the change in market value of other underlying assets). A fund may use total return swaps to gain exposure to an
asset without owning it or taking physical custody of it. For example, by investing in total return commodity swaps, a fund will receive the price appreciation of a commodity, commodity index or portion thereof in exchange for payment of an
agreed-upon fee.
Variance swap agreements. Variance swap agreements involve an agreement by two parties to exchange cash flows based on the
measured variance (or square of volatility) of a specified underlying asset. One party agrees to exchange a fixed rate or strike price payment for the floating rate or realized price variance on the underlying asset with
respect to the notional amount. At inception, the strike price chosen is generally fixed at a level such that the fair value of the swap is zero. As a result, no money changes hands at the initiation of the contract. At the expiration date, the
amount paid by one party to the other is the difference between the realized price variance of the underlying asset and the strike price multiplied by the notional amount. A receiver of the realized price variance would receive a payment when the
realized price variance of the underlying asset is greater than the strike price and would make a payment when that variance is less than the strike price. A payer of the realized price variance would make a payment when the realized price variance
of the underlying asset is greater than the strike price and would receive a payment when that variance is less than the strike price. This type of agreement is essentially a forward contract on the future realized price variance of the underlying
asset.
Eurodollar Instruments
A fund may be
authorized to invest in Eurodollar instruments which typically are dollar-denominated futures contracts or options on those contracts that are linked to LIBOR. In addition, foreign currency-denominated instruments are available from time to time.
Eurodollar futures contracts enable purchasers to obtain a fixed rate for the lending of funds and sellers to obtain a fixed rate for borrowings. A fund might use Eurodollar futures contracts and options thereon to hedge against changes in LIBOR, to
which many interest rate swaps and fixed income instruments are linked.
Warrants and Rights
Warrants and rights generally give the holder the right to receive, upon exercise and prior to the expiration date, a security of the issuer at a stated price.
Funds typically use warrants and rights in a manner similar to their use of options on securities, as described in General Characteristics of Options above and elsewhere in this SAI. Risks associated with the use of warrants and rights
are generally similar to risks associated with the use of options. Unlike most options, however, warrants and rights are issued in specific amounts, and warrants generally have longer terms than options. Warrants and rights are not likely to be as
liquid as exchange-traded options backed by a recognized clearing agency. In addition, the terms of warrants or rights may limit a funds ability to exercise the warrants or rights at such time, or in such quantities, as the fund would
otherwise wish.
Non-Standard Warrants and Participatory Notes. From time to time, a fund may use non-standard warrants, including low exercise price warrants or low exercise price options (LEPOs), and participatory notes (P-Notes) to gain exposure
to issuers in certain countries. LEPOs are different from standard warrants in that they do not give their holders the right to receive a security of the issuer upon exercise. Rather, LEPOs pay the holder the difference in price of the underlying
security between the date the LEPO was purchased and the date it is sold. P-Notes are a type of equity-linked derivative that generally are traded OTC and constitute general unsecured contractual obligations
of the banks, broker dealers or other financial institutions that issue them. Generally, banks and broker dealers associated with non-U.S.-based brokerage firms buy securities listed on certain foreign
exchanges and then issue P-Notes that are designed to replicate the performance of certain issuers and markets. The performance results of P-Notes will not replicate
exactly the performance of the issuers or markets that the notes seek to replicate due to transaction costs and other expenses. The return on a P-Note that is linked to a particular underlying security
generally is increased to the extent of any dividends paid in connection with the underlying security. However, the holder of a P-Note typically does not receive voting or other rights as it would if it
directly owned the underlying security, and P-Notes present similar risks to investing directly in the underlying security. Additionally, LEPOs and P-Notes entail the
same risks as other over-the-counter derivatives. These include the risk that the counterparty or issuer of the LEPO or P-Note
may not be able to fulfill its obligations, that the holder and counterparty or issuer may disagree as to the meaning or application of contractual terms, or that the instrument may not perform as expected. See Principal risksCredit and
Counterparty risk in the Prospectus, as applicable, and Risk of Hedging and Other Strategic Transactions below. Additionally, while LEPOs or P-Notes may be listed on an exchange, there is no
guarantee that a liquid market will exist or that the counterparty or issuer of a LEPO or P-Note will be willing to repurchase such instrument when a fund wishes to sell it.
Risk of Hedging and Other Strategic Transactions
Hedging
and other strategic transactions are subject to special risks, including:
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possible default by the counterparty to the transaction; |
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markets for the securities used in these transactions could be illiquid; and |
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to the extent a subadvisors assessment of market movements is incorrect, the risk that the use of the
hedging and other strategic transactions could result in losses to the fund. |
Losses resulting from the use of hedging and other
strategic transactions will reduce a funds NAV, and possibly income. Losses can be greater than if hedging and other strategic transactions had not been used.
Options and Futures Transactions. Options transactions are subject to the following additional risks:
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option transactions could force the sale or purchase of portfolio securities at inopportune times or for prices
higher than current market values (in the case of put options) or lower than current market values (in the case of call options), or could cause a fund to hold a security it might otherwise sell (in the case of a call option); |
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calls written on securities that a fund does not own are riskier than calls written on securities owned by the
fund because there is no underlying security held by the fund that can act as a partial hedge, and there also is a risk, especially with less liquid securities, that the securities may not be available for purchase; and |
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options markets could become illiquid in some circumstances and certain OTC options could have no markets. As a
result, in certain markets, a fund might not be able to close out a transaction without incurring substantial losses. |
Futures
transactions are subject to the following additional risks:
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the degree of correlation between price movements of futures contracts and price movements in the related
securities position of a fund could create the possibility that losses on the hedging instrument are greater than gains in the value of the funds position. |
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futures markets could become illiquid. As a result, in certain markets, a fund might not be able to close out a
transaction without incurring substantial losses. |
Although a funds use of futures and options for hedging should tend to minimize
the risk of loss due to a decline in the value of the hedged position, at the same time, it will tend to limit the potential gain that might result from an increase in value.
Currency Hedging. In addition to the general risks of hedging and other strategic transactions described above, currency hedging transactions have the
following risks:
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currency hedging can result in losses to a fund if the currency being hedged fluctuates in value to a degree or
direction that is not anticipated; |
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proxy hedging involves determining the correlation between various currencies. If a subadvisors
determination of this correlation is incorrect, a funds losses could be greater than if the proxy hedging were not used; and |
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foreign government exchange controls and restrictions on repatriation of currency can negatively affect currency
transactions. These forms of governmental actions can result in losses to a fund if it is unable to deliver or receive currency or monies to settle obligations. Such governmental actions also could cause hedges it has entered into to be rendered
useless, resulting in full currency exposure as well as incurring transaction costs. |
Currency Futures Contracts and Options on
Currency Futures Contracts. Currency futures contracts are subject to the same risks that apply to the use of futures contracts generally. In addition, settlement of a currency futures contract for the purchase of most currencies must occur at a
bank based in the issuing nation. Trading options on currency futures contracts is relatively new, and the ability to establish and close out positions on these options is subject to the maintenance of a liquid market that may not always be
available.
Risk Associated with Specific Types of Derivative Debt Securities. Different types of derivative debt securities are subject to
different combinations of prepayment, extension and/or interest rate risk. Conventional mortgage passthrough securities and sequential pay CMOs are subject to all of these risks, but typically are not leveraged. Thus, the magnitude of exposure may
be less than for more leveraged mortgage-backed securities.
The risk of early prepayments is the primary risk associated with IOs, super floaters, other
leveraged floating rate instruments and mortgage-backed securities purchased at a premium to their par value. In some instances, early prepayments may result in a complete loss of investment in certain of these securities. The primary risks
associated with certain other derivative debt securities are the potential extension of average life and/or depreciation due to rising interest rates.
Derivative debt securities include floating rate securities based on the COFI floaters, other lagging rate floating rate securities, capped
floaters, mortgage-backed securities purchased at a discount, leveraged inverse floating rate securities, POs, certain residual or support tranches of CMOs and index amortizing notes. Index amortizing notes are not mortgage-backed securities, but
are subject to extension risk resulting from the issuers failure to exercise its option to call or redeem the notes before their stated maturity date. Leveraged inverse IOs combine several elements of the mortgage-backed securities described
above and present an especially intense combination of prepayment, extension and interest rate risks.
PAC and TAC CMO bonds involve less exposure to
prepayment, extension and interest rate risk than other mortgage-backed securities, provided that prepayment rates remain within expected prepayment ranges or collars. To the extent that prepayment rates remain within these prepayment
ranges, the residual or support tranches of PAC and TAC CMOs assume the extra prepayment, extension and interest rate risk associated with the underlying mortgage assets.
Other types of floating rate derivative debt securities present more complex types of interest rate risks. For example, range floaters are subject to the risk
that the coupon will be reduced to below market rates if a designated interest rate floats outside of a specified interest rate band or collar. Dual index or yield curve floaters are subject to depreciation in the event of an unfavorable change in
the spread between two designated interest rates. X- reset floaters have a coupon that remains fixed for more than one accrual period. Thus, the type of risk involved in these securities depends on the terms of each individual X-reset floater.
Risk of Hedging and Other Strategic Transactions Outside the United States
When conducted outside the United States, hedging and other strategic transactions will not only be subject to the risks described above, but also could be
adversely affected by:
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foreign governmental actions affecting foreign securities, currencies or other instruments;
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less stringent regulation of these transactions in many countries as compared to the United States;
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the lack of clearing mechanisms and related guarantees in some countries for these transactions;
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more limited availability of data on which to make trading decisions than in the United States;
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delays in a funds ability to act upon economic events occurring in foreign markets during non-business hours in the United States; |
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the imposition of different exercise and settlement terms and procedures and margin requirements than in the
United States; and |
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lower trading volume and liquidity. |
Government Regulation of Derivatives
The regulation of
the U.S. and non-U.S. derivatives markets has undergone substantial change in recent years and such change may continue. In particular, effective August 19, 2022 (the Compliance Date), Rule 18f-4 under the 1940 Act (the Derivatives Rule) replaced the asset segregation regime of Investment Company Act Release No. 10666 (Release 10666) with a new framework for the use of
derivatives by registered funds. As of the Compliance Date, the SEC rescinded Release 10666 and withdrew no-action letters and similar guidance addressing a funds use of derivatives and began requiring
funds to satisfy the requirements of the Derivatives Rule. As a result, on or after the Compliance Date, the funds will no longer engage in segregation or coverage techniques with respect to derivatives transactions and will
instead comply with the applicable requirements of the Derivatives Rule.
The Derivatives Rule mandates that a fund adopt and/or implement: (i) value-at-risk limitations (VaR); (ii) a written derivatives risk management program; (iii) new Board oversight responsibilities; and (iv) new
reporting and recordkeeping requirements. In the event that a funds derivative exposure is 10% or less of its net assets, excluding certain currency and interest rate hedging transactions, it can elect to be classified as a limited derivatives
user (Limited Derivatives User) under the Derivatives Rule, in which case the fund is not subject to the full requirements of the Derivatives Rule. Limited Derivatives Users are excepted from VaR testing, implementing a derivatives risk
management program, and certain Board oversight and reporting requirements mandated by the Derivatives Rule. However, a Limited Derivatives User is still required to implement written compliance policies and procedures reasonably designed to manage
its derivatives risks.
The Derivatives Rule also provides special treatment for reverse repurchase agreements, similar financing transactions and
unfunded commitment agreements. Specifically, a fund may elect whether to treat reverse repurchase agreements and similar financing transactions as derivatives transactions subject to the requirements of the Derivatives Rule or as senior
securities equivalent to bank borrowings for purposes of Section 18 of the 1940 Act. Repurchase agreements are not subject to the Derivatives Rule, but are still subject to other provisions of the 1940 Act. In addition, when-issued or forward
settling securities transactions that physically settle within 35-days are deemed not to involve a senior security.
Furthermore, it is possible that additional government regulation of various types of derivative instruments may limit or prevent a fund from using such
instruments as part of its investment strategy in the future, which could negatively impact the fund. New position limits imposed on a fund or its counterparty may also impact the funds ability to invest in futures, options, and swaps in a
manner that efficiently meets its investment objective.
Use of extensive hedging and other strategic transactions by a fund will require, among other
things, that the fund post collateral with counterparties or clearinghouses, and/or are subject to the Derivatives Rule regulatory limitations as outlined above.
Futures Contracts and Options on Futures Contracts. In the case of a futures contract or an option on a futures contract, a fund must deposit initial
margin and, in some instances, daily variation margin, to meet its obligations under the contract. These assets may consist of cash, cash equivalents, liquid debt, equity securities or other acceptable assets.
Other Limitations
Subject to the limitations outlined in
the Government Regulation of Derivatives, a fund will not maintain open short positions in futures contracts, call options written on futures contracts, and call options written on securities indices if, in the aggregate, the current
market value of the open positions exceeds the current market value of that portion of its securities being hedged by those futures and options, plus or minus the unrealized gain or loss on those open positions.
For purposes of this limitation, to the extent that a fund has written call options on specific securities in that portion of its portfolio, the value of
those securities will be deducted from the current market value of that portion of the securities portfolio. If this limitation should be exceeded at any time, the fund will take prompt action to close out the appropriate number of open short
positions to bring its open futures and options positions within this limitation.
INVESTMENT RESTRICTIONS
A funds investment restrictions are subject to,
and may be impacted and limited by, the federal securities laws, rules and regulations, including the Investment Company Act of 1940 and Rule 18f-4 thereunder.
There are two classes of investment restrictions to which a fund is subject in implementing its investment policies: (a) fundamental; and (b) non-fundamental. Fundamental restrictions may be changed only by a vote of the lesser of: (i) 67% or more of the shares represented at a meeting at which more than 50% of the outstanding shares are
represented; or (ii) more than 50% of the outstanding shares. Non-fundamental restrictions are subject to change by the Board without shareholder approval.
When submitting an investment restriction change to the holders of a funds outstanding voting securities, the matter shall be deemed to have been
effectively acted upon with respect to the fund if a majority of the outstanding voting securities of the fund votes for the approval of the matter, notwithstanding: (1) that the matter has not been approved by the holders of a majority of the
outstanding voting securities of any other series of the Trust affected by the matter; and (2) that the matter has not been approved by the vote of a majority of the outstanding voting securities of the Trust as a whole.
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Balanced Fund and Fundamental Large Cap Core Fund
Fundamental Investment Restrictions
1. Senior
Securities
Balanced Fund
(1) The
fund may not issue senior securities, except as permitted under the 1940 Act, as amended, and as interpreted or modified by regulatory authority having jurisdiction, from time to time.
Fundamental Large Cap Core Fund
(2) The
fund may not issue senior securities, except as permitted under the 1940 Act, as amended, and as interpreted or modified by regulatory authority having jurisdiction, from time to time.
(For purposes of this fundamental restriction, purchasing securities on a when-issued, forward commitment or delayed delivery basis and
engaging in hedging and other strategic transactions will not be deemed to constitute the issuance of a senior security.)
2. Borrowing
Balanced Fund
(3) The fund may not borrow
money in amounts exceeding 33% of the funds total assets (including the amount borrowed) taken at market value. Interest paid on borrowings will reduce income available to shareholders.
Fundamental Large Cap Core Fund
(4) The
fund may not borrow money, except as permitted under the 1940 Act, as amended, and as interpreted or modified by regulatory authority having jurisdiction, from time to time.
3. Underwriting
Balanced Fund and Fundamental Large
Cap Core Fund
(5) A fund may not engage in the business of underwriting securities issued by others, except to the extent that each
such fund may be deemed to be an underwriter in connection with the disposition of portfolio securities.
4. Real Estate
Balanced Fund and Fundamental Large Cap Core Fund
(6) A fund may not purchase or sell real estate, which term does not include securities of companies which deal in real estate or mortgages or
investments secured by real estate or interests therein, except that each such fund reserves freedom of action to hold and to sell real estate acquired as a result of the funds ownership of securities.
5. Loans
Balanced Fund and Fundamental Large Cap Core
Fund
(7) A fund may not make loans except as permitted under the 1940 Act, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time.
6. Commodities
Balanced Fund
(8) The fund may not buy or
sell commodities, commodity contracts, puts, calls or combinations thereof, except futures contracts and options on securities, securities indices, currency and other financial instruments, options on such futures contracts, forward foreign currency
exchange contracts, forward commitments, interest rate or currency swaps, securities index put or call warrants and repurchase agreements entered into in accordance with the funds investment policies.
Fundamental Large Cap Core Fund
(9) The
fund may not purchase or sell commodities, except as permitted under the 1940 Act, as amended, and as interpreted or modified by regulatory authority having jurisdiction, from time to time.
7. Industry Concentration
Balanced Fund and
Fundamental Large Cap Core Fund
(10) A fund may not concentrate its investments in a particular industry, as that term is used in the
1940 Act, as amended, and as interpreted or modified by regulatory authority having jurisdiction, from time to time.
8. Diversification
Balanced Fund and Fundamental Large Cap Core Fund
(11) Each fund has elected to be treated as a diversified investment company, as that term is used in the 1940 Act, as amended, and as
interpreted or modified by regulatory authority having jurisdiction, from time to time.
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Non-Fundamental Investment Restrictions
Balanced Fund
The fund may not:
(a) Participate on a joint or joint-and-several basis in any
securities trading account. The bunching of orders for the sale or purchase of marketable portfolio securities with other accounts under the management of the Advisor to save commissions or to average prices among them is not deemed to
result in a joint securities trading account.
(b) Purchase securities on margin (except that it may obtain such short-term credits as may
be necessary for the clearance of transactions in securities and forward foreign currency exchange contracts and may make margin payments in connection with transactions in futures contracts and options on futures) or make short sales of securities
unless by virtue of its ownership of other securities, the fund has the right to obtain, without the payment of any additional consideration, securities equivalent in kind and amount to the securities sold and, if the right is conditional, the sale
is made upon the same conditions.
(c) Invest for the purpose of exercising control over or management of any company.
(d) Invest more than 15% of its net assets in illiquid securities.
If allowed by the funds other investment policies and restrictions, the fund may invest up to 5% of its total assets in Russian equity securities and up
to 10% of its total assets in Russian fixed-income securities. All Russian securities must be: (1) denominated in U.S. dollars, Canadian dollars, euros, sterling, or yen; (2) traded on a major exchange; and (3) held physically outside
of Russia.
Fundamental Large Cap Core Fund
The fund
will not:
(a) Knowingly invest more than 15% of the value of its net assets in securities or other investments, including repurchase
agreements maturing in more than seven days but excluding master demand notes, which are not readily marketable.
(b) Make short sales of
securities or maintain a short position, if, when added together, more than 25% of the value of the funds net assets would be: (i) deposited as collateral for the obligation to replace securities borrowed to effect short sales; and
(ii) allocated to segregated accounts in connection with short sales, except that it may obtain such short-term credits as may be required to clear transactions. For purposes of this restriction, collateral arrangements with respect to hedging
and other strategic transactions will not be deemed to involve the use of margin. Short sales against-the-box are not subject to this limitation.
(c) Pledge, hypothecate, mortgage or transfer (except as provided in the fundamental investment restriction regarding senior securities) as
security for indebtedness any securities held by the fund, except in an amount of not more than 10% of the value of the funds total assets and then only to secure borrowings permitted by the fundamental restriction regarding borrowing and the non-fundamental restriction regarding investment in securities that are not readily marketable. For purposes of this restriction, collateral arrangements with respect to hedging and other strategic transactions will
not be deemed to involve a pledge of assets. For purposes of the non-fundamental restriction regarding short sales, other strategic transactions can include short sales and derivative transactions
intended for non-hedging purposes.
Classic Value Fund
Fundamental Investment Restrictions
Classic Value
Fund may not:
1 |
Issue senior securities, except as permitted by the funds fundamental investment restrictions on
borrowing, lending and investing in commodities and as otherwise permitted under the 1940 Act. For purposes of this restriction, the issuance of shares of beneficial interest in multiple classes or series, the deferral of trustees fees, the
purchase or sale of options, futures contracts and options on futures contracts, forward commitments, forward foreign exchange contracts and repurchase agreements entered into in accordance with the funds investment policies are not deemed to
be senior securities. |
2 |
Borrow money, except: (i) for temporary or short-term purposes or for the clearance of transactions
in amounts not to exceed 331⁄3% of the value of the funds total assets (including the amount borrowed) taken at market value; (ii) in connection with the
redemption of fund shares or to finance failed settlements of portfolio trades without immediately liquidating portfolio securities or other assets; (iii) in order to fulfill commitments or plans to purchase additional securities pending the
anticipated sale of other portfolio securities or assets; (iv) in connection with entering into reverse repurchase agreements and dollar rolls, but only if after each such borrowing there is asset coverage of at least 300% as defined in the
1940 Act; and (v) as otherwise permitted under the 1940 Act. For purposes of this investment restriction, the deferral of trustees fees and transactions in short sales, futures contracts, options on futures contracts, securities or
indices and forward commitment transactions shall not constitute borrowing. |
3 |
Act as an underwriter, except to the extent that in connection with the disposition of portfolio
securities, the fund may be deemed to be an underwriter for purposes of the Securities Act of 1933. |
4 |
Purchase, sell or invest in real estate, but subject to its other investment policies and restrictions
may invest in securities of companies that deal in real estate or are engaged in the real estate business. These companies include real estate investment trusts and securities secured by real estate or interests in real estate. The fund may hold and
sell real estate acquired through default, liquidation or other distributions of an interest in real estate as a result of the funds ownership of securities. |
5 |
Invest in commodities or commodity futures contracts, other than financial derivative contracts.
Financial derivatives include forward currency contracts; financial futures contracts and options on financial futures contracts; options and warrants on securities, currencies and financial indices; swaps, caps, floors, collars and swaptions; and
repurchase agreements entered into in accordance with the funds investment policies. |
58
6 |
Make loans, except that the fund may (i) lend portfolio securities in accordance with the
funds investment policies up to 331⁄3% of the funds total assets taken at market value, (ii) enter into repurchase agreements, and
(iii) purchase all or a portion of an issue of publicly distributed debt securities, bank loan participation interests, bank certificates of deposit, bankers acceptances, debentures or other securities, whether or not the purchase is made
upon the original issuance of the securities. |
7 |
Purchase the securities of issuers conducting their principal activity in the same industry if,
immediately after such purchase, the value of its investments in such industry would exceed 25% of its total assets taken at market value at the time of such investment. This limitation does not apply to investments in obligations of the U.S.
Government or any of its agencies, instrumentalities or authorities. |
8 |
With respect to 75% of the funds total assets, invest more than 5% of the funds total assets
in the securities of any single issuer or own more than 10% of the outstanding voting securities of any one issuer, in each case other than (i) securities issued or guaranteed by the U.S. Government, its agencies or its instrumentalities or
(ii) securities of other investment companies. |
Non-Fundamental Investment
Restrictions
Classic Value Fund may not:
1 |
Invest in the securities of an issuer for the purpose of exercising control or management.
|
2 |
Purchase securities on margin, except that the fund may obtain such short-term credits as may be
necessary for the clearance of securities transactions. |
3 |
Invest more than 15% of its net assets in securities which are illiquid. |
If allowed by Classic Value Funds other investment policies and restrictions, the fund may invest up to 5% of its total assets in Russian equity
securities and up to 10% of its total assets in Russian fixed-income securities. All Russian securities must be: (1) denominated in U.S. dollars, Canadian dollars, euros, sterling, or yen; (2) traded on a major exchange; and (3) held
physically outside of Russia.
U.S. Global Leaders Growth Fund
Fundamental Investment Restrictions
1 |
Concentration. The fund may not concentrate its investments in a particular industry, as that term is
used in the 1940 Act, and as interpreted or modified by regulatory authority having jurisdiction, from time to time. |
2 |
Borrowing. The fund may not borrow money, except as permitted under the 1940 Act, as amended, and as
interpreted or modified by regulatory authority having jurisdiction, from time to time. |
3 |
Underwriting. The fund may not engage in the business of underwriting securities issued by others,
except to the extent that the Fund may be deemed to be an underwriter in connection with the disposition of portfolio securities. |
4 |
Real Estate. The fund may not purchase or sell real estate, which term does not include securities of
companies which deal in real estate or mortgages or investments secured by real estate or interests therein, except that the Fund reserves freedom of action to hold and to sell real estate acquired as a result of the funds ownership of
securities. |
5 |
Commodities. The fund may not purchase or sell commodities, except as permitted under the 1940 Act, as
amended, and as interpreted or modified by regulatory authority having jurisdiction, from time to time. |
6 |
Loans. The fund may not make loans except as permitted under the 1940 Act, as amended, and as
interpreted or modified by regulatory authority having jurisdiction, from time to time. |
7 |
Senior Securities. The fund may not issue senior securities, except as permitted under the 1940 Act, as
amended, and as interpreted or modified by regulatory authority having jurisdiction, from time to time. (For purposes of this fundamental restriction, purchasing securities on a when-issued, forward commitment or delayed delivery basis and engaging
in hedging and other strategic transactions will not be deemed to constitute the issuance of a senior security.) |
8 |
Diversification. The fund has elected to be treated as a diversified investment company, as that term is
used in the 1940 Act, as amended, and as interpreted or modified by regulatory authority having jurisdiction, from time to time. |
Non-Fundamental Investment Restrictions
U.S. Global Leaders Growth Fund may not:
9. Knowingly invest more than 15% of the value of its net assets in securities or other investments, including repurchase agreements maturing
in more than seven days but excluding master demand notes, which are not readily marketable.
10. Make short sales of securities or
maintain a short position, if, when added together, more than 25% of the value of the funds net assets would be: (i) deposited as collateral for the obligation to replace securities borrowed to effect short sales; and (ii) allocated
to segregated accounts in connection with short sales, except that it may obtain such short-term credits as may be required to clear transactions. For purposes of this restriction, collateral arrangements with respect to hedging and other strategic
transactions will not be deemed to involve the use of margin. Short sales against-the-box are not subject to this limitation.
11. Pledge, hypothecate, mortgage or transfer (except as provided in the fundamental restriction regarding Senior Securities) as security for
indebtedness any securities held by the fund, except in an amount of not more than 10% of the value of the funds total assets and then only to secure borrowings permitted by the fundamental restriction regarding borrowing and the non-fundamental restriction regarding short sales. For purposes of this restriction, collateral arrangements with respect to hedging and other strategic transactions will not be deemed to involve a pledge of assets.
For purposes of this restriction, other strategic transactions can include short sales and derivative transactions intended for non-hedging purposes.
59
Disciplined Value International Fund, Emerging Markets Equity Fund, ESG International Equity Fund, ESG Large
Cap Core Fund, Seaport Long/Short Fund, and Small Cap Core Fund
Fundamental Investment Restrictions
(1) Concentration. A fund will not concentrate its investments in a particular industry, as that term is used in the 1940 Act, as amended, and as
interpreted or modified by regulatory authority having jurisdiction, from time to time.
(2) Borrowing. A fund will not borrow money, except as
permitted under the 1940 Act, as amended, and as interpreted or modified by regulatory authority having jurisdiction, from time to time.
(3)
Underwriting. A fund will not engage in the business of underwriting securities issued by others, except to the extent that the fund may be deemed to be an underwriter in connection with the disposition of portfolio securities.
(4) Real Estate. A fund will not purchase or sell real estate, which term does not include securities of companies which deal in real estate or
mortgages or investments secured by real estate or interests therein, except that the fund reserves freedom of action to hold and to sell real estate acquired as a result of the funds ownership of securities.
(5) Commodities. A fund will not purchase or sell commodities, except as permitted under the 1940 Act, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time.
(6) Loans. A fund will not make loans except as permitted under the 1940 Act, as
amended, and as interpreted or modified by regulatory authority having jurisdiction, from time to time.
(7) Senior Securities. A fund will not
issue senior securities, except as permitted under the 1940 Act, as amended, and as interpreted or modified by regulatory authority having jurisdiction, from time to time.
For purposes of fundamental restriction No. 7, purchasing securities on a when-issued, forward commitment or delayed delivery basis and engaging in
hedging and other strategic transactions will not be deemed to constitute the issuance of a senior security.
Non-Fundamental Investment Restrictions
Disciplined Value International Fund, Emerging Markets Equity Fund, ESG International Equity Fund, ESG Large Cap Core Fund, and Seaport Long/ Short Fund
A fund will not:
(8) Knowingly invest
more than 15% of the value of its net assets in securities or other investments, including repurchase agreements maturing in more than seven days but excluding master demand notes, which are not readily marketable.
(9) Make short sales of securities or maintain a short position, if, when added together, more than 25% of the value of the funds net
assets would be: (i) deposited as collateral for the obligation to replace securities borrowed to effect short sales; and (ii) allocated to segregated accounts in connection with short sales, except that it may obtain such short-term
credits as may be required to clear transactions. For purposes of this restriction, collateral arrangements with respect to hedging and other strategic transactions will not be deemed to involve the use of margin. Short sales against-the-box are not subject to this limitation.
(10) Pledge, hypothecate, mortgage or transfer (except as provided in restriction (7)) as security for indebtedness any securities held by the
fund, except in an amount of not more than 10% of the value of the funds total assets and then only to secure borrowings permitted by restrictions (2) and (9). For purposes of this restriction, collateral arrangements with respect to
hedging and other strategic transactions will not be deemed to involve a pledge of assets.
(11) With respect to Seaport Long/Short Fund,
physically short securities, e.g., via prime brokerage agreements.
For purposes of restriction (10), other strategic
transactions can include short sales and derivative transactions intended for non-hedging purposes.
Small Cap Core Fund
Small Cap Core Fund will not:
(8) Knowingly invest more than 15% of the value of its net assets in securities or other investments, including repurchase agreements maturing
in more than seven days but excluding master demand notes, which are not readily marketable.
(9) Make short sales of securities or
maintain a short position, if, when added together, more than 25% of the value of the funds net assets would be: (i) deposited as collateral for the obligation to replace securities borrowed to effect short sales; and (ii) allocated
to segregated accounts in connection with short sales, except that it may obtain such short-term credits as may be required to clear transactions. For purposes of this restriction, collateral arrangements with respect to hedging and other strategic
transactions will not be deemed to involve the use of margin. Short sales against-the-box are not subject to this limitation.
(10) Pledge, hypothecate, mortgage or transfer (except as provided in restriction (7)) as security for indebtedness any securities held by the
Fund, except in an amount of not more than 10% of the value of the funds total assets and then only to secure borrowings permitted by restrictions (2) and (9). For purposes of this restriction, collateral arrangements with respect to hedging
and other strategic transactions will not be deemed to involve a pledge of assets.
60
(11) Make investments in business development companies (BDCs).
For purposes of restriction (10), other strategic transactions can include short sales and derivative transactions intended for non-hedging purposes.
Infrastructure Fund
Fundamental Investment Restrictions
(1)
Concentration. The fund will invest over 25% of its net assets in industries represented by infrastructure companies. The fund will not invest more than 25% of its net assets in the securities of issuers in any other single industry or group
of industries. This limitation does not apply to investments in obligations of the U.S. government or any of its agencies, instrumentalities or authorities.
(2) Borrowing. The fund will not borrow money, except as permitted under the 1940 Act, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time.
(3) Underwriting. The fund will not engage in the business of underwriting securities issued by
others, except to the extent that the fund may be deemed to be an underwriter in connection with the disposition of portfolio securities.
(4) Real
Estate. The fund will not purchase or sell real estate, which term does not include securities of companies which deal in real estate or mortgages or investments secured by real estate or interests therein, except that the fund reserves freedom
of action to hold and to sell real estate acquired as a result of the funds ownership of securities.
(5) Commodities. The fund will not
purchase or sell commodities, except as permitted under the 1940 Act, as amended, and as interpreted or modified by regulatory authority having jurisdiction, from time to time.
(6) Loans. The fund will not make loans except as permitted under the 1940 Act, as amended, and as interpreted or modified by regulatory authority
having jurisdiction, from time to time.
(7) Senior Securities. The fund will not issue senior securities, except as permitted under the 1940 Act,
as amended, and as interpreted or modified by regulatory authority having jurisdiction, from time to time.
For purposes of fundamental restriction (7),
purchasing securities on a when-issued, forward commitment or delayed delivery basis and engaging in hedging and other strategic transactions will not be deemed to constitute the issuance of a senior security.
Non-Fundamental Investment Restrictions
The fund will not:
(8) Knowingly invest more
than 15% of the value of its net assets in securities or other investments, including repurchase agreements maturing in more than seven days but excluding master demand notes, which are not readily marketable.
(9) Make short sales of securities or maintain a short position, if, when added together, more than 25% of the value of the funds net
assets would be: (i) deposited as collateral for the obligation to replace securities borrowed to effect short sales; and (ii) allocated to segregated accounts in connection with short sales, except that it may obtain such short-term
credits as may be required to clear transactions. For purposes of this restriction, collateral arrangements with respect to hedging and other strategic transactions will not be deemed to involve the use of margin. Short sales against-the-box are not subject to this limitation.
(10) Pledge, hypothecate, mortgage or transfer (except as provided in restriction (7)) as security for indebtedness any securities held by the
fund, except in an amount of not more than 10% of the value of the funds total assets and then only to secure borrowings permitted by restrictions (2) and (9). For purposes of this restriction, collateral arrangements with respect to
hedging and other strategic transactions will not be deemed to involve a pledge of assets.
For purposes of restriction (10), other
strategic transactions can include short sales and derivative transactions intended for non-hedging purposes.
Diversified Macro Fund, Global Thematic Opportunities Fund, and International Dynamic Growth Fund
Fundamental Investment Restrictions
(1)
Concentration. A fund will not concentrate its investments in a particular industry or group of industries, as used in the 1940 Act, as amended, and as interpreted or modified by regulatory authority having jurisdiction, from time to time.
(2) Borrowing. A fund will not borrow money, except as permitted under the 1940 Act, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time.
(3) Underwriting. A fund will not engage in the business of underwriting securities issued by
others, except to the extent that the fund may be deemed to be an underwriter in connection with the disposition of portfolio securities.
(4) Real
Estate. A fund will not purchase or sell real estate, which term does not include securities of companies which deal in real estate or mortgages or investments secured by real estate or interests therein, except that the fund reserves freedom of
action to hold and to sell real estate acquired as a result of the Funds ownership of securities.
61
(5) Commodities. A fund will not purchase or sell commodities, except as permitted under the 1940 Act, as
amended, and as interpreted or modified by regulatory authority having jurisdiction, from time to time.
(6) Loans. A fund will not make loans
except as permitted under the 1940 Act, as amended, and as interpreted or modified by regulatory authority having jurisdiction, from time to time.
(7)
Senior Securities. A fund will not issue senior securities, except as permitted under the 1940 Act, as amended, and as interpreted or modified by regulatory authority having jurisdiction, from time to time.
(8) Diversification. Each fund has elected to be treated as a diversified investment company, as that term is used in the 1940 Act, as amended, and as
interpreted or modified by regulatory authority having jurisdiction, from time to time.
For purposes of fundamental restriction (7), purchasing securities
on a when-issued, forward commitment or delayed delivery basis and engaging in hedging and other strategic transactions will not be deemed to constitute the issuance of a senior security.
Non-Fundamental Investment Restrictions
A fund will not:
(8) Knowingly invest more than
15% of the value of its net assets in securities or other investments, including repurchase agreements maturing in more than seven days but excluding master demand notes, which are not readily marketable.
(9) Make short sales of securities or maintain a short position, if, when added together, more than 25% of the value of the funds net
assets would be: (i) deposited as collateral for the obligation to replace securities borrowed to effect short sales; and (ii) allocated to segregated accounts in connection with short sales, except that it may obtain such short-term
credits as may be required to clear transactions. For purposes of this restriction, collateral arrangements with respect to hedging and other strategic transactions will not be deemed to involve the use of margin. Short sales against-the-box are not subject to this limitation.
(10) Pledge, hypothecate, mortgage or transfer (except as provided in restriction (7)) as security for indebtedness any securities held by the
fund, except in an amount of not more than 10% of the value of the funds total assets and then only to secure borrowings permitted by restrictions (2) and (9). For purposes of this restriction, collateral arrangements with respect to
hedging and other strategic transactions will not be deemed to involve a pledge of assets.
For purposes of restriction (10), other
strategic transactions can include short sales and derivative transactions intended for non-hedging purposes
Global Environmental Opportunities Fund
Fundamental Investment Restrictions
(1)
Concentration. The fund will not concentrate its investments in a particular industry, as that term is used in the 1940 Act, as amended, and as interpreted or modified by regulatory authority having jurisdiction, from time to time.
(2) Diversification. The fund has elected to be treated as a diversified investment company, as that term is used in the 1940 Act, as amended, and as
interpreted or modified by regulatory authority having jurisdiction, from time to time.
(3) Borrowing. The fund will not borrow money, except as
permitted under the 1940 Act, as amended, and as interpreted or modified by regulatory authority having jurisdiction, from time to time.
(4)
Underwriting. The fund will not engage in the business of underwriting securities issued by others, except to the extent that the fund may be deemed to be an underwriter in connection with the disposition of portfolio securities.
(5) Real Estate. The fund will not purchase or sell real estate, which term does not include securities of companies which deal in real estate or
mortgages or investments secured by real estate or interests therein, except that the fund reserves freedom of action to hold and to sell real estate acquired as a result of the funds ownership of securities.
(6) Commodities. The fund will not purchase or sell commodities, except as permitted under the 1940 Act, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time.
(7) Loans. A fund will not make loans except as permitted under the 1940 Act, as
amended, and as interpreted or modified by regulatory authority having jurisdiction, from time to time.
(8) Senior Securities. A fund will not
issue senior securities, except as permitted under the 1940 Act, as amended, and as interpreted or modified by regulatory authority having jurisdiction, from time to time.
For purposes of Fundamental Restriction No. 8, purchasing securities on a when-issued, forward commitment or delayed delivery basis and engaging in
hedging and other strategic transactions will not be deemed to constitute the issuance of a senior security.
Non-Fundamental Investment Restrictions
The fund will not:
(9) Knowingly invest more
than 15% of the value of its net assets in securities or other investments, including repurchase agreements maturing in more than seven days but excluding master demand notes, which are not readily marketable.
(10) Make short sales of securities or maintain a short position, if, when added together, more than 25% of the value of the funds net
assets would be: (i) deposited as collateral for the obligation to replace securities borrowed to effect short sales; and (ii) allocated to segregated accounts in connection with short sales, except that it may obtain such short-term
credits as may be required to clear transactions. For purposes of this restriction, collateral arrangements with respect to hedging and other strategic transactions will not be deemed to involve the use of margin. Short sales against-the-box are not subject to this limitation.
62
(11) Pledge, hypothecate, mortgage or transfer (except as provided in restriction (8)) as
security for indebtedness any securities held by the fund, except in an amount of not more than 33¹/3 %* of the value of the funds total assets and then only to secure borrowings permitted by restrictions
(2) and (10). For purposes of this restriction, collateral arrangements with respect to hedging and other strategic transactions will not be
deemed to involve a pledge of assets.
For purposes of this restriction (11), other strategic transactions can include short sales and
derivative transactions intended for non-hedging purposes, collateral arrangements with respect to hedging and other strategic transactions will not be deemed to involve a pledge of assets.
Financial Industries Fund and Regional Bank Fund
Fundamental Investment Restrictions
Financial Industries Fund
The fund may
not issue senior securities, except as permitted by the funds restrictions on borrowing money, investing in commodities, and making loans, and as otherwise permitted by the 1940 Act. For purposes of this restriction, the issuance of shares of
beneficial interest in multiple classes or series, the deferral of trustees fees, the purchase or sale of options, futures contracts and options on futures contracts, forward commitments, forward foreign exchange contracts and repurchase
agreements entered into in accordance with the funds investment policies are not deemed to be senior securities.
Regional Bank Fund
The fund may not issue senior securities, except as permitted under the 1940 Act, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time.
Financial Industries Fund
The fund may
not borrow money, except: (i) for temporary or short-term purposes or for the clearance of transactions in amounts not to exceed 331⁄3% of the value of the
funds total assets (including the amount borrowed) taken at market value; (ii) in connection with the redemption of fund shares or to finance failed settlements of portfolio trades without immediately liquidating portfolio securities or
other assets; (iii) in order to fulfill commitments or plans to purchase additional securities pending the anticipated sale of other portfolio securities or assets; (iv) in connection with entering into reverse repurchase agreements and
dollar rolls, but only if after each such borrowing there is asset coverage of at least 300% as defined in the 1940 Act; and (v) as otherwise permitted under the 1940 Act.
For purposes of this investment restriction, the deferral of trustees fees and transactions in short sales, futures contracts, options on
futures contracts, securities or indices and forward commitment transactions shall not constitute borrowing.
Regional Bank Fund
The fund may not borrow money, except from banks temporarily for extraordinary or emergency purposes (not for leveraging or investment) and then in an
aggregate amount not in excess of 5% of the value of the funds net assets at the time of such borrowing.
Financial Industries Fund
The fund may
not act as an underwriter of securities of other issuers except to the extent that in selling portfolio securities it may be deemed to be an underwriter for purposes of the 1933 Act.
Regional Bank Fund
The fund may not
engage in the business of underwriting securities issued by others, except to the extent that the fund may be deemed to be an underwriter in connection with the disposition of portfolio securities.
Financial Industries Fund
The fund may
not purchase, sell or invest in real estate, but subject to its other investment policies and restrictions may invest in securities of companies that deal in real estate or are engaged in the real estate business. These companies include real estate
investment trusts and securities secured by real estate or interests in real estate. The fund may hold and sell real estate acquired through default, liquidation or other distributions of an interest in real estate as a result of the Funds
ownership of securities.
Regional Bank Fund
The fund may not purchase or sell real estate, which term does not include securities of companies which deal in real estate or mortgages or
investments secured by real estate or interests therein, except that the Fund reserves freedom of action to hold and to sell real estate acquired as a result of the Funds ownership of securities.
63
Financial Industries Fund
The fund may
not invest in commodities or commodity futures contracts, other than financial derivative contracts. Financial derivative include forward foreign currency contracts; financial futures contracts and options on financial futures contracts; options and
warrants on securities, currencies and financial indices; swaps, caps, floors, collars and swaptions; and repurchase agreements entered into in accordance with the funds investment policies.
Regional Bank Fund
The fund may not
purchase or sell commodities or commodity futures contracts including forward foreign currency contracts, futures contracts and options thereon or interests in oil, gas or other mineral exploration or development programs.
Financial Industries Fund
The fund may
not make loans, except that the fund: (1) may lend portfolio securities in accordance with the funds investment policies up to 331⁄3% of the funds
total assets taken at market value,; (2) enter into repurchase agreements, and (3) purchase all or a portion of an issue of debt securities, bank loan participation interests, bank certificates of deposit, bankers acceptances, debentures
or other securities, whether or not the purchase is made upon the original issuance of the securities.
Regional Bank Fund
The fund may not make loans, except that the fund may purchase or hold debt instruments and may enter into repurchase agreements in accordance
with its investment objective and policies.
Financial Industries Fund
The fund may
not purchase the securities of issuers conducting their principal activity in the same industry if, immediately after such purchase, the value of its investments in such industry would exceed 25% of its total assets taken at market value at the time
of such investment; except that the fund will ordinarily invest more than 25% of its assets in the financial services sector. This limitation does not apply to investments in obligations of the U.S. government or any of its agencies,
instrumentalities or authorities.
Regional Bank Fund
The fund may not concentrate its investments in a particular industry, as that term is used in the 1940 Act, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to time. The fund will normally invest more than 25% of assets in the banking industry as defined in the Funds prospectus.
Financial Industries Fund
With respect to
75% of its total assets, the fund may not purchase securities of an issuer (other than the U.S. Government, its agencies, instrumentalities or authorities), if: (a) such purchase would cause more than 5% of the funds total assets taken at
market value to be invested in the securities of such issuer; or (b) such purchase would at the time result in more than 10% of the outstanding voting securities of such issuer being held by the fund.
Regional Bank Fund
The fund has elected
to be treated as a diversified investment company, as that term is used in the 1940 Act, as amended, and as interpreted or modified by regulatory authority having jurisdiction, from time to time.
9. |
Margin; Short Selling (Regional Bank Fund only) |
The fund may not purchase securities on margin or sell short, except that the fund may obtain such short term credits as are necessary for the
clearance of securities transactions. The deposit or payment by the Fund of initial or maintenance margin in connection with futures contracts or related options transactions is not considered the purchase of a security on margin
10. |
Warrants (Regional Bank Fund only) |
Regional Bank Fund may not invest more than 5% of the value of the funds net assets in marketable warrants to purchase common stock.
Warrants acquired in units or attached to securities are not included in this restriction.
Non-Fundamental
Investment Restrictions
Financial Industries Fund
Financial Industries Fund may not:
(1) Purchase
securities on margin, except that the fund may obtain such short-term credits as may be necessary for the clearance of securities transactions.
(2) Participate on a joint-and-several basis in any securities
trading account. The bunching of orders for the sale or purchase of marketable portfolio securities with other accounts under the management of the Advisor to save commissions or to average prices among them is not deemed to result in a
joint securities trading account.
64
(3) Invest more than 15% of its net assets in illiquid securities.
(4) Purchase securities while outstanding borrowings (other than reverse repurchase agreements) exceed 5% of the funds total assets.
(5) Invest for the purpose of exercising control over or management of any company.
If allowed by Financial Industries Funds other investment policies and restrictions, the fund may invest up to 5% of its total assets in Russian equity
securities and up to 10% of its total assets in Russian fixed-income securities. All Russian securities must be: (1) denominated in U.S. or Canadian dollars, euros, sterling, or yen; (2) traded on a major exchange; and (3) held
physically outside of Russia.
Regional Bank Fund
Regional Bank Fund may not:
1. Options
Transactions. Write, purchase, or sell puts, calls or combinations thereof except that the fund may write, purchase or sell puts and calls on securities.
2. Invest more than 15% of its net assets in illiquid securities.
3. Acquisition for Control Purposes. Purchase securities of any issuer for the purpose of exercising control or management, except in
connection with a merger, consolidation, acquisition or reorganization.
4. Joint Trading Accounts. Participate on a joint or joint and
several basis in any trading account in securities (except for a joint account with other funds managed by the Advisor for repurchase agreements permitted by the Securities and Exchange Commission pursuant to an exemptive order).
If allowed by Regional Bank Funds other investment policies and restrictions, the fund may invest up to 5% of its total assets in Russian equity
securities and up to 10% of its total assets in Russian fixed-income securities. All Russian securities must be: (1) denominated in U.S. dollars, Canadian dollars, euros, sterling, or yen; (2) traded on a major exchange; and (3) held
physically outside of Russia.
Additional Information Regarding Fundamental Restrictions
Concentration. While the 1940 Act does not define what constitutes concentration in an industry, the staff of the SEC takes the position
that any fund that invests more than 25% of its total assets in a particular industry (excluding the U.S. government, its agencies or instrumentalities) is deemed to be concentrated in that industry. With respect to a funds
investment in loan participations, if any, the fund treats both the borrower and the financial intermediary under a loan participation as issuers for purposes of determining whether the fund has concentrated in a particular industry. For purposes of
each funds fundamental restriction regarding concentration, the fund will take into account the concentration policies of the underlying funds in which the fund invests.
Diversification. A diversified fund, as to at least 75% of the value of its total assets, generally may not, except with respect to government
securities and securities of other investment companies, invest more than 5% of its total assets in the securities, or own more than 10% of the outstanding voting securities, of any one issuer. In determining the issuer of a municipal security, each
state, each political subdivision, agency, and instrumentality of each state and each multi-state agency of which such state is a member is considered a separate issuer. In the event that securities are backed only by assets and revenues of a
particular instrumentality, facility or subdivision, such entity is considered the issuer.
Borrowing. The 1940 Act permits a fund to borrow money
in amounts of up to one-third of its total assets, at the time of borrowing, from banks for any purpose (a funds total assets include the amounts being borrowed). To limit the risks attendant to
borrowing, the 1940 Act requires a fund to maintain at all times an asset coverage of at least 300% of the amount of its borrowings, not including borrowings for temporary purposes in an amount not exceeding 5% of the value of its total
assets. Asset coverage means the ratio that the value of a funds total assets (including amounts borrowed), minus liabilities other than borrowings, bears to the aggregate amount of all borrowings.
Commodities. Under the federal securities and commodities laws, certain financial instruments such as futures contracts and options thereon, including
currency futures, stock index futures or interest rate futures, and certain swaps, including currency swaps, interest rate swaps, swaps on broad-based securities indices, and certain credit default swaps, may, under certain circumstances, also be
considered to be commodities. Nevertheless, the 1940 Act does not prohibit investments in physical commodities or contracts related to physical commodities. Funds typically invest in futures contracts and related options on these and other types of
commodity contracts for hedging purposes, to implement tax or cash management strategies, or to enhance returns.
Loans. Although the 1940 Act does
not prohibit a fund from making loans, SEC staff interpretations currently prohibit funds from lending more than one-third of their total assets, except through the purchase of debt obligations or the use of
repurchase agreements. A repurchase agreement is an agreement to purchase a security, coupled with an agreement to sell that security back to the original seller on an agreed-upon date at a price that reflects current interest rates. The SEC
frequently treats repurchase agreements as loans.
Senior Securities. Senior securities are defined as fund obligations that have a
priority over a funds shares with respect to the payment of dividends or the distribution of fund assets. The 1940 Act prohibits a fund from issuing any class of senior securities or selling any senior securities of which it is the issuer,
except that a fund is permitted to borrow from a bank so long as, immediately after such borrowings, there is an asset coverage of at least 300% for all borrowings of a fund (not including borrowings for temporary purposes in an amount not exceeding
5% of the value of a funds total assets). In the event that such asset coverage falls below this percentage, a fund must reduce the amount of its borrowings within three days (not including Sundays and holidays) so that the asset coverage is
restored to at least 300%. The fundamental investment restriction regarding senior securities will be interpreted so as to permit collateral arrangements with respect to swaps, options, forward or futures contracts or other derivatives, or the
posting of initial or variation margin. The Derivatives Rule provides an exemption to enter into certain transactions deemed to be senior securities subject to compliance with the limitations outlined in Government Regulation of
Derivatives.
65
Except with respect to the fundamental investment restriction on borrowing, if a percentage restriction is
adhered to at the time of an investment, a later increase or decrease in the investments percentage of the value of a funds total assets resulting from a change in such values or assets will not constitute a violation of the percentage
restriction. Any subsequent change in a rating assigned by any rating service to a security (or, if unrated, any change in the subadvisors assessment of the security), or change in the percentage of portfolio assets invested in certain
securities or other instruments, or change in the average duration of a funds investment portfolio, resulting from market fluctuations or other changes in the funds total assets will not require the fund to dispose of an investment until
the subadvisor determines that it is practicable to sell or close out the investment without undue market or tax consequences to the fund. In the event that rating services assign different ratings to the same security, the subadvisor will determine
which rating it believes best reflects the securitys quality and risk at that time, which may be the highest of the several assigned ratings.
Investment Policies that May Be Changed Only on 60 Days Notice to Shareholders
In order to comply with Rule 35d-1 under the 1940 Act, the 80% investment policy for each of Emerging Markets Equity
Fund, ESG International Equity Fund, ESG Large Cap Core Fund, Financial Industries Fund, Fundamental Large Cap Core Fund, Infrastructure Fund, Regional Bank Fund, Small Cap Core Fund, and U.S. Global Leaders Growth Fund is subject to change only
upon 60 days prior notice to shareholders. Refer to the applicable Prospectus for each funds Principal investment strategies.
PORTFOLIO TURNOVER
The annual rate of
portfolio turnover will normally differ for each fund and may vary from year to year as well as within a year. A high rate of portfolio turnover (100% or more) generally involves correspondingly greater brokerage commission expenses, which must be
borne directly by the fund. Portfolio turnover is calculated by dividing the lesser of purchases or sales of portfolio securities during the fiscal period by the monthly average of the value of the funds portfolio securities. (Excluded from
the computation are all securities, including options, with maturities at the time of acquisition of one year or less). Portfolio turnover rates can change from year to year due to various factors, including among others, portfolio adjustments made
in response to market conditions.
The portfolio turnover rates for the funds for the fiscal periods ended October 31, 2022 and October 31, 2021 were as
follows:
|
|
|
|
|
|
|
|
|
Fund |
|
2022 (%) |
|
|
2021 (%) |
|
Balanced Fund |
|
|
61 |
|
|
|
65 |
|
Classic Value Fund |
|
|
18 |
|
|
|
25 |
|
Disciplined Value International Fund |
|
|
70 |
|
|
|
76 |
|
Diversified Macro Fund |
|
|
0 |
1 |
|
|
0 |
1 |
Emerging Markets Equity Fund |
|
|
27 |
|
|
|
46 |
|
ESG International Equity Fund |
|
|
27 |
|
|
|
28 |
|
ESG Large Cap Core Fund |
|
|
16 |
|
|
|
14 |
2 |
Financial Industries Fund |
|
|
45 |
|
|
|
64 |
|
Fundamental Large Cap Core Fund |
|
|
26 |
|
|
|
16 |
|
Global Environmental Opportunities Fund |
|
|
38 |
|
|
|
7 |
3 |
Global Thematic Opportunities Fund |
|
|
48 |
|
|
|
43 |
|
Infrastructure Fund |
|
|
33 |
|
|
|
27 |
|
International Dynamic Growth Fund |
|
|
94 |
|
|
|
133 |
|
Regional Bank Fund |
|
|
11 |
|
|
|
10 |
|
Seaport Long/Short Fund |
|
|
214 |
|
|
|
259 |
|
Small Cap Core Fund |
|
|
64 |
|
|
|
64 |
|
U.S. Global Leaders Growth Fund |
|
|
31 |
|
|
|
32 |
|
1 |
The calculation of portfolio turnover excludes amounts from securities whose maturities or expiration dates at
the time of acquisition were one year or less, which represents a significant amount of the investments held by the fund. As a result, the portfolio turnover is 0%. |
2 |
Excludes merger activity. |
3 Period from July 21, 2021 (commencement of operations) to October 31, 2021.
THOSE RESPONSIBLE FOR MANAGEMENT
The business of the Trusts, each an open-end management investment company, is managed by the Board, including certain Trustees who are not interested persons (as defined in the 1940 Act) of the funds or the Trusts (the Independent
Trustees). The Trustees elect officers who are responsible for the day-to-day operations of the funds or the Trusts and who execute policies formulated by the
Trustees. Several of the Trustees and officers of the Trusts also are officers or directors of the Advisor or the Distributor. Each Trustee oversees all of the funds and other funds in the John Hancock Fund Complex (as defined below).
66
The tables below present certain information regarding the Trustees and officers of the Trusts, including their
principal occupations which, unless specific dates are shown, are of at least five years duration. In addition, the tables include information concerning other directorships held by each Trustee in other registered investment companies or
publicly traded companies. Information is listed separately for each Trustee who is an interested person (as defined in the 1940 Act) of the Trusts (each a Non-Independent Trustee) and
the Independent Trustees. As of October 31, 2022, the John Hancock Fund Complex consisted of 186 funds (including separate series of series mutual funds). Each Trustee has been elected to serve on the Board. Each of William H.
Cunningham, Grace K. Fey, Deborah C. Jackson, Hassell H. McClellan, Steven R. Pruchansky, and Gregory A. Russo was most recently elected to serve on the Board at a shareholder meeting held on November 15, 2012. Each of Andrew G. Arnott, James
R. Boyle, Noni L. Ellison, Dean C. Garfield, Paul Lorentz, and Frances G. Rathke was most recently elected to serve on the Board at a shareholder meeting held on September 9, 2022. The address of each Trustee and officer of the Trusts is 200
Berkeley Street, Boston, Massachusetts 02116.
|
|
|
|
|
|
|
|
|
Name (Birth Year) |
|
Current Position(s)
with the Trusts1 |
|
Principal Occupation(s) and Other Directorships During the Past 5 Years |
|
Number of Funds in John Hancock Fund Complex Overseen by Trustee |
|
Non-Independent Trustees |
|
|
|
|
|
|
|
|
|
|
Andrew G. Arnott2 (1971) |
|
Trustee, each Trust (since 2017) |
|
Global Head of Retail for Manulife (since 2022); Head of Wealth and Asset Management, United States and Europe, for John Hancock and Manulife (20182023); Director and Chairman, John Hancock Investment Management LLC (since
2005, including prior positions); Director and Chairman, John Hancock Variable Trust Advisers LLC (since 2006, including prior positions); Director and Chairman, John Hancock Investment Management Distributors LLC (since 2004, including prior
positions); President of various trusts within the John Hancock Fund Complex (20072023, including prior positions). |
|
|
184 |
|
|
|
|
|
|
|
|
|
Trustee of various trusts within the John Hancock Fund Complex (since 2017). |
|
|
|
|
|
|
|
|
Paul Lorentz2
(1968) |
|
Trustee, each Trust (since 2022) |
|
Global Head, Manulife Wealth and Asset Management (since 2017); General Manager, Manulife, Individual Wealth Management and Insurance (2013 2017); President, Manulife Investments (20102016). |
|
|
183 |
|
|
|
|
|
|
|
|
|
Trustee of various trusts within the John Hancock Fund Complex (since 2022). |
|
|
|
|
1 |
Because each Trust is not required to and does not hold regular annual shareholder meetings, each Trustee holds
office for an indefinite term until his or her successor is duly elected and qualified or until he or she dies, retires, resigns, is removed or becomes disqualified. Trustees may be removed from the Trust (provided the aggregate number of Trustees
after such removal shall not be less than one) with cause or without cause, by the action of two-thirds of the remaining Trustees or by action of two-thirds of the
outstanding shares of the Trust. |
2 |
The Trustee is a Non-Independent Trustee due to current or
former positions with the Advisor and certain of its affiliates. |
67
|
|
|
|
|
|
|
Name (Birth Year) |
|
Current Position(s)
with the Trusts1 |
|
Principal Occupation(s) and Other Directorships
During the Past 5 Years |
|
Number of Funds in John Hancock Fund Complex Overseen by Trustee |
Independent Trustees |
|
|
|
|
|
|
|
|
|
|
James R. Boyle (1959) |
|
Trustee, each Trust (20052010, 20122014, and since 2015) |
|
Board Member, United of Omaha Life Insurance Company (since 2022). Board Member, Mutual of Omaha Investor Services, Inc. (since 2022).
Foresters Financial, Chief Executive Officer (20182022) and board member (20172022). Manulife Financial and John Hancock, more than 20 years, retiring in 2012 as Chief Executive Officer, John Hancock and Senior Executive Vice President,
Manulife Financial. Trustee of various trusts within the John Hancock Fund Complex
(2005 2014 and since 2015). |
|
183 |
|
|
|
|
William H. Cunningham (1944) |
|
Trustee, Capital Series and Investment Trust II (since 2005); Trustee, Investment Trust (since 1986) |
|
Professor, University of Texas, Austin, Texas (since 1971); former Chancellor, University of Texas System and former President of the
University of Texas, Austin, Texas; Director (since 2006), Lincoln National Corporation (insurance); Director, Southwest Airlines (since 2000).
Trustee of various trusts within the John Hancock Fund Complex (since 1986). |
|
184 |
|
|
|
|
Noni L. Ellison (1971) |
|
Trustee, each Trust (since 2022) |
|
Senior Vice President, General Counsel & Corporate Secretary, Tractor Supply Company (rural lifestyle retailer) (since 2021);
General Counsel, Chief Compliance Officer & Corporate Secretary, Carestream Dental, L.L.C. (20172021); Associate General Counsel & Assistant Corporate Secretary, W.W. Grainger, Inc. (global industrial supplier)
(20152017); Board Member, Goodwill of North Georgia, 2018 (FY2019)2020 (FY2021); Board Member, Howard University School of Law Board of Visitors (since 2021); Board Member, University of Chicago Law School Board of Visitors (since 2016);
Board member, Childrens Healthcare of Atlanta Foundation Board (2021present).
Trustee of various trusts within the John Hancock Fund Complex (since 2022). |
|
183 |
|
|
|
|
Grace K. Fey (1946) |
|
Trustee, each Trust (since 2012) |
|
Chief Executive Officer, Grace Fey Advisors (since 2007); Director and Executive Vice President, Frontier Capital Management Company
(1988 2007); Director, Fiduciary Trust (since 2009). Trustee of various trusts
within the John Hancock Fund Complex (since 2008). |
|
186 |
|
|
|
|
Dean C. Garfield (1968) |
|
Trustee, each Trust (since 2022) |
|
Vice President, Netflix, Inc. (since 2019); President & Chief Executive Officer, Information Technology Industry Council
(20092019); NYU School of Law Board of Trustees (since 2021); Member, U.S. Department of Transportation, Advisory Committee on Automation (since 2021); President of the United States Trade Advisory Council (20102018); Board Member,
College for Every Student (20172021); Board Member, The Seed School of Washington, D.C. (20122017).
Trustee of various trusts within the John Hancock Fund Complex (since 2022). |
|
183 |
68
|
|
|
|
|
|
|
Name (Birth Year) |
|
Current Position(s)
with the Trusts1 |
|
Principal Occupation(s) and Other Directorships
During the Past 5 Years |
|
Number of Funds in John Hancock Fund Complex Overseen by Trustee |
Independent Trustees |
|
|
|
|
|
|
|
|
|
|
Deborah C. Jackson (1952) |
|
Trustee, each Trust (since 2008) |
|
President, Cambridge College, Cambridge, Massachusetts (since 2011); Board of Directors, Amwell Corporation (since 2020); Board of Directors,
Massachusetts Womens Forum (20182020); Board of Directors, National Association of Corporate Directors/New England (20152020); Chief Executive Officer, American Red Cross of Massachusetts Bay (20022011); Board of Directors of
Eastern Bank Corporation (since 2001); Board of Directors of Eastern Bank Charitable Foundation (since 2001); Board of Directors of Boston Stock Exchange (20022008); Board of Directors of Harvard Pilgrim Healthcare (health benefits company)
(20072011). Trustee of various trusts within the John Hancock Fund Complex
(since 2008). |
|
185 |
|
|
|
|
Hassell H. McClellan (1945) |
|
Trustee, each Trust (since 2012) and Chairperson of the Board, each Trust (since 2017) |
|
Director/Trustee, Virtus Funds (20082020); Director, The Barnes Group (20102021); Associate Professor, The Wallace E. Carroll
School of Management, Boston College (retired 2013). Trustee (since 2005) and
Chairperson of the Board (since 2017) of various trusts within the John Hancock Fund Complex. |
|
186 |
|
|
|
|
Steven R. Pruchansky (1944) |
|
Trustee, Capital Series and Investment Trust II (since 2005); Trustee, Investment Trust (since 1994); Vice Chairperson of the Board, each Trust (since 2012) |
|
Managing Director, Pru Realty (since 2017); Chairman and Chief Executive Officer, Greenscapes of Southwest Florida, Inc. (20142020);
Director and President, Greenscapes of Southwest Florida, Inc. (until 2000); Member, Board of Advisors, First American Bank (until 2010); Managing Director, Jon James, LLC (real estate) (since 2000); Partner, Right Funding, LLC (2014 2017);
Director, First Signature Bank & Trust Company (until 1991); Director, Mast Realty Trust (until 1994); President, Maxwell Building Corp. (until 1991).
Trustee (since 1992), Chairperson of the Board (20112012), and Vice Chairperson of the Board (since 2012) of various trusts within the John Hancock Fund
Complex. |
|
183 |
|
|
|
|
Frances G. Rathke (1960) |
|
Trustee, each Trust (since 2020) |
|
Director, Audit Committee Chair, Oatly Group AB (plant-based drink company) (since 2021); Director, Audit Committee Chair and Compensation
Committee Member, Green Mountain Power Corporation (since 2016); Director, Treasurer and Finance & Audit Committee Chair, Flynn Center for Performing Arts (since 2016); Director and Audit Committee Chair, Planet Fitness (since 2016); Chief
Financial Officer and Treasurer, Keurig Green Mountain, Inc. (2003retired 2015).
Trustee of various trusts within the John Hancock Fund Complex (since 2020). |
|
183 |
69
|
|
|
|
|
|
|
Name (Birth Year) |
|
Current Position(s)
with the Trusts1 |
|
Principal Occupation(s) and Other Directorships
During the Past 5 Years |
|
Number of Funds in John Hancock Fund Complex Overseen by Trustee |
Independent Trustees |
|
|
|
|
|
|
|
|
|
|
Gregory A. Russo (1949) |
|
Trustee, each Trust (since 2009) |
|
Director and Audit Committee Chairman (20122020), and Member, Audit Committee and Finance Committee (20112020), NCH Healthcare
System, Inc. (holding company for multi-entity healthcare system); Director and Member (20122018), and Finance Committee Chairman (20142018), The Moorings, Inc. (nonprofit continuing care community); Global Vice Chairman, Risk &
Regulatory Matters, KPMG LLP (KPMG) (20022006); Vice Chairman, Industrial Markets, KPMG (19982002).
Trustee of various trusts within the John Hancock Fund Complex (since 2008). |
|
183 |
1 |
Because each Trust is not required to and does not hold regular annual shareholder meetings, each
Trustee holds office for an indefinite term until his or her successor is duly elected and qualified or until he or she dies, retires, resigns, is removed or becomes disqualified. Trustees may be removed from the Trust (provided the aggregate number
of Trustees after such removal shall not be less than one) with cause or without cause, by the action of two-thirds of the remaining Trustees or by action of two-thirds
of the outstanding shares of the Trust. |
Principal Officers who are not Trustees
The following table presents information regarding the current principal officers of the Trusts who are not Trustees, including their principal occupations
which, unless specific dates are shown, are of at least five years duration. Each of the officers is an affiliated person of the Advisor. All of the officers listed are officers or employees of the Advisor or its affiliates. All of the
officers also are officers of all of the other funds for which the Advisor serves as investment advisor.
|
|
|
|
|
Name (Birth Year) |
|
Current Position(s)
with the Trusts1 |
|
Principal Occupation(s) During the Past 5 Years |
|
|
|
Kristie M. Feinberg (1975) |
|
President (since 2023) |
|
Head of Wealth & Asset Management, U.S. and Europe, for John Hancock and Manulife (since 2023); CFO and Global Head of Strategy, Manulife Investment Management (20212023, including prior positions); CFO
Americas & Global Head of Treasury, Invesco, Ltd., Invesco US (20192020, including prior positions); Senior Vice President, Corporate Treasurer and Business Controller, OppenheimerFunds (20012019, including prior positions);
President of various trusts within the John Hancock Fund Complex (since 2023). |
|
|
|
Charles A. Rizzo (1957) |
|
Chief Financial Officer (since 2007) |
|
Vice President, John Hancock Financial Services (since 2008); Senior Vice President, John Hancock Investment Management LLC and John Hancock Variable Trust Advisers LLC (since 2008); Chief Financial Officer of various trusts within
the John Hancock Fund Complex (since 2007). |
|
|
|
Salvatore Schiavone (1965) |
|
Treasurer (since 2010) |
|
Assistant Vice President, John Hancock Financial Services (since 2007); Vice President, John Hancock Investment Management LLC and John Hancock Variable Trust Advisers LLC (since 2007); Treasurer of various trusts within the John
Hancock Fund Complex (since 2007, including prior positions). |
|
|
|
Christopher (Kit) Sechler (1973) |
|
Secretary and Chief Legal Officer (since 2018) |
|
Vice President and Deputy Chief Counsel, John Hancock Investment Management (since 2015); Assistant Vice President and Senior Counsel (20092015), John Hancock Investment Management; Assistant Secretary of John Hancock
Investment Management LLC and John Hancock Variable Trust Advisers LLC (since 2009); Chief Legal Officer and Secretary of various trusts within the John Hancock Fund Complex (since 2009, including prior positions). |
|
|
|
Trevor Swanberg (1979) |
|
Chief Compliance Officer (since 2020) |
|
Chief Compliance Officer, John Hancock Investment Management LLC and John Hancock Variable Trust Advisers LLC (since 2020); Deputy Chief Compliance Officer, John Hancock Investment Management LLC and John Hancock Variable Trust
Advisers LLC (20192020); Assistant Chief Compliance Officer, John Hancock Investment Management LLC and John Hancock Variable Trust Advisers LLC (20162019); Vice President, State Street Global Advisors (20152016); Chief Compliance
Officer of various trusts within the John Hancock Fund Complex (since 2016, including prior positions). |
1 |
Each officer holds office for an indefinite term until his or her successor is duly elected and
qualified or until he or she dies, retires, resigns, is removed or becomes disqualified. |
Additional Information about the Trustees
In addition to the description of each Trustees Principal Occupation(s) and Other Directorships set forth above, the following provides further
information about each Trustees specific experience, qualifications, attributes or skills with respect to each Trust. The information in this section should not be understood to mean that any of the Trustees is an expert within the
meaning of the federal securities laws.
70
The Board believes that the different perspectives, viewpoints, professional experience, education, and
individual qualities of each Trustee represent a diversity of experiences and a variety of complementary skills and expertise. Each Trustee has experience as a Trustee of the Trusts as well as experience as a Trustee of other John Hancock funds. It
is the Trustees belief that this allows the Board, as a whole, to oversee the business of the funds and the other funds in the John Hancock Fund Complex in a manner consistent with the best interests of the funds shareholders. When
considering potential nominees to fill vacancies on the Board, and as part of its annual self-evaluation, the Board reviews the mix of skills and other relevant experiences of the Trustees.
Independent Trustees
James R. Boyle
Mr. Boyle has high-level executive, financial, operational, governance, regulatory and leadership experience in the financial services industry, including in the development and management of registered investment companies, variable annuities,
retirement and insurance products. Mr. Boyle is the former President and CEO of a large international fraternal life insurance company and is the former President and CEO of multi-line life insurance and financial services companies.
Mr. Boyle began his career as a Certified Public Accountant with Coopers & Lybrand.
William H. Cunningham Mr. Cunningham
has management and operational oversight experience as a former Chancellor and President of a major university. Mr. Cunningham regularly teaches a graduate course in corporate governance at the law school and at the Red McCombs School of
Business at The University of Texas at Austin. He also has oversight and corporate governance experience as a current and former director of a number of operating companies, including an insurance company.
Noni L. Ellison As a senior vice president, general counsel, and corporate secretary with over 25 years of executive leadership experience,
Ms. Ellison has extensive management and business expertise in legal, regulatory, compliance, operational, quality assurance, international, finance and governance matters.
Grace K. Fey Ms. Fey has significant governance, financial services, and asset management industry expertise based on her extensive non-profit board experience, as well as her experience as a consultant to non-profit and corporate boards, and as a former director and executive of an investment management
firm.
Dean C. Garfield As a former president and chief executive officer of a leading industry organization and current vice-president of a
leading international company, Mr. Garfield has significant global executive operational, governance, regulatory, and leadership experience. He also has experience as a leader overseeing and implementing global public policy matters including
strategic initiatives.
Deborah C. Jackson Ms. Jackson has leadership, governance, management, and operational oversight experience as
the lead director of a large bank, president of a college, and as the former chief executive officer of a major charitable organization. She also has expertise in financial services matters and oversight and corporate governance experience as a
current and former director of various other corporate organizations, including an insurance company, a regional stock exchange, a telemedicine company, and non-profit entities.
Hassell H. McClellan As a former professor of finance and policy in the graduate management department of a major university, a director of a
public company, and as a former director of several privately held companies, Mr. McClellan has experience in corporate and financial matters. He also has experience as a director of other investment companies not affiliated with the Trusts.
Steven R. Pruchansky Mr. Pruchansky has entrepreneurial, executive and financial experience as a senior officer and chief executive of
business in the retail, service and distribution companies and a current and former director of real estate and banking companies.
Frances G. Rathke
Through her former positions in senior financial roles, as a former Certified Public Accountant, and as a consultant on strategic and financial matters, Ms. Rathke has experience as a leader overseeing, conceiving, implementing, and
analyzing strategic and financial growth plans, and financial statements. Ms. Rathke also has experience in the auditing of financial statements and related materials. In addition, she has experience as a director of various organizations,
including a publicly traded company and a non-profit entity.
Gregory A. Russo As a retired
Certified Public Accountant, Mr. Russo served as a partner and Global Vice Chairman in a major independent registered public accounting firm, as well as a member of its geographic boards of directors and International Executive Team. As a
result of Mr. Russos diverse global responsibilities, he possesses accounting, finance and executive operating experience.
Non-Independent Trustees
Andrew G. Arnott Through his positions as Global Head of Retail for Manulife;
Director and Chairman of John Hancock Investment Management LLC and John Hancock Variable Trust Advisers LLC; Director and Chairman of John Hancock Investment Management Distributors LLC; and Trustee of the John Hancock Fund Complex, Mr. Arnott
has experience in the management of investments, registered investment companies, variable annuities and retirement products, enabling him to provide management input to the Board.
Paul Lorentz Through his position as the Global Head of Manulife Wealth and Asset Management, Mr. Lorentz has experience with retirement,
retail and asset management solutions offered by Manulife worldwide, enabling him to provide management input to the Board.
71
Duties of Trustees; Committee Structure
Each Trust is organized as a Massachusetts business trust. Under each Declaration of Trust, the Trustees are responsible for managing the affairs of the Trust,
including the appointment of advisors and subadvisors. Each Trustee has the experience, skills, attributes or qualifications described above (see Principal Occupation(s) and Other Directorships and Additional Information about the
Trustees above). The Board appoints officers who assist in managing the day-to-day affairs of the Trusts. The Board met 5 times during the fiscal year ended
October 31, 2022.
The Board has appointed an Independent Trustee as Chairperson. The Chairperson presides at meetings of the Trustees and may call
meetings of the Board and any Board committee whenever he deems it necessary. The Chairperson participates in the preparation of the agenda for meetings of the Board and the identification of information to be presented to the Board with respect to
matters to be acted upon by the Board. The Chairperson also acts as a liaison with the funds management, officers, attorneys, and other Trustees generally between meetings. The Chairperson may perform such other functions as may be requested
by the Board from time to time. The Board also has designated a Vice Chairperson to serve in the absence of the Chairperson. Except for any duties specified in this SAI or pursuant to a Trusts Declaration of Trust or By-laws, or as assigned by the Board, the designation of a Trustee as Chairperson or Vice Chairperson does not impose on that Trustee any duties, obligations or liability that are greater than the duties,
obligations or liability imposed on any other Trustee, generally. The Board has designated a number of standing committees as further described below, each of which has a Chairperson. The Board also may designate working groups or ad hoc committees
as it deems appropriate.
The Board believes that this leadership structure is appropriate because it allows the Board to exercise informed and
independent judgment over matters under its purview, and it allocates areas of responsibility among committees or working groups of Trustees and the full Board in a manner that enhances effective oversight. The Board considers leadership by an
Independent Trustee as Chairperson to be integral to promoting effective independent oversight of the funds operations and meaningful representation of the shareholders interests, given the specific characteristics and circumstances of
the funds. The Board also believes that having a super-majority of Independent Trustees is appropriate and in the best interest of the funds shareholders. Nevertheless, the Board also believes that having interested persons serve on the Board
brings corporate and financial viewpoints that are, in the Boards view, helpful elements in its decision-making process. In addition, the Board believes that Messrs. Arnott, Boyle, and Lorentz as current or former senior executives of the
Advisor and the Distributor (or of their parent company, MFC), and of other affiliates of the Advisor and the Distributor, provide the Board with the perspective of the Advisor and the Distributor in managing and sponsoring all of each Trusts
series. The leadership structure of the Board may be changed, at any time and in the discretion of the Board, including in response to changes in circumstances or the characteristics of a Trust.
Board Committees
The Board has established an Audit
Committee; Compliance Committee; Contracts, Legal & Risk Committee; Nominating and Governance Committee; and Investment Committee. The current membership of each committee is set forth below.
Audit Committee. The Board has a standing Audit Committee composed solely of Independent Trustees (Messrs. Cunningham and McClellan and Ms. Rathke).
Ms. Rathke serves as Chairperson of this Committee. This Committee reviews the internal and external accounting and auditing procedures of the Trusts and, among other things, considers the selection of an independent registered public
accounting firm for each Trust, approves all significant services proposed to be performed by its independent registered public accounting firm and considers the possible effect of such services on its independence. Ms. Rathke has been
designated by the Board as an audit committee financial expert, as defined in SEC rules.
This Committee met 4 times during the fiscal year
ended October 31, 2022.
Compliance Committee. The Board also has a standing Compliance Committee (Ms. Fey, Mr. Garfield and
Ms. Jackson). Ms. Fey serves as Chairperson of this Committee. This Committee reviews and makes recommendations to the full Board regarding certain compliance matters relating to the Trusts. This Committee met 4 times during the fiscal
year ended October 31, 2022.
Contracts, Legal & Risk Committee. The Board also has a standing Contracts,
Legal & Risk Committee (Mr. Boyle, Ms. Ellison, and Messrs. Pruchansky and Russo). Mr. Russo serves as Chairperson of this Committee. This Committee oversees the initiation, operation, and renewal of the various contracts
between the Trust and other entities. These contracts include advisory and subadvisory agreements, custodial and transfer agency agreements and arrangements with other service providers. The Committee also reviews the significant legal affairs of
the funds, as well as any significant regulatory and legislative actions or proposals affecting or relating to the funds or their service providers. The Committee also assists the Board in its oversight role with respect to the processes pursuant to
which the Advisor and the subadvisors identify, manage and report the various risks that affect or could affect the funds. This Committee met 4 times during the fiscal year ended October 31, 2022.
Nominating and Governance Committee. The Board also has a Nominating and Governance Committee composed of all of the Independent Trustees. This
Committee will consider nominees recommended by Trust shareholders. Nominations should be forwarded to the attention of the Secretary of the Trust at 200 Berkeley Street, Boston, Massachusetts 02116. Any shareholder nomination must be submitted in
compliance with all of the pertinent provisions of Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the Exchange Act), in order to be considered by this Committee. This Committee
met 5 times during the fiscal year ended October 31, 2022.
Investment Committee. The Board also has an Investment Committee composed of all of the
Trustees. The Investment Committee has four subcommittees with the Trustees divided among the four subcommittees (each an Investment Sub-Committee). Ms. Jackson and Messrs. Boyle, Cunningham,
and Pruchansky serve as Chairpersons of the Investment Sub-Committees. Each Investment Sub-Committee reviews investment matters relating to a particular group of funds
in the John Hancock Fund Complex and coordinates with the full Board regarding investment matters. The Investment Committee met 5 times during the fiscal year ended October 31, 2022.
Annually, the Board evaluates its performance and that of its Committees, including the effectiveness of the Boards Committee structure.
72
Risk Oversight
As registered investment companies, the funds are subject to a variety of risks, including investment risks (such as, among others, market risk, credit risk
and interest rate risk), financial risks (such as, among others, settlement risk, liquidity risk and valuation risk), compliance risks, and operational risks. As a part of its overall activities, the Board oversees the funds risk management
activities that are implemented by the Advisor, the funds CCO and other service providers to the funds. The Advisor has primary responsibility for the funds risk management on a day-to-day basis as a part of its overall responsibilities. Each funds subadvisor, subject to oversight of the Advisor, is primarily responsible for managing investment and financial risks as a part of
its day-to-day investment responsibilities, as well as operational and compliance risks at its firm. The Advisor and the CCO also assist the Board in overseeing
compliance with investment policies of the funds and regulatory requirements and monitor the implementation of the various compliance policies and procedures approved by the Board as a part of its oversight responsibilities.
The Advisor identifies to the Board the risks that it believes may affect the funds and develops processes and controls regarding such risks. However, risk
management is a complex and dynamic undertaking and it is not always possible to comprehensively identify and/or mitigate all such risks at all times since risks are at times impacted by external events. In discharging its oversight
responsibilities, the Board considers risk management issues throughout the year with the assistance of its various Committees as described below. Each Committee meets at least quarterly and presents reports to the Board, which may prompt further
discussion of issues concerning the oversight of the funds risk management. The Board as a whole also reviews written reports or presentations on a variety of risk issues as needed and may discuss particular risks that are not addressed in the
Committee process.
The Board has established an Investment Committee, which consists of four Investment
Sub-Committees. Each Investment Sub-Committee assists the Board in overseeing the significant investment policies of the relevant funds and the performance of their
subadvisors. The Advisor monitors these policies and subadvisor activities and may recommend changes in connection with the funds to each relevant Investment Sub-Committee in response to subadvisor requests or
other circumstances. On at least a quarterly basis, each Investment Sub-Committee reviews reports from the Advisor regarding the relevant funds investment performance, which include information about
investment and financial risks and how they are managed, and from the CCO or his/her designee regarding subadvisor compliance matters. In addition, each Investment Sub-Committee meets periodically with the
portfolio managers of the funds subadvisors to receive reports regarding management of the funds, including with respect to risk management processes.
The Audit Committee assists the Board in reviewing with the independent auditors, at various times throughout the year, matters relating to the funds
financial reporting. In addition, this Committee oversees the process of each funds valuation of its portfolio securities, assisted by the Advisors Pricing Committee (composed of officers of the Advisor), which calculates fair value
determinations pursuant to procedures established by the Advisor and adopted by the Board.
The Compliance Committee assists the Board in overseeing the
activities of the Trusts CCO with respect to the compliance programs of the funds, the Advisor, the subadvisors, and certain of the funds other service providers (the Distributor and transfer agent). This Committee and the Board receive
and consider periodic reports from the CCO throughout the year, including the CCOs annual written report, which, among other things, summarizes material compliance issues that arose during the previous year and any remedial action taken to
address these issues, as well as any material changes to the compliance programs.
The Contracts, Legal & Risk Committee assists the Board in its
oversight role with respect to the processes pursuant to which the Advisor and the subadvisors identify, assess, manage and report the various risks that affect or could affect the funds. This Committee reviews reports from the funds Advisor
on a periodic basis regarding the risks facing the funds, and makes recommendations to the Board concerning risks and risk oversight matters as the Committee deems appropriate. This Committee also coordinates with the other Board Committees
regarding risks relevant to the other Committees, as appropriate.
In addressing issues regarding the funds risk management between meetings,
appropriate representatives of the Advisor communicate with the Chairperson of the Board, the relevant Committee Chair, or the Trusts CCO, who is directly accountable to the Board. As appropriate, the Chairperson of the Board, the Committee
Chairs and the Trustees confer among themselves, with the Trusts CCO, the Advisor, other service providers, external fund counsel, and counsel to the Independent Trustees, to identify and review risk management issues that may be placed on the
full Boards agenda and/or that of an appropriate Committee for review and discussion.
In addition, in its annual review of the funds
advisory, subadvisory and distribution agreements, the Board reviews information provided by the Advisor, the subadvisors and the Distributor relating to their operational capabilities, financial condition, risk management processes and resources.
The Board may, at any time and in its discretion, change the manner in which it conducts its risk oversight role.
The Advisor also has its own, independent interest in risk management. In this regard, the Advisor has appointed a Risk and Investment Operations Committee,
consisting of senior personnel from each of the Advisors functional departments. This Committee reports periodically to the Board and the Contracts, Legal & Risk Committee on risk management matters. The Advisors risk management
program is part of the overall risk management program of John Hancock, the Advisors parent company. John Hancocks Chief Risk Officer supports the Advisors risk management program, and at the Boards request will report on
risk management matters.
73
Compensation of Trustees
Trustees are reimbursed for travel and other out-of-pocket expenses. Each
Independent Trustee receives in the aggregate from the Trusts and the other open-end funds in the John Hancock Fund Complex an annual retainer of $285,000, a fee of $22,000 for each regular meeting of the
Trustees (in person or via videoconference or teleconference) and a fee of $5,000 for each special meeting of the Trustees (in person or via videoconference or teleconference). The Chairperson of the Board receives an additional retainer of
$205,000. The Vice Chairperson of the Board receives an additional retainer of $20,000. The Chairperson of each of the Audit Committee, Compliance Committee, and Contracts, Legal & Risk Committee receives an additional $40,000 retainer. The
Chairperson of each Investment Sub-Committee receives an additional $20,000 retainer.
The following table
provides information regarding the compensation paid by each Trust and the other investment companies in the John Hancock Fund Complex to the Independent Trustees for their services during the fiscal year ended October 31, 2022.
Compensation Table1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of Trustee |
|
Total Compensation from
Capital Series
($) |
|
|
Total Compensation from
Investment Trust ($) |
|
|
Total Compensation from
Investment Trust II ($) |
|
|
Total Compensation
from the Trusts and the
John Hancock Fund Complex ($)2 |
|
Independent Trustees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles L. Bardelis3 |
|
|
442 |
|
|
|
1,805 |
|
|
|
161 |
|
|
|
22,000 |
|
James R. Boyle |
|
|
7,918 |
|
|
|
32,641 |
|
|
|
2,996 |
|
|
|
450,000 |
|
Peter S. Burgess4 |
|
|
7,549 |
|
|
|
30,984 |
|
|
|
2,852 |
|
|
|
430,000 |
|
William H. Cunningham |
|
|
7,918 |
|
|
|
32,641 |
|
|
|
2,996 |
|
|
|
525,000 |
|
Noni L. Ellison5 |
|
|
2,932 |
|
|
|
13,358 |
|
|
|
1,154 |
|
|
|
179,500 |
|
Grace K. Fey |
|
|
8,309 |
|
|
|
34,231 |
|
|
|
3,143 |
|
|
|
597,500 |
|
Dean C. Garfield5 |
|
|
2,932 |
|
|
|
13,358 |
|
|
|
1,154 |
|
|
|
179,500 |
|
Deborah C. Jackson |
|
|
7,918 |
|
|
|
32,641 |
|
|
|
2,996 |
|
|
|
502,500 |
|
Patricia Lizarraga5,6 |
|
|
2,932 |
|
|
|
13,358 |
|
|
|
1,154 |
|
|
|
179,500 |
|
Hassell H. McClellan |
|
|
10,635 |
|
|
|
43,501 |
|
|
|
4,013 |
|
|
|
745,500 |
|
Steven R. Pruchansky |
|
|
7,734 |
|
|
|
31,811 |
|
|
|
2,925 |
|
|
|
440,000 |
|
Frances G. Rathke |
|
|
7,920 |
|
|
|
32,639 |
|
|
|
2,997 |
|
|
|
450,000 |
|
Gregory A. Russo |
|
|
8,125 |
|
|
|
33,402 |
|
|
|
3,072 |
|
|
|
460,000 |
|
Non-Independent Trustees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew G. Arnott |
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
Marianne Harrison7 |
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
Paul Lorentz5 |
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
1 |
The Trust does not have a pension or retirement plan for any of its Trustees or officers.
|
2 |
There were approximately 186 series in the John Hancock Fund Complex as of October 31, 2022.
|
3 |
Mr. Bardelis retired as Trustee effective as of December 31, 2021. |
4 |
Mr. Burgess retired as Trustee effective as of December 31, 2022. |
5 |
Elected to serve as Trustee effective as of September 9, 2022. |
6 |
Effective September 21, 2023, Ms. Lizarraga is no longer a Trustee. |
7 |
Ms. Harrison retired as Trustee as of May 1, 2023. |
Trustee Ownership of Shares of the Funds
The table below
sets forth the dollar range of the value of the shares of each fund, and the dollar range of the aggregate value of the shares of all funds in the John Hancock Fund Complex overseen by a Trustee, owned beneficially by the Trustees as of
December 31, 2022. For purposes of this table, beneficial ownership is defined to mean a direct or indirect pecuniary interest. Trustees may own shares beneficially through group annuity contracts. Exact dollar amounts of securities held are
not listed in the table. Rather, dollar ranges are identified.
|
|
|
|
|
|
|
|
|
|
|
Name of Trustees |
|
Balanced Fund |
|
|
Classic Value Fund |
|
Disciplined Value
International Fund |
|
Diversified Macro Fund |
Independent Trustees |
|
|
|
|
|
|
|
|
|
|
James R. Boyle |
|
|
None |
|
|
over $100,000 |
|
over $100,000 |
|
None |
William H. Cunningham |
|
|
None |
|
|
None |
|
None |
|
None |
Noni L. Ellison |
|
|
None |
|
|
None |
|
None |
|
None |
Grace K. Fey |
|
|
None |
|
|
None |
|
None |
|
None |
Dean C. Garfield |
|
|
None |
|
|
None |
|
None |
|
None |
Deborah C. Jackson |
|
$ |
10,001 - $50,000 |
|
|
$10,001 - $50,000 |
|
None |
|
None |
74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of Trustees |
|
Balanced Fund |
|
|
Classic Value Fund |
|
|
Disciplined Value
International Fund |
|
|
|
|
|
Diversified Macro Fund |
|
Hassell H. McClellan |
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
|
|
|
|
None |
|
Steven R. Pruchansky |
|
|
$10,001 - $50,000 |
|
|
|
$10,001 - $50,000 |
|
|
|
None |
|
|
|
|
|
|
|
None |
|
Frances G. Rathke |
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
|
|
|
|
None |
|
Gregory A. Russo |
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
|
|
|
|
None |
|
Non-Independent Trustees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew G. Arnott |
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
|
|
|
|
None |
|
Paul Lorentz |
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
|
|
|
|
None |
|
|
|
|
|
|
|
Name of Trustees |
|
Emerging Markets
Equity Fund |
|
|
ESG International
Equity Fund |
|
|
ESG Large Cap Core Fund |
|
|
|
|
|
Financial Industries Fund |
|
Independent Trustees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James R. Boyle |
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
|
|
|
|
None |
|
William H. Cunningham |
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
|
|
|
|
Over $100,000 |
|
Noni L. Ellison |
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
|
|
|
|
None |
|
Grace K. Fey |
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
|
|
|
|
None |
|
Dean C. Garfield |
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
|
|
|
|
None |
|
Deborah C. Jackson |
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
|
|
|
|
None |
|
Hassell H. McClellan |
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
|
|
|
|
None |
|
Steven R. Pruchansky |
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
|
|
|
|
$10,001 - $50,000 |
|
Frances G. Rathke |
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
|
|
|
|
None |
|
Gregory A. Russo |
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
|
|
|
|
None |
|
Non-Independent Trustees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew G. Arnott |
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
|
|
|
|
None |
|
Paul Lorentz |
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
|
|
|
|
None |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of Trustees |
|
Fundamental Large Cap Core Fund |
|
|
Global Environmental Opportunities Fund |
|
|
Global Thematic Opportunities Fund |
|
|
Infrastructure Fund |
|
|
International Dynamic Growth Fund |
|
Independent Trustees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James R. Boyle |
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
None |
|
William H. Cunningham |
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
None |
|
Noni L. Ellison |
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
None |
|
Grace K. Fey |
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
None |
|
Dean C. Garfield |
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
None |
|
Deborah C. Jackson |
|
|
$10,001 - $50,000 |
|
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
None |
|
Hassell H. McClellan |
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
None |
|
Steven R. Pruchansky |
|
|
$50,001 $100,000 |
|
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
None |
|
Frances G. Rathke |
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
None |
|
Gregory A. Russo |
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
None |
|
75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of Trustees |
|
Fundamental Large
Cap Core Fund |
|
|
Global
Environmental
Opportunities Fund |
|
|
Global Thematic
Opportunities Fund |
|
|
Infrastructure Fund |
|
|
International
Dynamic Growth
Fund |
|
Non-Independent Trustees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew G. Arnott |
|
|
$1 - $10,000 |
|
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
None |
|
Paul Lorentz |
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
|
|
|
|
Name of Trustees |
|
Regional Bank Fund |
|
|
Seaport Long/Short Fund |
|
|
Small Cap Core Fund |
|
|
U.S. Global Leaders Growth Fund |
|
|
Total John Hancock Fund Complex |
|
Independent Trustees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James R. Boyle |
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
Over $100,000 |
|
William H. Cunningham |
|
|
Over $100,000 |
|
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
Over $100,000 |
|
Noni L. Ellison |
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
None |
|
Grace K. Fey |
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
Over $100,000 |
|
Dean C. Garfield |
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
None |
|
Deborah C. Jackson |
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
Over $100,000 |
|
Hassell H. McClellan |
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
Over $100,000 |
|
Steven R. Pruchansky |
|
|
None |
|
|
|
None |
|
|
|
$10,001 - $50,000 |
|
|
|
$10,001 - $50,000 |
|
|
|
Over $100,000 |
|
Frances G. Rathke |
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
Over $100,000 |
|
Gregory A. Russo |
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
$50,001 - $100,000 |
|
|
|
Over $100,000 |
|
Non-Independent Trustees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew G. Arnott |
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
Over $100,000 |
|
Paul Lorentz |
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
None |
|
SHAREHOLDERS OF THE FUNDS
To the best knowledge of the Trusts, as of
February 1, 2023, the Trustees and officers of each Trust, in the aggregate, beneficially owned less than 1% of the outstanding shares of each class of shares of each fund.
To the best knowledge of the Trusts, as of February 1, 2023, the following shareholders (principal holders) owned beneficially or of record 5% or more of
the outstanding shares of the funds and classes stated below. A shareholder who owns beneficially more than 25% of a fund or any class of a fund is deemed to be a control person of that fund or that class of the fund, as applicable, and therefore
could determine the outcome of a shareholder meeting with respect to a proposal directly affecting that fund or that share class, as applicable.
As of
February 1, 2023, Manulife Reinsurance (Bermuda) Ltd (Manulife (Bermuda)) owned 60% of the voting securities of Global Environmental Opportunities Fund and 47% of the voting securities of ESG International Equity Fund. Manulife
(Bermuda) is organized under the laws of Bermuda. Its principal address is Victoria Place, 5th Floor, 31 Victoria Street, Hamilton HM 10, Bermuda. Manulife (Bermuda) is an indirect, wholly owned subsidiary of The Manufacturers Life Insurance
Company, a Canadian stock life insurance company. MFC is the holding company of The Manufacturers Life Insurance Company and its subsidiaries. The principal offices of MFC are located at 200 Bloor Street East, Toronto, Ontario, Canada M4W 1E5.
|
|
|
|
|
|
|
|
|
Fund Name |
|
Share Class |
|
Name and Address |
|
Percentage
Owned |
|
Type of
Ownership |
BALANCED FUND |
|
A |
|
EDWARD D JONES & CO FOR THE BENEFIT OF
CUSTOMERS 12555 MANCHESTER ROAD SAINT LOUIS MO
63131-3710 |
|
64.17% |
|
Record |
|
|
|
|
|
BALANCED FUND |
|
A |
|
AMERICAN ENTERPRISE INVESTMENT SVC 707 2ND AVE
S MINNEAPOLIS MN 55402-2405 |
|
7.35% |
|
Record |
76
|
|
|
|
|
|
|
|
|
Fund Name |
|
Share Class |
|
Name and Address |
|
Percentage
Owned |
|
Type of
Ownership |
BALANCED FUND |
|
C |
|
WELLS FARGO CLEARING SERVICES, LLC SPECIAL
CUSTODY ACCT FOR THE EXCLUSIVE BENEFIT OF CUSTOMER 2801
MARKET ST SAINT LOUIS MO 63103-2523 |
|
13.80% |
|
Record |
|
|
|
|
|
BALANCED FUND |
|
C |
|
PERSHING LLC 1 PERSHING PLZ
JERSEY CITY NJ 07399-0001 |
|
10.52% |
|
Record |
|
|
|
|
|
BALANCED FUND |
|
C |
|
EDWARD D JONES & CO FOR THE BENEFIT OF
CUSTOMERS 12555 MANCHESTER ROAD SAINT LOUIS MO
63131-3710 |
|
10.06% |
|
Record |
|
|
|
|
|
BALANCED FUND |
|
C |
|
RAYMOND JAMES OMNIBUS FOR MUTUAL FUNDS
HOUSE ACCT FIRM 880 CARILLON PKWY
ST PETERSBURG FL 33716-1100 |
|
9.87% |
|
Record |
|
|
|
|
|
BALANCED FUND |
|
C |
|
LPL FINANCIAL OMNIBUS CUSTOMER ACCOUNT
ATTN: MUTUAL FUND TRADING 4707 EXECUTIVE DRIVE
SAN DIEGO CA 92121-3091 |
|
7.29% |
|
Record |
|
|
|
|
|
BALANCED FUND |
|
C |
|
NATIONAL FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL FUNDS 200 LIBERTY ST # 1WFC
NEW YORK NY 10281-1015 |
|
6.24% |
|
Record |
|
|
|
|
|
BALANCED FUND |
|
C |
|
AMERICAN ENTERPRISE INVESTMENT SVC 707 2ND AVE
S MINNEAPOLIS MN 55402-2405 |
|
20.90% |
|
Record |
|
|
|
|
|
BALANCED FUND |
|
I |
|
AMERICAN ENTERPRISE INVESTMENT SVC 707 2ND AVE
S MINNEAPOLIS MN 55402-2405 |
|
18.23% |
|
Record |
|
|
|
|
|
BALANCED FUND |
|
I |
|
NATIONAL FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL FUNDS 200 LIBERTY ST # 1WFC
NEW YORK NY 10281-1015 |
|
15.12% |
|
Record |
|
|
|
|
|
BALANCED FUND |
|
I |
|
LPL FINANCIAL OMNIBUS CUSTOMER ACCOUNT
ATTN: MUTUAL FUND TRADING 4707 EXECUTIVE DRIVE
SAN DIEGO CA 92121-3091 |
|
11.76% |
|
Record |
|
|
|
|
|
BALANCED FUND |
|
I |
|
PERSHING LLC 1 PERSHING PLZ
JERSEY CITY NJ 07399-0001 |
|
9.80% |
|
Record |
|
|
|
|
|
BALANCED FUND |
|
I |
|
MLPF& S FOR THE SOLE BENEFIT OF ITS
CUSTOMERS ATTN FUND ADMINISTRATION 4800 DEER LAKE DRIVE EAST
2ND FL JACKSONVILLE FL 32246-6484 |
|
8.77% |
|
Record |
77
|
|
|
|
|
|
|
|
|
Fund Name |
|
Share Class |
|
Name and Address |
|
Percentage
Owned |
|
Type of
Ownership |
BALANCED FUND |
|
I |
|
MORGAN STANLEY SMITH BARNEY LLC FOR EXCLUSIVE
BENEFIT OF CUSTOMERS 1 NEW YORK PLAZA FL. 12 NEW YORK NY
10004-1965 |
|
6.83% |
|
Record |
|
|
|
|
|
BALANCED FUND |
|
I |
|
RAYMOND JAMES OMNIBUS FOR MUTUAL FUNDS
HOUSE ACCT FIRM 880 CARILLON PKWY
ST PETERSBURG FL 33716-1100 |
|
6.76% |
|
Record |
|
|
|
|
|
BALANCED FUND |
|
I |
|
WELLS FARGO CLEARING SERVICES, LLC SPECIAL
CUSTODY ACCT FOR THE EXCLUSIVE BENEFIT OF CUSTOMER 2801
MARKET ST SAINT LOUIS MO 63103-2523 |
|
6.41% |
|
Record |
|
|
|
|
|
BALANCED FUND |
|
R2 |
|
MG TRUSTCO CUST FBO JTDM FAMILY PRACTICE LLC
DEFERRED 717 17TH ST STE 1300 DENVER CO 80202-3304 |
|
13.00% |
|
Beneficial |
|
|
|
|
|
BALANCED FUND |
|
R2 |
|
MLPF& S FOR THE SOLE BENEFIT OF ITS
CUSTOMERS ATTN: FUND ADMINISTRATION 4800 DEER LAKE DRIVE EAST 2ND FL
JACKSONVILLE FL 32246-6484 |
|
10.25% |
|
Record |
|
|
|
|
|
BALANCED FUND |
|
R2 |
|
SPECIAL CUSTODY ACCOUNT FOR THE EXCLUSIVE
BENEFIT OF CUSTOMERS OF UBS FINANCIAL SERVICES INC 1000
HARBOR BLVD WEEHAWKEN NJ 07086-6761 |
|
8.21% |
|
Record |
|
|
|
|
|
BALANCED FUND |
|
R2 |
|
STEVE BERGMAN FBO BERGMAN REALTY CORP 401K
PSP & TRUST 1251 WATERFRONT PL STE 525
PITTSBURGH PA 15222-4228 |
|
7.46% |
|
Beneficial |
|
|
|
|
|
BALANCED FUND |
|
R2 |
|
ALERUS FINANCIAL FBO SIGHT MACHINE 401 K
PLAN 1251 WATERFRONT PL STE 525 PITTSBURGH PA
15222-4228 |
|
5.63% |
|
Beneficial |
|
|
|
|
|
BALANCED FUND |
|
R2 |
|
ASCENSUS TRUST COMPANY FBO EMAGINED SECURITY
INC 401 K & PS PO BOX 10758 FARGO ND
58106-0758 |
|
5.21% |
|
Beneficial |
|
|
|
|
|
BALANCED FUND |
|
R4 |
|
JOHN HANCOCK TRUST COMPANY 200 BERKELEY ST STE
7 BOSTON MA 02116-5038 |
|
40.12% |
|
Record |
|
|
|
|
|
BALANCED FUND |
|
R4 |
|
STATE STREET BANK AND TRUST AS TRUSTEE AND OR
CUSTODIAN FBO ADP ACCESS PRODUCT 1 LINCOLN ST
BOSTON MA 02111-2901 |
|
37.01% |
|
Beneficial |
|
|
|
|
|
BALANCED FUND |
|
R4 |
|
MATRIX TRUST COMPANY CUST FBO L & H
COMPANY INC 401 (K) PROFIT 717 17TH ST STE 1300 DENVER CO
80202-3304 |
|
10.04% |
|
Beneficial |
78
|
|
|
|
|
|
|
|
|
Fund Name |
|
Share Class |
|
Name and Address |
|
Percentage
Owned |
|
Type of
Ownership |
BALANCED FUND |
|
R5 |
|
ASCENSUS TRUST COMPANY FBO LAUDADIO POLYMERS
INC 401K PS PLAN PO BOX 10577 FARGO ND 58106-0577 |
|
60.90% |
|
Beneficial |
|
|
|
|
|
BALANCED FUND |
|
R5 |
|
MATRIX TRUST COMPANY AS AGENT FOR NEWPORT TRUST
COMPANY JACKSON SPRING & MFG CO INC 401K 35 IRON
POINT CIR STE 300 FOLSOM CA 95630-8589 |
|
28.04% |
|
Beneficial |
|
|
|
|
|
BALANCED FUND |
|
R6 |
|
EDWARD D JONES & CO FOR THE BENEFIT OF
CUSTOMERS 12555 MANCHESTER ROAD SAINT LOUIS MO
63131-3710 |
|
89.36% |
|
Record |
|
|
|
|
|
CLASSIC VALUE FUND |
|
A |
|
NATIONAL FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL FUNDS 200 LIBERTY ST # 1WFC
NEW YORK NY 10281-1015 |
|
28.44% |
|
Record |
|
|
|
|
|
CLASSIC VALUE FUND |
|
A |
|
EDWARD D JONES & CO FOR THE BENEFIT OF
CUSTOMERS 12555 MANCHESTER ROAD SAINT LOUIS MO
63131-3710 |
|
15.25% |
|
Record |
|
|
|
|
|
CLASSIC VALUE FUND |
|
A |
|
MLPF& S FOR THE SOLE BENEFIT OF ITS
CUSTOMERS ATTN: FUND ADMINISTRATION 4800 DEER LAKE DRIVE EAST
2ND FL JACKSONVILLE FL 32246-6484 |
|
5.47% |
|
Record |
|
|
|
|
|
CLASSIC VALUE FUND |
|
A |
|
MORGAN STANLEY SMITH BARNEY LLC FOR EXCLUSIVE
BENEFIT OF CUSTOMERS 1 NEW YORK PLAZA FL. 12 NEW YORK NY
10004-1965 |
|
5.33% |
|
Record |
|
|
|
|
|
CLASSIC VALUE FUND |
|
C |
|
WELLS FARGO CLEARING SERVICES, LLC SPECIAL
CUSTODY ACCT FOR THE EXCLUSIVE BENEFIT OF CUSTOMER 2801
MARKET ST SAINT LOUIS MO 63103-2523 |
|
20.54% |
|
Record |
|
|
|
|
|
CLASSIC VALUE FUND |
|
C |
|
MLPF& S FOR THE SOLE BENEFIT OF ITS
CUSTOMERS ATTN: FUND ADMINISTRATION 4800 DEER LAKE DRIVE EAST
2ND FL JACKSONVILLE FL 32246-6484 |
|
11.00% |
|
Record |
|
|
|
|
|
CLASSIC VALUE FUND |
|
C |
|
MORGAN STANLEY SMITH BARNEY LLC FOR EXCLUSIVE
BENEFIT OF CUSTOMERS 1 NEW YORK PLAZA FL. 12 NEW YORK NY
10004 - 1965 |
|
8.57% |
|
Record |
|
|
|
|
|
CLASSIC VALUE FUND |
|
C |
|
LPL FINANCIAL OMNIBUS CUSTOMER ACCOUNT
ATTN: MUTUAL FUND TRADING 4707 EXECUTIVE DRIVE
SAN DIEGO CA 92121 - 3091 |
|
6.65% |
|
Record |
|
|
|
|
|
CLASSIC VALUE FUND |
|
C |
|
AMERICAN ENTERPRISE INVESTMENT SVC 707 2ND AVE
S MINNEAPOLIS MN 55402 - 2405 |
|
6.41% |
|
Record |
79
|
|
|
|
|
|
|
|
|
Fund Name |
|
Share Class |
|
Name and Address |
|
Percentage
Owned |
|
Type of
Ownership |
CLASSIC VALUE FUND |
|
C |
|
CHARLES SCHWAB & CO INC SPECIAL
CUSTODY ACCT FBO CUSTOMERS ATTN MUTUAL FUNDS 101 MONTGOMERY
ST SAN FRANCISCO CA 94104 - 4151 |
|
6.38% |
|
Record |
|
|
|
|
|
CLASSIC VALUE FUND |
|
C |
|
NATIONAL FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL FUNDS 200 LIBERTY ST # 1WFC
NEW YORK NY 10281 - 1015 |
|
5.74% |
|
Record |
|
|
|
|
|
CLASSIC VALUE FUND |
|
C |
|
STIFEL NICOLAUS & CO INC EXCLUSIVE
BENEFIT OF CUSTOMERS 501 N BROADWAY SAINT LOUIS MO 63102 -
2188 |
|
5.57% |
|
Record |
|
|
|
|
|
CLASSIC VALUE FUND |
|
I |
|
AMERICAN ENTERPRISE INVESTMENT SVC 707 2ND AVE
S MINNEAPOLIS MN 55402 - 2405 |
|
41.44% |
|
Record |
|
|
|
|
|
CLASSIC VALUE FUND |
|
I |
|
CHARLES SCHWAB & CO INC SPECIAL
CUSTODY ACCT FBO CUSTOMERS ATTN MUTUAL FUNDS 101 MONTGOMERY
ST SAN FRANCISCO CA 94104 - 4151 |
|
27.60% |
|
Record |
|
|
|
|
|
CLASSIC VALUE FUND |
|
I |
|
WELLS FARGO CLEARING SERVICES, LLC SPECIAL
CUSTODY ACCT FOR THE EXCLUSIVE BENEFIT OF CUSTOMER 2801
MARKET ST SAINT LOUIS MO 63103 - 2523 |
|
6.87% |
|
Record |
|
|
|
|
|
CLASSIC VALUE FUND |
|
I |
|
PERSHING LLC 1 PERSHING PLZ
JERSEY CITY NJ 07399 - 0001 |
|
6.02% |
|
Record |
|
|
|
|
|
CLASSIC VALUE FUND |
|
R2 |
|
ASCENSUS TRUSTCO FBO AG RISK SOLUTIONS
RETPLAN PO BOX 10758 FARGO ND 58106 - 0758 |
|
42.99% |
|
Beneficial |
|
|
|
|
|
CLASSIC VALUE FUND |
|
R2 |
|
ASCENSUS TRUST COMPANY FBO MAIN
PO BOX 10758 FARGO ND 58106 - 0758 |
|
12.20% |
|
Beneficial |
|
|
|
|
|
CLASSIC VALUE FUND |
|
R2 |
|
LPL FINANCIAL OMNIBUS CUSTOMER ACCOUNT
ATTN: MUTUAL FUND TRADING 4707 EXECUTIVE DRIVE
SAN DIEGO CA 92121 - 3091 |
|
9.14% |
|
Record |
|
|
|
|
|
CLASSIC VALUE FUND |
|
R5 |
|
MID ATLANTIC TRUST COMPANY FBO ONE SOURCE
OFFICE REFRESHMENT 401 K PROFIT SHARING PLAN & TRUST
1251 WATERFRONT PL STE 525 PITTSBURGH PA 15222 - 4228 |
|
80.54% |
|
Beneficial |
|
|
|
|
|
CLASSIC VALUE FUND |
|
R5 |
|
MID ATLANTIC TRUST COMPANY FBO WOODBURY MEDICAL
PRACTICE 401(K) PR 1251 WATERFRONT PL STE 525 PITTSBURGH PA
15222 - 4228 |
|
19.46% |
|
Beneficial |
80
|
|
|
|
|
|
|
|
|
Fund Name |
|
Share Class |
|
Name and Address |
|
Percentage
Owned |
|
Type of
Ownership |
CLASSIC VALUE FUND |
|
R6 |
|
EDWARD D JONES & CO FOR THE BENEFIT OF
CUSTOMERS 12555 MANCHESTER ROAD SAINT LOUIS MO 63131 -
3710 |
|
66.37% |
|
Record |
|
|
|
|
|
CLASSIC VALUE FUND |
|
R6 |
|
THE NORTHERN TRUST CORPORATION AGEN FBO MODERN
WOODMEN RETIREMENT PLAN PO BOX 92956 CHICAGO IL 60675 -
2956 |
|
25.45% |
|
Beneficial |
|
|
|
|
|
DISCIPLINED VALUE INTERNATIONAL FUND |
|
A |
|
EDWARD D JONES & CO FOR THE BENEFIT OF
CUSTOMERS 12555 MANCHESTER ROAD SAINT LOUIS MO 63131 -
3710 |
|
58.64% |
|
Record |
|
|
|
|
|
DISCIPLINED VALUE INTERNATIONAL FUND |
|
C |
|
MORGAN STANLEY SMITH BARNEY LLC FOR EXCLUSIVE
BENEFIT OF CUSTOMERS 1 NEW YORK PLAZA FL. 12 NEW YORK NY
10004 - 1965 |
|
26.26% |
|
Record |
|
|
|
|
|
DISCIPLINED VALUE INTERNATIONAL FUND |
|
C |
|
RAYMOND JAMES OMNIBUS FOR MUTUAL FUNDS
HOUSE ACCT FIRM 880 CARILLON PKWY
ST PETERSBURG FL 33716 - 1100 |
|
19.66% |
|
Record |
|
|
|
|
|
DISCIPLINED VALUE INTERNATIONAL FUND |
|
C |
|
NATIONAL FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL FUNDS 200 LIBERTY ST # 1WFC
NEW YORK NY 10281 - 1015 |
|
12.32% |
|
Record |
|
|
|
|
|
DISCIPLINED VALUE INTERNATIONAL FUND |
|
C |
|
EDWARD D JONES & CO FOR THE BENEFIT OF
CUSTOMERS 12555 MANCHESTER ROAD SAINT LOUIS MO 63131 -
3710 |
|
7.79% |
|
Record |
|
|
|
|
|
DISCIPLINED VALUE INTERNATIONAL FUND |
|
C |
|
LPL FINANCIAL OMNIBUS CUSTOMER ACCOUNT
ATTN: MUTUAL FUND TRADING 4707 EXECUTIVE DRIVE
SAN DIEGO CA 92121 - 3091 |
|
6.31% |
|
Record |
|
|
|
|
|
DISCIPLINED VALUE INTERNATIONAL FUND |
|
I |
|
NATIONAL FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL FUNDS 200 LIBERTY ST # 1WFC
NEW YORK NY 10281 - 1015 |
|
48.20% |
|
Record |
|
|
|
|
|
DISCIPLINED VALUE INTERNATIONAL FUND |
|
I |
|
RAYMOND JAMES OMNIBUS FOR MUTUAL FUNDS
HOUSE ACCT FIRM 880 CARILLON PKWY
ST PETERSBURG FL 33716 - 1100 |
|
12.03% |
|
Record |
|
|
|
|
|
DISCIPLINED VALUE INTERNATIONAL FUND |
|
I |
|
AMERICAN ENTERPRISE INVESTMENT SVC 707 2ND AVE
S MINNEAPOLIS MN 55402 - 2405 |
|
8.19% |
|
Record |
|
|
|
|
|
DISCIPLINED VALUE INTERNATIONAL FUND |
|
I |
|
MORGAN STANLEY SMITH BARNEY LLC FOR EXCLUSIVE
BENEFIT OF CUSTOMERS 1 NEW YORK PLAZA FL. 12 NEW YORK NY
10004 - 1965 |
|
6.69% |
|
Record |
81
|
|
|
|
|
|
|
|
|
Fund Name |
|
Share Class |
|
Name and Address |
|
Percentage
Owned |
|
Type of
Ownership |
DISCIPLINED VALUE INTERNATIONAL FUND |
|
I |
|
AMERITRADE INC PO BOX 2226
OMAHA NE 68103 - 2226 |
|
5.66% |
|
Record |
|
|
|
|
|
DISCIPLINED VALUE INTERNATIONAL FUND |
|
I |
|
PERSHING LLC 1 PERSHING PLZ
JERSEY CITY NJ 07399 - 0001 |
|
5.40% |
|
Record |
|
|
|
|
|
DISCIPLINED VALUE INTERNATIONAL FUND |
|
I |
|
CHARLES SCHWAB & CO INC MUTUAL FUNDS
DEPT 101 MONTGOMERY ST SAN FRANCISCO CA 94105 |
|
5.19% |
|
Record |
|
|
|
|
|
DISCIPLINED VALUE INTERNATIONAL FUND |
|
NAV |
|
JHF II MULTIMANAGER LIFESTYLE GROWTH PORTFOLIO
200 BERKELEY ST BOSTON MA 02116 - 5022 |
|
27.20% |
|
Beneficial |
|
|
|
|
|
DISCIPLINED VALUE INTERNATIONAL FUND |
|
NAV |
|
JHF II MULTIMANAGER LIFESTYLE BALANCED PORTFOLIO
201 BERKELEY ST BOSTON MA 02116 - 5022 |
|
20.84% |
|
Beneficial |
|
|
|
|
|
DISCIPLINED VALUE INTERNATIONAL FUND |
|
NAV |
|
JHF II MULTIMANAGER LIFESTYLE AGGRESSIVE PORTFOLIO
202 BERKELEY ST BOSTON MA 02116 - 5022 |
|
11.99% |
|
Beneficial |
|
|
|
|
|
DISCIPLINED VALUE INTERNATIONAL FUND |
|
R2 |
|
EMPOWER TRUST FBO EMPOWER BENEFIT PLANS
8515 E ORCHARD RD # 2T2 GREENWOOD VLG CO 80111 - 5002 |
|
87.25% |
|
Record |
|
|
|
|
|
DISCIPLINED VALUE INTERNATIONAL FUND |
|
R4 |
|
MATRIX TRUST COMPANY CUST FBO IAMS CONSULTING
LLC 401K PLAN 717 17TH ST STE 1300 DENVER CO 80202 -
3304 |
|
45.16% |
|
Beneficial |
|
|
|
|
|
DISCIPLINED VALUE INTERNATIONAL FUND |
|
R4 |
|
ASCENSUS TRUST COMPANY FBO DATOCWITTEN GROUP
INC 401K PLAN PO BOX 10758 FARGO ND 58106 - 0758 |
|
38.52% |
|
Beneficial |
|
|
|
|
|
DISCIPLINED VALUE INTERNATIONAL FUND |
|
R4 |
|
MID ATLANTIC TRUST COMPANY FBO TAFT &
PARTNERS LLC 401(K) PROFIT S 1251 WATERFRONT PL STE 525
PITTSBURGH PA 15222 - 4228 |
|
12.65% |
|
Beneficial |
|
|
|
|
|
DISCIPLINED VALUE INTERNATIONAL FUND |
|
R6 |
|
EDWARD D JONES & CO FOR THE BENEFIT OF
CUSTOMERS 12555 MANCHESTER ROAD SAINT LOUIS MO 63131 -
3710 |
|
22.83% |
|
Record |
|
|
|
|
|
DISCIPLINED VALUE INTERNATIONAL FUND |
|
R6 |
|
JOHN HANCOCK LIFE INSURANCE COMPANY (USA)
ATTN: JHRPS TRADING OPS ST6 200 BERKELEY ST
BOSTON MA 02116 - 5022 |
|
22.15% |
|
Beneficial |
|
|
|
|
|
DISCIPLINED VALUE INTERNATIONAL FUND |
|
R6 |
|
NATIONAL FINANCIAL SERVICES LLC 499 WASHINGTON
BLVD JERSEY CITY NJ 07310 - 1995 |
|
17.72% |
|
Record |
82
|
|
|
|
|
|
|
|
|
Fund Name |
|
Share Class |
|
Name and Address |
|
Percentage
Owned |
|
Type of
Ownership |
DISCIPLINED VALUE INTERNATIONAL FUND |
|
R6 |
|
NATIONAL FINANCIAL SERVICES LLC 499 WASHINGTON
BLVD JERSEY CITY NJ 07310 - 1995 |
|
9.01% |
|
Record |
|
|
|
|
|
DISCIPLINED VALUE INTERNATIONAL FUND |
|
R6 |
|
ATTN MUTUAL FUND ADMINISTRATOR C/O PRINCIPAL
FINANCIAL SEI PRIVATE TRUST COMPANY 1 FREEDOM VALLEY DR
OAKS PA 19456 - 9989 |
|
5.81% |
|
Beneficial |
|
|
|
|
|
DISCIPLINED VALUE INTERNATIONAL FUND |
|
R6 |
|
CAPINCO C/O US BANK NA 1555 N RIVERCENTER DR
STE 302 MILWAUKEE WI 53212 - 3958 |
|
5.41% |
|
Beneficial |
|
|
|
|
|
DIVERSIFIED MACRO FUND |
|
A |
|
MORGAN STANLEY SMITH BARNEY LLC FOR EXCLUSIVE
BENEFIT OF CUSTOMERS 1 NEW YORK PLAZA FL. 12 NEW YORK NY
10004 - 1965 |
|
30.88% |
|
Record |
|
|
|
|
|
DIVERSIFIED MACRO FUND |
|
A |
|
MLPF& S FOR THE SOLE BENEFIT OF ITS
CUSTOMERS ATTN: FUND ADMINISTRATION 4800 DEER LAKE DRIVE EAST
2ND FL JACKSONVILLE FL 32246 - 6484 |
|
6.09% |
|
Record |
|
|
|
|
|
DIVERSIFIED MACRO FUND |
|
C |
|
MORGAN STANLEY SMITH BARNEY LLC FOR EXCLUSIVE
BENEFIT OF CUSTOMERS 1 NEW YORK PLAZA FL. 12 NEW YORK NY
10004 - 1965 |
|
67.57% |
|
Record |
|
|
|
|
|
DIVERSIFIED MACRO FUND |
|
C |
|
MLPF& S FOR THE SOLE BENEFIT OF ITS
CUSTOMERS ATTN: FUND ADMINISTRATION 4800 DEER LAKE DRIVE EAST
2ND FL JACKSONVILLE FL 32246 - 6484 |
|
11.89% |
|
Record |
|
|
|
|
|
DIVERSIFIED MACRO FUND |
|
C |
|
PERSHING LLC 1 PERSHING PLZ
JERSEY CITY NJ 07399 - 0001 |
|
9.70% |
|
Record |
|
|
|
|
|
DIVERSIFIED MACRO FUND |
|
I |
|
MLPF& S FOR THE SOLE BENEFIT OF ITS
CUSTOMERS ATTN: FUND ADMINISTRATION 4800 DEER LAKE DRIVE EAST
2ND FL JACKSONVILLE FL 32246 - 6484 |
|
44.23% |
|
Record |
|
|
|
|
|
DIVERSIFIED MACRO FUND |
|
I |
|
MORGAN STANLEY SMITH BARNEY LLC FOR EXCLUSIVE
BENEFIT OF CUSTOMERS 1 NEW YORK PLAZA FL. 12 NEW YORK NY
10004 - 1965 |
|
27.58% |
|
Record |
|
|
|
|
|
DIVERSIFIED MACRO FUND |
|
I |
|
LPL FINANCIAL OMNIBUS CUSTOMER ACCOUNT
ATTN: MUTUAL FUND TRADING 4707 EXECUTIVE DRIVE SAN DIEGO CA 92121
- 3091 |
|
8.18% |
|
Record |
|
|
|
|
|
DIVERSIFIED MACRO FUND |
|
I |
|
PERSHING LLC 1 PERSHING PLZ
JERSEY CITY NJ 07399 - 0001 |
|
5.10% |
|
Record |
|
|
|
|
|
DIVERSIFIED MACRO FUND |
|
NAV |
|
JHF II ALTERNATIVE ASSET ALLOCATION 200
BERKELEY ST BOSTON MA 02116-5022 |
|
29.01% |
|
Beneficial |
83
|
|
|
|
|
|
|
|
|
Fund Name |
|
Share Class |
|
Name and Address |
|
Percentage
Owned |
|
Type of
Ownership |
DIVERSIFIED MACRO FUND |
|
NAV |
|
JHF II MULTIMANAGER LIFESTYLE BALANCED PORTFOLIO
200 BERKELEY ST BOSTON MA 02116-5022 |
|
28.18% |
|
Beneficial |
|
|
|
|
|
DIVERSIFIED MACRO FUND |
|
NAV |
|
JHF II MULTIMANAGER LIFESTYLE GROWTH PORTFOLIO
200 BERKELEY ST BOSTON MA 02116-5022 |
|
19.94% |
|
Beneficial |
|
|
|
|
|
DIVERSIFIED MACRO FUND |
|
NAV |
|
JHF II MULTIMANAGER LIFESTYLE MODERATE PORTFOLIO
200 BERKELEY ST BOSTON MA 02116-5022 |
|
11.55% |
|
Beneficial |
|
|
|
|
|
DIVERSIFIED MACRO FUND |
|
NAV |
|
JHF II MULTIMANAGER LIFESTYLE AGGRESSIVE PORTFOLIO
200 BERKELEY ST BOSTON MA 02116-5022 |
|
11.31% |
|
Beneficial |
|
|
|
|
|
DIVERSIFIED MACRO FUND |
|
R6 |
|
J P MORGAN SECURITIES LLC OMNIBUS ACCOUNT FOR
THE EXCLUSIVE BENEFIT OF CUSTOMERS 4 CHASE METROTECH
CENTER 3RD FL MUTUAL FUND DEPARTMENT BROOKLYN NY
11245-0004 |
|
70.38% |
|
Record |
|
|
|
|
|
DIVERSIFIED MACRO FUND |
|
R6 |
|
ATTN MUTUAL FUND OPERATIONS MAC & CO
500 GRANT ST RM 151-1010 PITTSBURGH PA 15219-2502 |
|
17.42% |
|
Beneficial |
|
|
|
|
|
EMERGING MARKETS EQUITY FUND |
|
A |
|
EDWARD D JONES & CO FOR THE BENEFIT OF
CUSTOMERS 12555 MANCHESTER ROAD SAINT LOUIS MO
63131-3710 |
|
75.33% |
|
Record |
|
|
|
|
|
EMERGING MARKETS EQUITY FUND |
|
C |
|
AMERICAN ENTERPRISE INVESTMENT SVC 707 2ND AVE
S MINNEAPOLIS MN 55402-2405 |
|
29.78% |
|
Record |
|
|
|
|
|
EMERGING MARKETS EQUITY FUND |
|
C |
|
PERSHING LLC 1 PERSHING PLZ
JERSEY CITY NJ 07399-0001 |
|
21.92% |
|
Record |
|
|
|
|
|
EMERGING MARKETS EQUITY FUND |
|
C |
|
RBC CAPITAL MARKETS LLC MUTUAL FUND OMNIBUS
PROCESSING ATTN MUTUAL FUND PRODUCT GRP 250 NICOLLETT MALL
STE 1800 MINNEAPOLIS MN 55401-7554 |
|
8.75% |
|
Record |
|
|
|
|
|
EMERGING MARKETS EQUITY FUND |
|
C |
|
JOHN HANCOCK LIFE & HEALTH INS CO
CUSTODIAN FOR THE IRA OF MARY T CEMBROLA
48 BARBARA JEAN ST GRAFTON MA 01519-1054 |
|
6.49% |
|
Beneficial |
|
|
|
|
|
EMERGING MARKETS EQUITY FUND |
|
C |
|
STIFEL NICOLAUS & CO INC EXCLUSIVE
BENEFIT OF CUSTOMERS 501 N BROADWAY SAINT LOUIS MO
63102-2188 |
|
5.38% |
|
Record |
|
|
|
|
|
EMERGING MARKETS EQUITY FUND |
|
I |
|
AMERICAN ENTERPRISE INVESTMENT SVC 707 2ND AVE
S MINNEAPOLIS MN 55402-2405 |
|
95.16% |
|
Record |
84
|
|
|
|
|
|
|
|
|
Fund Name |
|
Share Class |
|
Name and Address |
|
Percentage
Owned |
|
Type of
Ownership |
EMERGING MARKETS EQUITY FUND |
|
NAV |
|
JHF II MULTIMANAGER LIFESTYLE GROWTH
PORTFOLIO 200 BERKELEY ST
BOSTON MA 02116-5022 |
|
23.52% |
|
Beneficial |
|
|
|
|
|
EMERGING MARKETS EQUITY FUND |
|
NAV |
|
JHVIT MANAGED VOLATILITY GROWTH PORTFOLIO
200 BERKELEY ST BOSTON MA 02116-5022 |
|
17.15% |
|
Beneficial |
|
|
|
|
|
EMERGING MARKETS EQUITY FUND |
|
NAV |
|
JHF II MULTIMANAGER LIFESTYLE BALANCED
PORTFOLIO 200 BERKELEY ST
BOSTON MA 02116-5022 |
|
13.39% |
|
Beneficial |
|
|
|
|
|
EMERGING MARKETS EQUITY FUND |
|
NAV |
|
JHF II MULTIMANAGER LIFESTYLE AGGRESSIVE
PORTFOLIO 200 BERKELEY ST
BOSTON MA 02116-5022 |
|
13.12% |
|
Beneficial |
|
|
|
|
|
EMERGING MARKETS EQUITY FUND |
|
NAV |
|
JHVIT MANAGED VOLATILITY BALANCED PORTFOLIO
200 BERKELEY ST BOSTON MA 02116-5022 |
|
8.18% |
|
Beneficial |
|
|
|
|
|
EMERGING MARKETS EQUITY FUND |
|
R2 |
|
JOHN HANCOCK LIFE INSURANCE CO USA 200 BERKELEY
ST BOSTON MA 02116-5023 |
|
92.08% |
|
Beneficial |
|
|
|
|
|
EMERGING MARKETS EQUITY FUND |
|
R4 |
|
JOHN HANCOCK LIFE INSURANCE CO USA 200 BERKELEY
ST BOSTON MA 02116-5023 |
|
69.44% |
|
Beneficial |
|
|
|
|
|
EMERGING MARKETS EQUITY FUND |
|
R4 |
|
TD AMERITRADE INC FEBO OUR CUSTOMERS
PO BOX 2226 OMAHA NE 68103-2226 |
|
20.66% |
|
Record |
|
|
|
|
|
EMERGING MARKETS EQUITY FUND |
|
R4 |
|
MATRIX TRUST COMPANY AS AGENT FOR ADVISOR TRUST
INC WEST IRONDEQUOIT (NY) 403(B) 717 17TH ST STE 1300
DENVER CO 80202-3304 |
|
7.86% |
|
Beneficial |
|
|
|
|
|
EMERGING MARKETS EQUITY FUND |
|
R6 |
|
EDWARD D JONES & CO FOR THE BENEFIT OF
CUSTOMERS 12555 MANCHESTER ROAD SAINT LOUIS MO
63131-3710 |
|
86.95% |
|
Record |
|
|
|
|
|
ESG INTERNATIONAL EQUITY FUND |
|
A |
|
EDWARD D JONES & CO FOR THE BENEFIT OF
CUSTOMERS 12555 MANCHESTER ROAD SAINT LOUIS MO
63131-3710 |
|
33.08% |
|
Record |
|
|
|
|
|
ESG INTERNATIONAL EQUITY FUND |
|
A |
|
CHARLES SCHWAB & CO INC MUTUAL FUNDS
DEPT 101 MONTGOMERY ST SAN FRANCISCO CA 94104-4151 |
|
32.36% |
|
Record |
|
|
|
|
|
ESG INTERNATIONAL EQUITY FUND |
|
A |
|
NATIONAL FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL FUNDS 200 LIBERTY ST # 1WFC NEW YORK NY
10281-1015 |
|
7.34% |
|
Record |
85
|
|
|
|
|
|
|
|
|
Fund Name |
|
Share Class |
|
Name and Address |
|
Percentage
Owned |
|
Type of
Ownership |
ESG INTERNATIONAL EQUITY FUND |
|
A |
|
TD AMERITRADE INC FEBO OUR CUSTOMERS
PO BOX 2226 OMAHA NE 68103-2226 |
|
7.16% |
|
Record |
|
|
|
|
|
ESG INTERNATIONAL EQUITY FUND |
|
I |
|
MANULIFE REINSURANCE (BERMUDA) LTD 200 BERKELEY
ST BOSTON MA 02116-5022 |
|
39.38% |
|
Beneficial |
|
|
|
|
|
ESG INTERNATIONAL EQUITY FUND |
|
I |
|
RAYMOND JAMES OMNIBUS FOR MUTUAL FUNDS
HOUSE ACCT FIRM 880 CARILLON PKWY
ST PETERSBURG FL 33716-1100 |
|
25.49% |
|
Record |
|
|
|
|
|
ESG INTERNATIONAL EQUITY FUND |
|
I |
|
NATIONAL FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL FUNDS 200 LIBERTY ST # 1WFC
NEW YORK NY 10281-1015 |
|
8.23% |
|
Record |
|
|
|
|
|
ESG INTERNATIONAL EQUITY FUND |
|
I |
|
AMERICAN ENTERPRISE INVESTMENT SVC 707 2ND AVE
S MINNEAPOLIS MN 55402-2405 |
|
7.19% |
|
Record |
|
|
|
|
|
ESG INTERNATIONAL EQUITY FUND |
|
I |
|
CHARLES SCHWAB & CO INC SPECIAL
CUSTODY ACCOUNT FOR EXCLUSIVE BENEFIT OF CUSTOMERS ATTN
MUTUAL FUNDS 101 MONTGOMERY ST SAN FRANCISCO CA
94104-4151 |
|
6.91% |
|
Record |
|
|
|
|
|
ESG INTERNATIONAL EQUITY FUND |
|
I |
|
ATTN MUTUAL FUND ADMINISTRATOR C/O PRINCIPAL
FINANCIAL SEI PRIVATE TRUST COMPANY 1 FREEDOM VALLEY DR
OAKS PA 19456-9989 |
|
5.83% |
|
Beneficial |
|
|
|
|
|
ESG INTERNATIONAL EQUITY FUND |
|
R6 |
|
MANULIFE REINSURANCE (BERMUDA) LTD 200 BERKELEY
ST BOSTON MA 02116-5022 |
|
73.45% |
|
Beneficial |
|
|
|
|
|
ESG INTERNATIONAL EQUITY FUND |
|
R6 |
|
EDWARD D JONES & CO FOR THE BENEFIT OF
CUSTOMERS 12555 MANCHESTER ROAD SAINT LOUIS MO
63131-3710 |
|
24.77% |
|
Record |
|
|
|
|
|
ESG LARGE CAP CORE FUND |
|
A |
|
MORGAN STANLEY SMITH BARNEY LLC FOR EXCLUSIVE
BENEFIT OF CUSTOMERS 1 NEW YORK PLAZA FL. 12 NEW YORK NY
10004-1965 |
|
15.58% |
|
Record |
|
|
|
|
|
ESG LARGE CAP CORE FUND |
|
A |
|
EDWARD D JONES & CO FOR THE BENEFIT OF
CUSTOMERS 12555 MANCHESTER ROAD SAINT LOUIS MO
63131-3710 |
|
9.86% |
|
Record |
|
|
|
|
|
ESG LARGE CAP CORE FUND |
|
A |
|
AMERICAN ENTERPRISE INVESTMENT SVC 707 2ND AVE
S MINNEAPOLIS MN 55402-2405 |
|
8.35% |
|
Record |
86
|
|
|
|
|
|
|
|
|
Fund Name |
|
Share Class |
|
Name and Address |
|
Percentage
Owned |
|
Type of
Ownership |
ESG LARGE CAP CORE FUND |
|
A |
|
NATIONAL FINANCIAL SERVICES LLC FEBO CUSTOMERS
MUTUAL FUNDS 200 LIBERTY ST # 1WFC
NEW YORK NY 10281-1015 |
|
6.93% |
|
Record |
|
|
|
|
|
ESG LARGE CAP CORE FUND |
|
A |
|
CHARLES SCHWAB & CO INC SPECIAL CUSTODY ACCT FBO CUSTOMERS ATTN MUTUAL FUNDS
101 MONTGOMERY ST SAN FRANCISCO CA 94104-4151 |
|
6.44% |
|
Record |
|
|
|
|
|
ESG LARGE CAP CORE FUND |
|
A |
|
PERSHING LLC 1 PERSHING PLZ
JERSEY CITY NJ 07399-0001 |
|
6.03% |
|
Record |
|
|
|
|
|
ESG LARGE CAP CORE FUND |
|
C |
|
MORGAN STANLEY SMITH BARNEY LLC FOR EXCLUSIVE
BENEFIT OF CUSTOMERS 1 NEW YORK PLAZA FL. 12 NEW YORK NY
10004-1965 |
|
24.53% |
|
Record |
|
|
|
|
|
ESG LARGE CAP CORE FUND |
|
C |
|
AMERICAN ENTERPRISE INVESTMENT SVC 707 2ND AVE
S MINNEAPOLIS MN 55402-2405 |
|
20.23% |
|
Record |
|
|
|
|
|
ESG LARGE CAP CORE FUND |
|
C |
|
LPL FINANCIAL OMNIBUS CUSTOMER ACCOUNT ATTN: MUTUAL FUND TRADING 4707 EXECUTIVE DRIVE SAN DIEGO CA 92121-3091 |
|
14.52% |
|
Record |
|
|
|
|
|
ESG LARGE CAP CORE FUND |
|
C |
|
NATIONAL FINANCIAL SERVICES LLC FEBO CUSTOMERS MUTUAL FUNDS 200 LIBERTY ST # 1WFC NEW YORK NY 10281-1015 |
|
14.40% |
|
Record |
|
|
|
|
|
ESG LARGE CAP CORE FUND |
|
C |
|
RAYMOND JAMES OMNIBUS FOR MUTUAL FUNDS HOUSE ACCT FIRM 880 CARILLON PKWY ST PETERSBURG FL 33716-1100 |
|
10.06% |
|
Record |
|
|
|
|
|
ESG LARGE CAP CORE FUND |
|
C |
|
PERSHING LLC 1 PERSHING PLZ JERSEY CITY NJ 07399-0001 |
|
7.66% |
|
Record |
|
|
|
|
|
ESG LARGE CAP CORE FUND |
|
I |
|
MORGAN STANLEY SMITH BARNEY LLC FOR EXCLUSIVE BENEFIT OF CUSTOMERS 1 NEW YORK PLAZA FL. 12 NEW YORK NY 10004-1965 |
|
19.20% |
|
Record |
|
|
|
|
|
ESG LARGE CAP CORE FUND |
|
I |
|
MANULIFE REINSURANCE (BERMUDA) LTD 200 BERKELEY ST BOSTON MA 02116-5022 |
|
18.46% |
|
Beneficial |
|
|
|
|
|
ESG LARGE CAP CORE FUND |
|
I |
|
AMERICAN ENTERPRISE INVESTMENT SVC 707 2ND AVE S MINNEAPOLIS MN 55402-2405 |
|
16.61% |
|
Record |
|
|
|
|
|
ESG LARGE CAP CORE FUND |
|
I |
|
NATIONAL FINANCIAL SERVICES LLC FEBO CUSTOMERS MUTUAL FUNDS 200 LIBERTY ST # 1WFC NEW YORK NY 10281-1015 |
|
12.27% |
|
Record |
87
|
|
|
|
|
|
|
|
|
Fund Name |
|
Share Class |
|
Name and Address |
|
Percentage
Owned |
|
Type of
Ownership |
ESG LARGE CAP CORE FUND |
|
I |
|
CHARLES SCHWAB & CO INC |
|
10.21% |
|
Record |
|
|
|
|
SPECIAL CUSTODY ACCT FBO CUSTOMERS |
|
|
|
|
|
|
|
|
ATTN MUTUAL FUNDS |
|
|
|
|
|
|
|
|
101 MONTGOMERY ST |
|
|
|
|
|
|
|
|
SAN FRANCISCO CA 94104-4151 |
|
|
|
|
|
|
|
|
|
ESG LARGE CAP CORE FUND |
|
I |
|
RAYMOND JAMES |
|
5.35% |
|
Record |
|
|
|
|
OMNIBUS FOR MUTUAL FUNDS |
|
|
|
|
|
|
|
|
HOUSE ACCT FIRM |
|
|
|
|
|
|
|
|
880 CARILLON PKWY |
|
|
|
|
|
|
|
|
ST PETERSBURG FL 33716-1100 |
|
|
|
|
|
|
|
|
|
ESG LARGE CAP CORE FUND |
|
R6 |
|
JOHN HANCOCK LIFE INSURANCE |
|
42.33% |
|
Beneficial |
|
|
|
|
COMPANY (USA) |
|
|
|
|
|
|
|
|
ATTN: JHRPS TRADING OPS ST6 |
|
|
|
|
|
|
|
|
200 BERKELEY ST |
|
|
|
|
|
|
|
|
BOSTON MA 02116-5022 |
|
|
|
|
|
|
|
|
|
ESG LARGE CAP CORE FUND |
|
R6 |
|
EDWARD D JONES & CO |
|
27.87% |
|
Record |
|
|
|
|
FOR THE BENEFIT OF CUSTOMERS |
|
|
|
|
|
|
|
|
12555 MANCHESTER ROAD |
|
|
|
|
|
|
|
|
SAINT LOUIS MO 63131-3710 |
|
|
|
|
|
|
|
|
|
ESG LARGE CAP CORE FUND |
|
R6 |
|
NATIONAL FINANCIAL SERVICES LLC |
|
10.97% |
|
Record |
|
|
|
|
499 WASHINGTON BLVD |
|
|
|
|
|
|
|
|
JERSEY CITY NJ 07310-1995 |
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ESG LARGE CAP CORE FUND |
|
R6 |
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NATIONAL FINANCIAL SERVICES LLC |
|
8.99% |
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Record |
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499 WASHINGTON BLVD |
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JERSEY CITY NJ 07310-1995 |
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ESG LARGE CAP CORE FUND |
|
R6 |
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TIAA FSB CUST/TTEE FBO |
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6.17% |
|
Record |
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RETIREMENT PLANS FOR WHICH |
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TIAA ACTS AS RECORDKEEPER |
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ATTN TRUST OPERATIONS |
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211 N BROADWAY STE 1000 |
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SAINT LOUIS MO 63102-2748 |
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FINANCIAL INDUSTRIES FUND |
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A |
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MLPF& S FOR THE |
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10.60% |
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Record |
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SOLE BENEFIT OF ITS CUSTOMERS |
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ATTN: FUND ADMINISTRATION |
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4800 DEER LAKE DR E FL 2 |
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JACKSONVILLE FL 32246-6484 |
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FINANCIAL INDUSTRIES FUND |
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A |
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NATIONAL FINANCIAL SERVICES LLC |
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8.40% |
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Record |
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FEBO CUSTOMERS |
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MUTUAL FUNDS |
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200 LIBERTY ST # 1WFC |
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NEW YORK NY 10281-1015 |
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FINANCIAL INDUSTRIES FUND |
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A |
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WELLS FARGO CLEARING SERVICES, LLC |
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7.22% |
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Record |
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SPECIAL CUSTODY ACCT FOR THE |
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EXCLUSIVE BENEFIT OF CUSTOMER |
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2801 MARKET ST |
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SAINT LOUIS MO 63103-2523 |
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FINANCIAL INDUSTRIES FUND |
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A |
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MORGAN STANLEY SMITH BARNEY LLC |
|
5.78% |
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Record |
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FOR EXCLUSIVE BENEFIT OF CUSTOMERS |
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1 NEW YORK PLAZA FL. 12 |
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NEW YORK NY 10004-1965 |
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88
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Fund Name |
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Share Class |
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Name and Address |
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Percentage
Owned |
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Type of
Ownership |
FINANCIAL INDUSTRIES FUND |
|
C |
|
J P MORGAN SECURITIES LLC OMNIBUS |
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15.66% |
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Record |
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ACCOUNT FOR THE EXCLUSIVE BENEFIT |
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OF CUSTOMERS |
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4 CHASE METROTECH CENTER |
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3RD FL MUTUAL FUND DEPARTMENT |
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BROOKLYN NY 11245-0004 |
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FINANCIAL INDUSTRIES FUND |
|
C |
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WELLS FARGO CLEARING SERVICES, LLC |
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12.25% |
|
Record |
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SPECIAL CUSTODY ACCT FOR THE |
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EXCLUSIVE BENEFIT OF CUSTOMER |
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2801 MARKET ST |
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SAINT LOUIS MO 63103-2523 |
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FINANCIAL INDUSTRIES FUND |
|
C |
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RAYMOND JAMES |
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11.33% |
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Record |
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OMNIBUS FOR MUTUAL FUNDS |
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HOUSE ACCT FIRM |
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880 CARILLON PKWY |
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ST PETERSBURG FL 33716-1100 |
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FINANCIAL INDUSTRIES FUND |
|
C |
|
MLPF&S FOR THE |
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8.44% |
|
Record |
|
|
|
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SOLE BENEFIT OF ITS CUSTOMERS |
|
|
|
|
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ATTN: FUND ADMINISTRATION |
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4800 DEERLAKE DRIVE EAST 2ND FL |
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JACKSONVILLE FL 32246-6484 |
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FINANCIAL INDUSTRIES FUND |
|
C |
|
NATIONAL FINANCIAL SERVICES LLC |
|
8.18% |
|
Record |
|
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|
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FEBO CUSTOMERS |
|
|
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|
MUTUAL FUNDS |
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200 LIBERTY ST # 1WFC |
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NEW YORK NY 10281-1015 |
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FINANCIAL INDUSTRIES FUND |
|
C |
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PERSHING LLC |
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7.39% |
|
Record |
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1 PERSHING PLZ |
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JERSEY CITY NJ 07399-0001 |
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FINANCIAL INDUSTRIES FUND |
|
C |
|
CHARLES SCHWAB & CO INC |
|
5.89% |
|
Record |
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SPECIAL CUSTODY ACCT FBO CUSTOMERS |
|
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ATTN MUTUAL FUNDS |
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101 MONTGOMERY ST |
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SAN FRANCISCO CA 94104-4151 |
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FINANCIAL INDUSTRIES FUND |
|
C |
|
AMERICAN ENTERPRISE INVESTMENT SVC |
|
5.32% |
|
Record |
|
|
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|
707 2ND AVE S |
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MINNEAPOLIS MN 55402-2405 |
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FINANCIAL INDUSTRIES FUND |
|
I |
|
MLPF& S FOR THE |
|
29.92% |
|
Record |
|
|
|
|
SOLE BENEFIT OF ITS CUSTOMERS |
|
|
|
|
|
|
|
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ATTN FUND ADMINISTRATION |
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4800 DEERLAKE DRIVE EAST 2ND FL |
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|
JACKSONVILLE FL 32246-6484 |
|
|
|
|
|
|
|
|
|
FINANCIAL INDUSTRIES FUND |
|
I |
|
NATIONAL FINANCIAL SERVICES LLC |
|
13.49% |
|
Record |
|
|
|
|
FEBO CUSTOMERS |
|
|
|
|
|
|
|
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ATTN: MUTUAL FUNDS DEPARTMENT |
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4TH FLOOR |
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499 WASHINGTON BLVD |
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|
|
JERSEY CITY NJ 07310-1995 |
|
|
|
|
|
|
|
|
|
FINANCIAL INDUSTRIES FUND |
|
I |
|
PERSHING LLC |
|
11.68% |
|
Record |
|
|
|
|
1 PERSHING PLZ |
|
|
|
|
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|
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|
JERSEY CITY NJ 07399-0001 |
|
|
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|
89
|
|
|
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|
|
|
Fund Name |
|
Share Class |
|
Name and Address |
|
Percentage
Owned |
|
Type of Ownership |
FINANCIAL INDUSTRIES FUND |
|
I |
|
RAYMOND JAMES OMNIBUS FOR MUTUAL FUNDS HOUSE
ACCT FIRM 880 CARILLON PKWY ST PETERSBURG FL
33716-1100 |
|
7.76% |
|
Record |
|
|
|
|
|
FINANCIAL INDUSTRIES FUND |
|
I |
|
SPECIAL CUSTODY ACCOUNT FOR THE EXCLUSIVE BENEFIT OF CUSTOMERS OF UBS FINANCIAL SERVICES INC
1000 HARBOR BLVD WEEHAWKEN NJ 07086-6761 |
|
5.63% |
|
Record |
|
|
|
|
|
FINANCIAL INDUSTRIES FUND |
|
NAV |
|
JHF II MULTIMANAGER LIFESTYLE GROWTH PORTFOLIO
200 BERKELEY ST BOSTON MA 02116-5022 |
|
33.97% |
|
Beneficial |
|
|
|
|
|
FINANCIAL INDUSTRIES FUND |
|
NAV |
|
JHF II MULTIMANAGER LIFESTYLE BALANCED PORTFOLIO
200 BERKELEY ST BOSTON MA 02116-5022 |
|
24.85% |
|
Beneficial |
|
|
|
|
|
FINANCIAL INDUSTRIES FUND |
|
NAV |
|
JHF II MULTIMANAGER LIFESTYLE AGGRESSIVE PORTFOLIO
200 BERKELEY ST BOSTON MA 02116-5022 |
|
14.76% |
|
Beneficial |
|
|
|
|
|
FINANCIAL INDUSTRIES FUND |
|
R6 |
|
MANULIFE ASSET MANAGEMENT (US) LLC 2021 MANULIFE INVESTMENT MANAGEMENT ABCD
197 CLARENDON ST BOSTON MA 02116-5010 |
|
49.53% |
|
Record |
|
|
|
|
|
FINANCIAL INDUSTRIES FUND |
|
R6 |
|
MANULIFE INVESTMENT MANAGEMENT (US) LLC
2019-2020 MIM US DEF INCENTIVE PLAN 197 CLARENDON ST
BOSTON MA 02116-5010 |
|
25.70% |
|
Record |
|
|
|
|
|
FINANCIAL INDUSTRIES FUND |
|
R6 |
|
MANULIFE INVESTMENT MANAGEMENT (US) 2020 MANULIFE INVESTMENT MANAGEMENT ABCD
197 CLARENDON ST BOSTON MA 02116-5010 |
|
21.23% |
|
Record |
|
|
|
|
|
FUNDAMENTAL LARGE CAP CORE FUND |
|
A |
|
EDWARD D JONES & CO FOR THE BENEFIT OF CUSTOMERS
12555 MANCHESTER ROAD SAINT LOUIS MO 63131-3710 |
|
21.13% |
|
Record |
|
|
|
|
|
FUNDAMENTAL LARGE CAP CORE FUND |
|
A |
|
NATIONAL FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL FUNDS 200 LIBERTY ST # 1WFC
NEW YORK NY 10281-1015 |
|
5.20% |
|
Record |
|
|
|
|
|
FUNDAMENTAL LARGE CAP CORE FUND |
|
C |
|
WELLS FARGO CLEARING SERVICES, LLC SPECIAL
CUSTODY ACCT FOR THE EXCLUSIVE BENEFIT OF CUSTOMER 2801 MARKET ST
SAINT LOUIS MO 63103-2523 |
|
18.64% |
|
Record |
90
|
|
|
|
|
|
|
|
|
Fund Name |
|
Share Class |
|
Name and Address |
|
Percentage
Owned |
|
Type of Ownership |
FUNDAMENTAL LARGE CAP CORE FUND |
|
C |
|
MORGAN STANLEY SMITH BARNEY LLC FOR EXCLUSIVE
BENEFIT OF CUSTOMERS 1 NEW YORK PLAZA FL. 12 NEW YORK NY
10004-1965 |
|
9.38% |
|
Record |
|
|
|
|
|
FUNDAMENTAL LARGE CAP CORE FUND |
|
C |
|
MLPF& S FOR THE SOLE BENEFIT OF ITS
CUSTOMERS ATTN: FUND ADMINISTRATION 4800 DEERLAKE DRIVE EAST 2ND FL
JACKSONVILLE FL 32246-6484 |
|
8.11% |
|
Record |
|
|
|
|
|
FUNDAMENTAL LARGE CAP CORE FUND |
|
C |
|
PERSHING LLC 1 PERSHING PLZ
JERSEY CITY NJ 07399-0001 |
|
7.68% |
|
Record |
|
|
|
|
|
FUNDAMENTAL LARGE CAP CORE FUND |
|
C |
|
RAYMOND JAMES OMNIBUS FOR MUTUAL FUNDS HOUSE
ACCT FIRM 880 CARILLON PKWY ST PETERSBURG FL
33716-1100 |
|
7.51% |
|
Record |
|
|
|
|
|
FUNDAMENTAL LARGE CAP CORE FUND |
|
C |
|
AMERICAN ENTERPRISE INVESTMENT SVC 707 2ND AVE
S MINNEAPOLIS MN 55402-2405 |
|
7.01% |
|
Record |
|
|
|
|
|
FUNDAMENTAL LARGE CAP CORE FUND |
|
C |
|
EDWARD D JONES & CO FOR THE BENEFIT OF
CUSTOMERS 12555 MANCHESTER ROAD SAINT LOUIS MO
63131-3710 |
|
6.12% |
|
Record |
|
|
|
|
|
FUNDAMENTAL LARGE CAP CORE FUND |
|
C |
|
SPECIAL CUSTODY ACCOUNT FOR THE EXCLUSIVE BENEFIT OF CUSTOMERS OF
UBS FINANCIAL SERVICES INC 1000 HARBOR BLVD WEEHAWKEN NJ
07086-6761 |
|
5.25% |
|
Record |
|
|
|
|
|
FUNDAMENTAL LARGE CAP CORE FUND |
|
I |
|
MLPF& S FOR THE SOLE BENEFIT OF ITS
CUSTOMERS ATTN: FUND ADMINISTRATION 4800 DEER LAKE DRIVE EAST 2ND FL
JACKSONVILLE FL 32246-6484 |
|
15.58% |
|
Record |
|
|
|
|
|
FUNDAMENTAL LARGE CAP CORE FUND |
|
I |
|
AMERICAN ENTERPRISE INVESTMENT SVC 707 2ND AVE
S MINNEAPOLIS MN 55402-2405 |
|
12.59% |
|
Record |
|
|
|
|
|
FUNDAMENTAL LARGE CAP CORE FUND |
|
I |
|
MORGAN STANLEY SMITH BARNEY LLC FOR EXCLUSIVE
BENEFIT OF CUSTOMERS 1 NEW YORK PLAZA FL. 12 NEW YORK NY
10004-1965 |
|
12.10% |
|
Record |
|
|
|
|
|
FUNDAMENTAL LARGE CAP CORE FUND |
|
I |
|
NATIONAL FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL FUNDS 200 LIBERTY ST # 1WFC
NEW YORK NY 10281-1015 |
|
11.33% |
|
Record |
|
|
|
|
|
FUNDAMENTAL LARGE CAP CORE FUND |
|
I |
|
CHARLES SCHWAB & CO INC MUTUAL FUNDS DEPT
101 MONTGOMERY ST SAN FRANCISCO CA 94104-4151 |
|
10.05% |
|
Record |
91
|
|
|
|
|
|
|
|
|
Fund Name |
|
Share Class |
|
Name and Address |
|
Percentage
Owned |
|
Type of Ownership |
FUNDAMENTAL LARGE CAP CORE FUND |
|
I |
|
SPECIAL CUSTODY ACCOUNT FOR THE EXCLUSIVE BENEFIT OF CUSTOMERS OF
UBS FINANCIAL SERVICES INC 1000 HARBOR BLVD
WEEHAWKEN NJ 07086-6761 |
|
8.29% |
|
Record |
|
|
|
|
|
FUNDAMENTAL LARGE CAP CORE FUND |
|
I |
|
WELLS FARGO CLEARING SERVICES, LLC SPECIAL
CUSTODY ACCT FOR THE EXCLUSIVE BENEFIT OF CUSTOMER 2801 MARKET ST
SAINT LOUIS MO 63103-2523 |
|
7.17% |
|
Record |
|
|
|
|
|
FUNDAMENTAL LARGE CAP CORE FUND |
|
I |
|
RAYMOND JAMES OMNIBUS FOR MUTUAL FUNDS HOUSE
ACCT FIRM 880 CARILLON PKWY ST PETERSBURG FL
33716-1100 |
|
5.33% |
|
Record |
|
|
|
|
|
FUNDAMENTAL LARGE CAP CORE FUND |
|
I |
|
PERSHING LLC 1 PERSHING PLZ
JERSEY CITY NJ 07399-0001 |
|
5.03% |
|
Record |
|
|
|
|
|
FUNDAMENTAL LARGE CAP CORE FUND |
|
NAV |
|
JHF II MULTIMANAGER LIFESTYLE GROWTH
PORTFOLIO 200 BERKELEY ST
BOSTON MA 02116-5022 |
|
22.52% |
|
Beneficial |
|
|
|
|
|
FUNDAMENTAL LARGE CAP CORE FUND |
|
NAV |
|
JHVIT MANAGED VOLATILITY GROWTH PORTFOLIO 200
BERKELEY ST BOSTON MA 02116-5022 |
|
20.34% |
|
Beneficial |
|
|
|
|
|
FUNDAMENTAL LARGE CAP CORE FUND |
|
NAV |
|
JHF II MULTIMANAGER LIFESTYLE BALANCED PORTFOLIO
200 BERKELEY ST BOSTON MA 02116-5022 |
|
13.19% |
|
Beneficial |
|
|
|
|
|
FUNDAMENTAL LARGE CAP CORE FUND |
|
NAV |
|
JHF II MULTIMANAGER LIFESTYLE AGGRESSIVE PORTFOLIO
200 BERKELEY ST BOSTON MA 02116-5022 |
|
12.56% |
|
Beneficial |
|
|
|
|
|
FUNDAMENTAL LARGE CAP CORE FUND |
|
NAV |
|
JHVIT MANAGED VOLATILITY BALANCED PORTFOLIO 200
BERKELEY ST BOSTON MA 02116-5022 |
|
11.81% |
|
Beneficial |
|
|
|
|
|
FUNDAMENTAL LARGE CAP CORE FUND |
|
NAV |
|
JOHN HANCOCK LIFE INSURANCE CO USA 200 BERKELEY
ST BOSTON MA 02116-5022 |
|
5.23% |
|
Beneficial |
|
|
|
|
|
FUNDAMENTAL LARGE CAP CORE FUND |
|
R2 |
|
SAMMONS FINANCIAL NETWORK LLC 8300 MILLS CIVIC
PKWY WDM IA 50266-3833 |
|
19.23% |
|
Record |
|
|
|
|
|
FUNDAMENTAL LARGE CAP CORE FUND |
|
R2 |
|
MORGAN STANLEY SMITH BARNEY LLC FOR EXCLUSIVE
BENEFIT OF CUSTOMERS 1 NEW YORK PLAZA FL. 12 NEW YORK NY
10004-1965 |
|
10.08% |
|
Record |
|
|
|
|
|
FUNDAMENTAL LARGE CAP CORE FUND |
|
R2 |
|
SPECIAL CUSTODY ACCOUNT FOR THE EXCLUSIVE BENEFIT OF CUSTOMERS OF UBS FINANCIAL SERVICES INC
1000 HARBOR BLVD WEEHAWKEN NJ 07086-6761 |
|
8.90% |
|
Record |
92
|
|
|
|
|
|
|
|
|
Fund Name |
|
Share Class |
|
Name and Address |
|
Percentage
Owned |
|
Type of Ownership |
FUNDAMENTAL LARGE CAP CORE FUND |
|
R2 |
|
ASCENSUS TRUST COMPANY FBO GRACE CONSULTING SOLO 401K PO BOX 10758
FARGO ND 58106-0758 |
|
8.08% |
|
Beneficial |
|
|
|
|
|
FUNDAMENTAL LARGE CAP CORE FUND |
|
R2 |
|
ASCENSUS TRUST COMPANY FBO FRENCH PUB INC 401K PLAN
PO BOX 10758 FARGO ND 58106-0758 |
|
5.05% |
|
Beneficial |
|
|
|
|
|
FUNDAMENTAL LARGE CAP CORE FUND |
|
R4 |
|
EMPOWER TRUST FBO EMPLOYEE BENEFITS CLIENTS 401K
8515 E ORCHARD RD 2T2 GREENWOOD VILLAGE CO 80111-5002 |
|
83.36% |
|
Record |
|
|
|
|
|
FUNDAMENTAL LARGE CAP CORE FUND |
|
R4 |
|
ASCENSUS TRUST COMPANY FBO IMS INC RETIREMENT SAVINGS PLAN
PO BOX 10758 FARGO ND 58106-0758 |
|
7.13% |
|
Beneficial |
|
|
|
|
|
FUNDAMENTAL LARGE CAP CORE FUND |
|
R5 |
|
MID ATLANTIC TRUST COMPANY FBO FARMER,
FUQUA & HUFF, P C 401(K) P 1251 WATERFRONT PL STE 525 PITTSBURGH PA 15222-4228 |
|
40.33% |
|
Beneficial |
|
|
|
|
|
FUNDAMENTAL LARGE CAP CORE FUND |
|
R5 |
|
GREAT-WEST TRUST CO EMPLOYEE BENEFITS CLIENTS 401K
8515 E ORCHARD RD 2T2 GREENWOOD VILLAGE CO 80111-5002 |
|
14.81% |
|
Record |
|
|
|
|
|
FUNDAMENTAL LARGE CAP CORE FUND |
|
R5 |
|
ASCENSUS TRUST COMPANY FBO BTS RETIREMENT PLAN
PO BOX 10758 FARGO ND 58106-0758 |
|
10.73% |
|
Beneficial |
|
|
|
|
|
FUNDAMENTAL LARGE CAP CORE FUND |
|
R5 |
|
LISA & MILTON ANDERSON TTEE FBO C/O FASCORE
MERRIAM ANDERSON ARCHITECTS INC PSP 8515 E ORCHARD RD # 2T2
GREENWOOD VLG CO 80111-5002 |
|
9.42% |
|
Beneficial |
|
|
|
|
|
FUNDAMENTAL LARGE CAP CORE FUND |
|
R5 |
|
MID ATLANTIC TRUST COMPANY FBO SCHUSTER PHYSICAL THERAPY 401(K) PR
1251 WATERFRONT PL STE 525 PITTSBURGH PA 15222-4228 |
|
9.42% |
|
Beneficial |
|
|
|
|
|
FUNDAMENTAL LARGE CAP CORE FUND |
|
R5 |
|
MID ATLANTIC TRUST COMPANY FBO BHAKTA OPTOMETRIC INC 401(K) PROFIT
1251 WATERFRONT PL STE 525 PITTSBURGH PA 15222-4228 |
|
8.85% |
|
Beneficial |
|
|
|
|
|
FUNDAMENTAL LARGE CAP CORE FUND |
|
R6 |
|
EDWARD D JONES & CO FOR THE BENEFIT OF CUSTOMERS |
|
88.60% |
|
Record |
|
|
|
|
12555 MANCHESTER ROAD |
|
|
|
|
|
|
|
|
SAINT LOUIS MO 63131-3710 |
|
|
|
|
|
|
|
|
|
GLOBAL ENVIRONMENTAL OPPORTUNITIES FUND |
|
A |
|
JOHN HANCOCK LIFE & HEALTH INS CO CUSTODIAN FOR THE IRA OF |
|
25.57% |
|
Beneficial |
|
|
|
|
JOHN G WEINZIERL |
|
|
|
|
|
|
|
|
7015 6TH ST SE |
|
|
|
|
|
|
|
|
BUFFALO MN 55313-4642 |
|
|
|
|
93
|
|
|
|
|
|
|
|
|
Fund Name |
|
Share Class |
|
Name and Address |
|
Percentage
Owned |
|
Type of Ownership |
GLOBAL ENVIRONMENTAL OPPORTUNITIES FUND |
|
A |
|
JOHN HANCOCK LIFE & HEALTH INS CO CUSTODIAN FOR THE IRA OF |
|
19.72% |
|
Beneficial |
|
|
|
|
IRIS C ZUNIGA |
|
|
|
|
|
|
|
|
15520 ROLLING MEADOWS CIR |
|
|
|
|
|
|
|
|
WELLINGTON FL 33414-9086 |
|
|
|
|
GLOBAL ENVIRONMENTAL OPPORTUNITIES FUND |
|
A |
|
MANULIFE REINSURANCE (BERMUDA) LTD 200 BERKELEY ST |
|
16.23% |
|
Beneficial |
|
|
|
|
BOSTON MA 02116-5022 |
|
|
|
|
|
|
|
|
|
GLOBAL ENVIRONMENTAL OPPORTUNITIES FUND |
|
A |
|
JOHN HANCOCK LIFE & HEALTH INS CO CUSTODIAN FOR THE IRA OF |
|
10.57% |
|
Beneficial |
|
|
|
|
BENJAMIN A BURCK |
|
|
|
|
|
|
|
|
237 MAIN RD |
|
|
|
|
|
|
|
|
PHIPPSBURG ME 04562-4137 |
|
|
|
|
|
|
|
|
|
GLOBAL ENVIRONMENTAL OPPORTUNITIES FUND |
|
A |
|
JOHN HANCOCK LIFE & HEALTH INS CO CUSTODIAN FOR THE IRA OF |
|
6.16% |
|
Beneficial |
|
|
|
|
JANET L HARRINGTON |
|
|
|
|
|
|
|
|
86 FOREST RD |
|
|
|
|
|
|
|
|
SALISBURY MA 01952-1604 |
|
|
|
|
|
|
|
|
|
GLOBAL ENVIRONMENTAL OPPORTUNITIES FUND |
|
A |
|
JOHN HANCOCK LIFE & HEALTH INS CO CUSTODIAN FOR THE IRA OF |
|
5.06% |
|
Beneficial |
|
|
|
|
ERIC WORTH |
|
|
|
|
|
|
|
|
209 SLEEPY HOLLOW TRL |
|
|
|
|
|
|
|
|
FREDERICKSBRG VA 22405-6133 |
|
|
|
|
|
|
|
|
|
GLOBAL ENVIRONMENTAL OPPORTUNITIES FUND |
|
C |
|
MANULIFE REINSURANCE (BERMUDA) LTD 200 BERKELEY ST |
|
99.80% |
|
Beneficial |
|
|
|
|
BOSTON MA 02116-5022 |
|
|
|
|
|
|
|
|
|
GLOBAL ENVIRONMENTAL OPPORTUNITIES FUND |
|
I |
|
CETERA INVESTMENT SVCS (FBO) DONNA RIGGI |
|
58.22% |
|
Beneficial |
|
|
|
|
470 CROW LN |
|
|
|
|
|
|
|
|
BURNSVILLE NC 28714-0687 |
|
|
|
|
|
|
|
|
|
GLOBAL ENVIRONMENTAL OPPORTUNITIES FUND |
|
I |
|
MANULIFE REINSURANCE (BERMUDA) LTD 200 BERKELEY ST |
|
41.78% |
|
Beneficial |
|
|
|
|
BOSTON MA 02116-5022 |
|
|
|
|
|
|
|
|
|
GLOBAL ENVIRONMENTAL OPPORTUNITIES FUND |
|
R6 |
|
MANULIFE REINSURANCE (BERMUDA) LTD 200 BERKELEY ST |
|
60.12% |
|
Beneficial |
|
|
|
|
BOSTON MA 02116-5022 |
|
|
|
|
|
|
|
|
|
GLOBAL ENVIRONMENTAL OPPORTUNITIES FUND |
|
R6 |
|
BROWN BROTHERS HARRIMAN AND COMPANY AS CUSTODIAN |
|
39.88% |
|
Record |
|
|
|
|
140 BROADWAY |
|
|
|
|
|
|
|
|
NEW YORK NY 10005-1108 |
|
|
|
|
|
|
|
|
|
GLOBAL THEMATIC OPPORTUNITIES FUND |
|
A |
|
RAYMOND JAMES OMNIBUS FOR MUTUAL FUNDS |
|
14.38% |
|
Record |
|
|
|
|
HOUSE ACCT FIRM |
|
|
|
|
|
|
|
|
880 CARILLON PKWY |
|
|
|
|
|
|
|
|
ST PETERSBURG FL 33716-1100 |
|
|
|
|
|
|
|
|
|
GLOBAL THEMATIC OPPORTUNITIES FUND |
|
A |
|
PERSHING LLC 1 PERSHING PLZ |
|
11.43% |
|
Record |
|
|
|
|
JERSEY CITY NJ 07399-0001 |
|
|
|
|
|
|
|
|
|
GLOBAL THEMATIC OPPORTUNITIES FUND |
|
A |
|
JOHN HANCOCK LIFE & HEALTH INS CO CUSTODIAN FOR THE IRA OF |
|
8.95% |
|
Beneficial |
|
|
|
|
JONATHAN PINEO |
|
|
|
|
|
|
|
|
PO BOX 2242 |
|
|
|
|
|
|
|
|
PISMO BEACH CA 93448-2242 |
|
|
|
|
94
|
|
|
|
|
|
|
|
|
Fund Name |
|
Share Class |
|
Name and Address |
|
Percentage
Owned |
|
Type of Ownership |
GLOBAL THEMATIC OPPORTUNITIES FUND |
|
A |
|
JOHN HANCOCK LIFE & HEALTH INS CO CUSTODIAN FOR THE IRA OF |
|
8.34% |
|
Beneficial |
|
|
|
|
JEFFREY JONES |
|
|
|
|
|
|
|
|
131 HOUPE RIDGE LN |
|
|
|
|
|
|
|
|
STATESVILLE NC 28625-1663 |
|
|
|
|
|
|
|
|
|
GLOBAL THEMATIC OPPORTUNITIES FUND |
|
A |
|
MORGAN STANLEY SMITH BARNEY LLC FOR EXCLUSIVE BENEFIT OF CUSTOMERS |
|
6.16% |
|
Record |
|
|
|
|
1 NEW YORK PLAZA FL. 12 |
|
|
|
|
|
|
|
|
NEW YORK NY 10004-1965 |
|
|
|
|
|
|
|
|
|
GLOBAL THEMATIC OPPORTUNITIES FUND |
|
A |
|
JOHN HANCOCK LIFE & HEALTH INS CO CUSTODIAN FOR THE IRA OF |
|
5.31% |
|
Beneficial |
|
|
|
|
KEVIN GAUGLER |
|
|
|
|
|
|
|
|
155 MAURAN AVE |
|
|
|
|
|
|
|
|
E PROVIDENCE RI 02914-5230 |
|
|
|
|
|
|
|
|
|
GLOBAL THEMATIC OPPORTUNITIES FUND |
|
C |
|
MORGAN STANLEY SMITH BARNEY LLC FOR EXCLUSIVE BENEFIT OF CUSTOMERS |
|
67.88% |
|
Record |
|
|
|
|
1 NEW YORK PLAZA FL. 12 |
|
|
|
|
|
|
|
|
NEW YORK NY 10004-1965 |
|
|
|
|
|
|
|
|
|
GLOBAL THEMATIC OPPORTUNITIES FUND |
|
C |
|
JOHN HANCOCK LIFE & HEALTH INS CO CUSTODIAN FOR THE IRA OF |
|
22.36% |
|
Beneficial |
|
|
|
|
ROSEMARY B FINAN |
|
|
|
|
|
|
|
|
633 OLMSTEAD AVE APT 5G |
|
|
|
|
|
|
|
|
BRONX NY 10473-1709 |
|
|
|
|
|
|
|
|
|
GLOBAL THEMATIC OPPORTUNITIES FUND |
|
C |
|
AMERICAN ENTERPRISE INVESTMENT SVC 707 2ND AVE S |
|
8.85% |
|
Record |
|
|
|
|
MINNEAPOLIS MN 55402-2405 |
|
|
|
|
|
|
|
|
|
GLOBAL THEMATIC OPPORTUNITIES FUND |
|
I |
|
PERSHING LLC 1 PERSHING PLZ |
|
70.56% |
|
Record |
|
|
|
|
JERSEY CITY NJ 07399-0001 |
|
|
|
|
|
|
|
|
|
GLOBAL THEMATIC OPPORTUNITIES FUND |
|
I |
|
MORGAN STANLEY SMITH BARNEY LLC FOR EXCLUSIVE BENEFIT OF CUSTOMERS |
|
15.05% |
|
Record |
|
|
|
|
1 NEW YORK PLAZA FL. 12 |
|
|
|
|
|
|
|
|
NEW YORK NY 10004-1965 |
|
|
|
|
|
|
|
|
|
GLOBAL THEMATIC OPPORTUNITIES |
|
I |
|
CHARLES SCHWAB & CO INC |
|
11.59% |
|
Record |
FUND |
|
|
|
MUTUAL FUNDS DEPT |
|
|
|
|
|
|
|
|
101 MONTGOMERY ST |
|
|
|
|
|
|
|
|
SAN FRANCISCO CA 94104-4151 |
|
|
|
|
|
|
|
|
|
GLOBAL THEMATIC OPPORTUNITIES |
|
NAV |
|
JHF II MULTIMANAGER LIFESTYLE GROWTH |
|
51.68% |
|
Beneficial |
FUND |
|
|
|
PORTFOLIO |
|
|
|
|
|
|
|
|
200 BERKELEY ST |
|
|
|
|
|
|
|
|
BOSTON MA 02116-5022 |
|
|
|
|
|
|
|
|
|
GLOBAL THEMATIC OPPORTUNITIES FUND |
|
NAV |
|
JHF II MULTIMANAGER LIFESTYLE BALANCED PORTFOLIO |
|
24.25% |
|
Beneficial |
|
|
|
|
200 BERKELEY ST |
|
|
|
|
|
|
|
|
BOSTON MA 02116-5022 |
|
|
|
|
|
|
|
|
|
GLOBAL THEMATIC OPPORTUNITIES FUND |
|
NAV |
|
JHF II MULTIMANAGER LIFESTYLE AGGRESSIVE PORTFOLIO |
|
24.07% |
|
Beneficial |
|
|
|
|
200 BERKELEY ST |
|
|
|
|
|
|
|
|
BOSTON MA 02116-5022 |
|
|
|
|
|
|
|
|
|
GLOBAL THEMATIC OPPORTUNITIES FUND |
|
R6 |
|
JOHN HANCOCK LIFE INSURANCE CO USA 200 BERKELEY ST |
|
51.77% |
|
Beneficial |
|
|
|
|
BOSTON MA 02116-5022 |
|
|
|
|
95
|
|
|
|
|
|
|
|
|
Fund Name |
|
Share Class |
|
Name and Address |
|
Percentage
Owned |
|
Type of Ownership |
GLOBAL THEMATIC OPPORTUNITIES FUND |
|
R6 |
|
GLEN J GIBBONS TOD SUBJECT TO (STA) TOD
RULES 17 SEVEN OAKS DR BARRINGTON RI 02806-2356 |
|
48.23% |
|
Beneficial |
|
|
|
|
|
INFRASTRUCTURE FUND |
|
A |
|
EDWARD D JONES & CO FOR THE BENEFIT OF
CUSTOMERS 12555 MANCHESTER ROAD SAINT LOUIS MO
63131-3710 |
|
47.92% |
|
Record |
|
|
|
|
|
INFRASTRUCTURE FUND |
|
A |
|
NATIONAL FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL FUNDS 200 LIBERTY ST # 1WFC
NEW YORK NY 10281-1015 |
|
8.87% |
|
Record |
|
|
|
|
|
INFRASTRUCTURE FUND |
|
A |
|
AMERICAN ENTERPRISE INVESTMENT SVC 707 2ND AVE
S MINNEAPOLIS MN 55402-2405 |
|
8.43% |
|
Record |
|
|
|
|
|
INFRASTRUCTURE FUND |
|
A |
|
CHARLES SCHWAB & CO INC SPECIAL
CUSTODY ACCT FBO CUSTOMERS ATTN MUTUAL FUNDS 101 MONTGOMERY
ST SAN FRANCISCO CA 94104-4151 |
|
7.82% |
|
Record |
|
|
|
|
|
INFRASTRUCTURE FUND |
|
C |
|
NATIONAL FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL FUNDS 200 LIBERTY ST # 1WFC
NEW YORK NY 10281-1015 |
|
28.68% |
|
Record |
|
|
|
|
|
INFRASTRUCTURE FUND |
|
C |
|
AMERICAN ENTERPRISE INVESTMENT SVC 707 2ND AVE
S MINNEAPOLIS MN 55402-2405 |
|
21.69% |
|
Record |
|
|
|
|
|
INFRASTRUCTURE FUND |
|
C |
|
LPL FINANCIAL OMNIBUS CUSTOMER ACCOUNT
ATTN: MUTUAL FUND TRADING 4707 EXECUTIVE DRIVE
SAN DIEGO CA 92121-3091 |
|
17.43% |
|
Record |
|
|
|
|
|
INFRASTRUCTURE FUND |
|
C |
|
PERSHING LLC 1 PERSHING PLZ
JERSEY CITY NJ 07399-0001 |
|
9.33% |
|
Record |
|
|
|
|
|
INFRASTRUCTURE FUND |
|
C |
|
RAYMOND JAMES OMNIBUS FOR MUTUAL FUNDS
HOUSE ACCT FIRM 880 CARILLON PKWY
ST PETERSBURG FL 33716-1100 |
|
5.31% |
|
Record |
|
|
|
|
|
INFRASTRUCTURE FUND |
|
C |
|
WELLS FARGO CLEARING SERVICES, LLC SPECIAL
CUSTODY ACCT FOR THE EXCLUSIVE BENEFIT OF CUSTOMER 2801
MARKET ST SAINT LOUIS MO 63103-2523 |
|
5.14% |
|
Record |
|
|
|
|
|
INFRASTRUCTURE FUND |
|
I |
|
NATIONAL FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL FUNDS 200 LIBERTY ST # 1WFC
NEW YORK NY 10281-1015 |
|
21.64% |
|
Record |
96
|
|
|
|
|
|
|
|
|
Fund Name |
|
Share Class |
|
Name and Address |
|
Percentage
Owned |
|
Type of Ownership |
INFRASTRUCTURE FUND |
|
I |
|
CHARLES SCHWAB & CO INC MUTUAL FUNDS
DEPT 101 MONTGOMERY ST SAN FRANCISCO CA 94104-4151 |
|
15.49% |
|
Record |
|
|
|
|
|
INFRASTRUCTURE FUND |
|
I |
|
ATTN MUTUAL FUND ADMIN C/O LAIRD NORTON
SEI PRIVATE TRUST COMPANY 1 FREEDOM VALLEY DR
OAKS PA 19456-9989 |
|
15.44% |
|
Beneficial |
|
|
|
|
|
INFRASTRUCTURE FUND |
|
I |
|
AMERICAN ENTERPRISE INVESTMENT SVC 707 2ND AVE
S MINNEAPOLIS MN 55402-2405 |
|
10.43% |
|
Record |
|
|
|
|
|
INFRASTRUCTURE FUND |
|
I |
|
LPL FINANCIAL OMNIBUS CUSTOMER ACCOUNT
ATTN: MUTUAL FUND TRADING 4707 EXECUTIVE
DRIVE SAN DIEGO CA 92121-3091 |
|
10.28% |
|
Record |
|
|
|
|
|
INFRASTRUCTURE FUND |
|
I |
|
SPECIAL CUSTODY ACCOUNT FOR THE EXCLUSIVE
BENEFIT OF CUSTOMERS OF UBS FINANCIAL SERVICES INC 1000
HARBOR BLVD WEEHAWKEN NJ 07086-6761 |
|
8.01% |
|
Record |
|
|
|
|
|
INFRASTRUCTURE FUND |
|
I |
|
PERSHING LLC 1 PERSHING PLZ
JERSEY CITY NJ 07399-0001 |
|
6.65% |
|
Record |
|
|
|
|
|
INFRASTRUCTURE FUND |
|
NAV |
|
JHF II ALTERNATIVE ASSET ALLOCATION 200
BERKELEY ST BOSTON MA 02116-5022 |
|
43.36% |
|
Beneficial |
|
|
|
|
|
INFRASTRUCTURE FUND |
|
NAV |
|
JHF II MULTIMANAGER LIFESTYLE CONSERVATIVE PORTFOLIO
200 BERKELEY ST BOSTON MA 02116-5022 |
|
41.63% |
|
Beneficial |
|
|
|
|
|
INFRASTRUCTURE FUND |
|
NAV |
|
JHF II MULTIMANAGER LIFESTYLE
MODERATEPORTFOLIO 200 BERKELEY ST
BOSTON MA 02116-5022 |
|
15.00% |
|
Beneficial |
|
|
|
|
|
INFRASTRUCTURE FUND |
|
R6 |
|
EDWARD D JONES & CO FOR THE BENEFIT OF
CUSTOMERS 12555 MANCHESTER ROAD SAINT LOUIS MO
63131-3710 |
|
79.93% |
|
Record |
|
|
|
|
|
INFRASTRUCTURE FUND |
|
R6 |
|
NORTHERN TRUST AS CUSTODIAN FBO VAI INTERNAL US
EQUITIES PO BOX 92956 CHICAGO IL 60675-2956 |
|
16.72% |
|
Beneficial |
|
|
|
|
|
INTERNATIONAL DYNAMIC GROWTH FUND |
|
C |
|
AMERICAN ENTERPRISE INVESTMENT SVC 707 2ND AVE
S MINNEAPOLIS MN 55402-2405 |
|
30.54% |
|
Record |
|
|
|
|
|
INTERNATIONAL DYNAMIC GROWTH FUND |
|
C |
|
NATIONAL FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL FUNDS 200 LIBERTY ST # 1 WFC
NEW YORK NY 10281-1015 |
|
27.60% |
|
Record |
97
|
|
|
|
|
|
|
|
|
Fund Name |
|
Share Class |
|
Name and Address |
|
Percentage
Owned |
|
Type of Ownership |
INTERNATIONAL DYNAMIC GROWTH FUND |
|
C |
|
PERSHING LLC 1 PERSHING PLZ
JERSEY CITY NJ 07399-0001 |
|
12.45% |
|
Record |
|
|
|
|
|
INTERNATIONAL DYNAMIC GROWTH FUND |
|
C |
|
JOHN HANCOCK LIFE & HEALTH INS CO
HORN & HORN PA SIMPLE IRA FBO DEBRA A HORN
3552 DOVECOTE MEADOW LN DAVIE FL 33328-7303 |
|
9.99% |
|
Beneficial |
|
|
|
|
|
INTERNATIONAL DYNAMIC GROWTH FUND |
|
C |
|
JOHN HANCOCK LIFE & HEALTH INS CO
HORN & HORN PA SIMPLE IRA FBO MERRICK L HORN
3552 DOVECOTE MEADOW LN DAVIE FL 33328-7303 |
|
5.68% |
|
Beneficial |
|
|
|
|
|
INTERNATIONAL DYNAMIC GROWTH FUND |
|
C |
|
TD AMERITRADE INC FEBO OUR CUSTOMERS
PO BOX 2226 OMAHA NE 68103-2226 |
|
5.42% |
|
Record |
|
|
|
|
|
INTERNATIONAL DYNAMIC GROWTH FUND |
|
I |
|
ATTN MUTUAL FUND OPS MAC & CO
500 GRANT ST RM 151-1010 PITTSBURGH PA 15219-2502 |
|
50.07% |
|
Beneficial |
|
|
|
|
|
INTERNATIONAL DYNAMIC GROWTH FUND |
|
I |
|
AMERICAN ENTERPRISE INVESTMENT SVC 707 2ND AVE
S MINNEAPOLIS MN 55402-2405 |
|
11.06% |
|
Record |
|
|
|
|
|
INTERNATIONAL DYNAMIC GROWTH FUND |
|
I |
|
NATIONAL FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL FUNDS 200 LIBERTY ST # 1WFC
NEW YORK NY 10281-1015 |
|
11.05% |
|
Record |
|
|
|
|
|
INTERNATIONAL DYNAMIC GROWTH FUND |
|
I |
|
ATTN MUTUAL FUND OPERATIONS MAC&CO
500 GRANT ST RM 151-1010 PITTSBURGH PA 15219-2502 |
|
8.98% |
|
Beneficial |
|
|
|
|
|
INTERNATIONAL DYNAMIC GROWTH FUND |
|
I |
|
PERSHING LLC 1 PERSHING PLZ
JERSEY CITY NJ 07399-0001 |
|
6.16% |
|
Record |
|
|
|
|
|
INTERNATIONAL DYNAMIC GROWTH FUND |
|
I |
|
CHARLES SCHWAB & CO INC SPECIAL
CUSTODY ACCT FBO CUSTOMERS ATTN MUTUAL FUNDS 101 MONTGOMERY
ST SAN FRANCISCO CA 94104-4151 |
|
5.43% |
|
Record |
|
|
|
|
|
INTERNATIONAL DYNAMIC GROWTH FUND |
|
NAV |
|
JHF II MULTIMANAGER LIFESTYLE GROWTH
PORTFOLIO 200 BERKELEY ST
BOSTON MA 02116-5022 |
|
34.15% |
|
Beneficial |
|
|
|
|
|
INTERNATIONAL DYNAMIC GROWTH FUND |
|
NAV |
|
JHF II MULTIMANAGER LIFESTYLE BALANCED
PORTFOLIO 200 BERKELEY ST
BOSTON MA 02116-5022 |
|
25.02% |
|
Beneficial |
|
|
|
|
|
INTERNATIONAL DYNAMIC GROWTH FUND |
|
NAV |
|
JHF II MULTIMANAGER LIFESTYLE AGGRESSIVE
PORTFOLIO 200 BERKELEY ST
BOSTON MA 02116-5022 |
|
15.22% |
|
Beneficial |
98
|
|
|
|
|
|
|
|
|
Fund Name |
|
Share Class |
|
Name and Address |
|
Percentage
Owned |
|
Type of Ownership |
INTERNATIONAL DYNAMIC GROWTH FUND |
|
R6 |
|
NORTHERN TRUST CO CUST FBO UNIDEL PO BOX
92956 CHICAGO IL 60675-2956 |
|
99.89% |
|
Beneficial |
|
|
|
|
|
REGIONAL BANK FUND |
|
A |
|
NATIONAL FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL FUNDS 200 LIBERTY ST # 1WFC
NEW YORK NY 10281-1015 |
|
11.03% |
|
Record |
|
|
|
|
|
REGIONAL BANK FUND |
|
A |
|
MLPF& S FOR THE SOLE BENEFIT OF ITS
CUSTOMERS ATTN: FUND ADMINISTRATION 4800 DEER LAKE DRIVE EAST
2ND FL JACKSONVILLE FL 32246-6484 |
|
7.65% |
|
Record |
|
|
|
|
|
REGIONAL BANK FUND |
|
A |
|
WELLS FARGO CLEARING SERVICES, LLC SPECIAL
CUSTODY ACCT FOR THE EXCLUSIVE BENEFIT OF CUSTOMER 2801
MARKET ST SAINT LOUIS MO 63103-2523 |
|
6.76% |
|
Record |
|
|
|
|
|
REGIONAL BANK FUND |
|
A |
|
MORGAN STANLEY SMITH BARNEY LLC FOR EXCLUSIVE
BENEFIT OF CUSTOMERS 1 NEW YORK PLAZA FL. 12 NEW YORK NY
10004-1965 |
|
6.72% |
|
Record |
|
|
|
|
|
REGIONAL BANK FUND |
|
A |
|
EDWARD D JONES & CO FOR THE BENEFIT OF
CUSTOMERS 12555 MANCHESTER ROAD SAINT LOUIS MO
63131-3710 |
|
6.13% |
|
Record |
|
|
|
|
|
REGIONAL BANK FUND |
|
C |
|
WELLS FARGO CLEARING SERVICES, LLC SPECIAL
CUSTODY ACCT FOR THE EXCLUSIVE BENEFIT OF CUSTOMER 2801
MARKET ST SAINT LOUIS MO 63103-2523 |
|
19.70% |
|
Record |
|
|
|
|
|
REGIONAL BANK FUND |
|
C |
|
RAYMOND JAMES OMNIBUS FOR MUTUAL FUNDS
HOUSE ACCT FIRM 880 CARILLON PKWY
ST PETERSBURG FL 33716-1100 |
|
17.84% |
|
Record |
|
|
|
|
|
REGIONAL BANK FUND |
|
C |
|
PERSHING LLC 1 PERSHING PLZ
JERSEY CITY NJ 07399-0001 |
|
10.89% |
|
Record |
|
|
|
|
|
REGIONAL BANK FUND |
|
C |
|
MORGAN STANLEY SMITH BARNEY LLC FOR EXCLUSIVE
BENEFIT OF CUSTOMERS 1 NEW YORK PLAZA FL. 12 NEW YORK NY
10004-1965 |
|
10.50% |
|
Record |
|
|
|
|
|
REGIONAL BANK FUND |
|
C |
|
NATIONAL FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL FUNDS 200 LIBERTY ST # 1WFC
NEW YORK NY 10281-1015 |
|
7.10% |
|
Record |
|
|
|
|
|
REGIONAL BANK FUND |
|
C |
|
AMERICAN ENTERPRISE INVESTMENT SVC 707 2ND AVE
S MINNEAPOLIS MN 55402-2405 |
|
6.62% |
|
Record |
99
|
|
|
|
|
|
|
|
|
Fund Name |
|
Share Class |
|
Name and Address |
|
Percentage
Owned |
|
Type of Ownership |
REGIONAL BANK FUND |
|
C |
|
LPL FINANCIAL OMNIBUS CUSTOMER ACCOUNT
ATTN: MUTUAL FUND TRADING 4707 EXECUTIVE DRIVE
SAN DIEGO CA 92121-3091 |
|
6.62% |
|
Record |
|
|
|
|
|
REGIONAL BANK FUND |
|
I |
|
MLPF& S FOR THE SOLE BENEFIT OF ITS
CUSTOMERS ATTN FUND ADMINISTRATION 4800 DEERLAKE DRIVE EAST
2ND FL JACKSONVILLE FL 32246-6484 |
|
16.84% |
|
Record |
|
|
|
|
|
REGIONAL BANK FUND |
|
I |
|
NATIONAL FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL FUNDS 200 LIBERTY ST # 1WFC
NEW YORK NY 10281-1015 |
|
13.05% |
|
Record |
|
|
|
|
|
REGIONAL BANK FUND |
|
I |
|
RAYMOND JAMES OMNIBUS FOR MUTUAL FUNDS
HOUSE ACCT FIRM 880 CARILLON PKWY
ST PETERSBURG FL 33716-1100 |
|
10.46% |
|
Record |
|
|
|
|
|
REGIONAL BANK FUND |
|
I |
|
WELLS FARGO CLEARING SERVICES, LLC SPECIAL
CUSTODY ACCT FOR THE EXCLUSIVE BENEFIT OF CUSTOMER 2801
MARKET ST SAINT LOUIS MO 63103-2523 |
|
8.82% |
|
Record |
|
|
|
|
|
REGIONAL BANK FUND |
|
I |
|
LPL FINANCIAL OMNIBUS CUSTOMER ACCOUNT
ATTN: MUTUAL FUND TRADING 4707 EXECUTIVE DRIVE
SAN DIEGO CA 92121-3091 |
|
8.58% |
|
Record |
|
|
|
|
|
REGIONAL BANK FUND |
|
I |
|
AMERICAN ENTERPRISE INVESTMENT SVC 707 2ND AVE
S MINNEAPOLIS MN 55402-2405 |
|
7.48% |
|
Record |
|
|
|
|
|
REGIONAL BANK FUND |
|
I |
|
CHARLES SCHWAB & CO INC MUTUAL FUNDS
DEPT 101 MONTGOMERY ST SAN FRANCISCO CA 94104-4151 |
|
7.31% |
|
Record |
|
|
|
|
|
REGIONAL BANK FUND |
|
I |
|
MORGAN STANLEY SMITH BARNEY LLC FOR EXCLUSIVE
BENEFIT OF CUSTOMERS 1 NEW YORK PLAZA FL. 12 NEW YORK NY
10004-1965 |
|
6.61% |
|
Record |
|
|
|
|
|
REGIONAL BANK FUND |
|
I |
|
PERSHING LLC 1 PERSHING PLZ
JERSEY CITY NJ 07399-0001 |
|
6.13% |
|
Record |
|
|
|
|
|
REGIONAL BANK FUND |
|
I |
|
SPECIAL CUSTODY ACCOUNT FOR THE EXCLUSIVE BENEFIT OF CUSTOMERS OF UBS FINANCIAL SERVICES INC
1000 HARBOR BLVD WEEHAWKEN NJ 07086-6761 |
|
5.09% |
|
Record |
100
|
|
|
|
|
|
|
|
|
Fund Name |
|
Share Class |
|
Name and Address |
|
Percentage
Owned |
|
Type of Ownership |
REGIONAL BANK FUND |
|
R6 |
|
DCGT AS TTEE AND/OR CUST FBO PLIC VARIOUS
RETIREMENT PLANS ATTN NPIO TRADE DESK OMNIBUS
711 HIGH ST DES MOINES IA 50392-0001 |
|
34.23% |
|
Beneficial |
|
|
|
|
|
REGIONAL BANK FUND |
|
R6 |
|
EDWARD D JONES & CO FOR THE BENEFIT OF
CUSTOMERS 12555 MANCHESTER ROAD SAINT LOUIS MO
63131-3710 |
|
19.07% |
|
Record |
|
|
|
|
|
REGIONAL BANK FUND |
|
R6 |
|
MANULIFE ASSET MANAGEMENT (US) LLC 2021
MANULIFE INVESTMENT MANAGEMENT ABCD 197 CLARENDON ST
BOSTON MA 02116-5010 |
|
11.38% |
|
Record |
|
|
|
|
|
REGIONAL BANK FUND |
|
R6 |
|
MANULIFE INVESTMENT MANAGEMENT (US) LLC
2019-2020 MIM US DEF INCENTIVE PLAN 197 CLARENDON ST
BOSTON MA 02116-5010 |
|
10.70% |
|
Record |
|
|
|
|
|
REGIONAL BANK FUND |
|
R6 |
|
EMPOWER TRUST FBO FBO CERTAIN RETIREMENT
PLANS 8515 E ORCHARD ROAD 2T2 GREENWOOD VLG CO
80111-5002 |
|
6.78% |
|
Record |
|
|
|
|
|
REGIONAL BANK FUND |
|
R6 |
|
MANULIFE INVESTMENT MANAGEMENT (US) 2020
MANULIFE INVESTMENT MANAGEMENT ABCD 197 CLARENDON ST
BOSTON MA 02116-5010 |
|
5.89% |
|
Record |
|
|
|
|
|
SEAPORT LONG/SHORT FUND |
|
A |
|
MORGAN STANLEY SMITH BARNEY LLC FOR EXCLUSIVE
BENEFIT OF CUSTOMERS 1 NEW YORK PLAZA FL. 12 NEW YORK NY
10004-1965 |
|
59.33% |
|
Record |
|
|
|
|
|
SEAPORT LONG/SHORT FUND |
|
A |
|
CHARLES SCHWAB & CO INC SPECIAL
CUSTODY ACCT FBO CUSTOMERS ATTN MUTUAL FUNDS 101 MONTGOMERY
ST SAN FRANCISCO CA 94104-4151 |
|
6.28% |
|
Record |
|
|
|
|
|
SEAPORT LONG/SHORT FUND |
|
A |
|
MLPF& S FOR THE SOLE BENEFIT OF ITS
CUSTOMERS ATTN: FUND ADMINISTRATION 4800 DEERLAKE DRIVE EAST
2ND FL JACKSONVILLE FL 32246-6484 |
|
6.17% |
|
Record |
|
|
|
|
|
SEAPORT LONG/SHORT FUND |
|
A |
|
PERSHING LLC 1 PERSHING PLZ
JERSEY CITY NJ 07399-0001 |
|
5.02% |
|
Record |
|
|
|
|
|
SEAPORT LONG/SHORT FUND |
|
C |
|
MORGAN STANLEY SMITH BARNEY LLC FOR EXCLUSIVE
BENEFIT OF CUSTOMERS 1 NEW YORK PLAZA FL. 12 NEW YORK NY
10004-1965 |
|
45.26% |
|
Record |
101
|
|
|
|
|
|
|
|
|
Fund Name |
|
Share Class |
|
Name and Address |
|
Percentage
Owned |
|
Type of Ownership |
SEAPORT LONG/SHORT FUND |
|
C |
|
MLPF& S FOR THE SOLE BENEFIT OF ITS
CUSTOMERS ATTN: FUND ADMINISTRATION 4800 DEERLAKE DRIVE EAST 2ND FL JACKSONVILLE FL 32246-6484 |
|
21.88% |
|
Record |
|
|
|
|
|
SEAPORT LONG/SHORT FUND |
|
C |
|
NATIONAL FINANCIAL SERVICES LLC FEBO CUSTOMERS MUTUAL FUNDS 200 LIBERTY ST # 1WFC NEW YORK NY 10281-1015 |
|
12.00% |
|
Record |
|
|
|
|
|
SEAPORT LONG/SHORT FUND |
|
C |
|
WELLS FARGO CLEARING SERVICES, LLC SPECIAL CUSTODY ACCT FOR THE EXCLUSIVE BENEFIT OF CUSTOMER 2801 MARKET ST SAINT LOUIS MO 63103-2523 |
|
8.90% |
|
Record |
|
|
|
|
|
SEAPORT LONG/SHORT FUND |
|
I |
|
MLPF& S FOR THE SOLE BENEFIT OF ITS CUSTOMERS ATTN: FUND ADMINISTRATION 4800 DEER LAKE DR E FL 2 JACKSONVILLE FL 32246-6484 |
|
37.98% |
|
Record |
|
|
|
|
|
SEAPORT LONG/SHORT FUND |
|
I |
|
MORGAN STANLEY SMITH BARNEY LLC FOR EXCLUSIVE BENEFIT OF CUSTOMERS 1 NEW YORK PLAZA FL. 12 NEW YORK NY 10004-1965 |
|
27.00% |
|
Record |
|
|
|
|
|
SEAPORT LONG/SHORT FUND |
|
I |
|
NATIONAL FINANCIAL SERVICES LLC FEBO CUSTOMERS MUTUAL FUNDS 200 LIBERTY ST # 1WFC NEW YORK NY 10281-1015 |
|
11.50% |
|
Record |
|
|
|
|
|
SEAPORT LONG/SHORT FUND |
|
I |
|
CHARLES SCHWAB & CO INC MUTUAL FUNDS DEPT 101 MONTGOMERY ST SAN FRANCISCO CA 94104-4151 |
|
9.88% |
|
Record |
|
|
|
|
|
SEAPORT LONG/SHORT FUND |
|
NAV |
|
JHF II ALTERNATIVE ASSET ALLOCATION 200 BERKELEY ST BOSTON MA 02116-5022 |
|
100.00% |
|
Beneficial |
|
|
|
|
|
SEAPORT LONG/SHORT FUND |
|
R6 |
|
NORTHERN TRUST AS CUSTODIAN FBO UNITED STATES OLYMPIC ENDOWMENT PO BOX 92956 CHICAGO IL 60675-2956 |
|
36.47% |
|
Beneficial |
|
|
|
|
|
SEAPORT LONG/SHORT FUND |
|
R6 |
|
CAPINCO C/O US BANK NA 1555 N RIVERCENTER DR STE 302 MILWAUKEE WI 53212-3958 |
|
35.92% |
|
Beneficial |
|
|
|
|
|
SEAPORT LONG/SHORT FUND |
|
R6 |
|
SEI PRIVATE TRUST COMPANY C/O MELLON BANK ATTN MUTUAL FUNDS ADMIN 1 FREEDOM VALLEY DR OAKS PA 19456-9989 |
|
7.03% |
|
Beneficial |
|
|
|
|
|
SEAPORT LONG/SHORT FUND |
|
R6 |
|
STRATEVEST CO OMNIBUS ACCOUNT PO BOX 1034 CHERRY HILL NJ 08034-0009 |
|
5.56% |
|
Record |
102
|
|
|
|
|
|
|
|
|
Fund Name |
|
Share Class |
|
Name and Address |
|
Percentage
Owned |
|
Type of Ownership |
SEAPORT LONG/SHORT FUND |
|
R6 |
|
C/O M & T BANK SEI PRIVATE TRUST
COMPANY 1 FREEDOM VALLEY DR OAKS PA 19456-9989 |
|
5.27% |
|
Beneficial |
|
|
|
|
|
SEAPORT LONG/SHORT FUND |
|
R6 |
|
BAND & CO C/O US BANK NA
PO BOX 1787 MILWAUKEE WI 53201-1787 |
|
5.22% |
|
Beneficial |
|
|
|
|
|
SMALL CAP CORE FUND |
|
A |
|
EDWARD D JONES & CO FOR THE BENEFIT OF
CUSTOMERS 12555 MANCHESTER ROAD SAINT LOUIS MO
63131-3710 |
|
60.41% |
|
Record |
|
|
|
|
|
SMALL CAP CORE FUND |
|
A |
|
CHARLES SCHWAB & CO INC SPECIAL
CUSTODY ACCOUNT FOR BENE OF CUST ATTN MUTUAL FUNDS 101
MONTGOMERY ST SAN FRANCISCO CA 94104-4151 |
|
5.39% |
|
Record |
|
|
|
|
|
SMALL CAP CORE FUND |
|
A |
|
NATIONAL FINANCIAL SERVICES LLC FEBO CUSTOMERS
MUTUAL FUNDS 200 LIBERTY ST # 1WFC
NEW YORK NY 10281-1015 |
|
5.02% |
|
Record |
|
|
|
|
|
SMALL CAP CORE FUND |
|
I |
|
AMERICAN ENTERPRISE INVESTMENT SVC 707 2ND AVE
S MINNEAPOLIS MN 55402-2405 |
|
20.52% |
|
Record |
|
|
|
|
|
SMALL CAP CORE FUND |
|
I |
|
LPL FINANCIAL OMNIBUS CUSTOMER ACCOUNT
ATTN: MUTUAL FUND TRADING 4707 EXECUTIVE DRIVE
SAN DIEGO CA 92121-3091 |
|
19.76% |
|
Record |
|
|
|
|
|
SMALL CAP CORE FUND |
|
I |
|
NATIONAL FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL FUNDS 200 LIBERTY ST # 1WFC
NEW YORK NY 10281-1015 |
|
19.36% |
|
Record |
|
|
|
|
|
SMALL CAP CORE FUND |
|
I |
|
CHARLES SCHWAB & CO INC SPECIAL
CUSTODY ACCOUNT FOR BENE OF CUST ATTN MUTUAL FUNDS
101 MONTGOMERY ST SAN FRANCISCO CA 94104-4151 |
|
12.25% |
|
Record |
|
|
|
|
|
SMALL CAP CORE FUND |
|
I |
|
RAYMOND JAMES OMNIBUS FOR MUTUAL FUNDS
HOUSE ACCT FIRM 880 CARILLON PKWY
ST PETERSBURG FL 33716-1100 |
|
8.32% |
|
Record |
|
|
|
|
|
SMALL CAP CORE FUND |
|
I |
|
PERSHING LLC 1 PERSHING PLZ
JERSEY CITY NJ 07399-0001 |
|
7.54% |
|
Record |
103
|
|
|
|
|
|
|
|
|
Fund Name |
|
Share Class |
|
Name and Address |
|
Percentage
Owned |
|
Type of Ownership |
SMALL CAP CORE FUND |
|
NAV |
|
JHF II MULTIMANAGER LIFESTYLE GROWTH PORTFOLIO
200 BERKELEY ST BOSTON MA 02116-5022 |
|
47.16% |
|
Beneficial |
|
|
|
|
|
SMALL CAP CORE FUND |
|
NAV |
|
JHF II MULTIMANAGER LIFESTYLE BALANCED PORTFOLIO
200 BERKELEY ST BOSTON MA 02116-5022 |
|
30.50% |
|
Beneficial |
|
|
|
|
|
SMALL CAP CORE FUND |
|
NAV |
|
JHF II MULTIMANAGER LIFESTYLE AGGRESSIVE PORTFOLIO
200 BERKELEY ST BOSTON MA 02116-5022 |
|
20.15% |
|
Beneficial |
|
|
|
|
|
SMALL CAP CORE FUND |
|
R6 |
|
EDWARD D JONES & CO FOR THE BENEFIT OF
CUSTOMERS 12555 MANCHESTER ROAD SAINT LOUIS MO
63131-3710 |
|
85.53% |
|
Record |
|
|
|
|
|
U.S. GLOBAL LEADERS GROWTH FUND |
|
A |
|
EDWARD D JONES & CO FOR THE BENEFIT OF
CUSTOMERS 12555 MANCHESTER ROAD SAINT LOUIS MO
63131-3710 |
|
39.18% |
|
Record |
|
|
|
|
|
U.S. GLOBAL LEADERS GROWTH FUND |
|
A |
|
NATIONAL FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL FUNDS 200 LIBERTY ST # 1WFC
NEW YORK NY 10281-1015 |
|
8.22% |
|
Record |
|
|
|
|
|
U.S. GLOBAL LEADERS GROWTH FUND |
|
C |
|
PERSHING LLC 1 PERSHING PLZ
JERSEY CITY NJ 07399-0001 |
|
13.76% |
|
Record |
|
|
|
|
|
U.S. GLOBAL LEADERS GROWTH FUND |
|
C |
|
NATIONAL FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL FUNDS 200 LIBERTY ST # 1WFC
NEW YORK NY 10281-1015 |
|
12.67% |
|
Record |
|
|
|
|
|
U.S. GLOBAL LEADERS GROWTH FUND |
|
C |
|
AMERICAN ENTERPRISE INVESTMENT SVC 707 2ND AVE
S MINNEAPOLIS MN 55402-2405 |
|
12.13% |
|
Record |
|
|
|
|
|
U.S. GLOBAL LEADERS GROWTH FUND |
|
C |
|
EDWARD D JONES & CO FOR THE BENEFIT OF
CUSTOMERS 12555 MANCHESTER ROAD SAINT LOUIS MO
63131-3710 |
|
8.41% |
|
Record |
|
|
|
|
|
U.S. GLOBAL LEADERS GROWTH FUND |
|
C |
|
RAYMOND JAMES OMNIBUS FOR MUTUAL FUNDS
HOUSE ACCT FIRM 880 CARILLON PKWY
ST PETERSBURG FL 33716-1100 |
|
6.82% |
|
Record |
|
|
|
|
|
U.S. GLOBAL LEADERS GROWTH FUND |
|
C |
|
WELLS FARGO CLEARING SERVICES, LLC SPECIAL CUSTODY ACCT FOR THE EXCLUSIVE BENEFIT OF CUSTOMER
2801 MARKET ST SAINT LOUIS MO 63103-2523 |
|
6.68% |
|
Record |
104
|
|
|
|
|
|
|
|
|
Fund Name |
|
Share Class |
|
Name and Address |
|
Percentage Owned |
|
Type of Ownership |
U.S. GLOBAL LEADERS GROWTH FUND |
|
C |
|
LPL FINANCIAL OMNIBUS CUSTOMER ACCOUNT
ATTN: MUTUAL FUND TRADING 4707 EXECUTIVE DRIVE SAN DIEGO CA
92121-3091 |
|
6.62% |
|
Record |
|
|
|
|
|
U.S. GLOBAL LEADERS GROWTH FUND |
|
C |
|
MORGAN STANLEY SMITH BARNEY LLC FOR EXCLUSIVE BENEFIT OF CUSTOMERS
1 NEW YORK PLAZA FL. 12 NEW YORK NY 10004-1965 |
|
6.52% |
|
Record |
|
|
|
|
|
U.S. GLOBAL LEADERS GROWTH FUND |
|
I |
|
AMERICAN ENTERPRISE INVESTMENT SVC 707 2ND AVE
S MINNEAPOLIS MN 55402-2405 |
|
70.82% |
|
Record |
|
|
|
|
|
U.S. GLOBAL LEADERS GROWTH FUND |
|
I |
|
NATIONAL FINANCIAL SERVICES LLC FEBO
CUSTOMERS MUTUAL FUNDS 200 LIBERTY ST # 1WFC
NEW YORK NY 10281-1015 |
|
9.11% |
|
Record |
|
|
|
|
|
U.S. GLOBAL LEADERS GROWTH FUND |
|
R2 |
|
MLPF& S FOR THE SOLE BENEFIT OF ITS CUSTOMERS
ATTN: FUND ADMINISTRATION 4800 DEER LAKE DRIVE EAST 2ND FL
JACKSONVILLE FL 32246-6484 |
|
16.46% |
|
Record |
|
|
|
|
|
U.S. GLOBAL LEADERS GROWTH FUND |
|
R2 |
|
SPECIAL CUSTODY ACCOUNT FOR THE EXCLUSIVE BENEFIT OF CUSTOMERS OF
UBS FINANCIAL SERVICES INC 1000 HARBOR BLVD
WEEHAWKEN NJ 07086-6761 |
|
15.50% |
|
Record |
|
|
|
|
|
U.S. GLOBAL LEADERS GROWTH FUND |
|
R2 |
|
ASCENSUS TRUST COMPANY FBO INLAND PAPER COMPANY
401 K PLAN 7 PO BOX 10758 FARGO ND 58106-0758 |
|
13.84% |
|
Beneficial |
|
|
|
|
|
U.S. GLOBAL LEADERS GROWTH FUND |
|
R2 |
|
ASCENSUS TRUSTCO FBO HAW KEY LLC CO RETPLAN
PO BOX 10758 FARGO ND 58106-0758 |
|
5.03% |
|
Beneficial |
|
|
|
|
|
U.S. GLOBAL LEADERS GROWTH FUND |
|
R6 |
|
EDWARD D JONES & CO FOR THE BENEFIT OF
CUSTOMERS 12555 MANCHESTER ROAD SAINT LOUIS MO
63131-3710 |
|
83.96% |
|
Record |
|
|
|
|
|
U.S. GLOBAL LEADERS GROWTH FUND |
|
R6 |
|
CHARLES SCHWAB & CO INC MUTUAL FUNDS
DEPT 101 MONTGOMERY ST SAN FRANCISCO CA 94104-4151 |
|
10.77% |
|
Record |
INVESTMENT MANAGEMENT ARRANGEMENTS AND OTHER SERVICES
Advisory Agreement
The Advisor serves as investment advisor to the funds and is responsible for the supervision of the subadvisor services to the funds pursuant to the Advisory
Agreement. Pursuant to the Advisory Agreement and subject to general oversight by the Board, the Advisor manages and supervises the investment operations and business affairs of the funds. The Advisor provides the funds with all necessary office
facilities and equipment and any personnel necessary for the oversight and/or conduct of the investment operations of the funds. The Advisor also coordinates and oversees the services provided to the funds under other agreements, including
custodial, administrative and transfer agency services. Additionally, the Advisor provides certain administrative and other non-advisory services to the funds pursuant to a separate Service Agreement or
Accounting and Legal Services Agreement, as discussed below.
105
The Advisor is responsible for overseeing and implementing a funds investment program and provides a
variety of advisory oversight and investment research services, including: (i) monitoring fund portfolio compositions and risk profiles and (ii) evaluating fund investment characteristics, such as investment strategies, and recommending to
the Board potential enhancements to such characteristics. The Advisor provides management and transition services associated with certain fund events (e.g., strategy, portfolio manager or subadvisor changes).
The Advisor has the responsibility to oversee the subadvisors and recommend to the Board: (i) the hiring, termination, and replacement of a subadvisor;
and (ii) the allocation and reallocation of a funds assets among multiple subadvisors, when appropriate. In this capacity, the Advisor negotiates with potential subadvisors and, once retained, among other things: (i) monitors the
compliance of the subadvisor with the investment objectives and related policies of the funds; (ii) reviews the performance of the subadvisor; and (iii) reports periodically on such performance to the Board. The Advisor utilizes the
expertise of a team of investment professionals in manager research and oversight who provide these research and monitoring services.
The Advisor is not
liable for any error of judgment or mistake of law or for any loss suffered by a fund in connection with the matters to which the Advisory Agreement relates, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part
of the Advisor in the performance of its duties or from its reckless disregard of its obligations and duties under the Advisory Agreement.
Under the
Advisory Agreement, a fund may use the name John Hancock or any name derived from or similar to it only for so long as the Advisory Agreement or any extension, renewal or amendment thereof remains in effect. If the Advisory Agreement is
no longer in effect, the fund (to the extent that it lawfully can) will cease to use such name or any other name indicating that it is advised by or otherwise connected with the Advisor. In addition, the Advisor or JHLICO U.S.A., a subsidiary of
Manulife Financial, may grant the nonexclusive right to use the name John Hancock or any similar name to any other corporation or entity, including but not limited to any investment company of which the JHLICO U.S.A. or any subsidiary or
affiliate thereof or any successor to the business of any subsidiary or affiliate thereof shall be the investment advisor.
The continuation of the
Advisory Agreement and the Distribution Agreement (discussed below) were each approved by all Trustees. The Advisory Agreement and the Distribution Agreement will continue in effect from year to year, provided that each Agreements continuance
is approved annually both: (i) by the holders of a majority of the outstanding voting securities of the Trusts or by the Trustees; and (ii) by a majority of the Trustees who are not parties to the Agreement, or interested
persons of any such parties. Each of these Agreements may be terminated on 60 days written notice by any party or by a vote of a majority of the outstanding voting securities of the funds and will terminate automatically if assigned.
Each Trust bears all costs of its organization and operation, including but not limited to expenses of preparing, printing and mailing all
shareholders reports, notices, prospectuses, proxy statements and reports to regulatory agencies; expenses relating to the issuance, registration and qualification of shares; government fees; interest charges; expenses of furnishing to
shareholders their account statements; taxes; expenses of redeeming shares; brokerage and other expenses connected with the execution of portfolio securities transactions; expenses pursuant to a funds plan of distribution; fees and expenses of
custodians including those for keeping books and accounts maintaining a committed line of credit and calculating the NAV of shares; fees and expenses of transfer agents and dividend disbursing agents; legal, accounting, financial, management, tax
and auditing fees and expenses of the funds (including an allocable portion of the cost of the Advisors employees rendering such services to the funds); the compensation and expenses of officers and Trustees (other than persons serving as
President or Trustee who are otherwise affiliated with the funds the Advisor or any of their affiliates); expenses of Trustees and shareholders meetings; trade association memberships; insurance premiums; and any extraordinary expenses.
Securities held by a fund also may be held by other funds or investment advisory clients for which the Advisor, the subadvisor or their respective
affiliates provide investment advice. Because of different investment objectives or other factors, a particular security may be bought for one or more funds or clients when one or more are selling the same security. If opportunities for purchase or
sale of securities by the Advisor or subadvisor for a fund or for other funds or clients for which the Advisor or subadvisor renders investment advice arise for consideration at or about the same time, transactions in such securities will be made,
insofar as feasible, for the respective fund, funds or clients in a manner deemed equitable to all of them. To the extent that transactions on behalf of more than one client of the Advisor or subadvisor or their respective affiliates may increase
the demand for securities being purchased or the supply of securities being sold, there may be an adverse effect on price.
Advisor Compensation. As
compensation for its advisory services under each Advisory Agreement, the Advisor receives a fee from the relevant Trust computed separately for each relevant fund. The amount of the advisory fee is determined by applying the daily equivalent of an
annual fee rate to the net assets of the fund. Each fund other than U.S. Global Leaders Growth Fund pays the advisory fee daily. U.S. Global Leaders Growth Fund pays the advisory fee monthly in arrears. The management fees a fund currently is
obligated to pay the Advisor are as set forth in its Prospectus.
From time to time, the Advisor may reduce its fee or make other arrangements to limit a
funds expenses to a specified percentage of average daily net assets. The Advisor retains the right to re-impose a fee and recover any other payments to the extent that, during the fiscal year in which
such expense limitation is in place, the funds annual expenses fall below this limit.
The following table shows the advisory fees that each fund
incurred and paid to the Advisor for the fiscal periods ended October 31, 2022, October 31, 2021, and October 31, 2020.
106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advisory Fee Paid in Fiscal Year Ended |
|
Fund |
|
2022
($) |
|
|
2021
($) |
|
|
2020
($) |
|
Balanced Fund |
|
|
|
|
|
|
|
|
|
|
|
|
Gross Fees |
|
|
24,532,304 |
|
|
|
22,036,075 |
|
|
|
14,762,658 |
|
Waivers |
|
|
(350,248 |
) |
|
|
(336,113 |
) |
|
|
(177,307 |
) |
Net Fees |
|
|
24,182,056 |
|
|
|
21,699,962 |
|
|
|
14,585,351 |
|
Classic Value Fund |
|
|
|
|
|
|
|
|
|
|
|
|
Gross Fees |
|
|
18,821,239 |
|
|
|
17,634,411 |
|
|
|
13,412,683 |
|
Waivers |
|
|
(220,284 |
) |
|
|
(212,222 |
) |
|
|
(127,607 |
) |
Net Fees |
|
|
18,600,955 |
|
|
|
17,422,189 |
|
|
|
13,285,076 |
|
Disciplined Value International Fund |
|
|
|
|
|
|
|
|
|
|
|
|
Gross Fees |
|
|
15,852,603 |
|
|
|
16,744,077 |
|
|
|
12,574,516 |
|
Waivers |
|
|
(167,763 |
) |
|
|
(189,537 |
) |
|
|
(114,074 |
) |
Net Fees |
|
|
15,684,840 |
|
|
|
16,554,540 |
|
|
|
12,460,442 |
|
Diversified Macro Fund |
|
|
|
|
|
|
|
|
|
|
|
|
Gross Fees |
|
|
7,259,874 |
|
|
|
4,480,753 |
|
|
|
2,760,017 |
|
Waivers |
|
|
(48,444 |
) |
|
|
(33,042 |
) |
|
|
(301,252 |
) |
Net Fees |
|
|
7,211,430 |
|
|
|
4,447,711 |
|
|
|
2,458,765 |
|
Emerging Markets Equity Fund |
|
|
|
|
|
|
|
|
|
|
|
|
Gross Fees |
|
|
18,667,933 |
|
|
|
19,129,441 |
|
|
|
17,605,967 |
|
Waivers |
|
|
(3,193,045 |
) |
|
|
(3,225,474 |
) |
|
|
(344,375 |
) |
Net Fees |
|
|
15,474,888 |
|
|
|
15,903,967 |
|
|
|
17,261,592 |
|
ESG International Equity Fund |
|
|
|
|
|
|
|
|
|
|
|
|
Gross Fees |
|
|
1,070,957 |
|
|
|
776,929 |
|
|
|
492,617 |
|
Waivers |
|
|
(264,088 |
) |
|
|
(206,344 |
) |
|
|
(178,490 |
) |
Net Fees |
|
|
806,869 |
|
|
|
570,585 |
|
|
|
314,127 |
|
ESG Large Cap Core Fund |
|
|
|
|
|
|
|
|
|
|
|
|
Gross Fees |
|
|
1,304,520 |
|
|
|
1,020,309 |
|
|
|
481,491 |
|
Waivers |
|
|
(253,931 |
) |
|
|
(202,848 |
) |
|
|
(178,551 |
) |
Net Fees |
|
|
1,050,589 |
|
|
|
817,461 |
|
|
|
302,940 |
|
Financial Industries Fund |
|
|
|
|
|
|
|
|
|
|
|
|
Gross Fees |
|
|
5,255,421 |
|
|
|
5,595,419 |
|
|
|
4,854,155 |
|
Waivers |
|
|
(56,855 |
) |
|
|
(63,631 |
) |
|
|
(44,766 |
) |
Net Fees |
|
|
5,198,566 |
|
|
|
5,531,788 |
|
|
|
4,809,389 |
|
Fundamental Large Cap Core Fund |
|
|
|
|
|
|
|
|
|
|
|
|
Gross Fees |
|
|
33,576,173 |
|
|
|
35,836,578 |
|
|
|
30,111,321 |
|
Waivers |
|
|
(450,583 |
) |
|
|
(512,932 |
) |
|
|
(354,302 |
) |
Net Fees |
|
|
33,125,590 |
|
|
|
35,323,646 |
|
|
|
29,757,019 |
|
Global Environmental Opportunities Fund |
|
|
|
|
|
|
|
|
|
|
|
|
Gross Fees |
|
|
114,065 |
|
|
|
23,777 |
1 |
|
|
N/A |
|
Waivers |
|
|
(114,065 |
) |
|
|
(23,777 |
)1 |
|
|
N/A |
|
Net Fees |
|
|
0 |
|
|
|
0 |
1 |
|
|
N/A |
|
Global Thematic Opportunities Fund |
|
|
|
|
|
|
|
|
|
|
|
|
Gross Fees |
|
|
2,692,806 |
|
|
|
3,197,693 |
|
|
|
2,846,425 |
|
Waivers |
|
|
(180,333 |
) |
|
|
(310,971 |
) |
|
|
(396,512 |
) |
Net Fees |
|
|
2,512,473 |
|
|
|
2,886,722 |
|
|
|
2,449,913 |
|
107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advisory Fee Paid in Fiscal Year Ended |
|
Fund |
|
2022
($) |
|
|
2021
($) |
|
|
2020
($) |
|
Infrastructure Fund |
|
|
|
|
|
|
|
|
|
|
|
|
Gross Fees |
|
|
5,700,725 |
|
|
|
4,300,517 |
|
|
|
3,284,586 |
|
Waivers |
|
|
(60,570 |
) |
|
|
(49,241 |
) |
|
|
(64,299 |
) |
Net Fees |
|
|
5,640,155 |
|
|
|
4,251,276 |
|
|
|
3,220,287 |
|
International Dynamic Growth Fund |
|
|
|
|
|
|
|
|
|
|
|
|
Gross Fees |
|
|
2,605,992 |
|
|
|
2,400,957 |
|
|
|
2,344,015 |
|
Waivers |
|
|
(289,115 |
) |
|
|
(276,656 |
) |
|
|
(350,799 |
) |
Net Fees |
|
|
2,316,877 |
|
|
|
2,124,301 |
|
|
|
1,993,216 |
|
Regional Bank Fund |
|
|
|
|
|
|
|
|
|
|
|
|
Gross Fees |
|
|
9,685,980 |
|
|
|
9,104,606 |
|
|
|
8,379,028 |
|
Waivers |
|
|
(104,444 |
) |
|
|
(104,089 |
) |
|
|
(78,398 |
) |
Net Fees |
|
|
9,581,536 |
|
|
|
9,000,517 |
|
|
|
8,300,630 |
|
Seaport Long/Short Fund |
|
|
|
|
|
|
|
|
|
|
|
|
Gross Fees |
|
|
14,769,479 |
|
|
|
14,709,000 |
|
|
|
10,654,718 |
|
Waivers |
|
|
(84,305 |
) |
|
|
(88,541 |
) |
|
|
(51,513 |
) |
Net Fees |
|
|
14,685,174 |
|
|
|
14,620,459 |
|
|
|
10,603,205 |
|
Small Cap Core Fund |
|
|
|
|
|
|
|
|
|
|
|
|
Gross Fees |
|
|
13,615,295 |
|
|
|
10,945,153 |
|
|
|
5,462,598 |
|
Waivers |
|
|
(143,505 |
) |
|
|
(117,003 |
) |
|
|
(45,949 |
) |
Net Fees |
|
|
13,471,790 |
|
|
|
10,828,150 |
|
|
|
5,416,649 |
|
U.S. Global Leaders Growth Fund |
|
|
|
|
|
|
|
|
|
|
|
|
Gross Fees |
|
|
17,377,480 |
|
|
|
17,828,057 |
|
|
|
12,733,117 |
|
Waivers |
|
|
(197,897 |
) |
|
|
(217,259 |
) |
|
|
(124,419 |
) |
Net Fees |
|
|
17,179,583 |
|
|
|
17,610,798 |
|
|
|
12,608,698 |
|
1 |
Period from July 21, 2021 (commencement of operations) to October 31, 2021. |
Service Agreement and Accounting and Legal Services Agreement
Pursuant to (i) a Service Agreement with Capital Series (with respect to Classic Value Fund only), Investment Trust (all series), and Investment Trust II
(all series); and (ii) an Accounting and Legal Services Agreement with Capital Series (with respect to U.S. Global Leaders Growth Fund only), the Advisor is responsible for providing, at the expense of the applicable Trust or Trusts, certain
financial, accounting and administrative services such as legal services, tax, accounting, valuation, financial reporting and performance, compliance and service provider oversight. Pursuant to the Service Agreement, the Advisor shall determine,
subject to Board approval, the expenses to be reimbursed by each fund, including an overhead allocation. Pursuant to the Accounting and Legal Services Agreement, such expenses shall not exceed levels that are fair and reasonable in light of the
usual and customary charges made by others for services of the same nature and quality. The payments under the Service Agreement and the Accounting and Legal Services Agreement are not intended to provide a profit to the Advisor. Instead, the
Advisor provides the services under the Service Agreement and the Accounting and Legal Services Agreement because it also provides advisory services under the Advisory Agreement. Pursuant to each Agreement, the reimbursement shall be calculated and
paid monthly in arrears.
The Advisor is not liable for any error of judgment or mistake of law or for any loss suffered by a fund in connection with the
matters to which the Service Agreement or the Accounting and Legal Services Agreement relates, except losses resulting from willful misfeasance, bad faith or negligence by the Advisor in the performance of its duties or from reckless disregard by
the Advisor of its obligations under either Agreement.
The Service Agreement and the Accounting and Legal Services Agreement each had an initial term of
two years, and continues thereafter so long as such continuance is specifically approved at least annually by a majority of the Board and a majority of the Independent Trustees. The Trust, on behalf of any or all of the funds, or the Advisor may
terminate either Agreement at any time without penalty on 60 days written notice to the other party. Either Agreement may be amended by mutual written agreement of the parties, without obtaining shareholder approval.
The following table shows the fees that each fund incurred and paid to the Advisor for non-advisory services pursuant
to the Service Agreement or the Accounting and Legal Services Agreement, as applicable, for the fiscal periods ended October 31, 2022, October 31, 2021, and October 31, 2020.
108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service Fee Paid in Fiscal Year Ended October 31, |
|
Fund |
|
2022
($) |
|
|
2021
($) |
|
|
2020
($) |
|
Balanced Fund |
|
|
656,812 |
|
|
|
596,437 |
|
|
|
481,801 |
|
Classic Value Fund |
|
|
400,334 |
|
|
|
384,124 |
|
|
|
331,239 |
|
Disciplined Value International Fund |
|
|
314,413 |
|
|
|
337,412 |
|
|
|
309,106 |
|
Diversified Macro Fund |
|
|
99,481 |
|
|
|
56,789 |
|
|
|
46,184 |
|
Emerging Markets Equity Fund |
|
|
311,504 |
|
|
|
328,276 |
|
|
|
358,010 |
|
ESG International Equity Fund |
|
|
19,472 |
|
|
|
14,718 |
|
|
|
10,495 |
|
ESG Large Cap Core Fund |
|
|
26,023 |
|
|
|
22,064 |
|
|
|
11,875 |
|
Financial Industries Fund |
|
|
104,111 |
|
|
|
114,109 |
|
|
|
113,968 |
|
Fundamental Large Cap Core Fund |
|
|
834,166 |
|
|
|
914,213 |
|
|
|
923,269 |
|
Global Environmental Opportunities Fund |
|
|
2,393 |
|
|
|
527 |
1 |
|
|
N/A |
|
Global Thematic Opportunities Fund |
|
|
50,032 |
|
|
|
60,821 |
|
|
|
66,932 |
|
Infrastructure Fund |
|
|
117,811 |
|
|
|
87,997 |
|
|
|
78,796 |
|
International Dynamic Growth Fund |
|
|
50,183 |
|
|
|
45,880 |
|
|
|
57,356 |
|
Regional Bank Fund |
|
|
196,959 |
|
|
|
186,099 |
|
|
|
205,852 |
|
Seaport Long/Short Fund |
|
|
160,008 |
|
|
|
158,425 |
|
|
|
136,245 |
|
Small Cap Core Fund |
|
|
260,091 |
|
|
|
210,318 |
|
|
|
125,021 |
|
U.S. Global Leaders Growth Fund |
|
|
368,806 |
|
|
|
388,639 |
|
|
|
333,767 |
|
1 |
Period from July 21, 2021 (commencement of operations) to October 31, 2021. |
Subadvisory Agreements
Duties of the Subadvisors.
Under the terms of each of the current subadvisory agreements (each a Subadvisory Agreement and collectively, the Subadvisory Agreements), the subadvisors manage the investment and reinvestment of the assets of the funds,
subject to the supervision of the Board and the Advisor. Each subadvisor formulates a continuous investment program for each such fund consistent with its investment objectives and policies outlined in the Prospectus. Each subadvisor implements such
programs by purchases and sales of securities and regularly reports to the Advisor and the Board with respect to the implementation of such programs. Each subadvisor, at its expense, furnishes all necessary investment and management facilities,
including salaries of personnel required for it to execute its duties, as well as administrative facilities, including bookkeeping, clerical personnel, and equipment necessary for the conduct of the investment affairs of the assigned funds.
Additional information about the funds portfolio managers, including other accounts managed, ownership of fund shares, and compensation structure, can be found at Appendix B to this SAI.
The Advisor has delegated to the subadvisors the responsibility to vote all proxies relating to the securities held by the funds. See Other Services
Proxy Voting below, for additional information.
The Subadvisory Agreement for Classic Value Fund provides that the subadvisor will not be
liable for any losses, claims, damages, liabilities or litigation (including legal and other expenses) incurred or suffered by the Advisor, the relevant Trust, the fund or any of their affiliates as a result of any error of judgment or mistake of
law by the subadvisor with respect to the fund, except that nothing in the respective Agreement shall waive or limit the liability of the subadvisor for any and all losses, claims, damages, liabilities or litigation (including reasonable legal and
other expenses) to which the Advisor, the fund or any affiliated persons may become subject under any statute, at common law or otherwise arising out of or based on (a) the subadvisors causing the fund to be in violation of any applicable
federal or state law, rule or regulation or any investment policy or restriction set forth in the funds Prospectus or this SAI or any written policies, procedures, guidelines or instructions provided in writing to the subadvisor by the
Trustees or the Advisor, (b) the subadvisors causing the fund to fail to satisfy the requirements of Subchapter M of the Code for qualification as a RIC, or (c) the subadvisors willful misfeasance, bad faith or gross negligence
generally in the performance of its duties hereunder or its reckless disregard of its obligations and duties under the respective Agreement.
Subadvisory Fees. As compensation for their services, each subadvisor receives fees from the Advisor computed separately for each fund.
Subadvisory Arrangement for Emerging Markets Equity Fund. In rendering investment advisory services to Emerging Markets Equity Fund, Manulife IM (US),
the subadvisor to the fund, may use the portfolio management, research and other resources of Manulife Investment Management (Singapore) Pte. Ltd. (Manulife IM (Singapore)) and Manulife Asset Management (Europe) Limited (Manulife
IM (Europe)), each an affiliate of Manulife IM (US) (each a Participating Affiliate, and together, Participating Affiliates). The Participating Affiliates are not registered with the SEC as investment advisors under the
Advisers Act. Manulife IM (US) has entered into separate memoranda of understanding and supervisory agreements (collectively, the Participating Affiliate Agreements) with each Participating Affiliate pursuant to which each Participating
Affiliate is considered a participating affiliate of the subadvisor as that term is used in relief granted by the staff of the SEC allowing U.S. registered investment advisors to use portfolio management or research resources of advisory affiliates
subject to the supervision of a registered advisor. Investment professionals from the Participating Affiliates may render portfolio management, research and other services to Emerging Markets Equity Fund under the Participating Affiliate Agreements
and are subject to supervision by Manulife IM (US).
109
Affiliated Subadvisors. The Advisor and the Affiliated Subadvisors are controlled by Manulife Financial.
Advisory arrangements involving Affiliated Subadvisors and investment in affiliated underlying funds present certain conflicts of interest. For
each fund subadvised by an Affiliated Subadvisor, the Affiliated Subadvisor will benefit from increased subadvisory fees. In addition, MFC will benefit, not only from the net advisory fee retained by the Advisor but also from the subadvisory fee
paid by the Advisor to the Affiliated Subadvisor. Consequently, the Affiliated Subadvisors and MFC may be viewed as benefiting financially from: (i) the appointment of or continued service of Affiliated Subadvisors to manage the funds; and
(ii) the allocation of the assets of the funds to the funds having Affiliated Subadvisors. Similarly, the Advisor may be viewed as having a conflict of interest in the allocation of the assets of the funds to affiliated underlying funds as
opposed to unaffiliated underlying funds. However, both the Advisor, in recommending to the Board the appointment or continued service of Affiliated Subadvisors, and such Subadvisors, in allocating the assets of the funds, have a fiduciary duty to
act in the best interests of the funds and their shareholders. The Advisor has a duty to recommend that Affiliated Subadvisors be selected, retained, or replaced only when the Advisor believes it is in the best interests of shareholders. In
addition, under the Trusts Manager of Managers exemptive order received from the SEC, each Trust is required to obtain shareholder approval of any subadvisory agreement appointing an Affiliated Subadvisor as the subadvisor except
as otherwise permitted by applicable SEC No-Action Letter to a fund (in the case of a new fund, the initial sole shareholder of the fund, an affiliate of the Advisor and MFC, may provide this approval).
Similarly, each Affiliated Subadvisor has a duty to allocate assets to Affiliated Subadvised funds, and affiliated underlying funds more broadly, only when it believes this is in shareholders best interests and without regard for the financial
incentives inherent in making such allocations. The Independent Trustees are aware of and monitor these conflicts of interest.
Additional Information
Applicable to Subadvisory Agreements
Term of each Subadvisory Agreement. Each Subadvisory Agreement will initially continue in effect as to a
fund for a period no more than two years from the date of its execution (or the execution of an amendment making the agreement applicable to that fund) and thereafter if such continuance is specifically approved at least annually either: (a) by
the Trustees; or (b) by the vote of a majority of the outstanding voting securities of that fund. In either event, such continuance also shall be approved by the vote of the majority of the Trustees who are not interested persons of any party
to the Subadvisory Agreements.
Any required shareholder approval of any continuance of any of the Subadvisory Agreements shall be effective with respect
to any fund if a majority of the outstanding voting securities of that fund votes to approve such continuance, even if such continuance may not have been approved by a majority of the outstanding voting securities of: (a) any other series of
the applicable Trust affected by the Subadvisory Agreement; or (b) all of the series of the applicable Trust.
Failure of Shareholders to Approve
Continuance of any Subadvisory Agreement. If the outstanding voting securities of any fund fail to approve any continuance of any Subadvisory Agreement, the party may continue to act as investment subadvisor with respect to such fund pending the
required approval of the continuance of the Subadvisory Agreement or a new agreement with either that party or a different subadvisor, or other definitive action.
Termination of a Subadvisory Agreement. A Subadvisory Agreement may be terminated at any time without the payment of any penalty on 60 days
written notice to the other party or parties to the Agreement, and also to the relevant fund. The following parties may terminate a Subadvisory Agreement:
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with respect to any fund, a majority of the outstanding voting securities of such fund; |
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the applicable subadvisor. |
A Subadvisory Agreement will automatically terminate in the event of its assignment or upon termination of the Advisory Agreement.
Amendments to the Subadvisory Agreements. A Subadvisory Agreement may be amended by the parties to the agreement, provided that the amendment is
approved by the vote of a majority of the outstanding voting securities of the relevant fund (except as noted below) and by the vote of a majority of the Independent Trustees. The required shareholder approval of any amendment to a Subadvisory
Agreement shall be effective with respect to any fund if a majority of the outstanding voting securities of that fund votes to approve the amendment, even if the amendment may not have been approved by a majority of the outstanding voting securities
of: (a) any other series of the applicable Trust affected by the amendment; or (b) all the series of the applicable Trust.
With respect to
Classic Value Fund, Disciplined Value International Fund, Diversified Macro Fund, Emerging Markets Equity Fund, ESG International Equity Fund, ESG Large Cap Core Fund, Financial Industries Fund, Fundamental Large Cap Core Fund, Global Environmental
Opportunities Fund, Global Thematic Opportunities Fund, Infrastructure Fund, International Dynamic Growth Fund, Seaport Long/Short Fund, Small Cap Core Fund, and U.S. Global Leaders Growth Fund, as noted under Whos who Investment
advisor in the Prospectus, an SEC order permits the Advisor, subject to approval by the Board and a majority of the Independent Trustees, to appoint a subadvisor (other than an Affiliated Subadvisor), or change a subadvisory fee or otherwise
amend a subadvisory agreement (other than with an Affiliated Subadvisor) pursuant to an agreement that is not approved by shareholders.
110
Diversified Macro Fund, through a Subsidiary (its separate wholly-owned subsidiary organized under the laws of
the Cayman Islands), seeks exposure to the commodities markets, including by investing in certain commodity-linked instruments. The Subsidiary has entered into a separate advisory agreement with the Advisor for the management of the
Subsidiarys portfolio. In turn, the Advisor has entered into a separate contract with the funds subadvisor whereby the subadvisor provides day-to-day
management of the Subsidiarys investments, subject to the supervision of the Advisor.
Other Services
Proxy Voting. Based on the terms of the current Subadvisory Agreements, each Trusts proxy voting policies and procedures (the Trust
Procedures) delegate to the subadvisors of each of its funds the responsibility to vote all proxies relating to securities held by that fund in accordance with the subadvisors proxy voting policies and procedures. A subadvisor has a duty
to vote or not vote such proxies in the best interests of the fund it subadvises and its shareholders, and to avoid the influence of conflicts of interest. In the event that the Advisor assumes day-to-day management responsibilities for the fund, each Trusts Procedures delegate proxy voting responsibilities to the Advisor. Complete descriptions of the Trust Procedures and the proxy voting
procedures of the Advisor and the subadvisors are set forth in Appendix C to this SAI.
It is possible that conflicts of interest could arise for a
subadvisor when voting proxies. Such conflicts could arise, for example, when a subadvisor or its affiliate has an existing business relationship with the issuer of the security being voted or with a third party that has an interest in the vote. A
conflict of interest also could arise when a fund, its Advisor or principal underwriter or any of their affiliates has an interest in the vote.
In the
event a subadvisor becomes aware of a material conflict of interest, the Trust Procedures generally require the subadvisor to follow any conflicts procedures that may be included in the subadvisors proxy voting procedures. Although conflicts
procedures will vary among subadvisors, they generally include one or more of the following:
(a) |
voting pursuant to the recommendation of a third party voting service; |
(b) |
voting pursuant to pre-determined voting guidelines; or
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(c) |
referring voting to a special compliance or oversight committee. |
The specific conflicts procedures of each subadvisor are set forth in its proxy voting procedures included in Appendix C. While these conflicts procedures may
reduce the influence of conflicts of interest on proxy voting, such influence will not necessarily be eliminated.
Although a subadvisor may have a duty
to vote all proxies on behalf of the fund that it subadvises, it is possible that the subadvisor may not be able to vote proxies under certain circumstances. For example, it may be impracticable to translate in a timely manner voting materials that
are written in a foreign language or to travel to a foreign country when voting in person rather than by proxy is required. In addition, if the voting of proxies for shares of a security prohibits a subadvisor from trading the shares in the
marketplace for a period of time, the subadvisor may determine that it is not in the best interests of the fund to vote the proxies. In addition, consistent with its duty to vote proxies in the best interests of a funds shareholders, a
subadvisor may refrain from voting one or more of the funds proxies if the subadvisor believes that the costs of voting such proxies may outweigh the potential benefits. For example, the subadvisor may choose not to recall securities where the
subadvisor believes the costs of voting may outweigh the potential benefit of voting. A subadvisor also may choose not to recall securities that have been loaned in order to vote proxies for shares of the security since the fund would lose security
lending income if the securities were recalled.
Information regarding how a fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30th is available:
(1) |
without charge, on www.jhinvestments.com and (2) on the SECs website at sec.gov.
|
DISTRIBUTION AGREEMENTS
Each Trust has a Distribution Agreement with John
Hancock Investment Management Distributors LLC, an affiliate of the Advisor, located at 200 Berkeley Street, Boston, Massachusetts 02116. Under the Distribution Agreement, the Distributor is obligated to use its best efforts to sell shares of each
class of the funds. Shares of the funds also are sold by selected broker-dealers, banks and registered investment advisors (Selling Firms) that have entered into selling agreements with the Distributor. These Selling Firms are authorized
to designate other intermediaries to receive purchase and redemption orders on behalf of the funds. The Distributor accepts orders for the purchase of the shares of the funds that are continually offered at the NAV next determined, plus any
applicable sales charge. Class I, Class NAV, Class R2, Class R4, Class R5, and Class R6 shares of the funds are offered without a front-end sales load or CDSC. In connection with
the sale of Class A shares, the Distributor and Selling Firms typically receive compensation from a sales charge imposed at the time of sale. In the case of both Class A shares and Class C shares where a CDSC is applicable, the
Selling Firms receive compensation immediately, but the Distributor is compensated on a deferred basis. Neither the Distributor nor Selling Firms receive any compensation with respect to the sale of Class R6 shares of the funds.
With respect to share classes other than Class R6, the Distributor may make, either from Rule 12b-1 distribution
fees, if applicable, or out of its own resources, additional payments to financial intermediaries (firms), such as broker-dealers, banks, registered investment advisors, independent financial planners, and retirement plan administrators. These
payments are sometimes referred to as revenue sharing. No such payments are made with respect to the funds Class R6 shares.
The
funds do not issue share certificates. Shares are electronically recorded. The Board reserves the right to change or waive a funds minimum investment requirements and to reject any order to purchase shares (including purchase by exchange)
when, in the judgment of the Advisor or the relevant subadvisor, such rejection is in the funds best interest.
Underwriting Commissions. The
following table shows the underwriting commissions that the Distributor charged and retained with respect to transactions in Class A and Class C shares of the funds for the fiscal periods ended October 31, 2022, October 31, 2021, and
October 31, 2020.
111
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Fiscal Period Ended October 31, |
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Fund |
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Share Class |
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2022
($) |
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2021
($) |
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2020
($) |
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Amount Charged |
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Amount Retained |
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Amount Charged |
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Amount Retained |
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Amount Charged |
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Amount Retained |
|
Balanced Fund |
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Class A |
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|
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1,981,211 |
|
|
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208,930 |
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2,907,820 |
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314,664 |
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2,163,080 |
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224,127 |
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Class C |
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22,552 |
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0 |
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21,812 |
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0 |
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34,100 |
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0 |
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Classic Value Fund |
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Class A |
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97,054 |
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19,349 |
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111,498 |
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18,762 |
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119,571 |
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19,799 |
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Class C |
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1,436 |
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0 |
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372 |
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0 |
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827 |
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0 |
|
Disciplined Value International Fund |
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Class A |
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61,515 |
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10,535 |
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72,679 |
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12,268 |
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91,946 |
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15,498 |
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Class C |
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1,508 |
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|
0 |
|
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|
146 |
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0 |
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|
308 |
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|
0 |
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Diversified Macro Fund |
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Class A |
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66,211 |
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|
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11,798 |
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|
335 |
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50 |
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0 |
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0 |
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Class C |
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134 |
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0 |
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0 |
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|
0 |
|
|
|
0 |
|
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|
0 |
|
Emerging Markets Equity Fund |
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Class A |
|
|
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71,945 |
|
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12,771 |
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121,601 |
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20,656 |
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3,729 |
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|
586 |
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Class C |
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|
764 |
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0 |
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0 |
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0 |
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0 |
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0 |
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ESG International Equity Fund |
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Class A |
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19,597 |
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3,434 |
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14,559 |
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2,443 |
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4,867 |
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848 |
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Class C |
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0 |
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0 |
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0 |
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0 |
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0 |
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0 |
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ESG Large Cap Core Fund |
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Class A |
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92,114 |
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14,843 |
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113,343 |
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18,921 |
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14,568 |
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2,394 |
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Class C |
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1,195 |
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0 |
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200 |
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0 |
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0 |
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0 |
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Financial Industries Fund |
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Class A |
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91,638 |
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17,392 |
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99,992 |
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16,284 |
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88,139 |
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14,145 |
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Class C |
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1,407 |
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0 |
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926 |
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0 |
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1,993 |
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0 |
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Fundamental Large Cap Core Fund |
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Class A |
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676,595 |
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115,769 |
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798,749 |
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132,468 |
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700,348 |
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115,463 |
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Class C |
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5,002 |
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0 |
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2,749 |
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0 |
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4,523 |
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0 |
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Global Environmental Opportunities Fund |
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Class A |
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46 |
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7 |
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0 |
1 |
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0 |
1 |
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N/A |
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N/A |
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Class C |
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0 |
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0 |
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|
0 |
1 |
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|
0 |
1 |
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N/A |
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N/A |
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Global Thematic Opportunities Fund |
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Class A |
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3,051 |
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|
677 |
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3,089 |
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|
493 |
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1,203 |
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|
207 |
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Class C |
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0 |
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0 |
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0 |
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0 |
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0 |
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0 |
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Infrastructure Fund |
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Class A |
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215,454 |
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33,771 |
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568,496 |
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93,908 |
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175,486 |
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29,277 |
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Class C |
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2,540 |
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0 |
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180 |
|
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0 |
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2,640 |
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|
0 |
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International Dynamic Growth Fund |
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|
Class A |
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8,207 |
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1,619 |
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15,736 |
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3,114 |
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8,485 |
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|
995 |
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Class C |
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|
424 |
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0 |
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|
0 |
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0 |
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|
0 |
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0 |
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Regional Bank Fund |
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Class A |
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|
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439,275 |
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77,840 |
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478,946 |
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78,464 |
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331,426 |
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|
53,972 |
|
|
|
|
Class C |
|
|
|
5,977 |
|
|
|
0 |
|
|
|
6,600 |
|
|
|
0 |
|
|
|
10,071 |
|
|
|
0 |
|
Seaport Long/Short Fund |
|
|
Class A |
|
|
|
11,489 |
|
|
|
1,930 |
|
|
|
10,168 |
|
|
|
1,662 |
|
|
|
22,504 |
|
|
|
4,303 |
|
|
|
|
Class C |
|
|
|
1,049 |
|
|
|
0 |
|
|
|
540 |
|
|
|
0 |
|
|
|
509 |
|
|
|
0 |
|
Small Cap Core Fund |
|
|
Class A |
|
|
|
283,940 |
|
|
|
48,488 |
|
|
|
391,967 |
|
|
|
66,530 |
|
|
|
193,575 |
|
|
|
33,186 |
|
U.S. Global Leaders Growth Fund |
|
|
Class A |
|
|
|
447,201 |
|
|
|
68,756 |
|
|
|
803,190 |
|
|
|
133,463 |
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831,096 |
|
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|
139,663 |
|
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|
Class C |
|
|
|
5,415 |
|
|
|
0 |
|
|
|
12,080 |
|
|
|
0 |
|
|
|
11,873 |
|
|
|
0 |
|
1 |
Period from July 21, 2021 (commencement of operations) to October 31, 2021. |
Distribution Plans. The Board has adopted distribution plans with respect to Class A, Class C, Class R2, Class R4, and
Class R5 shares pursuant to Rule 12b-1 under the 1940 Act (the Rule 12b-1 Plans). Under the Rule 12b-1 Plans, a
fund may pay distribution and service fees based on average daily net assets attributable to those classes, at the maximum aggregate annual rates shown in the following table. However, the service portion of the Rule
12b-1 fees borne by a class of shares of a fund will not exceed 0.25% of average daily net assets attributable to such class of shares.
112
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|
Share Class |
|
Rule 12b-1 Fee (%) |
|
Class A (Balanced Fund, Emerging Markets Equity Fund, Financial Industries Fund,
Infrastructure Fund, Regional Bank Fund, and Seaport Long/Short Fund) |
|
|
0.30 |
|
Class A (Classic Value Fund, Disciplined Value International Fund, Diversified Macro Fund,
ESG International Equity Fund, ESG Large Cap Core Fund, Fundamental Large Cap Core Fund, Global Environmental Opportunities Fund, Global Thematic Opportunities Fund, International Dynamic Growth Fund, Small Cap Core Fund, and U.S. Global Leaders
Growth Fund) |
|
|
0.25 |
|
Class C |
|
|
1.00 |
|
Class R2 |
|
|
0.25 |
|
Class R41 |
|
|
0.25 |
|
Class R5 |
|
|
0.00 |
|
1 |
The Distributor has contractually agreed to limit the Rule 12b-1
distribution and service fees for Class R4 shares of the Balanced Fund, Disciplined Value International Fund, Emerging Markets Equity Fund, and Fundamental Large Cap Core Fund to 0.15% until February 28, 2024. |
There are two types of Rule 12b-1 Plans: reimbursement and compensation plans. While a
reimbursement plan provides for reimbursement of certain distribution and shareholder service expenses of a fund, a compensation plan provides for direct payment of distribution and shareholder service fees to the Distributor. Except as noted below,
the funds Rule 12b-1 Plans are compensation Rule 12b-1 Plans. Under a compensation Rule 12b-1 Plan, the Distributor will
retain the entire amount of the payments made to it, even if such amount exceeds the Distributors actual distribution- related expenses for the applicable fiscal year.
The fees charged under the Rule 12b-1 Plans will be paid to the Distributor either in reimbursement of distribution
and shareholder service expenses incurred by the Distributor on the funds behalf, or as direct compensation to the Distributor in contemplation of such expenses, as noted above. The distribution portion of the fees payable pursuant to the Rule
12b-1 Plans may be spent on any activities or expenses primarily intended to result in the sale of shares of the particular class, including but not limited to: (i) compensation to Selling Firms and
others (including affiliates of the Distributor) that are engaged in or support the sale of fund shares; and (ii) marketing, promotional and overhead expenses incurred in connection with the distribution of fund shares. The service portion of
the fees payable pursuant to the Rule 12b-1 Plans may be used to compensate Selling Firms and others for providing personal and account maintenance services to shareholders.
The following share classes have reimbursement plans for the stated funds: Class A (Classic Value Fund, Financial Industries Fund, Fundamental Large Cap
Core Fund, Regional Bank Fund, and U.S. Global Leaders Growth Fund) and Class C (Balanced Fund, Classic Value Fund, Financial Industries Fund, Fundamental Large Cap Core Fund, Regional Bank Fund, and U.S. Global Leaders Growth Fund). Under a
reimbursement Rule 12b-1 Plan, if the aggregate payments received by the Distributor for a particular class of shares of a fund in any fiscal year exceed the expenditures made by the Distributor in that year
pursuant to that Rule 12b-1 Plan, the Distributor will reimburse the fund for the amount of the excess. If, however, the expenditures made by the Distributor on a funds behalf during any fiscal year
exceed the payments received under such Rule 12b-1 Plan, the Distributor is entitled to carry over such unreimbursed expenses (for Class C shares, with interest) to be paid in subsequent fiscal years from
available Rule 12b-1 amounts. However, with respect to Class A reimbursement Rule 12b-1 Plans, these expenses will not be carried beyond twelve months from the date
they were incurred. The funds do not treat unreimbursed expenses under Class C reimbursement Rule 12b-1 Plans as a liability of the funds because the Trustees can terminate any of these Plans at any time
with no additional liability to the shareholders and the funds for these expenses.
The Rule 12b-1 Plans and all
amendments were approved by the Board, including a majority of the Independent Trustees, by votes cast in person at meetings called for the purpose of voting on the Rule 12b-1 Plans. Pursuant to the Rule 12b-1 Plans, at least quarterly, the Distributor provides the Board with a written report of the amounts expended under the Rule 12b-1 Plans and the purpose for which these
expenditures were made. The Board reviews these reports on a quarterly basis to determine the continued appropriateness of such expenditures.
Each Rule 12b-1 Plan provides that it will continue in effect only so long as its continuance is approved at least annually by a majority of both the Board and the Independent Trustees. Each Rule 12b-1 Plan provides that it may be terminated without penalty: (a) by a vote of a majority of the Independent Trustees; and (b) by a vote of a majority of the funds outstanding shares of the
applicable class, in each case upon 60 days written notice to the Distributor. Each Rule 12b-1 Plan further provides that it may not be amended to increase materially the maximum amount of the fees for
the services described therein without the approval of a majority of the outstanding shares of the class of a fund that has voting rights with respect to the Rule 12b- 1 Plan. The Rule 12b-1 Plans provide that
no material amendment to the Rule 12b-1 Plans will be effective unless it is approved by a majority vote of the Board and the Independent Trustees of the relevant Trust. The holders of Class A,
Class C, Class R2, Class R4, and Class R5 shares have exclusive voting rights with respect to the Rule 12b-1 Plans applicable to their class of shares. In adopting the Rule 12b-1 Plans, the Board, including the Independent Trustees, concluded that, in their judgment, there is a reasonable likelihood that the Rule 12b-1 Plans will benefit the
holders of the applicable classes of shares of each fund.
Class I, Class NAV, and Class R6 shares of the funds are not subject to any Rule
12b-1 Plan. Expenses associated with the obligation of the Distributor to use its best efforts to sell Class I, Class NAV, and Class R6 shares will be paid by the Advisor or by the Distributor
and will not be paid from the fees paid under the Rule 12b-1 Plan for any other class of shares. In addition, expenses associated with the obligation of the Distributor to use its best efforts to sell
Class R5 shares will be paid by the Advisor or by the Distributor and will not be paid by the funds.
113
Amounts paid to the Distributor by any class of shares of a fund will not be used to pay the expenses incurred
with respect to any other class of shares of that fund; provided, however, that expenses attributable to the fund as a whole will be allocated, to the extent permitted by law, according to a formula based upon gross sales dollars and/or average
daily net assets of each such class, as may be approved from time to time by vote of a majority of the Trustees. From time to time, a fund may participate in joint distribution activities with other funds and the costs of those activities will be
borne by the fund in proportion to the relative NAVs of the fund and the other funds.
Each Rule 12b-1 Plan
recognizes that the Advisor may use its management fee revenue under the Advisory Agreement with a fund as well as its past profits or other resources from any source to make payments with respect to expenses incurred in connection with the
distribution of shares of the fund. To the extent that the payment of management fees by a fund to the Advisor should be deemed to be the indirect financing of any activity primarily intended to result in the sale of shares of a class within the
meaning of Rule 12b-1, such payments are deemed to be authorized by the Rule 12b-1 Plan.
During the fiscal period ended October 31, 2022, the following amounts were paid to the Distributor pursuant to each funds Rule 12b-1 Plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund |
|
Share Class |
|
|
Rule 12b-1 Service Fee
Payments ($) |
|
|
Rule 12b-1 Distribution Fee
Payments ($) |
|
Balanced Fund |
|
|
Class A |
|
|
|
6,394,065 |
|
|
|
1,278,807 |
|
Balanced Fund |
|
|
Class C |
|
|
|
633,956 |
|
|
|
1,901,865 |
|
Balanced Fund |
|
|
Class R2 |
|
|
|
25,512 |
|
|
|
|
|
Balanced Fund |
|
|
Class R4 |
|
|
|
38,522 |
|
|
|
|
|
Classic Value Fund |
|
|
Class A |
|
|
|
977,715 |
|
|
|
|
|
Classic Value Fund |
|
|
Class C |
|
|
|
18,593 |
|
|
|
55,780 |
|
Classic Value Fund |
|
|
Class R2 |
|
|
|
6,067 |
|
|
|
|
|
Disciplined Value International Fund |
|
|
Class A |
|
|
|
282,726 |
|
|
|
|
|
Disciplined Value International Fund |
|
|
Class C |
|
|
|
14,096 |
|
|
|
42,288 |
|
Disciplined Value International Fund |
|
|
Class R2 |
|
|
|
6,766 |
|
|
|
|
|
Disciplined Value International Fund |
|
|
Class R4 |
|
|
|
255 |
|
|
|
|
|
Diversified Macro Fund |
|
|
Class A |
|
|
|
12,441 |
|
|
|
|
|
Diversified Macro Fund |
|
|
Class C |
|
|
|
2,159 |
|
|
|
6,478 |
|
Emerging Markets Equity Fund |
|
|
Class A |
|
|
|
53,484 |
|
|
|
10,697 |
|
Emerging Markets Equity Fund |
|
|
Class C |
|
|
|
3,613 |
|
|
|
10,839 |
|
Emerging Markets Equity Fund |
|
|
Class R2 |
|
|
|
550 |
|
|
|
|
|
Emerging Markets Equity Fund |
|
|
Class R4 |
|
|
|
102 |
|
|
|
|
|
ESG International Equity Fund |
|
|
Class A |
|
|
|
20,736 |
|
|
|
|
|
ESG Large Cap Core Fund |
|
|
Class A |
|
|
|
51,145 |
|
|
|
|
|
ESG Large Cap Core Fund |
|
|
Class C |
|
|
|
12,340 |
|
|
|
37,019 |
|
Financial Industries Fund |
|
|
Class A |
|
|
|
691,843 |
|
|
|
23,997 |
|
Financial Industries Fund |
|
|
Class C |
|
|
|
30,238 |
|
|
|
90,713 |
|
Fundamental Large Cap Core Fund |
|
|
Class A |
|
|
|
4,885,289 |
|
|
|
|
|
Fundamental Large Cap Core Fund |
|
|
Class C |
|
|
|
174,046 |
|
|
|
522,137 |
|
Fundamental Large Cap Core Fund |
|
|
Class R2 |
|
|
|
19,569 |
|
|
|
|
|
Fundamental Large Cap Core Fund |
|
|
Class R4 |
|
|
|
2,745 |
|
|
|
|
|
Global Environmental Opportunities Fund |
|
|
Class A |
|
|
|
424 |
|
|
|
|
|
Global Environmental Opportunities Fund |
|
|
Class C |
|
|
|
251 |
|
|
|
753 |
|
Global Thematic Opportunities Fund |
|
|
Class A |
|
|
|
3,887 |
|
|
|
|
|
Global Thematic Opportunities Fund |
|
|
Class C |
|
|
|
1,796 |
|
|
|
5,389 |
|
Infrastructure Fund |
|
|
Class A |
|
|
|
168,273 |
|
|
|
33,655 |
|
Infrastructure Fund |
|
|
Class C |
|
|
|
29,918 |
|
|
|
89,754 |
|
International Dynamic Growth Fund |
|
|
Class A |
|
|
|
33,172 |
|
|
|
|
|
International Dynamic Growth Fund |
|
|
Class C |
|
|
|
657 |
|
|
|
1,970 |
|
Regional Bank Fund |
|
|
Class A |
|
|
|
1,916,554 |
|
|
|
311,033 |
|
114
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund |
|
Share Class |
|
|
Rule 12b-1 Service Fee
Payments ($) |
|
|
Rule 12b-1 Distribution Fee
Payments ($) |
|
Regional Bank Fund |
|
|
Class C |
|
|
|
292,001 |
|
|
|
876,002 |
|
Seaport Long/Short Fund |
|
|
Class A |
|
|
|
33,890 |
|
|
|
6,778 |
|
Seaport Long/Short Fund |
|
|
Class C |
|
|
|
8,935 |
|
|
|
26,806 |
|
Small Cap Core Fund |
|
|
Class A |
|
|
|
887,790 |
|
|
|
|
|
U.S. Global Leaders Growth Fund |
|
|
Class A |
|
|
|
2,361,744 |
|
|
|
|
|
U.S. Global Leaders Growth Fund |
|
|
Class C |
|
|
|
126,735 |
|
|
|
380,206 |
|
U.S. Global Leaders Growth Fund |
|
|
Class R2 |
|
|
|
4,326 |
|
|
|
|
|
During the fiscal period ended October 31, 2022, the following unreimbursed expense amounts were incurred under the
funds reimbursement Rule 12b-1 Plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund |
|
Share Class |
|
|
Unreimbursed Expenses
($) |
|
|
Unreimbursed Expenses as a Percent
of the Share Class Net Assets
(%) |
|
Balanced Fund |
|
|
Class C |
|
|
$ |
9,245,056 |
|
|
|
3.81 |
% |
Classic Value Fund |
|
|
Class A |
|
|
$ |
404,290 |
|
|
|
0.10 |
% |
|
|
|
Class C |
|
|
$ |
4,781,198 |
|
|
|
65.25 |
% |
Financial Industries Fund |
|
|
Class A |
|
|
$ |
15,606 |
|
|
|
0.01 |
% |
|
|
|
Class C |
|
|
$ |
779,102 |
|
|
|
6.73 |
% |
Fundamental Large Cap Core Fund |
|
|
Class A |
|
|
$ |
390,389 |
|
|
|
0.02 |
% |
|
|
|
Class C |
|
|
$ |
4,917,873 |
|
|
|
7.45 |
% |
Regional Bank Fund |
|
|
Class A |
|
|
$ |
48,535 |
|
|
|
0.01 |
% |
|
|
|
Class C |
|
|
$ |
3,379,802 |
|
|
|
2.93 |
% |
U.S. Global Leaders Growth Fund |
|
|
Class A |
|
|
$ |
715,838 |
|
|
|
0.08 |
% |
|
|
|
Class C |
|
|
$ |
4,328,384 |
|
|
|
9.42 |
% |
Class R Service Plans. Each Trust has adopted a separate service plan with respect to Class R2,
Class R4, and Class R5 shares of the applicable funds (the Class R Service Plans). The Class R Service Plans authorize a fund to pay securities dealers, plan administrators or other service organizations who agree to
provide certain services to retirement plans, or plan participants holding shares of the fund a service fee of up to a specified percentage of the funds average daily net assets attributable to the applicable class of shares held by such plan
participants. The percentages are 0.25% for Class R2 shares, 0.10% for Class R4 shares, and 0.05% for Class R5 shares. The services may include (a) acting, directly or through an agent, as the shareholder and nominee for all plan
participants; (b) maintaining account records for each plan participant that beneficially owns the applicable class of shares; (c) processing orders to purchase, redeem and exchange the applicable class of shares on behalf of plan
participants, and handling the transmission of funds representing the purchase price or redemption proceeds; (d) addressing plan participant questions regarding their accounts and the funds; and (e) other services related to servicing such
retirement plans.
SALES COMPENSATION
As part of their business strategy, the funds, along
with the Distributor, pay compensation to Selling Firms that sell the shares of the funds. These firms typically pass along a portion of this compensation to the shareholders broker or financial professional.
The primary sources of Selling Firm compensation payments for sales of shares of the funds are: (1) the Rule
12b-1 fees that are applicable to the class of shares being sold and that are paid out of a funds assets; and (2) in the case of Class A and Class C shares, sales charges paid by
investors. The sales charges and Rule 12b-1 fees are detailed in the relevant Prospectus and under Distribution Agreements, Sales Charges on Class A and Class C Shares, and
Deferred Sales Charge on Class A and Class C Shares in this SAI. For Class I shares, the Distributor may make a one-time payment at the time of initial purchase out of its own
resources to a Selling Firm that sells Class I shares of the funds. This payment may not exceed 0.15% of the amount invested.
Initial
Compensation. Whenever an investor purchases Class A or Class C shares of a fund, the Selling Firm receives a reallowance/payment/ commission as described in the section First Year Broker or Other Selling Firm Compensation.
Annual Compensation. Except as provided below, for Class A share purchases of a fund, beginning with the first year an investment is made,
the Selling Firm receives an annual Rule 12b-1 fee of 0.25% of its average daily net assets invested in the fund. This Rule 12b-1 fee is paid monthly in arrears.
115
For Class A investments of $1 million or more in most funds, investments by certain retirement plans
where a finders fee has been paid, and investments made in Class C shares of a fund, beginning in the second year after an investment is made, the Selling Firm receives an annual Rule 12b- 1 service
fee of up to 0.25% of its average daily net (eligible) assets invested in the fund. The term (eligible) assets used in this context refers to shares held for more than one year. In addition, beginning in the second year after an
investment is made in Class C shares of a fund, the Distributor will pay the Selling Firm a distribution fee in an amount not to exceed 0.75% of the average daily net (eligible) assets invested in the fund. These service and distribution fees
are paid monthly in arrears.
For Class R2 and Class R4 shares of a fund, beginning in the first year after an investment is made, the Selling
Firm receives an annual Rule 12b-1 service fee of 0.25% of its average daily net (eligible) assets, except that the annual Rule 12b-1 distribution and service fee
payable to Selling Firms for Class R4 shares of certain funds is limited to 0.15% of the average daily net assets of Class R4 shares for each such fund until February 28, 2024, as described in each such funds Class R4
Prospectus.
For more information, see the table below under the column captioned Selling Firm receives Rule
12b-1 service fee. These service and distribution fees are paid monthly in arrears.
Additional Payments
to Financial Intermediaries. Shares of the funds are primarily sold through financial intermediaries (firms), such as broker- dealers, banks, registered investment advisors, independent financial planners, and retirement plan administrators. In
addition to sales charges, which are payable by shareholders, and Rule 12b-1 distribution fees, which are paid by the funds, the Advisor, the Distributor or another affiliate makes additional payments to firms
out of its own resources. These payments are sometimes referred to as revenue sharing. Many firms involved in the sale of fund shares receive one or more types of these cash payments. The categories of payments that the Advisor, the
Distributor or another affiliate provides to firms are described below. These categories are not mutually exclusive and the Advisor, the Distributor or another affiliate may make additional types of revenue sharing payments in the future. Some firms
receive payments under more than one or all categories. These payments assist in the efforts of the Advisor, the Distributor or another affiliate to promote the sale of the funds shares. The Advisor, the Distributor or another affiliate agrees
with the firm on the methods for calculating any additional compensation, which may include the level of sales or assets attributable to the firm. Not all firms receive additional compensation and the amount of compensation varies. These payments
could be significant to a firm and are an important factor in a firms willingness to support the sale of the funds through its distribution system. To the extent firms receiving such payments purchase shares of the funds on behalf of their
clients, the Advisor and/or the Distributor benefit from increased management and other fees with respect to those assets. The Advisor, the Distributor or another affiliate determines which firms to make payments to and the extent of the payments it
is willing to make. The Advisor, the Distributor or another affiliate generally chooses to compensate firms that have a strong capability to distribute shares of the funds and that are willing to cooperate with the promotional efforts of the
Advisor, the Distributor or another affiliate. The Advisor, the Distributor or another affiliate does not make an independent assessment of the cost of providing such services.
The provision of these additional payments, the varying fee structures and the basis on which a firm compensates its registered representatives or
salespersons creates an incentive for a particular firm, registered representative, or salesperson to highlight, feature or recommend funds, including the funds, or other investments based, at least in part, on the level of compensation paid.
Additionally, if greater payments are made with respect to one mutual fund complex than another, a firm has an incentive to recommend one fund complex over another. Similarly, if a firm receives greater compensation for one share class versus
another, that firm has an incentive to recommend the share class with the greater compensation. Shareholders should consider whether such incentives exist when evaluating any recommendations from a firm to purchase or sell shares of the funds and
when considering which share class is most appropriate. Shareholders should ask their salesperson or visit their firms website for more information about the additional payments they receive and any potential conflicts of interest, as well as
for information regarding any fees and/or commissions the firm charges. Firms may categorize and disclose these arrangements differently than the Distributor and its affiliates.
As of October 31, 2022, the following member firms of the Financial Industry Regulatory Authority, Inc. (FINRA) have arrangements in effect
with the Advisor, the Distributor or another affiliate pursuant to which the firm is entitled to a revenue sharing payment at an annual rate of up to 0.25% of the value of the fund shares sold or serviced by the firm:
|
|
|
Business Partner Firms |
|
Business Partner Firms |
|
|
Advisor Group-FSC Securities Corporation |
|
Cetera - Advisors LLC |
|
|
Advisor Group-Royal Alliance Associates, Inc. |
|
Cetera - Financial Institutions |
|
|
Advisor Group-Sagepoint Financial, Inc. |
|
Cetera - Financial Specialists, Inc. |
|
|
Advisor Group-Woodbury Financial Services |
|
Charles Schwab |
|
|
Advisor Group-Securities America, Inc. |
|
Commonwealth Financial Network |
|
|
Advisor Group-Triad Advisors, LLC. |
|
Concourse Financial Group Securities |
|
|
Ameriprise Financial Services, Inc. |
|
Crown Capital Securities L.P. |
|
|
Avantax Wealth Management |
|
DA Davidson & Co Inc. |
|
|
Banc of America/Merrill Lynch |
|
Edward D. Jones & Co. LP |
|
|
BOK Financial Securities, Inc. |
|
Fidelity - Fidelity Brokerage Services LLC |
|
|
Centaurus Financial, Inc. |
|
Fidelity - Fidelity Investments Institutional Operations Company, Inc. |
|
|
Cetera - Advisor Network LLC |
|
Fidelity - National Financial Services LLC |
116
|
|
|
Business Partner Firms |
|
Business Partner Firms |
|
|
Fifth Third Securities, Inc. |
|
Principal Securities, Inc. |
|
|
First Command Financial Planning |
|
Raymond James and Associates, Inc. |
|
|
First Horizon Advisors |
|
Raymond James Financial Services, Inc. |
|
|
Geneos Wealth Management |
|
RBC Capital Markets Corporation |
|
|
GWFS Equities, Inc. |
|
Robert W. Baird & Co. |
|
|
Independent Financial Group |
|
Stifel, Nicolaus, & Co, Inc. |
|
|
Infinex Investments Inc. |
|
TD Ameritrade |
|
|
J.P. Morgan Securities LLC |
|
The Investment Center, Inc. |
|
|
Key Investment Services |
|
Transamerica Financial Advisors, Inc. |
|
|
LPL Financial LLC |
|
UBS Financial Services, Inc. |
|
|
MML Investor Services, Inc. |
|
Unionbanc Investment Services |
|
|
Money Concepts Capital Corp. |
|
Valley Financial Management, Inc. |
|
|
Morgan Stanley Wealth Management, LLC |
|
Wells Fargo Advisors |
|
|
Northwestern Mutual Investment Services, LLC |
|
|
The Advisor, the Distributor or another affiliate also has arrangements with intermediaries that are not members of FINRA.
The Advisor, the Distributor or another affiliate may revise the terms of any existing revenue sharing arrangement, and may enter into additional revenue
sharing arrangements with other firms in the future.
Sales and Asset Based Payments. The Advisor, the Distributor or another affiliate makes
revenue sharing payments as incentives to certain firms to promote and sell shares of the funds. The Advisor, the Distributor or another affiliate hopes to benefit from revenue sharing by increasing the funds net assets, which, as well as
benefiting the funds, would result in additional management and other fees for the Advisor and its affiliates. In consideration for revenue sharing compensation, some firms will feature certain funds in their sales systems or give the Advisor, the
Distributor or another affiliate additional access to members of their sales forces or management. In addition, some firms agree to participate in the marketing efforts of the Advisor, the Distributor or another affiliate by allowing the Advisor,
the Distributor or another affiliate to participate in conferences, seminars or other programs attended by the firms sales force. Although certain firms seek revenue sharing payments to offset costs incurred by the firm in servicing the
firms clients that have invested in the funds, such firms may still earn a profit on these payments. Revenue sharing payments provide a firm with an incentive to recommend the funds.
The payments to firms generally are negotiated based on a number of factors including, but not limited to, quality of service, reputation in the industry,
ability to attract and retain assets, target markets, customer relationships, and relationship with the Advisor, the Distributor or another affiliate. No one factor is determinative of the type or amount of additional compensation to be provided.
The amount of these payments, as determined from time to time by the Advisor, the Distributor or another affiliate in its sole discretion, may be different for different firms. For example, one way in which revenue sharing payments made by the
Advisor, the Distributor or another affiliate are calculated is on sales of shares of the funds (Sales-Based Payments). Such payments can also be calculated on the average daily net assets of the applicable funds attributable to that
particular financial intermediary or on another subset of assets of funds in the John Hancock Fund Complex (Asset-Based Payments). Sales-Based Payments primarily create incentives for firms to sell shares of the funds and Asset-Based
Payments primarily create incentives for firms to retain previously sold shares of the funds in investor accounts. The Advisor, the Distributor or another affiliate pays firms either or both Sales-Based Payments and Asset-Based Payments. The
compensation arrangements described in this section are not mutually exclusive, and a single firm may receive multiple types of compensation. Such payments may be calculated by reference to the gross or net sales by such person, the average net
assets of shares held by the customers of such person, the number of accounts of the funds attributable to such person, on the basis of a flat fee or a negotiated lump sum payment for services provided, or otherwise.
Administrative, Technology, and Processing Support Payments. The Advisor, the Distributor or another affiliate also pays certain firms that sell shares
of the funds for certain administrative services, including recordkeeping and sub-accounting shareholder accounts, to the extent that the funds do not pay for these costs directly. The Advisor, the Distributor
or another affiliate also makes payments to certain firms that sell shares of the funds in connection with client account maintenance support, statement preparation and transaction processing. The types of payments that the Advisor, the Distributor
or another affiliate makes under this category include, among others, payment of ticket charges per purchase or exchange order placed by a financial intermediary, payment of networking fees in connection with certain fund trading systems, or one-time payments for ancillary services such as setting up funds on a firms fund trading system. The Advisor, the Distributor or another affiliate also makes platform support payments to some firms for the
purpose of supporting services provided by a financial firms servicing of shareholder accounts, including, but not limited to, platform education and communications, relationship management support, development to support new or changing
products, eligibility for inclusion on sample fund line-ups, trading or order taking platforms and related infrastructure/technology and/or legal, risk management and regulatory compliance infrastructure in
support of investment related products, programs and services. In addition, the Advisor, the Distributor or another affiliate may pay for certain services including technology, operations, tax, due diligence, or audit consulting
services.
117
Retirement Plan Program Servicing Payments. The Advisor, the Distributor or another affiliate may make
payments to certain financial intermediaries who sell fund shares through retirement plan programs. A financial intermediary may perform retirement plan program services itself or may arrange with a third party to perform retirement plan program
services. In addition to participant recordkeeping, reporting or transaction processing, retirement plan program services may include: services rendered to a plan in connection with fund/investment selection and monitoring; employee enrollment and
education; plan balance rollover or separation; or other similar services.
Marketing Support Payments. The Advisor, the Distributor or another
affiliate makes payments to some firms for marketing support services, including: providing periodic and ongoing education and training and support of firm personnel regarding the funds; disseminating to firm personnel information and product
marketing materials regarding the funds; explaining to firms clients the features and characteristics of the funds; conducting due diligence regarding the funds; granting access (in some cases on a preferential basis over other competitors) to
sales meetings, sales representatives and management representatives of the firm; and providing business planning assistance, marketing support, advertising and other services.
Other Cash Payments. From time to time, the Advisor, the Distributor or another affiliate provides, either from Rule
12b-1 distribution fees or out of its own resources, additional compensation to firms that sell or arrange for the sale of shares of the funds. Such compensation provided by the Advisor, the Distributor or
another affiliate may take various forms, including payments for the receipt of analytical data in relation to sales of fund shares, financial assistance to firms that enable the Advisor, the Distributor or another affiliate to participate in and/or
present at conferences or seminars, sales or training programs for invited registered representatives and other employees, client entertainment, client and investor events, and other firm-sponsored events, and travel expenses, including lodging
incurred by registered representatives and other employees in connection with client prospecting, retention and due diligence trips. Other compensation may be offered to the extent not prohibited by federal or state laws or any self-regulatory
agency, such as FINRA. The Advisor, the Distributor or another affiliate makes payments for entertainment events it deems appropriate, subject to its guidelines and applicable law. These payments vary depending upon the nature of the event or the
relationship.
In certain circumstances, the Advisor, the Distributor or another affiliate has other relationships with some firms relating to the
provisions of services to the funds, such as providing omnibus account services or transaction processing services, or effecting portfolio transactions for the funds. If a firm provides these services, the Advisor or the funds may compensate the
firm for these services. In addition, in certain circumstances, some firms have other compensated or uncompensated relationships with the Advisor or its affiliates that are not related to the funds.
First Year Broker or Other Selling Firm Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investor pays sales charge (% of offering price)1 |
|
|
Selling Firm receives commission2 |
|
|
Selling Firm receives Rule 12b-1 service fee |
|
|
Total Selling Firm compensation3,4 |
|
Class A investments (all funds except Balanced Fund)5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Up to $49,999 |
|
|
5.00 |
% |
|
|
4.25 |
% |
|
|
0.25 |
% |
|
|
4.50 |
% |
$50,000 - $99,999 |
|
|
4.50 |
% |
|
|
3.75 |
% |
|
|
0.25 |
% |
|
|
4.00 |
% |
$100,000 - $249,999 |
|
|
3.50 |
% |
|
|
2.85 |
% |
|
|
0.25 |
% |
|
|
3.10 |
% |
$250,000 - $499,999 |
|
|
2.50 |
% |
|
|
2.10 |
% |
|
|
0.25 |
% |
|
|
2.35 |
% |
$500,000 - $999,999 |
|
|
2.00 |
% |
|
|
1.60 |
% |
|
|
0.25 |
% |
|
|
1.85 |
% |
Class A investments (Balanced
Fund)5,6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Up to $49,999 |
|
|
4.50 |
% |
|
|
4.05 |
% |
|
|
0.25 |
% |
|
|
4.30 |
% |
$50,000 - $99,999 |
|
|
3.50 |
% |
|
|
3.05 |
% |
|
|
0.25 |
% |
|
|
3.30 |
% |
$100,000 - $249,999 |
|
|
3.00 |
% |
|
|
2.55 |
% |
|
|
0.25 |
% |
|
|
2.80 |
% |
$250,000 - $4,999,999 |
|
|
|
|
|
|
0.75 |
% |
|
|
0.25 |
% |
|
|
1.00 |
% |
Next $1 - $5M above that |
|
|
|
|
|
|
0.25 |
% |
|
|
0.25 |
% |
|
|
0.50 |
% |
Next $1 or more above that |
|
|
|
|
|
|
0.00 |
% |
|
|
0.25 |
% |
|
|
0.25 |
% |
Class A investments of $1 million or more (all funds except Balanced Fund)6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First $1M - $4,999,999 |
|
|
|
|
|
|
0.75 |
% |
|
|
0.25 |
% |
|
|
1.00 |
% |
Next $1 - $5M above that |
|
|
|
|
|
|
0.25 |
% |
|
|
0.25 |
% |
|
|
0.50 |
% |
Next $1 or more above that |
|
|
|
|
|
|
0.00 |
% |
|
|
0.25 |
% |
|
|
0.25 |
% |
Class C investments7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Amounts |
|
|
|
|
|
|
0.75 |
% |
|
|
0.25 |
% |
|
|
1.00 |
% |
118
First Year Broker or Other Selling Firm Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investor pays sales charge (% of offering price)1 |
|
|
Selling Firm receives commission2 |
|
|
Selling Firm receives Rule 12b-1 service fee |
|
|
Total Selling Firm compensation3,4 |
|
Class R2 investments5
All Amounts |
|
|
|
|
|
|
0.00 |
% |
|
|
0.25 |
% |
|
|
0.25 |
% |
Class R4 investments5
All Amounts |
|
|
|
|
|
|
0.00 |
% |
|
|
0.15 |
% |
|
|
0.15 |
% |
Class R5 investments
All Amounts |
|
|
|
|
|
|
0.00 |
% |
|
|
0.00 |
% |
|
|
0.00 |
% |
Class R6 investments
All Amounts |
|
|
|
|
|
|
0.00 |
% |
|
|
0.00 |
% |
|
|
0.00 |
% |
Class I investments8
All Amounts |
|
|
|
|
|
|
0.00 |
% |
|
|
0.00 |
% |
|
|
0.00 |
% |
1 |
See Sales Charges on Class A and Class C Shares for discussion on how to qualify for a
reduced sales charge. The Distributor may take recent redemptions into account in determining if an investment qualifies as a new investment. |
2 |
For Class A investments under $1 million, a portion of the Selling Firms commission is
paid out of the front-end sales charge. |
3 |
Selling Firm commission, Rule 12b-1 service fee, and any underwriter
fee percentages are calculated from different amounts, and therefore may not equal the total Selling Firm compensation percentages due to rounding, when combined using simple addition. |
4 |
The Distributor retains the balance. |
5 |
For purchases of Class A, Class R2, and Class R4 shares, beginning with the first year an
investment is made, the Selling Firm receives an annual Rule 12b-1 service fee paid monthly in arrears. See Distribution Agreements for a description of Class A, Class R2, Class R4,
and Class R5 Service Plan charges and payments. |
6 |
Certain retirement platforms may invest in Class A shares without being subject to sales charges.
Purchases via these platforms may pay a commission from the first dollar invested. Additionally, commissions (up to 1.00%) are paid to dealers who initiate and are responsible for certain Class A share purchases not subject to sales charges. In
both cases, the Selling Firm receives Rule 12b-1 fees in the first year as a percentage of the amount invested. After the first year, the Selling Firm receives Rule
12b-1 fees as a percentage of average daily net eligible assets paid monthly in arrears. |
7 |
For Class C shares, the Selling Firm receives Rule 12b-1 fees in
the first year as a percentage of the amount invested. After the first year, the Selling Firm receives Rule 12b-1 fees as a percentage of average daily net eligible assets paid monthly in arrears.
|
8 |
The Distributor may make a one-time payment at time of initial purchase
out of its own resources to a Selling Firm that sells Class I shares of the funds. This payment may be up to 0.15% of the amount invested. |
CDSC revenues collected by the Distributor may be used to pay Selling Firm commissions when there is no initial sales charge.
NET ASSET VALUE
The NAV for each class of shares of each fund is
normally determined once daily as of the close of regular trading on the NYSE (typically 4:00 p.m. Eastern time, on each business day that the NYSE is open). Each class of shares of each fund has its own NAV, which is computed by dividing the total
assets, minus liabilities, allocated to each share class by the number of fund shares outstanding for that class. The current NAV of a fund is available on our website at jhinvestments.com.
In case of emergency or other disruption resulting in the NYSE not opening for trading or the NYSE closing at a time other than the regularly scheduled close,
the NAV may be determined as of the regularly scheduled close of the NYSE pursuant to the Advisors Valuation Policies and Procedures. The time at which shares and transactions are priced and until which orders are accepted may vary to the
extent permitted by the SEC and applicable regulations. On holidays or other days when the NYSE is closed, the NAV is not calculated and the fund does not transact purchase or redemption requests. Trading of securities that are primarily listed on
foreign exchanges may take place on weekends and U.S. business holidays on which the funds NAV is not calculated. Consequently, the funds portfolio securities may trade and the NAV of the funds shares may be significantly affected
on days when a shareholder will not be able to purchase or redeem shares of the fund.
The Board has designated the funds advisor as the valuation
designee to perform fair value functions for each fund in accordance with the advisors valuation policies and procedures. As valuation designee, the advisor will determine the fair value, in good faith, of securities and other assets held by
each fund for which market quotations are not readily available and, among other things, will assess and manage material risks associated with fair value determinations, select, apply and test fair value methodologies, and oversee and evaluate
pricing services and other valuation agents used in valuing a funds investments. The advisor is subject to Board oversight and reports to the Board information regarding the fair valuation process and related material matters. The advisor
carries out its responsibilities as valuation designee through its Pricing Committee.
Portfolio securities are valued by various methods that are
generally described below. Portfolio securities also may be fair valued by the Advisors Pricing Committee in certain instances pursuant to procedures established by the Advisor and adopted by the Board. Equity securities are generally valued
at the last sale price or, for certain markets, the official closing price as of the close of the relevant exchange. Securities not traded on a particular day are valued using last available bid prices. A security that is listed or traded on more
than one exchange is typically valued at the price on the exchange where the security was acquired or most likely will be sold. In certain instances, the Pricing Committee may determine to value equity securities using prices obtained from another
exchange or market if trading on the exchange or market on which prices are typically obtained did not
119
open for trading as scheduled, or if trading closed earlier than scheduled, and trading occurred as normal on another exchange or market. Equity securities traded principally in foreign markets
are typically valued using the last sale price or official closing price in the relevant exchange or market, as adjusted by an independent pricing vendor to reflect fair value. On any day a foreign market is closed and the NYSE is open, any foreign
securities will typically be valued using the last price or official closing price obtained from the relevant exchange on the prior business day adjusted based on information provided by an independent pricing vendor to reflect fair value. Debt
obligations are typically valued based on evaluated prices provided by an independent pricing vendor. The value of securities denominated in foreign currencies is converted into U.S. dollars at the exchange rate supplied by an independent pricing
vendor. Forward foreign currency contracts are valued at the prevailing forward rates which are based on foreign currency exchange spot rates and forward points supplied by an independent pricing vendor. Exchange-traded options are valued at the mid-price of the last quoted bid and ask prices. Futures contracts whose settlement prices are determined as of the close of the NYSE are typically valued based on the settlement price while other futures contracts
are typically valued at the last traded price on the exchange on which they trade. Foreign equity index futures that trade in the electronic trading market subsequent to the close of regular trading may be valued at the last traded price in the
electronic trading market as of the close of the NYSE, or may be fair valued based on fair value adjustment factors provided by an independent pricing vendor in order to adjust for events that may occur between the close of foreign exchanges or
markets and the close of the NYSE. Swaps and unlisted options are generally valued using evaluated prices obtained from an independent pricing vendor. Shares of other open-end investment companies that are not
ETFs (underlying funds) are valued based on the NAVs of such underlying funds. Shares of the Subsidiary will be valued at NAV.
Pricing vendors may use
matrix pricing or valuation models that utilize certain inputs and assumptions to derive values, including transaction data, broker-dealer quotations, credit quality information, general market conditions, news, and other factors and assumptions.
The fund may receive different prices when it sells odd-lot positions than it would receive for sales of institutional round lot positions. Pricing vendors generally value securities assuming orderly
transactions of institutional round lot sizes, but a fund may hold or transact in such securities in smaller, odd lot sizes.
The Pricing Committee
engages in oversight activities with respect to pricing vendors, which includes, among other things, monitoring significant or unusual price fluctuations above predetermined tolerance levels from the prior day, back-testing of pricing vendor prices
against actual trades, conducting periodic due diligence meetings and reviews, and periodically reviewing the inputs, assumptions and methodologies used by these vendors. Nevertheless, market quotations, official closing prices, or information
furnished by a pricing vendor could be inaccurate, which could lead to a security being valued incorrectly.
If market quotations, official closing
prices, or information furnished by a pricing vendor are not readily available or are otherwise deemed unreliable or not representative of the fair value of such security because of market- or issuer-specific events, a security will be valued at its
fair value as determined in good faith by the Boards valuation designee, the Advisor. In certain instances, therefore, the Pricing Committee may determine that a reported valuation does not reflect fair value, based on additional information
available or other factors, and may accordingly determine in good faith the fair value of the assets, which may differ from the reported valuation.
Fair
value pricing of securities is intended to help ensure that a funds NAV reflects the fair market value of the funds portfolio securities as of the close of regular trading on the NYSE (as opposed to a value that no longer reflects market
value as of such close), thus limiting the opportunity for aggressive traders or market timers to purchase shares of the fund at deflated prices reflecting stale security valuations and promptly sell such shares at a gain, thereby diluting the
interests of long term shareholders. However, a securitys valuation may differ depending on the method used for determining value, and no assurance can be given that fair value pricing of securities will successfully eliminate all potential
opportunities for such trading gains.
The use of fair value pricing has the effect of valuing a security based upon the price a fund might reasonably
expect to receive if it sold that security in an orderly transaction between market participants, but does not guarantee that the security can be sold at the fair value price. Further, because of the inherent uncertainty and subjective nature of
fair valuation, a fair valuation price may differ significantly from the value that would have been used had a readily available market price for the investment existed and these differences could be material.
Regarding a funds investment in an underlying fund that is not an ETF, which (as noted above) is valued at such underlying funds NAV, the
prospectus for such underlying fund explains the circumstances and effects of fair value pricing for that underlying fund.
POLICY REGARDING DISCLOSURE OF PORTFOLIO HOLDINGS
The Board has adopted a Policy Regarding Disclosure
of Portfolio Holdings, to protect the interests of the shareholders of the funds and to address potential conflicts of interest that could arise between the interests of shareholders and the interests of the Advisor, or the interests of
the funds subadvisors, principal underwriter or affiliated persons of the Advisor, subadvisors or principal underwriter. The Trusts general policy
with respect to the release of a funds portfolio holdings to unaffiliated persons is to do so only in limited circumstances and only to provide nonpublic information regarding portfolio holdings to any person, including affiliated persons, on
a need to know basis and, when released, to release such information only as consistent with applicable legal requirements and the fiduciary duties owed to shareholders. Each Trust applies its policy uniformly to all potential recipients
of such information, including individual and institutional investors, intermediaries, affiliated persons of a fund, and all third party service providers and rating agencies.
Each Trust posts to its website at jhinvestments.com complete portfolio holdings a number of days after each calendar month end as described in the
Prospectus. Each fund also discloses its complete portfolio holdings information as of the end of the third month of every fiscal quarter on Form N- PORT within 60 days of the end of the fiscal quarter and on
Form N-CSR within 70 days after the second and fourth quarter ends of the Trusts fiscal year. The portfolio holdings information in Form N-PORT is not required to
be delivered to shareholders, but is made public through the SEC electronic filings. Shareholders receive either complete portfolio holdings information or summaries of a funds portfolio holdings with their annual and semiannual reports.
120
Firms that provide administrative, custody, financial, accounting, legal or other services to a fund may receive
nonpublic information about a funds portfolio holdings for purposes relating to their services. Additionally, portfolio holdings information for a fund that is not publicly available will be released only pursuant to the exceptions described
in the Policy Regarding Disclosure of Portfolio Holdings. A funds material nonpublic holdings information may be provided to the following unaffiliated persons as part of the investment activities of the fund: entities that, by explicit
agreement, are required to maintain the confidentiality of the information disclosed; rating organizations, such as Moodys, S&P, Fitch, Morningstar and Lipper, Vestek (Thomson Financial) or other entities for the purpose of compiling
reports and preparing data; proxy voting services for the purpose of voting proxies; entities providing computer software; courts (including bankruptcy courts) or regulators with jurisdiction over the relevant Trust and its affiliates; and
institutional traders to assist in research and trade execution. Exceptions to the portfolio holdings release policy can be approved only by the Trusts CCO or the CCOs duly authorized delegate after considering: (a) the purpose of
providing such information; (b) the procedures that will be used to ensure that such information remains confidential and is not traded upon; and (c) whether such disclosure is in the best interest of the shareholders.
As of October 31, 2022, the entities that may receive information described in the preceding paragraph, and the purpose for which such information is
disclosed, are as presented in the table below. Portfolio holdings information is provided as frequently as daily with a one-day lag.
|
|
|
Entity Receiving Portfolio Information |
|
Disclosure Purpose |
|
|
Abel Noser LLC |
|
Transaction Cost Analysis |
|
|
ACA Performance Services |
|
GIPS Verification and Compliance |
|
|
Accenture |
|
Operational Functions |
|
|
Bloomberg L.P. |
|
Pricing / Analytics / Trade Order Mangement |
|
|
BNP Paribas S.A. |
|
Leverage Provider / Pledging |
|
|
Broadridge Financial Solutions |
|
Proxy Voting / Software Vendor / Data Provider |
|
|
Brown Brothers Harriman |
|
Reconciliation / Corporate Actions / Service Provider |
|
|
Capital Institutional Services (CAPIS) |
|
Rebalancing Strategy / Transition Services / Recapture |
|
|
Charles River |
|
Trading |
|
|
Citibank |
|
Securities Lending |
|
|
Clarkson |
|
Vessel Valuations or Appraisals (for shipping) |
|
|
Confluence Technologies |
|
Consulting |
|
|
DataLend |
|
Securities Lending Analytics |
|
|
DG3 |
|
Financial Reporting / Type Setting |
|
|
Donnelley Financial Solutions |
|
Financial Reporting / Printing |
|
|
DUCO |
|
Reconciliation services |
|
|
Dynamo Software |
|
Fair Value and Private Transactions Support |
|
|
Electra Information Systems |
|
Reconciliation |
|
|
Ernst & Young |
|
Tax Reporting |
|
|
ETF Global |
|
Holdings Analytics |
|
|
EVARE |
|
Analytics / Data Gathering / Reconciliation |
|
|
FactSet |
|
Data Gathering / Analytics / Performance |
|
|
Foley Hoag |
|
Foreign Currency Trade Review |
|
|
FX Transparency |
|
FX Trade Execution Analysis |
|
|
Gainskeeper |
|
Wash Sales / REIT Data |
|
|
Glass Lewis |
|
Proxy Voting |
|
|
Goldman Sachs (GSAL) |
|
Securities Lending |
|
|
Indus Valley Partners (IVP) |
|
Treasury and reconciliation services |
|
|
Institutional Shareholder Services (ISS) |
|
Class Actions / Proxy Voting |
|
|
Interactive Data |
|
Pricing |
|
|
KPMG |
|
Tax Reporting |
|
|
Law Firm of Davis and Harman |
|
Development of Revenue Ruling |
|
|
Linedata |
|
NAV Oversight |
121
|
|
|
Entity Receiving Portfolio Information |
|
Disclosure Purpose |
|
|
Lipper |
|
Ratings / Surveys |
|
|
Markit |
|
Service Provider-Electronic Data Management / Service Provider |
|
|
Milestone |
|
Service Provider-Valuation Oversight |
|
|
Morningstar, Inc. |
|
Ratings / Surveys |
|
|
MSCI Inc. |
|
Liquidity Risk Management, Performance |
|
|
National Financial Services |
|
Securities Lending |
|
|
Northern Trust Co. |
|
Back Office Functions / Trade Execution Analysis |
|
|
PricewaterhouseCoopers LLP |
|
Audit Services |
|
|
Riordan Consulting |
|
GIPS Performance Composites |
|
|
RSM US LLP |
|
Consulting |
|
|
Russell Implementation Services |
|
Transition Services |
|
|
Ryan Business Technology Solutions |
|
Investment guidelines and controls |
|
|
SEI Global Services, Inc. (SEI) |
|
Reconciliation |
|
|
SS&C Technologies/Advent/Apx Advent |
|
Analytics / Data Gathering / Reconciliation /Performance |
|
|
Star Compliance |
|
Code of Ethics Monitoring |
|
|
State Street Bank |
|
Service Provider-IBOR / Operational Functions |
|
|
State Street Closed End Financing |
|
All SS lending funds |
|
|
State Street Investment Management Solutions |
|
Back Office Functions |
|
|
SunGard |
|
Securities Lending Analytics |
|
|
SWIFT |
|
Accounting / Custody & Trade Messaging |
|
|
Trade Informatics (f.k.a. SJ Levinson) |
|
Trade Execution Analysis |
|
|
Virtu Analytics, LLC |
|
Trade Execution Analysis |
|
|
Wolters Kluwer |
|
Audit Services / Tax Reporting |
The CCO is required to pre-approve the disclosure of nonpublic information regarding a
funds portfolio holdings to any affiliated persons of the relevant Trust. The CCO will use the following three considerations before approving disclosure of a funds nonpublic information to affiliated persons:
(a) the purpose of providing such information; (b) the procedures that will be used to ensure that such information remains confidential and is not
traded upon; and (c) whether such disclosure is in the best interest of the shareholders.
The CCO shall report to the Board whenever additional
disclosures of a funds portfolio holdings are approved. The CCOs report shall be presented at the Board meeting following such approval.
When
the CCO believes that the disclosure of a funds nonpublic information to an unaffiliated person presents a potential conflict of interest between the interest of the shareholders and the interest of affiliated persons of the relevant Trust,
the CCO shall refer the potential conflict to the Board. The Board shall then permit such disclosure of a funds nonpublic information only if in its reasonable business judgment it concludes that such disclosure will be in the best interests
of the relevant Trusts shareholders.
The receipt of compensation by a fund, the Advisor, a subadvisor or an affiliate as consideration for
disclosing a funds nonpublic portfolio holdings information is not deemed a legitimate business purpose and is strictly forbidden.
Registered
investment companies and separate accounts that are advised or subadvised by the funds subadvisors may have investment objectives and strategies and, therefore, portfolio holdings, that potentially are similar to those of a fund. Neither such
registered investment companies and separate accounts nor the funds subadvisors are subject to the Trusts Policy Regarding Disclosure of Portfolio Holdings, and may be subject to different portfolio holdings disclosure policies. The
funds subadvisors may not, and the Trusts Board cannot, exercise control over policies applicable to separate subadvised funds and accounts.
In addition, the Advisor or the funds subadvisors may receive compensation for furnishing to separate account clients (including sponsors of wrap
accounts) model portfolios, the composition of which may be similar to those of a particular fund. Such clients have access to their portfolio holdings and are not subject to the Trusts Policy Regarding Disclosure of Portfolio Holdings. In
general, the provision of portfolio management services and/or model portfolio information to wrap program sponsors is subject to contractual confidentiality provisions that the sponsor will only use such information in connection with the program,
although there can be no assurance that this would be the case in an agreement between any particular fund subadvisor that is not affiliated with the Advisor and a wrap account sponsor. Finally, the Advisor or the funds subadvisors may
distribute to investment advisory clients analytical information concerning a model portfolio, which information may correspond substantially to the characteristics of a particular funds portfolio, provided that the applicable fund is not
identified in any manner as being the model portfolio.
122
The potential provision of information in the various ways discussed in the preceding paragraph is not subject to
the Trusts Policy Regarding Disclosure of Portfolio Holdings, as discussed above, and is not deemed to be the disclosure of a funds nonpublic portfolio holdings information. As a result of the funds inability to control the
disclosure of information as noted above, there can be no guarantee that this information would not be used in a way that adversely impacts a fund. Nonetheless, each fund has oversight processes in place to attempt to minimize this risk.
SALES CHARGES ON CLASS A AND CLASS C SHARES
Class A and Class C shares of the funds, as
applicable, are offered at a price equal to their NAV plus a sales charge that, in the case of Class A shares, is imposed at the time of purchase (the initial sales charge), or, in the case of Class C shares, on a contingent
deferred basis (the contingent deferred sales charge or CDSC).
The Trustees reserve the right to change or waive a funds
minimum investment requirements and to reject any order to purchase shares (including purchase by exchange) when in the judgment of the Advisor such rejection is in the funds best interest.
The availability of certain sales charge waivers and discounts will depend on whether you purchase your shares directly from the funds or through a financial
intermediary. Intermediaries may have different policies and procedures regarding the availability of front-end sales charge waivers or CDSC waivers (See Appendix 1 to the Prospectus, Intermediary sales
charge waivers, which includes information about specific sales charge waivers applicable to the intermediaries identified therein).
The sales
charges applicable to purchases of Class A shares of a fund are described in the Prospectus. Please note, these waivers are distinct from those described in Appendix 1 to the Prospectus, Intermediary sales charge waivers, and are
not intended to describe the sales load cost structure of, or be exclusive to, any particular intermediary. Methods of obtaining reduced sales charges referred to generally in the Prospectus are described in detail below. In calculating the sales
charge applicable to current purchases of Class A shares of a fund, the investor is entitled to accumulate current purchases with the current offering price of the Class A, Class C, Class I, Class R6, or all Class R
shares of the John Hancock funds owned by the investor (see Combination and Accumulation Privileges below).
In order to receive the reduced
sales charge, the investor must notify his or her financial professional and/or the financial professional must notify the funds transfer agent, John Hancock Signature Services, Inc. (Signature Services) at the time of purchase of
the Class A shares, about any other John Hancock funds owned by the investor, the investors spouse and their children under the age of 21 (see Combination and Accumulation Privileges below). This includes investments held
in an IRA, including those held at a broker or financial professional other than the one handling the investors current purchase. Additionally, individual purchases by a trustee(s) or other fiduciary(ies) also may be aggregated if the
investments are for a single trust estate or for a group retirement plan. Assets held within a group retirement plan may not be combined with any assets held by those same participants outside of the plan.
John Hancock will credit the combined value, at the current offering price, of all eligible accounts to determine whether an investor qualifies for a reduced
sales charge on the current purchase. Signature Services will automatically link certain accounts registered in the same client name, with the same taxpayer identification number, for the purpose of qualifying an investor for lower initial sales
charge rates. An investor must notify Signature Services and his or her broker-dealer (financial professional) at the time of purchase of any eligible accounts held by the investors spouse or children under 21 in order to ensure these assets
are linked to the investors accounts. Also, see Appendix 1 to the Prospectus, Intermediary sales charge waivers, for more information regarding the availability of sales charge waivers through particular intermediaries.
Without Sales Charges. Class A shares may be offered without a front-end sales charge or CDSC to various
individuals and institutions as follows:
|
|
|
A Trustee or officer of the Trust; a director or officer of the Advisor and its affiliates, subadvisors or
Selling Firms; employees or sales representatives of any of the foregoing; retired officers, employees or directors of any of the foregoing; a member of the immediate family (spouse, child, grandparent, grandchild, parent, sibling, mother-in-law, father-in-law,
daughter-in-law, son-in-law, brother-in-law, sister-in-law, niece, nephew and same sex domestic partner; Immediate Family) of any of the
foregoing; or any fund, pension, profit sharing or other benefit plan for the individuals described above. |
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A broker, dealer, financial planner, consultant or registered investment advisor that uses fund shares in certain
eligible retirement platforms, fee- based investment products or services made available to their clients. |
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Financial intermediaries who offer shares to self-directed investment brokerage accounts that may or may not be
charged a transaction fee. Also, see Appendix 1 to the Prospectus, Intermediary sales charge waivers, for more information regarding the availability of sales charge waivers through particular intermediaries. |
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Individuals transferring assets held in a SIMPLE IRA, SEP, or SARSEP invested in John Hancock funds directly to
an IRA. |
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Individuals converting assets held in an IRA, SIMPLE IRA, SEP, or SARSEP invested in John Hancock funds directly
to a Roth IRA. |
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Individuals recharacterizing assets from an IRA, Roth IRA, SEP, SARSEP or SIMPLE IRA invested in John Hancock
funds back to the original account type from which it was converted. |
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Terminating participants in a pension, profit sharing or other plan qualified under Section 401(a) of the
Code, or described in Section 457(b) of the Code, (i) that is funded by certain John Hancock group annuity contracts, (ii) for which John Hancock Trust Company serves as trustee or custodian, or (iii) the trustee or custodian of
which has retained RPS as a service provider, rolling over assets (directly or within 60 days after distribution) from such a plan (or from a John Hancock Managed IRA or John Hancock Annuities IRA into which such assets have already been rolled
over) to a John Hancock custodial IRA or John Hancock custodial Roth IRA that invests in John Hancock funds, or the subsequent establishment of or any rollover into a new John Hancock fund account by such terminating participants and/or their
Immediate Family (as defined above), including subsequent investments into such accounts and which are held directly at John Hancock funds or at the PFS Financial Center. |
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Participants in a terminating pension, profit sharing or other plan qualified under Section 401(a) of the
Code, or described in Section 457(b) of the Code (the assets of which, immediately prior to such plans termination, were (a) held in certain John Hancock group annuity contracts, (b) in trust or custody by John Hancock Trust
Company, or (c) by a trustee or custodian which has retained John Hancock RPS as a service provider, but have been transferred from such contracts or trust funds and are held either: (i) in trust by a distribution processing organization;
or (ii) in a custodial IRA or custodial Roth IRA sponsored by an authorized third party trust company and made available through John Hancock), rolling over assets (directly or within 60 days after distribution) from such a plan to a John
Hancock custodial IRA or John Hancock custodial Roth IRA that invests in John Hancock funds, or the subsequent establishment of or any rollover into a new John Hancock fund account by such participants and/or their Immediate Family (as defined
above), including subsequent investments into such accounts and which are held directly at John Hancock funds or at the PFS Financial Center. |
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Participants actively enrolled in a John Hancock RPS plan account rolling over or transferring assets into a new
John Hancock custodial IRA or John Hancock custodial Roth IRA that invests in John Hancock funds through John Hancock PFS (to the extent such assets are otherwise prohibited from rolling over or transferring into the John Hancock RPS plan account),
including subsequent investments into such accounts and which are held directly at John Hancock funds or at the John Hancock PFS Financial Center. |
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Individuals rolling over assets held in a John Hancock custodial 403(b)(7) account into a John Hancock custodial
IRA account. |
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Individuals exchanging shares held in an eligible fee-based program for
Class A Shares, provided however, subsequent purchases in Class A Shares will be subject to applicable sales charges. |
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Former employees/associates of John Hancock, its affiliates or agencies rolling over (directly or indirectly
within 60 days after distribution) to a new John Hancock custodial IRA or John Hancock custodial Roth IRA from the John Hancock Employee Investment-Incentive Plan (TIP), John Hancock Savings Investment Plan (SIP) or the John Hancock Pension Plan and
such participants and their Immediate Family (as defined above) subsequently establishing or rolling over assets into a new John Hancock account through John Hancock PFS, including subsequent investments into such accounts and which are held
directly at John Hancock funds or at the John Hancock PFS Financial Center. |
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Participants in group retirement plans that are eligible and permitted to purchase Class A shares. This
waiver is contingent upon the group retirement plan being in a recordkeeping arrangement and does not apply to group retirement plans transacting business with a fund through a brokerage relationship in which sales charges are customarily imposed.
In addition, this waiver does not apply to a group retirement plan that leaves its current recordkeeping arrangement and subsequently transacts business with the fund through a brokerage relationship in which sales charges are customarily imposed.
Whether a sales charge waiver is available to your group retirement plan through its record keeper depends upon the policies and procedures of your intermediary. Please consult your financial professional for further information.
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NOTE: Rollover investments to Class A shares from assets withdrawn from SIMPLE 401(k), TSA, 457, 403(b), 401(k), Money Purchase
Pension Plan, Profit-Sharing Plan, and any other qualified plans as described in Code Sections 401(a), 403(b), or 457 and not specified above as waiver-eligible, will be subject to applicable sales charges.
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A member of a class action lawsuit against insurance companies who is investing settlement proceeds.
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Retirement plans investing through the PruSolutionSM program. |
In-Kind Re-Registrations. A shareholder who has previously paid a sales
charge, withdraws funds via a tax-reportable transaction from one John Hancock fund account and reregisters those assets directly to another John Hancock fund account, without the assets ever leaving the John
Hancock Fund Complex, may do so without paying a sales charge. The beneficial owner must remain the same, i.e., in-kind.
NOTE: Rollover investments to Class A shares from assets withdrawn from SIMPLE 401(k), TSA, 457, 403(b), 401(k), Money Purchase Pension Plan,
Profit-Sharing Plan, and any other qualified plans as described in Sections 401(a), 403(b), or 457 of the Code are not eligible for this provision, and will be subject to applicable sales charges.
Class A shares also may be purchased without an initial sales charge in connection with certain liquidation, merger or acquisition transactions involving
other investment companies or personal holding companies.
Reducing Class A Sales Charges
Combination and Accumulation Privileges. In calculating the sales charge applicable to purchases of Class A shares made at one time, the purchases
will be combined to reduce sales charges if made by an individual, his or her spouse, and their children under the age of 21 when purchasing securities in the following:
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his or her own individual or their joint account; |
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his or her trust account of which one of the above persons is the grantor or the beneficial owner;
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a Uniform Gift/Transfer to Minor Account or Coverdell Education Savings Account (ESA) in which one of
the above persons is the custodian or beneficiary; |
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a single participant retirement/benefit plan account, as long as it is established solely for the benefit of the
individual account owner; |
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an IRA, including traditional IRAs, Roth IRAs, and SEP IRAs; and |
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his or her sole proprietorship. |
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Group Retirement Plans, including 403(b)(7), Money Purchase Pension Plans, Profit-Sharing Plans, SARSEPs, and
Simple IRAs with multiple participants may combine Class A share purchases to reduce their sales charge.
Individual qualified and non-qualified investments can be combined to take advantage of this privilege; however, assets held within a group retirement plan may not be combined with any assets held by those same participants outside of the
plan.
Class A investors also may reduce their Class A sales charge by taking into account not only the amount being invested but also the
current offering price of all the Class A, Class C, Class I, Class R6, and all Class R shares of all funds in the John Hancock Fund Complex already held by such persons. However, Class A shares of John Hancock Money
Market Fund, a series of John Hancock Current Interest (the Money Market Fund), will be eligible for the accumulation privilege only if the investor has previously paid a sales charge on the amount of those shares. To receive a reduced
sales charge, the investor must tell his or her financial professional or Signature Services at the time of the purchase about any other John Hancock funds held by that investor, his or her spouse, and their children under the age of 21. Further
information about combined purchases, including certain restrictions on combined group purchases, is available from Signature Services or a Selling Firms representative.
Group Investment Program. Under the Combination and Accumulation Privileges, all members of a group may combine their individual purchases of
Class A shares to potentially qualify for breakpoints in the sales charge schedule. This feature is provided to any group that: (1) has been in existence for more than six months, (2) has a legitimate purpose other than the purchase
of fund shares at a discount for its members, (3) utilizes salary deduction or similar group methods of payment, and (4) agrees to allow sales materials of the funds in its mailings to its members at a reduced or no cost to the
Distributor.
Letter of Intention. Reduced Class A sales charges are applicable to investments made pursuant to an LOI, which should be read
carefully prior to its execution by an investor. All investors have the option of making their investments over a specified period of thirteen (13) months. An individuals non- retirement and
qualified retirement plan investments can be combined to satisfy an LOI. The retirement accounts eligible for combination include traditional IRAs, Roth IRAs, Coverdell ESAs, SEPs, SARSEPs, and SIMPLE IRAs. Since some assets are held in omnibus
accounts, an investor wishing to count those eligible assets towards a Class A purchase must notify Signature Services and his or her financial professional of these holdings. The aggregate amount of such an investment must be equal to or
greater than a funds first breakpoint level (generally $50,000 or $100,000 depending on the specific fund) over a period of 13 months from the date of the LOI. Any shares for which no sales charge was paid will not be credited as purchases
made under the LOI.
The sales charge applicable to all amounts invested after an LOI is signed is computed as if the aggregate amount intended to be
invested had been invested immediately. If such aggregate amount is not actually invested, the difference in the sales charge actually paid and the sales charge that would have been paid had the LOI not been in effect is due from the investor. In
such cases, the sales charge applicable will be assessed based on the amount actually invested. However, for the purchases actually made within the specified period of 13 months, the applicable sales charge will not be higher than that which would
have applied (including accumulations and combinations) had the LOI been for the amount actually invested. The asset inclusion criteria stated under the Combination and Accumulation Privilege applies to accounts eligible under the LOI. If such
assets exceed the LOI amount at the conclusion of the LOI period, the LOI will be considered to have been met.
The LOI authorizes Signature Services to
hold in escrow sufficient Class A shares (approximately 5% of the aggregate) to make up any difference in sales charges on the amount intended to be invested and the amount actually invested, until such investment is completed within the 13-month period. At that time, the escrowed shares will be released. If the total investment specified in the LOI is not completed, the shares held in escrow may be redeemed and the proceeds used as required to pay
such sales charge as may be due. By signing the LOI, the investor authorizes Signature Services to act as his or her attorney-in-fact to redeem any escrowed Class A
shares and adjust the sales charge, if necessary. An LOI does not constitute a binding commitment by an investor to purchase, or by a fund to sell, any additional Class A shares, and may be terminated at any time.
Deferred Sales Charge on Class A and Class C Shares
Class A shares are available with no front-end sales charge on investments of $1 million ($250,000 for
Balanced Fund) or more. Class C shares are purchased at NAV without the imposition of an initial sales charge. In each of these cases, the funds will receive the full amount of the purchase payment. Also, see Appendix 1 to the Prospectus
Intermediary sales charge waivers, for more information regarding the availability of sales charge waivers through particular intermediaries.
Contingent Deferred Sales Charge. There is a CDSC on any Class A shares upon which a commission or finders fee was paid that are sold within
one year of purchase. Class C shares that are redeemed within one year of purchase will be subject to a CDSC at the rates set forth in the applicable Prospectus as a percentage of the dollar amount subject to the CDSC. The CDSC will be assessed
on an amount equal to the lesser of the current market value or the original purchase cost of the Class A or Class C shares being redeemed. No CDSC will be imposed on increases in account value above the initial purchase prices or on
shares derived from reinvestment of dividends or capital gains distributions.
In determining whether a CDSC applies to a redemption, the calculation will
be determined in a manner that results in the lowest possible rate being charged. It will be assumed that a shareholders redemption comes first from shares the shareholder has held beyond the one-year
CDSC redemption period for Class A or Class C shares, or those the shareholder acquired through dividend and capital gain reinvestment. For this purpose, the amount of any increase in a shares value above its initial purchase price
is not subject to a CDSC. Thus, when a share that has appreciated in value is redeemed during the CDSC period, a CDSC is assessed only on its initial purchase price.
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When requesting a redemption for a specific dollar amount, a shareholder should state if proceeds to equal the
dollar amount requested are required. If not stated, only the specified dollar amount will be redeemed from the shareholders account and the proceeds will be less any applicable CDSC.
With respect to a CDSC imposed on a redemption of Class A shares, proceeds from the imposition of a CDSC are paid to the Distributor and are used in
whole or in part by the Distributor to defray its expenses related to paying a commission or finders fee in connection with the purchase at NAV of Class A shares with a value of $1 million ($250,000 for Balanced Fund) or more.
With respect to a CDSC imposed on a redemption of Class C shares, proceeds from the imposition of a CDSC are paid to the Distributor and are used in
whole or in part by the Distributor to defray its expenses related to providing distribution-related services to the funds in connection with the sale of Class C shares, such as the payment of compensation to select Selling Firms for selling
Class C shares. The combination of the CDSC and the distribution and service fees facilitates the ability of the funds to sell Class C shares without a sales charge being deducted at the time of the purchase.
Waiver of Contingent Deferred Sales Charge. The CDSC will be waived on redemptions of Class A and Class C shares, unless stated otherwise, in
the circumstances defined below:
For all account types:
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Redemptions of Class A shares by a group retirement plan that continues to offer the same or another John
Hancock mutual fund as an investment to its participants. |
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Redemptions of Class A shares by retirement plans that invested through the PruSolutionsSM program. |
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Redemptions made pursuant to a funds right to liquidate an account if the investor owns shares worth less
than the stated account minimum in the section Small accounts in the Prospectus. |
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Redemptions made under certain liquidation, merger or acquisition transactions involving other investment
companies or personal holding companies. |
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Redemptions due to death or disability. (Does not apply to trust accounts unless trust is being dissolved.)
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Redemptions made under the Reinstatement Privilege, as described in Sales Charge Reductions and
Waivers in the Prospectus. |
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Redemption of Class C shares made under a systematic withdrawal plan or redemptions for fees charged by
planners or advisors for advisory services, as long as the shareholders annual redemptions do not exceed 12% of the account value, including reinvested dividends, at the time the systematic withdrawal plan was established and 12% of the value
of subsequent investments (less redemptions) in that account at the time Signature Services is notified. (Please note that this waiver does not apply to systematic withdrawal plan redemptions of Class A shares that are subject to a CDSC).
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Rollovers, contract exchanges or transfers of John Hancock custodial 403(b)(7) account assets required by
Signature Services as a result of its decision to discontinue maintaining and administering 403(b)(7) accounts. |
For Retirement Accounts
(such as traditional, Roth IRAs and Coverdell ESAs, SIMPLE IRAs, SIMPLE 401(k), Rollover IRA, TSA, 457, 403(b), 401(k), Money Purchase Pension Plan, Profit-Sharing Plan and other plans as described in the Code) unless otherwise noted.
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Redemptions made to effect mandatory or life expectancy distributions under the Code. (Waiver based on required
minimum distribution calculations for John Hancock mutual fund IRA assets only.) |
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Returns of excess contributions made to these plans. |
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Redemptions made to effect certain distributions, as outlined in the following table, to participants or
beneficiaries from employer sponsored retirement plans under sections 401(a) (such as Money Purchase Pension Plans and Profit-Sharing Plan/401(k) Plans), 403(b), 457 and 408 (SEPs and SIMPLE IRAs) of the Code. |
Please see the following table for some examples.
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Type of Distribution |
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401(a) Plan (401(k),
MPP, PSP) & 457 |
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403(b) |
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Roth IRA & Coverdell
ESA |
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IRA, SEP IRA &
Simple IRA |
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Non-retirement |
Death or Disability |
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Waived |
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Waived |
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Waived |
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Waived |
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Waived |
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Over 701⁄2 (or 72, in the case of individuals for whom the minimum distribution requirements begin at age 72) |
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Waived |
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Waived |
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Waived1 |
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Waived1 |
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12% of account value annually in periodic payments |
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Between 591⁄2 and 701⁄2 (or 72, in the case of individuals for
whom the minimum distribution requirements begin at age 72) |
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Waived |
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Waived |
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12% of account value annually in periodic payments |
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Waived for Life Expectancy or 12% of account value annually in periodic payments |
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12% of account value annually in periodic payments |
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Type of Distribution |
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401(a) Plan (401(k),
MPP, PSP) & 457 |
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403(b) |
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Roth IRA & Coverdell
ESA |
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IRA, SEP IRA &
Simple IRA |
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Non-retirement |
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Under 591⁄2 (Class C only) |
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Waived for annuity payments (72t2) or 12% of account value annually in periodic payments |
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Waived for annuity payments (72t) or 12% of account value annually in periodic payments |
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12% of account value annually in periodic payments |
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Waived for annuity payments (72t) or 12% of account value annually in periodic payments |
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12% of account value annually in periodic payments |
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Termination of Plan |
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Not Waived |
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Waived |
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N/A |
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N/A |
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N/A |
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Hardships |
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Waived |
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Waived |
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N/A |
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N/A |
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N/A |
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Qualified Domestic Relations Orders |
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Waived |
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Waived |
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N/A |
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N/A |
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N/A |
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Termination of Employment Before Normal Retirement Age |
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Waived |
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Waived |
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N/A |
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N/A |
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N/A |
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Return of Excess |
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Waived |
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Waived |
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Waived |
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Waived |
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N/A |
1 |
External direct rollovers and transfer of assets are excluded. |
2 |
Refers to withdrawals from retirement accounts under Section 72(t) of the Code.
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If a shareholder qualifies for a CDSC waiver under one of these situations, Signature Services must be notified at the time of
redemption. The waiver will be granted once Signature Services has confirmed that the shareholder is entitled to the waiver.
SPECIAL REDEMPTIONS
Although it would not normally do so, each fund has
the right to pay the redemption price of its shares in whole or in part in portfolio securities as prescribed by the Trustees. When a shareholder sells any securities received in a redemption of fund shares, the shareholder will incur a brokerage
charge. Any such securities would be valued for the purposes of fulfilling such a redemption request in the same manner as they are in computing the funds NAV. Each fund (other than Financial Industries Fund and Regional Bank Fund) has,
however, elected to be governed by Rule 18f-1 under the 1940 Act. Under that rule, a fund must redeem its shares for cash except to the extent that the redemption payments to any shareholder during any 90-day period would exceed the lesser of $250,000 or 1% of the funds NAV at the beginning of such period.
Each
Trust has adopted Procedures Regarding Redemptions in Kind by Affiliates (the Procedures) to facilitate the efficient and cost effective movement of assets of a fund and other funds managed by the Advisor or its affiliates
(affiliated funds) in connection with certain investment and marketing strategies. It is the position of the SEC that the 1940 Act prohibits an investment company, such as each fund, from satisfying a redemption request from a
shareholder that is affiliated with the investment company by means of an in-kind distribution of portfolio securities. However, under a no-action letter issued by the
SEC staff, a redemption in kind to an affiliated shareholder is permissible provided certain conditions are met. The Procedures, which are intended to conform to the requirements of this no-action letter,
allow for in-kind redemptions by fund and affiliated fund shareholders subject to specified conditions, including that:
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the distribution is effected through a pro rata distribution of securities of the distributing fund or affiliated
fund; |
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the distributed securities are valued in the same manner as they are in computing the funds or affiliated
funds NAV; |
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neither the affiliated shareholder nor any other party with the ability and the pecuniary incentive to influence
the redemption in kind may select or influence the selection of the distributed securities; and |
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the Board, including a majority of the Independent Trustees, must determine on a quarterly basis that any
redemptions in kind to affiliated shareholders made during the prior quarter were effected in accordance with the Procedures, did not favor the affiliated shareholder to the detriment of any other shareholder and were in the best interests of the
fund and the affiliated fund. |
Potential Adverse Effects of Large Shareholder Transactions
A fund may from time to time sell to one or more investors, including other funds advised by the Advisor or third parties, a substantial amount of its shares,
and may thereafter be required to satisfy redemption requests by such shareholders. The Advisor and/or the subadvisor, as seed investors, may have significant ownership in certain funds. The Advisor and subadvisor, as applicable, face conflicts of
interest when considering the effect of redemptions on any such funds and on other shareholders in deciding whether and when to redeem its respective shares. Such sales and redemptions may be very substantial relative to the size of such fund. While
it is not possible to predict the overall effect of such sales and redemptions over time, such transactions may adversely affect such funds performance to the extent that the fund is required to invest cash received in connection with a sale
or to sell portfolio securities to facilitate a redemption at, in either case, a time when the fund otherwise would not invest or sell. As a result, the fund may have greater or lesser market exposure than would otherwise be the case. Such
transactions also may accelerate the realization of capital gains or increase a funds transaction costs, which would detract from fund performance.
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A large redemption could significantly reduce the assets of a fund, causing decreased liquidity and, depending on
any applicable expense caps and/or waivers, a higher expense ratio. If a fund is forced to sell portfolio securities that have appreciated in value, such sales may accelerate the realization of taxable income to shareholders if such sales of
investments result in gains. If a fund has difficulty selling portfolio securities in a timely manner to meet a large redemption request, the fund may have to borrow money to do so. In such an instance, the funds remaining shareholders would
bear the costs of such borrowings, and such costs could reduce the funds returns. In addition, a large redemption could result in a funds current expenses being allocated over a smaller asset base, leading to an increase in the
funds expense ratio and possibly resulting in the funds becoming too small to be economically viable.
Non-U.S. market closures and redemptions. Market closures during regular holidays in an applicable non-U.S. market that are not holidays observed in the U.S. market may prevent the fund from executing securities transactions within the normal settlement period. Unforeseeable closures of applicable non-U.S. markets may have a similar impact. During such closures, the fund may be required to rely on other methods to satisfy shareholder redemption requests, including the use of its line of credit, interfund
lending facility, redemptions in kind, or such other liquidity means or facilities as the fund may have in place from time to time, or the delivery of redemption proceeds may be extended beyond the normal settlement cycle.
ADDITIONAL SERVICES AND PROGRAMS
Exchange Privilege. Each Trust permits
exchanges of shares of any class of a fund for shares of the same class of any other fund within the John Hancock Fund Complex offering that same class at the time of the exchange. Class I, Class R2, Class R4, Class R5, or
Class R6 shareholders also may exchange their shares for Class A shares of Money Market Fund. If a shareholder exchanges into Class A shares of the Money Market Fund, any future exchanges out of Money Market Fund Class A shares
must be to the same share class from which they were originally exchanged.
The registration for both accounts involved must be identical. Identical
registration is determined by having the same beneficial owner on both accounts involved in the exchange.
Exchanges between funds are based on their
respective NAVs. No sales charge is imposed, except on exchanges of Class A shares from Money Market Fund to another John Hancock fund, if a sales charge has not previously been paid on those shares. Shares acquired in an exchange will be
subject to the CDSC rate and holding schedule of the fund in which such shares were originally purchased if and when such shares are redeemed. For Class C shares, this will have no impact on shareholders because the CDSC rates and holding
schedules are the same for all Class C shares across the John Hancock Fund Complex. For Class A shares, certain funds within the John Hancock Fund Complex have different CDSC rates and holding schedules and shareholders should review the
Prospectus for funds with Class A shares before considering an exchange. For purposes of determining the holding period for calculating the CDSC, shares will continue to age from their original purchase date.
If a group retirement plan, whose financial advisor has received finders fee compensation on the plans investments, exchanges all its Class A
assets out of a John Hancock fund to a non-John Hancock investment, a CDSC may apply.
Each fund reserves the
right to require that previously exchanged shares (and reinvested dividends) be in the fund for 90 days before a shareholder is permitted a new exchange.
An exchange of shares is treated as a redemption of shares of one fund and the purchase of shares of another for federal income tax purposes. An exchange may
result in a taxable gain or loss. See Additional Information Concerning Taxes.
Conversion Privilege. Provided a funds
eligibility requirements are met, and to the extent the referenced share class is offered by the fund, an investor in the fund pursuant to a fee-based, wrap or other investment platform program of certain
firms, as determined by the fund, may be afforded an opportunity to make a conversion of (i) Class A and/or Class C shares (not subject to a CDSC) also owned by the investor in the same fund to Class I shares or Class R6
shares of the fund; or (ii) Class I shares also owned by the investor in the same fund to Class R6 shares of the same fund. Investors that no longer participate in a fee-based, wrap, or other
investment platform program of certain firms may be afforded an opportunity to make a conversion to Class A shares of the same fund. Class C shares may be converted to Class A at the request of the applicable financial intermediary
after the expiration of the CDSC period, provided that the financial intermediary through which a shareholder purchased or holds Class C shares has records verifying that the Class C share CDSC period has expired and the position is held
in an omnibus or dealer-controlled account. The fund may in its sole discretion permit a conversion of one share class to another share class of the same fund in certain circumstances other than those described above.
In addition, Trustees, employees of the Advisor or its affiliates, employees of the subadvisor, members of the funds portfolio management team and the
spouses and children (under age 21) of the aforementioned, may make a conversion of Class A or Class I shares also owned by the investor in the same fund to Class R6 shares. If Class R6 shares are unavailable, such investors may
make a conversion of Class A shares in the same fund to Class I shares.
The conversion of one share class to another share class of the same
fund in the particular circumstances described above, should not cause the investor to realize taxable gain or loss. For further details, see Additional Information Concerning Taxes for information regarding the tax treatment of such
conversions.
Systematic Withdrawal Plan. Each Trust permits the establishment of a Systematic Withdrawal Plan. Payments under this plan represent
proceeds arising from the redemption of fund shares. Since the redemption price of fund shares may be more or less than the shareholders cost, depending upon the market value of the securities owned by a fund at the time of redemption, the
distribution of cash pursuant to this plan may result in realization of gain or loss for purposes of federal, state and local income taxes. The maintenance of a Systematic Withdrawal Plan concurrently with purchases of additional shares of a fund
could be disadvantageous to a shareholder because of the initial sales charge payable on such purchases of
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Class A shares and the CDSC imposed on redemptions of Class C shares and because redemptions are taxable events. Therefore, a shareholder should not purchase shares at the same time
that a Systematic Withdrawal Plan is in effect. Each fund reserves the right to modify or discontinue the Systematic Withdrawal Plan of any shareholder on 30 days prior written notice to such shareholder, or to discontinue the availability of
such plan in the future. The shareholder may terminate the plan at any time by giving proper notice to Signature Services.
Monthly Automatic
Accumulation Program (MAAP). This program is explained in a Prospectus that describes Class A or Class C shares. The program, as it relates to automatic investment checks, is subject to the following conditions:
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The investments will be drawn on or about the day of the month indicated; |
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The privilege of making investments through the MAAP may be revoked by Signature Services without prior notice if
any investment is not honored by the shareholders bank. The bank shall be under no obligation to notify the shareholder as to the nonpayment of any checks; and |
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The program may be discontinued by the shareholder either by calling Signature Services or upon written notice to
Signature Services that is received at least five (5) business days prior to the due date of any investment. |
Reinstatement or
Reinvestment Privilege. If Signature Services and the financial professional are notified prior to reinvestment, a shareholder who has redeemed fund shares may, within 120 days after the date of redemption, reinvest, without payment of a sales
charge any part of the redemption proceeds in shares back into the same share class of the same John Hancock fund and account from which it was removed, subject to the minimum investment limit of that fund. The proceeds from the redemption of
Class A shares of a fund may be reinvested at NAV without paying a sales charge for Class A shares of the fund. If a CDSC was paid upon a redemption, a shareholder may reinvest the proceeds from this redemption at NAV in additional shares
of the same class, fund, and account from which the redemption was made. The shareholders account will be credited with the amount of any CDSC charged upon the prior redemption and the new shares will continue to be subject to the CDSC. The
holding period of the shares acquired through reinvestment will, for purposes of computing the CDSC payable upon a subsequent redemption, include the holding period of the redeemed shares.
Redemption proceeds that are otherwise prohibited from being reinvested in the same account or the same fund may be invested in another account for the same
shareholder in the same share class of the same fund (or different John Hancock fund if the original fund is no longer available) without paying a sales charge. Any such reinvestment is subject to the minimum investment limit.
A fund may refuse any reinvestment request and may change or cancel its reinvestment policies at any time.
A redemption or exchange of fund shares is a taxable transaction for federal income tax purposes even if the reinvestment privilege is exercised, and any gain
or loss realized by a shareholder on the redemption or other disposition of fund shares will be treated for tax purposes as described under the caption Additional Information Concerning Taxes.
Section 403(b)(7) Accounts:
Section 403(b)(7)
of the Code permits public school employers and employers of certain types of tax-exempt organizations to establish for their eligible employees custodial accounts for the purpose of providing for retirement
income for such employees. Treasury regulations impose certain conditions on exchanges between one custodial account intended to qualify under Section 403(b)(7) (the exchanged account) and another contract or custodial account
intended to qualify under Section 403(b) (the replacing account) under the same employer plan (a Section 403(b) Plan).
Specifically, the replacing account agreement must include distribution restrictions that are no less stringent than those imposed under the exchanged account
agreement, and the employer must enter into an agreement with the custodian (or other issuer) of the replacing account under which the employer and the custodian (or other issuer) of the replacing account will from time to time in the future provide
each other with certain information.
Due to Treasury regulations:
|
1 |
The funds do not accept requests to establish new John Hancock custodial 403(b)(7) accounts intended to
qualify as a Section 403(b) Plan. |
|
2 |
The funds do not accept requests for exchanges or transfers into John Hancock custodial 403(b)(7)
accounts (i.e., where the investor holds the replacing account). |
|
3 |
The funds require certain signed disclosure documentation in the event: |
A shareholder established a John Hancock custodial 403(b)(7) account with a fund prior to September 24, 2007; and
A shareholder directs the fund to exchange or transfer some or all of the John Hancock custodial 403(b)(7) account assets to another
custodial 403(b) contract or account (i.e., where the exchanged account is with the fund).
|
4 |
The funds do not accept salary deferrals into custodial 403(b)(7) accounts. |
In the event that a fund does not receive the required documentation, and the fund is nonetheless directed to proceed with the transfer, the transfer may be
treated as a taxable transaction.
PURCHASES AND REDEMPTIONS THROUGH THIRD PARTIES
Shares of the funds may be purchased or redeemed
through certain Selling Firms. Selling Firms may charge the investor additional fees for their services. A fund will be deemed to have received a purchase or redemption order when an authorized Selling Firm, or if applicable, a Selling Firms
authorized designee, receives the order. Orders may be processed at the NAV next calculated after the Selling Firm receives the order. The Selling Firm must segregate any orders it receives after the close of regular trading on the NYSE and transmit
those orders to the fund for execution at the NAV next determined. Some Selling Firms that maintain network/omnibus/nominee accounts with a fund for their clients charge an annual fee on the average net assets held in such accounts for accounting,
servicing, and distribution services they provide with respect to the underlying fund shares. This fee is paid by the Advisor, the fund and/or the Distributor.
129
Certain accounts held on a funds books, known as omnibus accounts, contain the investments of multiple
underlying clients that are invested in shares of the funds. These underlying client accounts are maintained by entities such as financial intermediaries. Indirect investments in a John Hancock fund through a financial intermediary such as, but not
limited to: a broker-dealer, a bank (including a bank trust department), an investment advisor, a record keeper or trustee of a retirement plan or qualified tuition plan or a sponsor of a fee-based program
that maintains an omnibus account with a fund for trading on behalf of its customers, may be subject to guidelines, conditions, services and restrictions that are different from those discussed in a funds Prospectus. These differences may
include, but are not limited to: (i) eligibility standards to purchase, exchange, and sell shares depending on that intermediarys policies; (ii) availability of sales charge waivers and fees; (iii) minimum and maximum initial
and subsequent purchase amounts; and (iv) unavailability of LOI privileges. With respect to the availability of sales charge waivers and fees, and LOI privileges, see Appendix 1 to the Prospectus, Intermediary sales charge waivers.
Additional conditions may apply to an investment in a fund, and the investment professional or intermediary may charge a transaction-based, administrative or other fee for its services. These conditions and fees are in addition to those imposed by a
fund and its affiliates.
DESCRIPTION OF FUND SHARES
The Trustees are responsible for the management and
supervision of each Trust. Each Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest of each fund or other series of the Trust without par value. Under each Declaration of Trust,
the Trustees have the authority to create and classify shares of beneficial interest in separate series and classes without further action by shareholders. As of the date of this SAI, the Trustees have authorized shares of 20 series of the Trusts.
Additional series may be added in the future. The Trustees also have authorized the issuance of 8 classes of shares of the funds, designated as Class A, Class C, Class I, Class NAV, Class R2, Class R4, Class R5,
and Class R6. Additional classes of shares may be authorized in the future.
Each share of each class of a fund represents an equal proportionate
interest in the aggregate net assets attributable to that class of the fund. Holders of each class of shares have certain exclusive voting rights on matters relating to their respective distribution plan, if any. The different classes of a fund may
bear different expenses relating to the cost of holding shareholder meetings necessitated by the exclusive voting rights of any class of shares.
Dividends paid by a fund, if any, with respect to each class of shares will be calculated in the same manner, at the same time and on the same day and will be
in the same amount, except for differences resulting from the fact that: (i) the distribution and service fees, if any, relating to each class of shares will be borne exclusively by that class, and (ii) each class of shares will bear any
class expenses properly allocable to that class of shares. Similarly, the NAV per share may vary depending on which class of shares is purchased. No interest will be paid on uncashed dividend or redemption checks.
In the event of liquidation, shareholders of each class are entitled to share pro rata in the net assets of a fund that are available for distribution to
these shareholders. Shares entitle their holders to one vote per share (and fractional votes for fractional shares), are freely transferable and have no preemptive, subscription or conversion rights. When issued, shares are fully paid and non-assessable, except as set forth below.
Unless otherwise required by the 1940 Act or the Declaration of Trust, each
Trust has no intention of holding annual meetings of shareholders. Trust shareholders may remove a Trustee by the affirmative vote of at least two-thirds of the relevant Trusts outstanding shares and the
Trustees shall promptly call a meeting for such purpose when requested to do so in writing by the record holders of not less than 10% of the outstanding shares of the Trust. Shareholders may, under certain circumstances, communicate with other
shareholders in connection with a request for a special meeting of shareholders. However, at any time that less than a majority of the Trustees holding office were elected by the shareholders, the Trustees will call a special meeting of shareholders
for the purpose of electing Trustees.
Under Massachusetts law, shareholders of a Massachusetts business trust could, under certain circumstances, be held
personally liable for acts or obligations of such trust or a series thereof. However, each Declaration of Trust contains an express disclaimer of shareholder liability for acts, obligations or affairs of the relevant Trust. Each Declaration of Trust
also provides for indemnification out of the Trusts assets for all losses and expenses of any shareholder held personally liable by reason of being or having been a shareholder. Each Declaration of Trust also provides that no series of the
relevant Trust shall be liable for the liabilities of any other series. Furthermore, no series of a Trust shall be liable for the liabilities of any other fund within the John Hancock Fund Complex. Liability is therefore limited to circumstances in
which a fund itself would be unable to meet its obligations, and the possibility of this occurrence is remote.
Each fund reserves the right to reject any
application that conflicts with the funds internal policies or the policies of any regulatory authority. The Distributor does not accept starter, credit card, or third party checks. All checks returned by the post office as undeliverable will
be reinvested at NAV in the fund or funds from which a redemption was made or dividend paid. Information provided on the account application may be used by the funds to verify the accuracy of the information or for background or financial history
purposes. A joint account will be administered as a joint tenancy with right of survivorship, unless the joint owners notify Signature Services of a different intent. A shareholders account is governed by the laws of The Commonwealth of
Massachusetts. For telephone transactions, the transfer agent will take measures to verify the identity of the caller, such as asking for name, account number, Social Security, or other taxpayer ID number and other relevant information. If
appropriate measures are taken, the transfer agent is not responsible for any losses that may occur to any account due to an unauthorized telephone call. Also, for shareholders protection, telephone redemptions are not permitted on accounts
whose names or addresses have changed within the past 30 days. Proceeds from telephone transactions can be mailed only to the address of record.
130
Except as otherwise provided, shares of a fund generally may be sold only to U.S. citizens, U.S. residents, and
U.S. domestic corporations, partnerships, trusts or estates. For purposes of this policy, U.S. citizens and U.S. residents must reside in the U.S. and U.S. domestic corporations, partnerships, trusts, and estates must have a U.S. address of record.
The Declaration of Trust of Investment Trust also provides that the Board may approve the merger of a relevant fund with an affiliated fund without
shareholder approval, in accordance with the 1940 Act. This provision will permit the merger of affiliated funds without shareholder approval in certain circumstances to avoid incurring the expense of soliciting proxies when a combination does not
raise significant issues for shareholders. For example, this provision would permit the combination of two small funds having the same portfolio managers, the same investment objectives, and the same fee structure in order to achieve economies of
scale and thereby reduce fund expenses borne by shareholders. Such a merger will still require the Board (including a majority of the Independent Trustees) to determine that the merger is in the best interests of the combining funds and will not
dilute the interest of existing shareholders. The Trustees would evaluate any and all information reasonably necessary to make their determination and consider and give appropriate weight to all pertinent factors in fulfilling their duty of care to
shareholders.
Shareholders of an acquired fund will still be required to approve a combination that would result in a change in a fundamental investment
policy, a material change to the terms of an advisory agreement, the institution of or an increase in Rule 12b-1 fees, or when the board of the surviving fund does not have a majority of Independent Trustees
who were elected by its shareholders. Under Massachusetts law, shareholder approval is not required for fund mergers, consolidation, or sales of assets. Shareholder approval nevertheless will be obtained for combinations of affiliated funds when
required by the 1940 Act. Shareholder approval also will be obtained for combinations with unaffiliated funds when deemed appropriate by the Trustees.
Each Trusts amended and restated Declaration of Trust: (i) sets forth certain duties, responsibilities, and powers of the Trustees;
(ii) clarifies that, other than as provided under federal securities laws, the shareholders may only bring actions involving a fund derivatively; (iii) provides that any action brought by a shareholder related to a fund will be brought in
Massachusetts state or federal court, and that, if a claim is brought in a different jurisdiction and subsequently changed to a Massachusetts venue, the shareholder will be required to reimburse the fund for such expenses; and (iv) clarifies
that shareholders are not intended to be third-party beneficiaries of fund contracts. The foregoing description of the Declaration of Trust is qualified in its entirety by the full text of the Declaration of Trust, effective as of January 22,
2016, which is available by writing to the Secretary of the Trust at 200 Berkeley Street, Boston, Massachusetts 02116, and also on the SECs and Secretary of the Commonwealth of Massachusetts websites.
SAMPLE CALCULATION OF MAXIMUM OFFERING PRICE
Class A shares are sold with a maximum initial
sales charge of 5.00% or 4.50%. Class C shares are sold at NAV without any initial sales charges and with a 1.00% CDSC on shares redeemed within 12 months of purchase. Class I, Class NAV, Class R2, Class R4, Class R5,
and Class R6 shares of each fund, as applicable, are sold at NAV without any initial sales charges or CDSCs. The following tables show the maximum offering price per share of each class of each fund using the funds relevant NAV as of
October 31, 2022.
|
|
|
|
|
|
|
Fund |
|
NAV and Redemption Price per
Class A Share
($) |
|
Maximum Sales Charge
(5.00% of offering price, unless
otherwise noted)
($) |
|
Maximum Offering Price to
Public
($) |
Balanced Fund |
|
22.25 |
|
1.05 |
|
23.30 |
Classic Value Fund |
|
37.10 |
|
1.95 |
|
39.05 |
Disciplined Value International Fund |
|
12.11 |
|
0.64 |
|
12.75 |
Diversified Macro Fund |
|
10.68 |
|
0.56 |
|
11.24 |
Emerging Markets Equity Fund |
|
7.82 |
|
0.41 |
|
8.23 |
ESG International Equity Fund |
|
11.49 |
|
0.60 |
|
12.09 |
ESG Large Cap Core Fund |
|
17.70 |
|
0.93 |
|
18.63 |
Financial Industries Fund |
|
17.14 |
|
0.90 |
|
18.04 |
Fundamental Large Cap Core Fund |
|
54.43 |
|
2.86 |
|
57.29 |
Global Environmental Opportunities Fund |
|
7.94 |
|
0.42 |
|
8.36 |
Global Thematic Opportunities Fund |
|
9.94 |
|
0.52 |
|
10.46 |
Infrastructure Fund |
|
12.07 |
|
0.64 |
|
12.71 |
International Dynamic Growth Fund |
|
8.42 |
|
0.24 |
|
8.86 |
Regional Bank Fund |
|
29.71 |
|
1.56 |
|
31.27 |
Seaport Long/Short Fund |
|
10.61 |
|
0.56 |
|
11.17 |
131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NAV and Redemption Price per Class A Share |
|
|
Maximum Sales Charge (5.00% of offering price, unless otherwise noted) |
|
|
Maximum Offering Price to
Public |
Fund |
|
($) |
|
|
($) |
|
|
($) |
|
|
|
|
Small Cap Core Fund |
|
|
13.97 |
|
|
|
0.74 |
|
|
14.71 |
U.S. Global Leaders Growth Fund |
|
|
48.62 |
|
|
|
2.56 |
|
|
51.18 |
|
|
|
|
|
|
|
NAV, Shares Offering Price and Redemption Price per Share |
|
|
|
Class C |
|
Fund |
|
($) |
|
Balanced Fund |
|
|
22.22 |
|
Classic Value Fund |
|
|
36.24 |
|
Disciplined Value International Fund |
|
|
12.04 |
|
Diversified Macro Fund |
|
|
10.58 |
|
Emerging Markets Equity Fund |
|
|
7.54 |
|
ESG International Equity Fund |
|
|
|
|
ESG Large Cap Core Fund |
|
|
17.15 |
|
Financial Industries Fund |
|
|
14.77 |
|
Fundamental Large Cap Core Fund |
|
|
46.04 |
|
Global Environmental Opportunities Fund |
|
|
7.86 |
|
Global Thematic Opportunities Fund |
|
|
9.72 |
|
Infrastructure Fund |
|
|
11.91 |
|
International Dynamic Growth Fund |
|
|
8.15 |
|
Regional Bank Fund |
|
|
28.09 |
|
Seaport Long/Short Fund |
|
|
10.01 |
|
Small Cap Core Fund |
|
|
|
|
U.S. Global Leaders Growth Fund |
|
|
36.15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NAV, Shares Offering Price and Redemption Price per Share |
|
Fund |
|
Class R2 ($) |
|
|
Class R4 ($) |
|
|
Class R5 ($) |
|
|
Class R6 ($) |
|
Balanced Fund |
|
|
22.22 |
|
|
|
22.37 |
|
|
|
22.33 |
|
|
|
22.26 |
|
Classic Value Fund |
|
|
37.01 |
|
|
|
|
|
|
|
37.29 |
|
|
|
37.30 |
|
Disciplined Value International Fund |
|
|
12.12 |
|
|
|
12.12 |
|
|
|
|
|
|
|
12.15 |
|
Diversified Macro Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.74 |
|
Emerging Markets Equity Fund |
|
|
7.82 |
|
|
|
7.85 |
|
|
|
|
|
|
|
7.87 |
|
ESG International Equity Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11.53 |
|
ESG Large Cap Core Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17.79 |
|
Financial Industries Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17.16 |
|
Fundamental Large Cap Core Fund |
|
|
57.06 |
|
|
|
57.16 |
|
|
|
57.74 |
|
|
|
57.79 |
|
Global Environmental Opportunities Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7.96 |
|
Global Thematic Opportunities Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.00 |
|
Infrastructure Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12.11 |
|
International Dynamic Growth Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.52 |
|
Regional Bank Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29.70 |
|
Seaport Long/Short Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11.06 |
|
Small Cap Core Fund |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14.12 |
|
U.S. Global Leaders Growth Fund |
|
|
52.01 |
|
|
|
|
|
|
|
|
|
|
|
55.18 |
|
132
|
|
|
|
|
|
|
|
|
|
|
NAV, Shares Offering Price and Redemption Price per Share |
|
Fund |
|
Class I ($) |
|
|
Class NAV ($) |
|
Balanced Fund |
|
|
22.23 |
|
|
|
|
|
Classic Value Fund |
|
|
37.24 |
|
|
|
|
|
Disciplined Value International Fund |
|
|
12.14 |
|
|
|
12.14 |
|
Diversified Macro Fund |
|
|
10.72 |
|
|
|
10.73 |
|
Emerging Markets Equity Fund |
|
|
7.86 |
|
|
|
7.86 |
|
ESG International Equity Fund |
|
|
11.52 |
|
|
|
|
|
ESG Large Cap Core Fund |
|
|
17.77 |
|
|
|
|
|
Financial Industries Fund |
|
|
17.15 |
|
|
|
17.16 |
|
Fundamental Large Cap Core Fund |
|
|
57.56 |
|
|
|
57.77 |
|
Global Environmental Opportunities Fund |
|
|
7.95 |
|
|
|
|
|
Global Thematic Opportunities Fund |
|
|
9.99 |
|
|
|
10.01 |
|
Infrastructure Fund |
|
|
12.09 |
|
|
|
12.11 |
|
International Dynamic Growth Fund |
|
|
8.50 |
|
|
|
8.53 |
|
Regional Bank Fund |
|
|
29.70 |
|
|
|
|
|
Seaport Long/Short Fund |
|
|
10.92 |
|
|
|
11.06 |
|
Small Cap Core Fund |
|
|
14.06 |
|
|
|
14.11 |
|
U.S. Global Leaders Growth Fund |
|
|
54.46 |
|
|
|
|
|
ADDITIONAL INFORMATION CONCERNING TAXES
The following discussion is a general and abbreviated
summary of certain tax considerations affecting the funds and their shareholders. No attempt is made to present a detailed explanation of all federal, state, local and foreign tax concerns, and the discussions set forth here and in the Prospectus do
not constitute tax advice. Investors are urged to consult their own tax advisors with specific questions relating to federal, state, local or foreign taxes.
Each fund is treated as a separate entity for accounting and tax purposes and intends to qualify as a RIC under Subchapter M of the Code for each taxable
year. In order to qualify for the special tax treatment accorded RICs and their shareholders, a fund must, among other things:
(a) derive
at least 90% of its gross income from dividends, interest, payments with respect to certain securities loans, and gains from the sale or other disposition of stock, securities, and foreign currencies, or other income (including but not limited to
gains from options, futures, or forward contracts) derived with respect to its business of investing in such stock, securities, or currencies, and net income derived from interests in qualified publicly traded partnerships (as defined below);
(b) distribute with respect to each taxable year at least the sum of 90% of its investment company taxable income (as that term is defined in
the Code without regard to the deduction for dividends paid-generally, taxable ordinary income and the excess, if any, of net short-term capital gains over net long-term capital losses) and 90% of net
tax-exempt interest income, for such year; and
(c) diversify its holdings so that, at the end of
each quarter of the funds taxable year: (i) at least 50% of the market value of the funds total assets is represented by cash and cash items, U.S. government securities, securities of other RICs, and other securities limited in
respect of any one issuer to a value not greater than 5% of the value of the funds total assets and not more than 10% of the outstanding voting securities of such issuer; and (ii) not more than 25% of the value of the funds total
assets is invested (x) in the securities (other than those of the U.S. government or other RICs) of any one issuer or of two or more issuers that the fund controls and that are engaged in the same, similar, or related trades or businesses, or
(y) in the securities of one or more qualified publicly traded partnerships (as defined below).
With respect to gains from the sale or other
disposition of foreign currencies, the Treasury Department can, by regulation, exclude from qualifying income foreign currency gains which are not directly related to a RICs principal business of investing in stock (or options or futures with
respect to stock or securities), but no regulations have been proposed or adopted pursuant to this grant of regulatory authority.
In general, for
purposes of the 90% gross income requirement described in paragraph (a) above, income derived from a partnership will be treated as qualifying income only to the extent such income is attributable to items of income of the partnership which
would be qualifying income if realized by the RIC. However, 100% of the net income derived from an interest in a qualified publicly traded partnership will be treated as qualifying income. A qualified publicly traded
partnership is a publicly traded partnership that satisfies certain requirements with respect to the type of income it produces. In addition, although in general the passive loss rules of the Code do not apply to RICs, such rules do apply to a
RIC with respect to items attributable to an interest in a qualified publicly traded partnership. Finally, for purposes of paragraph (c) above, the term outstanding voting securities of such issuer will include the equity securities
of a qualified publicly traded partnership. If a fund invests in publicly traded partnerships, it might be required to recognize in its taxable year income in excess of its cash distributions from such publicly traded partnerships during that year.
133
Such income, even if not reported to a fund by the publicly traded partnerships until after the end of that year,
would nevertheless be subject to the RIC income distribution requirements and would be taken into account for purposes of the 4% excise tax described below.
Each fund may use equalization payments in determining the portion of its net investment income and net realized capital gains that have been
distributed. A fund that elects to use equalization payments will allocate a portion of its investment income and capital gains to the amounts paid in redemption of fund shares, and such income and gains will be deemed to have been distributed by
the fund for purposes of the distribution requirements described above. This may have the effect of reducing the amount of income and gains that the fund is required to distribute to shareholders in order for the fund to avoid federal income tax and
excise tax and also may defer the recognition of taxable income by shareholders. This process does not affect the tax treatment of redeeming shareholders and, since the amount of any undistributed income and/or gains will be reflected in the value
of the funds shares, the total return on a shareholders investment will not be reduced as a result of the funds distribution policy. The IRS has not published any guidance concerning the methods to be used in allocating investment
income and capital gain to redemptions of shares. In the event that the IRS determines that a fund is using an improper method of allocation and has under-distributed its net investment income or net realized capital gains for any taxable year, such
fund may be liable for additional federal income or excise tax or may jeopardize its treatment as a RIC.
A fund may invest in certain commodity
investments including commodity-based ETFs. Under an IRS revenue ruling effective after September 30, 2006, income from certain commodities-linked derivatives in which certain funds invest is not considered qualifying income for purposes of the
90% qualifying income test. This ruling limits the extent to which a fund may receive income from such commodity-linked derivatives to a maximum of 10% of its annual gross income.
As a result of qualifying as a RIC, a fund will not be subject to U.S. federal income tax on its investment company taxable income (as that term is defined in
the Code, determined without regard to the deduction for dividends paid) and net capital gain (i.e., the excess of its net realized long-term capital gain over its net realized short-term capital loss), if any, that it distributes to its
shareholders in each taxable year, provided that it distributes to its shareholders at least the sum of 90% of its investment company taxable income and 90% of its net exempt interest income for such taxable year.
A fund will be subject to a non-deductible 4% excise tax to the extent that the fund does not distribute by the end of
each calendar year: (a) at least 98% of its ordinary income for the calendar year; (b) at least 98.2% of its capital gain net income for the one-year period ending, as a general rule, on October 31
of each year; and (c) 100% of the undistributed ordinary income and capital gain net income from the preceding calendar years (if any). For this purpose, any income or gain retained by a fund that is subject to corporate tax will be considered to
have been distributed by year-end. To the extent possible, each fund intends to make sufficient distributions to avoid the application of both federal income and excise taxes. Under current law, distributions
of net investment income and net capital gain are not taxed to a life insurance company to the extent applied to increase the reserves for the companys variable annuity and life insurance contracts.
If a fund fails to meet the annual gross income test or asset diversification test or fails to satisfy the 90% distribution requirement as described above,
for any taxable year, the fund would incur income tax as a regular corporation on its taxable income and net capital gains for that year, it would lose its deduction for dividends paid to shareholders, and it would be subject to certain gain
recognition and distribution requirements upon requalification. Further distributions of income by the fund to its shareholders would be treated as dividend income, although distributions to individual shareholders generally would constitute
qualified dividend income subject to reduced federal income tax rates if the shareholder satisfies certain holding period requirements with respect to its shares in the fund and distributions to corporate shareholders generally should be eligible
for the DRD. Compliance with the RIC 90% qualifying income test and with the asset diversification requirements is carefully monitored by the Advisor and the subadvisors and it is intended that each fund will comply with the requirements for
qualification as a RIC.
If a fund fails to meet the annual gross income test described above, the fund will nevertheless be considered to have satisfied
the test if (i) (a) such failure is due to reasonable cause and not due to willful neglect and (b) the fund reports the failure, and (ii) the fund pays an excise tax equal to the excess
non-qualifying income. If a fund fails to meet the asset diversification test described above with respect to any quarter, the fund will nevertheless be considered to have satisfied the requirements for such
quarter if the fund cures such failure within six months and either: (i) such failure is de minimis; or (ii) (a) such failure is due to reasonable cause and not due to willful neglect; and (b) the fund reports the failure and
pays an excise tax.
A fund may make investments that produce income that is not matched by a corresponding cash distribution to the fund, such as
investments in pay- in-kind bonds or in obligations such as certain Brady Bonds and zero-coupon securities having OID (i.e., an
amount equal to the excess of the stated redemption price of the security at maturity over its issue price), or market discount (i.e., an amount equal to the excess of the stated redemption price at maturity of the security (appropriately adjusted
if it also has OID) over its basis immediately after it was acquired) if the fund elects to accrue market discount on a current basis. In addition, income may continue to accrue for federal income tax purposes with respect to a non-performing investment. Any such income would be treated as income earned by the fund and therefore would be subject to the distribution requirements of the Code. Because such income may not be matched by a
corresponding cash distribution to the fund, the fund may be required to borrow money or dispose of other securities to be able to make distributions to its investors. In addition, if an election is not made to currently accrue market discount with
respect to a market discount bond, all or a portion of any deduction for any interest expense incurred to purchase or hold such bond may be deferred until such bond is sold or otherwise disposed of.
Investments in debt obligations that are at risk of or are in default present special tax issues for a fund. Tax rules are not entirely clear about issues
such as when a fund may cease to accrue interest, OID, or market discount, when and to what extent deductions may be taken for bad debts or worthless securities, how payments received on obligations in default should be allocated between principal
and income, and whether exchanges of debt obligations in a workout context are taxable. These and other issues will be addressed by a fund that holds such obligations in order to reduce the risk of distributing insufficient income to preserve its
status as a RIC and seek to avoid becoming subject to federal income or excise tax.
134
A fund may make investments in convertible securities and exchange traded notes. Convertible debt ordinarily is
treated as a single property consisting of a pure debt interest until conversion, after which the investment becomes an equity interest. If the security is issued at a premium (i.e., for cash in excess of the face amount payable on
retirement), the creditor-holder may amortize the premium over the life of the bond. If the security is issued for cash at a price below its face amount, the creditor-holder must accrue OID in income over the life of the debt. The
creditor-holders exercise of the conversion privilege is treated as a nontaxable event. Mandatorily convertible debt, such as an exchange traded note issued in the form of an unsecured obligation that pays a return based on the performance of
a specified market index, currency or commodity, is often treated as a contract to buy or sell the reference property rather than debt. Similarly, convertible preferred stock with a mandatory conversion feature is ordinarily, but not always, treated
as equity rather than debt. In general, conversion of preferred stock for common stock of the same corporation is tax-free. Conversion of preferred stock for cash is a taxable redemption. Any redemption
premium for preferred stock that is redeemable by the issuing company might be required to be amortized under OID principles.
Certain funds may engage in
hedging or derivatives transactions involving foreign currencies, forward contracts, options and futures contracts (including options, futures and forward contracts on foreign currencies) and short sales (see Hedging and Other Strategic
Transactions). Such transactions will be subject to special provisions of the Code that, among other things, may affect the character of gains and losses realized by a fund (that is, may affect whether gains or losses are ordinary or capital),
accelerate recognition of income of a fund and defer recognition of certain of the funds losses. These rules could therefore affect the character, amount and timing of distributions to shareholders. The futures that are traded on a regulated
exchange, such as NYSE or NASDAQ, will be treated as Code Section 1256 contracts, and the capital gain/loss will be reflected as 40% short-term capital gain/loss and 60% long-term capital gain/loss. Any futures that are not traded on a
regulated exchange will follow the 365 day rule of short-term capital or long-term capital treatment. In addition, these provisions: (1) will require a fund to
mark-to-market certain types of positions in its portfolio (that is, treat them as if they were closed out); and (2) may cause a fund to recognize
income without receiving cash with which to pay dividends or make distributions in amounts necessary to satisfy the distribution requirement and avoid the 4% excise tax. Each fund intends to monitor its transactions, will make the appropriate tax
elections and will make the appropriate entries in its books and records when it acquires any option, futures contract, forward contract or hedged investment in order to mitigate the effect of these rules.
Foreign exchange gains and losses realized by a fund in connection with certain transactions involving foreign currency-denominated debt securities, certain
foreign currency options, foreign currency forward contracts, foreign currencies, or payables or receivables denominated in a foreign currency are subject to Section 988 of the Code, which generally causes such gains and losses to be treated as
ordinary income and losses and may affect the amount, timing and character of distributions to shareholders. If the net foreign exchange loss for a year treated as ordinary loss under Section 988 were to exceed a funds investment company
taxable income computed without regard to such loss, the resulting overall ordinary loss for such year would not be deductible by the fund or its shareholders in future years. Under such circumstances, distributions paid by the fund could be deemed
return of capital.
Certain funds may be required to account for their transactions in forward rolls or swaps, caps, floors and collars in a manner that,
under certain circumstances, may limit the extent of their participation in such transactions. Additionally, a fund may be required to recognize gain, but not loss, if a swap or other transaction is treated as a constructive sale of an appreciated
financial position in a funds portfolio. Additionally, some countries restrict repatriation which may make it difficult or impossible for a fund to obtain cash corresponding to its earnings or assets in those countries.
However, a fund must distribute to shareholders for each taxable year substantially all of its net income and net capital gains, including such income or
gain, to qualify as a RIC and avoid liability for any federal income or excise tax. Therefore, a fund may have to dispose of its portfolio securities under disadvantageous circumstances to generate cash, or borrow cash, to satisfy these distribution
requirements.
Certain funds may invest in REITs and/or MLPs. Effective for taxable years beginning after December 31, 2017 and before January 1, 2026,
the Code generally allows individuals and certain non-corporate entities a deduction for 20% of qualified publicly traded partnership income, such as income from MLPs, and a deduction for 20% of
qualified REIT dividends. Treasury regulations allow a RIC to pass the character of its qualified REIT dividends through to its shareholders provided certain holding period requirements are met. A similar pass-through by RICs of qualified publicly
traded partnership income is not currently available. As a result, an investor who invests directly in MLPs will be able to receive the benefit of such deductions, while a shareholder in a fund that invests in MLPs currently will not.
If a fund invests in stock (including an option to acquire stock such as is inherent in a convertible bond) in certain foreign corporations that receive at
least 75% of their annual gross income from passive sources (such as interest, dividends, certain rents and royalties or capital gain) or hold at least 50% of their assets in investments producing such passive income (passive foreign
investment companies or PFICs), the fund could be subject to federal income tax and additional interest charges on excess distributions received from such companies or gain from the sale of stock in such companies, even
if all income or gain actually received by the fund is timely distributed to its shareholders. The fund would not be able to pass through to its shareholders any credit or deduction for such a tax.
If a fund were to invest in a PFIC and elected to treat the PFIC as a qualified electing fund under the Code, in lieu of the foregoing
requirements, the fund would be required to include in income each year a portion of the ordinary earnings and net capital gain of the qualified electing fund, even if not distributed to the fund. Alternatively, a fund can elect to mark-to-market at the end of each taxable year its shares in a PFIC; in this case, the fund would recognize as ordinary income any increase in the value of such shares, and as
ordinary loss any decrease in such value to the extent it did not exceed prior increases included in income. Under either election, a fund might be required to recognize in a year income in excess of its distributions from PFICs and its proceeds
from dispositions of PFIC stock during that year, and such income would nevertheless be subject to the distribution requirements and would be taken into account for purposes of the 4% excise tax.
135
A fund may be subject to withholding and other taxes imposed by foreign countries with respect to its investments
in foreign securities. Some tax conventions between certain countries and the U.S. may reduce or eliminate such taxes. If more than 50% of the value of a funds total assets at the close of any taxable year consists of stock or securities of
foreign corporations, the fund will be able to elect to pass such taxes through to the shareholders (as additional income) along with a corresponding entitlement to a foreign tax credit or deduction. Such foreign taxes will reduce the amount a fund
has available to distribute to shareholders.
If this election is made, a shareholder generally subject to tax will be required to include in gross income
(in addition to taxable dividends actually received) his or her pro rata share of the foreign taxes paid by the fund, and may be entitled either to deduct (as an itemized deduction) his or her pro rata share of foreign taxes in computing his or her
taxable income or to use it (subject to limitations) as a foreign tax credit against his or her U.S. federal income tax liability. No deduction for foreign taxes may be claimed by a shareholder who does not itemize deductions. Each shareholder will
be notified after the close of the funds taxable year whether the foreign taxes paid by the fund will pass-through for that taxable year.
Diversified Macro Fund may invest a portion of its assets in the Subsidiary, a Cayman Islands exempted company that is classified as a corporation for federal
tax purposes. A foreign corporation, such as the Subsidiary, generally is not subject to federal income tax unless it is engaged in the conduct of a trade or business in the United States. The Subsidiary intends to operate in a manner that is
expected to meet the requirements of a safe harbor under section 864(b)(2) of the Code, under which it may trade in stocks or securities or certain commodities for its own account without being deemed to be engaged in a U.S. trade or business. If,
however, certain of the Subsidiarys activities did not meet those safe harbor requirements, it might be considered as engaging in such a trade or business. Even if the Subsidiary is not so engaged, it may be subject to a withholding tax at a
rate of 30% on some portion of its U.S.-source gross income that is not effectively connected with the conduct of a U.S. trade or business.
The
Subsidiary will be treated as a controlled foreign corporation (a CFC), and the fund with the Subsidiary will be a United States shareholder thereof. As a result, the fund will be required to include in its gross income each
taxable year all of the Subsidiarys subpart F income, which generally is treated as ordinary income; it is expected that virtually all of the Subsidiarys income will be subpart F income. If the Subsidiary realizes
a net loss, that loss generally will not be available to offset the funds income. The funds inclusion of the Subsidiarys subpart F income in its gross income will increase the funds tax basis in its shares of the
Subsidiary. Distributions by the Subsidiary to a fund will not be taxable to the extent of its previously undistributed subpart F income and will reduce the funds tax basis in those shares.
Although gains from the disposition of commodities are not considered qualifying income for purposes of the 90% gross income test described above, the Service
has issued numerous private letter rulings (PLRs) in recent years that a RICs income from a wholly-owned foreign subsidiary (such as the Subsidiary) is qualifying income. Because a PLR may be cited as precedent only by the
taxpayer(s) to which it is issued, the fund cannot rely upon such PLRs. Further, in July 2011 the Service suspended the issuance of further PLRs to RICs seeking commodities exposure through the use of foreign wholly-owned subsidiaries (and
structured notes).
RICs investments in CFCs for purposes of indirectly investing in commodities has been further impacted by the issuance of
regulations under the Code published on March 19, 2019 (Regulations). Under the Regulations, the income a RIC is deemed under the Code to constructively derive from a CFC, in which the RIC invests in connection with its business of
investing in securities, each taxable year will be considered qualifying income for the RIC whether or not distributed by the CFC to the RIC out of its associated earnings and profits for the applicable taxable year.
The federal income tax treatment of the funds income from the Subsidiary may be adversely affected by future legislation, other Treasury Regulations,
and/or other guidance issued by the Service that could affect the character, timing of recognition, and/or amount of the funds taxable income and/or net capital gains and, therefore, the distributions it makes.
For United States federal income tax purposes, distributions paid out of a funds current or accumulated earnings and profits will, except in the case of
distributions of qualified dividend income and capital gain dividends described below, be taxable as ordinary dividend income. Certain income distributions paid by a fund (whether paid in cash or reinvested in additional fund shares) to individual
taxpayers are taxed at rates applicable to net long-term capital gains (currently 20%, 15%, or 0%, depending on an individuals level of income). For this purpose, qualified dividend income means dividends received by a fund from
United States corporations and qualified foreign corporations, as well as certain dividends from underlying funds that are reported as qualified dividend income, provided that the fund satisfies certain holding period and other
requirements in respect of the stock of such corporations and underlying funds. There can be no assurance as to what portion of a funds dividend distributions will qualify as qualified dividend income. Dividends paid by funds that primarily
invest in bonds and other debt securities generally will not qualify for the reduced tax rate applicable to qualified dividend income and will not qualify for the corporate dividends-received deduction. Distributions from a PFIC are not eligible for
the reduced rate of tax on qualified dividend income.
If a fund should have dividend income that qualifies for the reduced tax rate
applicable to qualified dividend income, the maximum amount allowable will be reported by the fund. This amount will be reflected on Form 1099-DIV for the applicable calendar year.
For purposes of the dividends received deduction available to corporations, dividends received by a fund, if any, from U.S. domestic corporations in respect
of the stock of such corporations held by the fund, for U.S. federal income tax purposes, for at least 46 days (91 days in the case of certain preferred stock) during a prescribed period extending before and after each such dividend and distributed
and reported by the fund may be treated as qualifying dividends. Corporate shareholders must meet the holding period requirements stated above with respect to their shares of a fund for each dividend in order to qualify for the deduction and, if
they have any debt that is deemed under the Code directly attributable to such shares, may be denied a portion of the dividends received deduction. Additionally, any corporate shareholder should consult its tax advisor regarding the possibility that
its tax basis in its shares may be reduced, for federal income tax purposes, by reason of extraordinary dividends received with respect to the shares and, to the extent such basis would be reduced below zero, that current recognition of
income would be required.
136
Certain distributions reported by a fund as Section 163(j) interest dividends may be treated as interest
income by shareholders for purposes of the tax rules applicable to interest expense limitations under Section 163(j) of the Code. Such treatment by the shareholder is generally subject to holding period requirements and other potential
limitations, although the holding period requirements are generally not applicable to dividends declared by money market funds and certain other funds that declare dividends daily and pay such dividends on a monthly or more frequent basis. The
amount that a fund is eligible to report as a Section 163(j) dividend for a tax year is generally limited to the excess of the funds business interest income over the sum of the funds (i) business interest expense and
(ii) other deductions properly allocable to the funds business interest income.
Shareholders receiving any distribution from a fund in the
form of additional shares pursuant to a dividend reinvestment plan will be treated as receiving a taxable distribution in an amount equal to the fair market value of the shares received, determined as of the reinvestment date.
Shareholders who have chosen automatic reinvestment of their distributions will have a federal tax basis in each share received pursuant to such a
reinvestment equal to the amount of cash they would have received had they elected to receive the distribution in cash, divided by the number of shares received in the reinvestment.
For federal income tax purposes, a fund is permitted to carry forward a net capital loss incurred in any year to offset net capital gains, if any, in any
subsequent year until such loss carryforwards have been fully used. Capital losses carried forward will retain their character as either short-term or long-term capital losses. A funds ability to utilize capital loss carryforwards in a given
year or in total may be limited. To the extent subsequent net capital gains are offset by such losses, they would not result in federal income tax liability to a fund and would not be distributed as such to shareholders.
Below are the capital loss carryforwards available to the funds as of October 31, 2022 to the extent provided by regulations, to offset future net
realized capital gains:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term Losses |
|
|
Long-term Losses |
|
|
Total |
|
Fund |
|
($) |
|
|
($) |
|
|
($) |
|
Balanced Fund |
|
|
39,645,634 |
|
|
|
|
|
|
|
39,645,634 |
|
Classic Value Fund |
|
|
|
|
|
|
|
|
|
|
|
|
Disciplined Value International Fund |
|
|
132,784,073 |
|
|
|
113,094,228 |
|
|
|
245,878,301 |
|
Diversified Macro Fund |
|
|
3,979,588 |
|
|
|
10,006,336 |
|
|
|
13,985,924 |
|
Emerging Markets Equity Fund |
|
|
148,414,508 |
|
|
|
57,356,993 |
|
|
|
205,771,501 |
|
ESG International Equity Fund |
|
|
440,748 |
|
|
|
|
|
|
|
440,748 |
|
ESG Large Cap Core Fund |
|
|
943,998 |
|
|
|
158,724 |
|
|
|
1,102,722 |
|
Financial Industries Fund |
|
|
|
|
|
|
|
|
|
|
|
|
Fundamental Large Cap Core Fund |
|
|
|
|
|
|
|
|
|
|
|
|
Global Environmental Opportunities Fund |
|
|
511,327 |
|
|
|
87,642 |
|
|
|
598,969 |
|
Global Thematic Opportunities Fund |
|
|
6,286,913 |
|
|
|
63,976 |
|
|
|
6,350,889 |
|
Infrastructure Fund |
|
|
27,708,898 |
|
|
|
11,870,267 |
|
|
|
39,579,165 |
|
International Dynamic Growth Fund |
|
|
24,460,184 |
|
|
|
|
|
|
|
24,460,184 |
|
Regional Bank Fund |
|
|
|
|
|
|
|
|
|
|
|
|
Seaport Long/Short Fund |
|
|
30,304,804 |
|
|
|
|
|
|
|
30,304,804 |
|
Small Cap Core Fund |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Global Leaders Growth Fund |
|
|
23,247,166 |
|
|
|
|
|
|
|
23,247,166 |
|
Distributions of net capital gain, if any, reported as capital gains dividends are taxable to a shareholder as long-term
capital gains, regardless of how long the shareholder has held fund shares. A distribution of an amount in excess of a funds current and accumulated earnings and profits will be treated by a shareholder as a return of capital which is applied
against and reduces the shareholders basis in his or her shares. To the extent that the amount of any such distribution exceeds the shareholders basis in his or her shares, the excess will be treated by the shareholder as gain from a
sale or exchange of the shares. Distributions of gains from the sale of investments that a fund owned for one year or less will be taxable as ordinary income.
A fund may elect to retain its net capital gain or a portion thereof for investment and be taxed at corporate rates on the amount retained. In such case, it
may designate the retained amount as undistributed capital gains in a notice to its shareholders who will be treated as if each received a distribution of his pro rata share of such gain, with the result that each shareholder will: (i) be
required to report his pro rata share of such gain on his tax return as long-term capital gain; (ii) receive a refundable tax credit for his pro rata share of tax paid by the fund on the gain; and (iii) increase the tax basis for his
shares by an amount equal to the deemed distribution less the tax credit.
137
Selling shareholders generally will recognize gain or loss in an amount equal to the difference between the
shareholders adjusted tax basis in the shares sold and the sale proceeds. Such gain or loss will be treated as capital gain or loss if the shares are capital assets in the shareholders hands and will be long-term or short-term, depending
upon the shareholders tax holding period for the shares and subject to the special rules described below. The maximum tax rate applicable to net capital gains recognized by individuals and other
non-corporate taxpayers is generally 20% for gains recognized on the sale of capital assets held for more than one year (as well as certain capital gain distributions) (15% or 0% for individuals at certain
income levels).
A shareholder exchanging shares of one fund for shares of another fund will be treated for tax purposes as having sold the shares of the
first fund, realizing tax gain or loss on such exchange. A shareholder exercising a right to convert one class of fund shares to a different class of shares of the same fund should not realize taxable gain or loss.
Any loss realized upon the sale or exchange of fund shares with a holding period of six months or less will be treated as a long-term capital loss to the
extent of any capital gain distributions received (or amounts designated as undistributed capital gains) with respect to such shares. In addition, all or a portion of a loss realized on a sale or other disposition of fund shares may be disallowed
under wash sale rules to the extent the shareholder acquires other shares of the same fund (whether through the reinvestment of distributions or otherwise) within a period of 61 days beginning 30 days before and ending 30 days after the
date of disposition of the shares. Any disallowed loss will result in an adjustment to the shareholders tax basis in some or all of the other shares acquired.
Sales charges paid upon a purchase of shares cannot be taken into account for purposes of determining gain or loss on a sale of the shares before the 91st day
after their purchase to the extent a sales charge is reduced or eliminated in a subsequent acquisition of shares of a fund, during the period beginning on the date of such sale and ending on January 31 of the calendar year following the calendar
year in which such sale was made, pursuant to a reinvestment or exchange privilege. Any disregarded amounts will result in an adjustment to the shareholders tax basis in some or all of any other shares acquired.
The benefits of the reduced tax rates applicable to long-term capital gains and qualified dividend income may be impacted by the application of the
alternative minimum tax to individual shareholders.
Certain net investment income received by an individual having adjusted gross income in excess of
$200,000 (or $250,000 for married individuals filing jointly) will be subject to a tax of 3.8%. Undistributed net investment income of trusts and estates in excess of a specified amount also will be subject to this tax. Dividends and capital gains
distributed by a fund, and gain realized on redemption of fund shares, will constitute investment income of the type subject to this tax.
Special tax
rules apply to investments through defined contribution plans and other tax-qualified plans. Shareholders should consult their tax advisor to determine the suitability of shares of a fund as an investment
through such plans.
Dividends and distributions on a funds shares are generally subject to federal income tax as described herein to the extent
they do not exceed the funds realized income and gains, even though such dividends and distributions may economically represent a return of a particular shareholders investment. Such distributions are likely to occur in respect of shares
purchased at a time when a funds net asset value reflects gains that are either unrealized or realized but not distributed. Such realized gains may be required to be distributed even when a funds net asset value also reflects unrealized
losses. Such gains could be substantial, and the taxes incurred by a shareholder with respect to such distributions could have a material impact on the value of the shareholders investment.
Certain distributions declared in October, November or December to shareholders of record of such month and paid in the following January will be taxed to
shareholders as if received on December 31 of the year in which they were declared. In addition, certain other distributions made after the close of a taxable year of a fund may be spilled back and treated as paid by the fund
(except for purposes of the non-deductible 4% federal excise tax) during such taxable year. In such case, shareholders will be treated as having received such dividends in the taxable year in which the
distributions were actually made.
A fund will inform its shareholders of the source and tax status of all distributions promptly after the close of each
calendar year.
Each fund (or its administrative agent) must report to the IRS and furnish to shareholders the cost basis information and holding period
for such funds shares purchased on or after January 1, 2012, and repurchased by the fund on or after that date. A fund will permit shareholders to elect from among several permitted cost basis methods. In the absence of an election, each
fund will use an average cost as its default cost basis method. The cost basis method that a shareholder elects may not be changed with respect to a repurchase of shares after the settlement date of the repurchase.
Shareholders should consult with their tax advisors to determine the best permitted cost basis method for their tax situation and to obtain more information
about how the new cost basis reporting rules apply to them.
A fund generally is required to withhold and remit to the U.S. Treasury a percentage of the
taxable dividends and other distributions paid to and proceeds of share sales, exchanges, or redemptions made by any individual shareholder (including foreign individuals) who fails to furnish the fund with a correct taxpayer identification number,
who has under-reported dividends or interest income, or who fails to certify to the fund that he or she is a United States person and is not subject to such withholding. The backup withholding tax rate is 24%. Distributions will not be subject to
backup withholding to the extent they are subject to the withholding tax on foreign persons described in the next paragraph. Any tax withheld as a result of backup withholding does not constitute an additional tax imposed on the record owner of the
account and may be claimed as a credit on the record owners federal income tax return.
138
Non-U.S. investors not engaged in a U.S. trade or business with which
their investment in a fund is effectively connected will be subject to U.S. federal income tax treatment that is different from that described above. Such non-U.S. investors may be subject to withholding tax
at the rate of 30% (or a lower rate under an applicable tax treaty) on amounts treated as ordinary dividends from a fund. Capital gain distributions, if any, are not subject to the 30% withholding tax. Unless an effective IRS Form W-8BEN or other authorized withholding certificate is on file, backup withholding will apply to certain other payments from a fund. Non-U.S. investors should consult their tax
advisors regarding such treatment and the application of foreign taxes to an investment in a fund.
Properly-reported dividends generally are exempt from
U.S. federal withholding tax where they are (i) interest-related dividends paid in respect of a funds qualified net interest income (generally, a funds U.S. source interest income, other than certain contingent
interest and interest from obligations of a corporation or partnership in which the fund is at least a 10% shareholder, reduced by expenses that are allocable to such income) or (ii) short-term capital gain dividends paid in respect of a
funds qualified short-term gains (generally, the excess of a funds net short-term capital gain over the funds long-term capital loss for such taxable year). Depending on its circumstances, a fund may designate all, some
or none of its potentially eligible dividends as such interest-related dividends or as short-term capital gain dividends and/or treat such dividends, in whole or in part, as ineligible for this exemption from withholding.
Under legislation known as FATCA, a 30% U.S. withholding tax may apply to any U.S.-source withholdable payments made to a non-U.S. entity unless the non-U.S. entity enters into an agreement with either the IRS or a governmental authority in its own country, as applicable, to collect and provide
substantial information regarding the entitys owners, including specified United States persons and United States owned foreign entities, or otherwise demonstrates compliance with or exemption from FATCA. The term
withholdable payment includes any payment of interest (even if the interest is otherwise exempt from the withholding rules described above) or dividends, in each case with respect to any U.S. investment. The withholding tax regime went
into effect on July 1, 2014 with respect to U.S.-source income. The IRS has issued proposed regulations, which have immediate effect, while pending, to eliminate the withholding tax that was scheduled to begin in 2019 with respect to
U.S.-source investment sale proceeds. A specified United States person is essentially any U.S. person, other than publicly traded corporations, their affiliates, tax-exempt organizations, governments, banks,
real estate investment trusts, RICs, and common trust funds. A United States owned foreign entity is a foreign entity with one or more substantial United States owners, generally defined as United States person owning a greater than 10%
interest. Non-U.S. investors should consult their own tax advisers regarding the impact of this legislation on their investment in a fund.
If a shareholder realizes a loss on disposition of a funds shares of $2 million or more for an individual shareholder or $10 million or more
for a corporate shareholder, the shareholder must file with the IRS a disclosure statement on Form 8886. Direct shareholders of portfolio securities are in many cases excepted from this reporting requirement, but under current guidance, shareholders
of a RIC are not excepted. Future guidance may extend the current exception from this reporting requirement to shareholders of most or all RICs.
The
foregoing is a general and abbreviated summary of the applicable provisions of the Code and Treasury Regulations currently in effect. It is not intended to be a complete explanation or a substitute for consultation with individual tax advisors. For
the complete provisions, reference should be made to the pertinent Code sections and the Treasury Regulations promulgated thereunder. The Code and Treasury Regulations are subject to change, possibly with retroactive effect.
Taxation of the Subsidiary. The Subsidiary is classified as a corporation for U.S. federal income tax purposes. The fund having the Subsidiary intends
to take the position that income from its investments in the Subsidiary will constitute qualifying income for purposes of qualifying as a RIC. The IRS has issued regulations providing that subpart F income (as defined below) deemed
received from a CFC (as defined below), in which a RIC invests in connection with its business of investing in securities, and included in a RICs gross income constitutes qualifying income. The tax treatment of income from the
Subsidiary may be adversely affected by future legislation, Treasury Regulations and/or guidance issued by the IRS, which could affect the character, timing and/or amount of a funds taxable income or any gains and distributions made by the
fund. If the fund were to earn non- qualifying income from any source including the Subsidiary in excess of 10% of its gross income for any taxable year, it would fail to qualify as a RIC for that year, unless
the fund were eligible to cure and cured such failure by paying a fund-level tax equal to the full amount of such excess.
Foreign corporations, such as
the Subsidiary, will generally not be subject to U.S. federal income taxation unless they are deemed to be engaged in a U.S. trade or business. It is expected that the Subsidiary will conduct it activities in a manner so as to meet the requirements
of a safe harbor under Section 864(b)(2) of the Code under which the Subsidiary may engage in trading in stocks or securities or certain commodities without being deemed to be engaged in a U.S. trade or business. However, if certain of the
Subsidiarys activities were determined not to be of the type described in the safe harbor (which is not expected), then the activities of the Subsidiary may constitute a U.S. trade or business, and would be taxed as such.
The Subsidiary is treated as a controlled foreign corporation (CFC) for tax purposes and the fund with the Subsidiary is treated as a U.S.
shareholder of the Subsidiary. As a result, the fund is required to include in gross income for U.S. federal income tax purposes all of the Subsidiarys subpart F income, whether or not such income is distributed by the
Subsidiary. It is expected that all of the Subsidiarys income will be subpart F income. The funds recognition of the Subsidiarys subpart F income will increase the funds tax basis in the Subsidiary.
Distributions by the Subsidiary to the fund will be tax-free to the extent of its previously undistributed subpart F income, and will correspondingly reduce the funds tax basis in the
Subsidiary. Subpart F income is generally treated as ordinary income, regardless of the character of the Subsidiarys underlying income. If a net loss is realized by the Subsidiary, such loss is not generally available to offset the
income earned by the fund.
PORTFOLIO BROKERAGE
Pursuant to the Subadvisory Agreements, the
subadvisors are responsible for placing all orders for the purchase and sale of portfolio securities of the funds. The subadvisors have no formula for the distribution of the funds brokerage business; rather they place orders for the purchase
and sale of securities with the primary objective of obtaining the most favorable overall results for the applicable fund. The cost of securities transactions for each fund will consist primarily of brokerage commissions or dealer or underwriter
spreads. Fixed-income securities and money market instruments are generally traded on a net basis and do not normally involve either brokerage commissions or transfer taxes.
139
Occasionally, securities may be purchased directly from the issuer. For securities traded primarily in the OTC
market, the subadvisors will, where possible, deal directly with dealers who make a market in the securities unless better prices and execution are available elsewhere. Such dealers usually act as principals for their own account.
Selection of Brokers or Dealers to Effect Trades. In selecting brokers or dealers to implement transactions, the subadvisors will give consideration to
a number of factors, including:
|
|
|
price, dealer spread or commission, if any; |
|
|
|
the reliability, integrity and financial condition of the broker dealer; |
|
|
|
size of the transaction; |
|
|
|
difficulty of execution; |
|
|
|
brokerage and research services provided (unless prohibited by applicable law); and |
|
|
|
confidentiality and anonymity. |
Consideration of these factors by a subadvisor, either in terms of a particular transaction or the subadvisors overall responsibilities with respect to
the fund and any other accounts managed by the subadvisor, could result in the applicable fund paying a commission or spread on a transaction that is in excess of the amount of commission or spread another broker dealer might have charged for
executing the same transaction.
Securities of Regular Broker Dealers. The table below presents information regarding the securities of the
funds regular broker dealers (or parents of the regular broker dealers) that were held by the funds as of October 31, 2022. A Regular Broker Dealer of a fund is defined by the SEC as one of the 10 brokers or dealers that
during the funds most recent fiscal year: (a) received the greatest dollar amount of brokerage commissions by virtue of direct or indirect participation in the funds portfolio transactions; (b) engaged as principal in the
largest dollar amount of portfolio transactions of the fund; or (c) sold the largest dollar amount of securities of the fund.
|
|
|
|
|
Fund |
|
Regular Broker Dealer |
|
Holdings ($000s) |
Balanced Fund |
|
Bank of America Corp. |
|
17,876 |
|
|
Barclays Bank PLC |
|
5,504 |
|
|
Citigroup, Inc. |
|
11,898 |
|
|
JPMorgan Chase & Co. |
|
93,281 |
|
|
Morgan Stanley & Company, Inc. |
|
8,356 |
|
|
The Goldman Sachs Group, Inc. |
|
44,850 |
|
|
UBS Group AG |
|
1,159 |
Classic Value Fund |
|
Bank of America Corp. |
|
45,876 |
|
|
State Street Corp. |
|
6,631 |
|
|
The Goldman Sachs Group, Inc. |
|
28,628 |
|
|
Wells Fargo & Company |
|
81,941 |
Disciplined Value International Fund |
|
UBS Group AG |
|
20,056 |
Diversified Macro Fund |
|
N/A |
|
N/A |
Emerging Markets Equity Fund |
|
JPMorgan Chase & Co. |
|
67,688 |
ESG International Equity Fund |
|
N/A |
|
N/A |
ESG Large Cap Core Fund |
|
Bank of America Corp. |
|
2,722 |
Financial Industries Fund |
|
AllianceBernstein Holding LP |
|
8,662 |
|
|
Bank of America Corp. |
|
19,322 |
|
|
BNP Paribas SA |
|
1,982 |
|
|
JPMorgan Chase & Co. |
|
13,042 |
|
|
Morgan Stanley & Company, Inc. |
|
14,970 |
Fundamental Large Cap Core Fund |
|
Barclays Bank PLC |
|
60,000 |
|
|
JPMorgan Chase & Co. |
|
129,084 |
|
|
Morgan Stanley & Company, Inc. |
|
233,555 |
|
|
State Street Corp. |
|
56,179 |
|
|
The Goldman Sachs Group, Inc. |
|
123,802 |
Global Environmental Opportunities Fund |
|
N/A |
|
N/A |
140
|
|
|
|
|
Fund |
|
Regular Broker Dealer |
|
Holdings ($000s) |
Global Thematic Opportunities Fund |
|
N/A |
|
N/A |
Infrastructure Fund |
|
Royal Bank of Scotland PLC |
|
11,200 |
International Dynamic Growth Fund |
|
N/A |
|
N/A |
Regional Bank Fund |
|
Bank of America Corp. |
|
26,765 |
|
|
JPMorgan Chase & Co. |
|
28,351 |
Seaport Long/Short Fund |
|
Citigroup, Inc. |
|
1 |
|
|
JPMorgan Chase & Co. |
|
1,005 |
|
|
Morgan Stanley & Company, Inc. |
|
6,580 |
|
|
State Street Corp. |
|
61,029 |
|
|
The Goldman Sachs Group, Inc. |
|
3,050 |
Small Cap Core Fund |
|
N/A |
|
N/A |
U.S. Global Leaders Growth Fund |
|
State Street Corp. |
|
35,199 |
Soft Dollar Considerations. In selecting brokers and dealers, the subadvisors will give consideration to the value and
quality of any research, statistical, quotation, brokerage or valuation services provided by the broker or dealer to the subadvisor. In placing a purchase or sale order, unless prohibited by applicable law, the subadvisor may use a broker whose
commission in effecting the transaction is higher than that of some other broker if the subadvisor determines in good faith that the amount of the higher commission is reasonable in relation to the value of the brokerage and research services
provided by such broker, viewed in terms of either the particular transaction or the subadvisors overall responsibilities with respect to a fund and any other accounts managed by the subadvisor. In addition to statistical, quotation, brokerage
or valuation services, a subadvisor may receive from brokers or dealers products or research that are used for both research and other purposes, such as administration or marketing. In such case, the subadvisor will make a good faith determination
as to the portion attributable to research. Only the portion attributable to research will be paid through portfolio brokerage. The portion not attributable to research will be paid by the subadvisor. Research products and services may be acquired
or received either directly from executing brokers or indirectly through other brokers in step-out transactions. A step-out is an arrangement by which a
subadvisor executes a trade through one broker dealer but instructs that entity to step-out all or a portion of the trade to another broker dealer. This second broker dealer will clear and settle, and receive
commissions for, the stepped-out portion. The second broker dealer may or may not have a trading desk of its own.
Under MiFID II, EU investment managers, including certain subadvisors to funds in the John Hancock Fund Complex, may only pay for research from brokers and
dealers directly out of their own resources or by establishing research payment accounts for each client, rather than through client commissions. MiFID II limits the use of soft dollars by subadvisors located in the EU, if applicable,
and in certain circumstances may result in other subadvisors reducing the use of soft dollars as to certain groups of clients or as to all clients.
The
subadvisors also may receive research or research credits from brokers that are generated from underwriting commissions when purchasing new issues of fixed-income securities or other assets for a fund. These services, which in some cases also may be
purchased for cash, include such matters as general economic and security market reviews, industry and company reviews, evaluations of securities and recommendations as to the purchase and sale of securities. Some of these services are of value to
the subadvisor in advising several of its clients (including the funds), although not all of these services are necessarily useful and of value in managing the funds. The management fee paid by a fund is not reduced because a subadvisor and its
affiliates receive such services.
As noted above, a subadvisor may purchase new issues of securities for a fund in underwritten fixed price offerings. In
these situations, the underwriter or selling group member may provide the subadvisor with research in addition to selling the securities (at the fixed public offering price) to the funds or other advisory clients. Because the offerings are conducted
at a fixed price, the ability to obtain research from a broker dealer in this situation provides knowledge that may benefit the fund, other subadvisor clients, and the subadvisor without incurring additional costs. These arrangements may not fall
within the safe harbor in Section 28(e) of the Exchange Act, because the broker dealer is considered to be acting in a principal capacity in underwritten transactions. However, FINRA has adopted rules expressly permitting broker dealers to
provide bona fide research to advisors in connection with fixed price offerings under certain circumstances. As a general matter in these situations, the underwriter or selling group member will provide research credits at a rate that is higher than
that which is available for secondary market transactions.
Brokerage and research services provided by brokers and dealers include advice, either
directly or through publications or writings, as to:
|
|
|
the value of securities; |
|
|
|
the advisability of purchasing or selling securities; |
|
|
|
the availability of securities or purchasers or sellers of securities; and |
|
|
|
analyses and reports concerning: (a) issuers; (b) industries; (c) securities; (d) economic, political
and legal factors and trends; and (e) portfolio strategy. |
Research services are received primarily in the form of written reports,
computer generated services, telephone contacts and personal meetings with security analysts. In addition, such services may be provided in the form of meetings arranged with corporate and industry spokespersons,
141
economists, academicians and government representatives. In some cases, research services are generated by third parties but are provided to the subadvisor by or through a broker.
To the extent research services are used by the subadvisors, such services would tend to reduce such partys expenses. However, the subadvisors do not
believe that an exact dollar value can be assigned to these services. Research services received by the subadvisors from brokers or dealers executing transactions for series of the Trusts, which may not be used in connection with a fund, also will
be available for the benefit of other funds managed by the subadvisors.
Allocation of Trades by the Subadvisors. The subadvisors manage a number
of accounts other than the funds. Although investment determinations for the funds will be made by a subadvisor independently from the investment determinations it makes for any other account, investments deemed appropriate for the funds by a
subadvisor also may be deemed appropriate by it for other accounts. Therefore, the same security may be purchased or sold at or about the same time for both the funds and other accounts. In such circumstances, a subadvisor may determine that orders
for the purchase or sale of the same security for the funds and one or more other accounts should be combined. In this event the transactions will be priced and allocated in a manner deemed by the subadvisor to be equitable and in the best interests
of the funds and such other accounts. While in some instances combined orders could adversely affect the price or volume of a security, each fund believes that its participation in such transactions on balance will produce better overall results for
the fund.
For purchases of equity securities, when a complete order is not filled, a partial allocation will be made to each participating account pro
rata based on the order size. For high demand issues (for example, initial public offerings), shares will be allocated pro rata by account size as well as on the basis of account objective, account size (a small accounts allocation may be
increased to provide it with a meaningful position), and the accounts other holdings. In addition, an accounts allocation may be increased if that accounts portfolio manager was responsible for generating the investment idea or the
portfolio manager intends to buy more shares in the secondary market. For fixed-income accounts, generally securities will be allocated when appropriate among accounts based on account size, except if the accounts have different objectives or if an
account is too small to receive a meaningful allocation. For new issues, when a complete order is not filled, a partial allocation will be made to each account pro rata based on the order size. However, if a partial allocation is too small to be
meaningful, it may be reallocated based on such factors as account objectives, strategies, duration benchmarks and credit and sector exposure. For example, value funds will likely not participate in initial public offerings as frequently as growth
funds. In some instances, this investment procedure may adversely affect the price paid or received by the funds or the size of the position obtainable for it. On the other hand, to the extent permitted by law, a subadvisor may aggregate securities
to be sold or purchased for the funds with those to be sold or purchased for other clients that it manages in order to obtain best execution.
Specific
TradeOrder Procedure for Diversified Macro Fund and Other Accounts. Graham Capital Management, L.P. (Graham) has established the following procedure when processing orders for multiple accounts, including Diversified Macro
Fund. Graham randomizes the sequence in which otherwise identical orders for different accounts are sent to execution platforms so that no accounts orders consistently arrive before other accounts orders: the first order to be sent is
picked at random, the second is picked at random from those remaining, and so on. Graham believes that this randomization eliminates any possible bias that might result from processing similar orders in a fixed sequence.
Affiliated Underwriting Transactions by a Subadvisor. Each Trust has approved procedures in conformity with Rule
10f-3 under the 1940 Act whereby a fund may purchase securities that are offered in underwritings in which an affiliate of the subadvisors participates. These procedures prohibit a fund from directly or
indirectly benefiting a subadvisor affiliate in connection with such underwritings. In addition, for underwritings where a subadvisor affiliate participates as a principal underwriter, certain restrictions may apply that could, among other things,
limit the amount of securities that the funds could purchase.
Brokerage Commissions Paid. For the last three fiscal periods, the funds paid
brokerage commissions in connection with portfolio transactions. Any material differences from year to year reflect an increase or decrease in trading activity by the applicable fund. The total brokerage commissions paid by the funds for the fiscal
periods ended October 31, 2022, October 31, 2021, and October 31, 2020 are set forth in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Commissions Paid in Fiscal Period Ended October 31, |
|
Fund |
|
2022 ($) |
|
|
2021 ($) |
|
|
2020 ($) |
|
Balanced Fund |
|
|
220,982 |
|
|
|
224,692 |
|
|
|
267,349 |
|
Classic Value Fund |
|
|
1,188,926 |
|
|
|
1,296,481 |
|
|
|
1,331,744 |
|
Disciplined Value International Fund |
|
|
2,017,133 |
|
|
|
2,383,835 |
|
|
|
2,106,654 |
|
Diversified Macro Fund |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
Emerging Markets Equity Fund |
|
|
1,409,554 |
|
|
|
1,307,856 |
|
|
|
1,821,830 |
|
ESG International Equity Fund |
|
|
109,179 |
|
|
|
96,391 |
|
|
|
39,885 |
|
ESG Large Cap Core Fund |
|
|
17,560 |
|
|
|
19,170 |
|
|
|
14,911 |
|
Financial Industries Fund |
|
|
296,136 |
|
|
|
546,838 |
|
|
|
343,865 |
|
Fundamental Large Cap Core Fund |
|
|
748,907 |
|
|
|
907,748 |
|
|
|
1,015,429 |
|
Global Environmental Opportunities Fund |
|
|
5,301 |
|
|
|
1,1881 |
|
|
|
N/A |
|
Global Thematic Opportunities Fund |
|
|
101,390 |
|
|
|
143,463 |
|
|
|
122,949 |
|
142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Commissions Paid in Fiscal Period Ended October 31, |
|
Fund |
|
2022
($) |
|
|
2021
($) |
|
|
2020
($) |
|
Infrastructure Fund |
|
|
206,928 |
|
|
|
167,448 |
|
|
|
116,247 |
|
International Dynamic Growth Fund |
|
|
498,721 |
|
|
|
510,631 |
|
|
|
528,931 |
|
Regional Bank Fund |
|
|
190,052 |
|
|
|
256,892 |
|
|
|
407,956 |
|
Seaport Long/Short Fund |
|
|
3,066,070 |
|
|
|
2,586,110 |
|
|
|
2,104,403 |
|
Small Cap Core Fund |
|
|
2,126,105 |
|
|
|
1,818,023 |
|
|
|
1,197,789 |
|
U.S. Global Leaders Growth Fund |
|
|
256,469 |
|
|
|
195,189 |
|
|
|
315,496 |
|
1 Period from July 21, 2021 (commencement of operations) to October 31, 2021.
Affiliated Brokerage. Pursuant to procedures determined by the Trustees and consistent with the above policy of obtaining best net results, a fund may
execute portfolio transactions with or through brokers affiliated with the Advisor or subadvisor (Affiliated Brokers). Affiliated Brokers may act as broker for the funds on exchange transactions, subject, however, to the general policy
set forth above and the procedures adopted by the Trustees pursuant to the 1940 Act. Commissions paid to an Affiliated Broker must be at least as favorable as those that the Trustees believe to be contemporaneously charged by other brokers in
connection with comparable transactions involving similar securities being purchased or sold. A transaction would not be placed with an Affiliated Broker if the fund would have to pay a commission rate less favorable than the Affiliated
Brokers contemporaneous charges for comparable transactions for its other most favored, but unaffiliated, customers, except for accounts for which the Affiliated Broker acts as clearing broker for another brokerage firm, and any customers of
the Affiliated Broker not comparable to the fund, as determined by a majority of the Trustees who are not interested persons (as defined in the 1940 Act) of the fund, the Advisor, the subadvisor or the Affiliated Broker. Because the
Advisor or subadvisor that is affiliated with the Affiliated Broker has, as an investment advisor to the funds, the obligation to provide investment management services, which includes elements of research and related investment skills such research
and related skills will not be used by the Affiliated Broker as a basis for negotiating commissions at a rate higher than that determined in accordance with the above criteria.
The Advisors indirect parent, Manulife Financial, is the parent of a broker dealer, JH Distributors. JH Distributors is considered an Affiliated Broker.
Brokerage Commissions Paid to Affiliated Brokers. For the fiscal periods ended October 31, 2022, October 31, 2021, and October 31, 2020, no
commissions were paid by any of the funds to brokers affiliated with the subadvisors.
Commission Recapture Program. The Board has approved each
funds participation in a commission recapture program. Commission recapture is a form of institutional discount brokerage that returns commission dollars directly to a fund. It provides a way to gain control over the commission expenses
incurred by a subadvisor, which can be significant over time and thereby reduces expenses, improves cash flow and conserves assets. A fund can derive commission recapture dollars from both equity trading commissions and fixed-income (commission
equivalent) spreads. From time to time, the Board reviews whether participation in the recapture program is in the best interests of the funds.
TRANSFER AGENT SERVICES
John Hancock
Signature Services, Inc., P.O. Box 219909, Kansas City, MO 64121-9909, a wholly-owned indirect subsidiary of MFC, is the transfer and dividend paying agent for the Class A, Class C, Class I, Class R2, Class R4,
Class R5, and Class R6 shares of the funds, as applicable.
The fees paid to Signature Services are determined based on the cost to Signature
Services of providing services to the fund and to all other John Hancock affiliated funds for which Signature Services serves as transfer agent (Signature Services Cost). Signature Services Cost includes: (i) an allocable portion of
John Hancock corporate overhead; and (ii) out-of-pocket expenses, including payments made by Signature Services to intermediaries and other third-parties
(Subtransfer Agency Fees) whose clients and/or customers invest in one or more funds for sub-transfer agency and administrative services provided to those clients/customers. Signature Services Cost
is calculated monthly and allocated by Signature Services among four different categories as described below based generally on the Signature Services Cost associated with providing services to each category in the aggregate. Within each category,
Signature Services Cost is allocated across all of the John Hancock affiliated funds and/or classes for which Signature Services provides transfer agent services, on the basis of relative average net assets.
Retail Share and Institutional Classes of Non-Municipal Bond Funds. An amount equal to the total Signature
Services Cost associated with providing services to Class A, Class C, and Class I shares of all non-municipal series of the Trust and of all other John Hancock affiliated funds for which it
serves as transfer agent is allocated pro-rata based upon assets of all Class A, Class C, and Class I shares in the aggregate, without regard to fund or class.
Class R6 Shares. An amount equal to the total Signature Services Cost associated with providing services to Class R6 shares of
the Trusts and all other John Hancock affiliated funds for which it serves as transfer agent, is allocated pro-rata based upon assets of all such shares in the aggregate, without regard to fund.
143
Retirement Share Classes. An amount equal to the total Signature Services Cost associated with providing
services to Class R2, Class R4, and Class R5 shares of the Trusts and all other John Hancock affiliated funds for which it serves as transfer agent is allocated pro-rata based upon assets of all
such shares in the aggregate, without regard to fund or class. In addition, payments made to intermediaries and/or record keepers under Class R Service plans will be made by each relevant fund on a fund- and class- specific basis pursuant to
the applicable plan.
Municipal Bond Funds. An amount equal to the total Signature Services Cost associated with providing services to
Class A, Class C, and Class I shares of all John Hancock affiliated municipal bond funds for which it serves as transfer agent is allocated pro-rata based upon assets of all such shares in the
aggregate, without regard to fund or class. John Hancock municipal bond funds currently only offer Class A, Class C, Class I, and Class R6 shares. The allocation of Signature Services Costs for Class R6 shares of the
municipal bond funds is described above. The Trusts currently do not offer any municipal bond funds.
In applying the foregoing methodology, Signature
Services seeks to operate its aggregate transfer agency operations on an at cost or break even basis. The allocation of aggregate transfer agency costs to categories of funds and/or classes assets seeks to ensure that
shareholders of each class within each category will pay the same or a very similar level of transfer agency fees for the delivery of similar services. Under this methodology, the actual costs associated with providing particular services to a
particular fund and/or share classes during a period of time, including payments to intermediaries for sub-transfer agency services to clients or customers whose assets are invested in a particular fund or
share class, are not charged to and borne by that particular fund or share classes during that period. Instead, they are included in Signature Services Cost, which is then allocated to the applicable aggregate asset category described above and then
allocated to all assets in that category based on relative net assets. Applying this methodology could result in some funds and/or classes having higher or lower transfer agency fees than they would have had if they bore only fund- or class-specific
costs directly or indirectly attributable to them.
LEGAL AND REGULATORY MATTERS
There are no legal proceedings to which the Trusts,
the Advisor, or the Distributor is a party that are likely to have a material adverse effect on the funds or the ability of either the Advisor or the Distributor to perform its contract with the funds.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The financial statements of each fund for the fiscal
period ended October 31, 2022, including the related financial highlights that appear in the Prospectus, have been audited by PricewaterhouseCoopers LLP, independent registered public accounting firm, as stated in their report with respect
thereto, and are incorporated herein by reference in reliance upon said report given on the authority of said firm as experts in accounting and auditing. PricewaterhouseCoopers LLP has offices at 101 Seaport Boulevard, Suite 500, Boston,
Massachusetts 02210.
FINANCIAL STATEMENTS
The financial statements of each fund for the fiscal
period ended October 31, 2022, are incorporated herein by reference from each funds most recent Annual Report filed with the SEC on Form N-CSR pursuant to Rule
30b2-1 under the 1940 Act.
CUSTODY OF PORTFOLIO SECURITIES
Except as noted below, State Street Bank and Trust
Company, State Street Financial Center, One Lincoln Street, Boston, Massachusetts 02111, currently acts as custodian and bookkeeping agent with respect to each funds assets. Citibank, N.A., 388 Greenwich Street, New York, New York 10013,
currently acts as custodian and bookkeeping agent with respect to the assets of Balanced Fund, Disciplined Value International Fund, Diversified Macro Fund, Emerging Markets Equity Fund, ESG International Equity Fund, ESG Large Cap Core Fund,
Fundamental Large Cap Core Fund, Global Environmental Opportunities Fund, Global Thematic Opportunities Fund, and International Dynamic Growth Fund. State Street and Citibank have selected various banks and trust companies in foreign countries to
maintain custody of certain foreign securities. Each fund also may use special purpose custodian banks from time to time for certain assets. State Street and Citibank are authorized to use the facilities of the Depository Trust Company, the
Participants Trust Company, and the book-entry system of the Federal Reserve Banks. Citibank also currently acts as custodian of the Subsidiarys assets.
CODES OF ETHICS
Each Trust, the Advisor, the Distributor and each
subadvisor to the funds have adopted Codes of Ethics that comply with Rule 17j-1 under the 1940 Act. Each Code of Ethics permits personnel subject to the Code of Ethics to invest in securities, including
securities that may be purchased or held by a fund.
144
APPENDIX A DESCRIPTION OF BOND RATINGS
DESCRIPTION OF BOND RATINGS
DESCRIPTIONS OF CREDIT RATING SYMBOLS AND DEFINITIONS
The
ratings of Moodys Investors Service, Inc. (Moodys), S&P Global Ratings and Fitch Ratings (Fitch) represent their respective opinions as of the date they are expressed and not statements of fact as to the
quality of various long-term and short-term debt instruments they undertake to rate. It should be emphasized that ratings are general and are not absolute standards of quality. Consequently, debt instruments with the same maturity, coupon and rating
may have different yields while debt instruments of the same maturity and coupon with different ratings may have the same yield.
Ratings do not
constitute recommendations to buy, sell, or hold any security, nor do they comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or
taxability of any payments of any security.
IN GENERAL
Moodys. Ratings assigned on Moodys global long-term and short-term rating scales are forward-looking opinions of the relative credit risks
of financial obligations issued by non-financial corporates, financial institutions, structured finance vehicles, project finance vehicles, and public sector entities.
Note that the content of this Appendix A, to the extent that it relates to the ratings determined by Moodys, is derived directly from Moodys
electronic publication of Ratings Symbols and Definitions which is available at: https://www.moodys.com/ researchdocumentcontentpage.aspx?docid=PBC_79004.
S&P Global Ratings. An S&P Global Ratings issue credit rating is a forward-looking opinion about the creditworthiness of an obligor with
respect to a specific financial obligation, a specific class of financial obligations, or a specific financial program (including ratings on medium-term note programs and commercial paper programs). It takes into consideration the creditworthiness
of guarantors, insurers, or other forms of credit enhancement on the obligation and takes into account the currency in which the obligation is denominated. The opinion reflects S&P Global Ratings view of the obligors capacity and
willingness to meet its financial commitments as they come due, and this opinion may assess terms, such as collateral security and subordination, which could affect ultimate payment in the event of default.
Issue ratings are an assessment of default risk but may incorporate an assessment of relative seniority or ultimate recovery in the event of default. Junior
obligations are typically rated lower than senior obligations, to reflect the lower priority in bankruptcy.
Note that the content of this Appendix A, to
the extent that it relates to the ratings determined by S&P Global Ratings, is derived directly from S&P Global Ratings electronic publication of S&Ps Global Ratings Definitions, which is available at:
https://www.standardandpoors.com/en_US/web/ guest/article/-/view/sourceId/504352.
Fitch. Fitchs opinions are forward looking and include
Fitchs views of future performance. In many cases, these views on future performance may include forecasts, which may in turn (i) be informed by non-disclosable management projections, (ii) be
based on a trend (sector or wider economic cycle) at a certain stage in the cycle, or (iii) be based on historical performance. As a result, while ratings may include cyclical considerations and attempt to assess the likelihood of repayment at
ultimate/final maturity, material changes in economic conditions and expectations (for a particular issuer) may result in a rating change.
The terms investment grade and speculative grade have established themselves over time as shorthand to describe the categories
AAA to BBB (investment grade) and BB to D (speculative grade). The terms investment grade and speculative grade are market conventions and do not imply any recommendation or endorsement of a specific
security for investment purposes. Investment grade categories indicate relatively low to moderate credit risk, while ratings in the speculative categories either signal a higher level of credit risk or that a default has already occurred. For the
convenience of investors, Fitch may also include issues relating to a rated issuer that are not and have not been rated on its web page. Such issues are also denoted as NR.
Note that the content of this Appendix A, to the extent that it relates to the ratings determined by Fitch, is derived directly from Fitchs electronic
publication of Definitions of Ratings and Other Forms of Opinion which is available at: https://www.fitchratings.com/products/rating-definitions.
145
GENERAL PURPOSE RATINGS
LONG-TERM ISSUE RATINGS
MOODYS GLOBAL
LONG-TERM RATING SCALE
Long-term ratings are assigned to issuers or obligations with an original maturity of one year or more and reflect both on
the likelihood of a default or impairment on contractual financial obligations and the expected financial loss suffered in the event of default or impairment.
Aaa: Obligations rated Aaa are judged to be of the highest quality, subject to the lowest level of credit risk.
Aa: Obligations rated Aa are judged to be of high quality and are subject to very low credit risk.
A: Obligations rated A are considered upper-medium grade and are subject to low credit risk.
Baa: Obligations rated Baa are judged to be medium-grade and subject to moderate credit risk and as such may possess certain speculative
characteristics.
Ba: Obligations rated Ba are judged to be speculative and are subject to substantial credit risk.
B: Obligations rated B are considered speculative and are subject to high credit risk.
Caa: Obligations rated Caa are judged to be speculative of poor standing and are subject to very high credit risk.
Ca: Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.
C: Obligations rated C are the lowest rated and are typically in default, with little prospect for recovery of principal or interest.
Note: Addition of a Modifier 1, 2 or 3: Moodys appends numerical modifiers 1, 2 and 3 to each generic rating classification from Aa through Caa.
The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of
that generic rating category. Additionally, a (hyb) indicator is appended to all ratings of hybrid securities issued by banks, insurers, finance companies, and securities firms. By their terms, hybrid securities allow for the omission of
scheduled dividends, interest, or principal payments, which can potentially result in impairment if such an omission occurs. Hybrid securities may also be subject to contractually allowable write-downs of principal that could result in impairment.
Together with the hybrid indicator, the long-term obligation rating assigned to a hybrid security is an expression of the relative credit risk associated
with that security.
S&P GLOBAL RATINGS LONG-TERM ISSUE CREDIT RATINGS
Long-term ratings are assigned to issuers or obligations with an original maturity of one year or more and reflect both on the likelihood of a default or
impairment on contractual financial obligations and the expected financial loss suffered in the event of default or impairment.
AAA: An obligation
rated AAA has the highest rating assigned by S&P Global Ratings. The obligors capacity to meet its financial commitment on the obligation is extremely strong.
AA: An obligation rated AA differs from the highest-rated obligations only to a small degree. The obligors capacity to meet its
financial commitment on the obligation is very strong.
A: An obligation rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligors capacity to meet its financial commitment on the obligation is still strong.
BBB: An obligation rated BBB exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are
more likely to weaken the obligors capacity to meet its financial commitments on the obligation.
BB, B, CCC, CC and C: Obligations rated
BB, B, CCC CC and C are regarded as having significant speculative characteristics. BB indicates the least degree of speculation and C the highest. While such
obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.
BB: An obligation rated BB is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions that could lead to the obligors inadequate capacity to meet its financial commitment on the obligation.
B: An obligation rated B is more vulnerable to nonpayment than obligations rated BB, but the obligor currently has the capacity
to meet its financial commitments on the obligation. Adverse business, financial, or economic conditions will likely impair the obligors capacity or willingness to meet its financial commitments on the obligation.
CCC: An obligation rated CCC is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic
conditions for the obligor to meet its financial commitments on the obligation. In the event of adverse business, financial or economic conditions, the obligor is not likely to have the capacity to meet its financial commitments on the obligation.
CC: An obligation rated CC is currently highly vulnerable to nonpayment. The CC rating is used when a default has not yet
occurred but S&P Global Ratings expects default to be a virtual certainty, regardless of the anticipated time to default.
146
C: An obligation rated C is currently highly vulnerable to nonpayment, and the obligation is
expected to have lower relative seniority or lower ultimate recovery compared to obligations that are rated higher.
D: An obligation rated
D is in default or in breach of an imputed promise. For non-hybrid capital instruments, the D rating category is used when payments on an obligation are not made on the date due, unless
S&P Global Ratings believes that such payments will be made within five business days in the absence of a stated grace period or within the earlier of the stated grace period or 30 calendar days. The D rating also will be used upon
the filing of a bankruptcy petition or taking of similar action and where default on an obligation is a virtual certainty, for example due to automatic stay provisions. An obligations rating is lowered to D if it is subject to a
distressed exchange offer.
Note: Addition of a Plus (+) or minus (-) sign: The ratings from AA to CCC may be modified by
the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories.
Dual Ratings Dual ratings may be
assigned to debt issues that have a put option or demand feature. The first component of the rating addresses the likelihood of repayment of principal and interest as due, and the second component of the rating addresses only the demand feature. The
first component of the rating can relate to either a short-term or long-term transaction and accordingly use either short-term or long-term rating symbols. The second component of the rating relates to the put option and is assigned a short-term
rating symbol (for example, AAA/A-1+ or A-1+/A-1). With U. S. municipal short-term demand debt, the U.S.
municipal short-term note rating symbols are used for the first component of the rating (for example, SP-1+/A-1+).
FITCH CORPORATE FINANCE OBLIGATIONS LONG-TERM RATING SCALES
Ratings of individual securities or financial obligations of a corporate issuer address relative vulnerability to default on an ordinal scale. In addition, for
financial obligations in corporate finance, a measure of recovery given default on that liability is also included in the rating assessment. This notably applies to covered bond ratings, which incorporate both an indication of the probability of
default and of the recovery given a default of this debt instrument.
AAA: Highest credit quality. AAA ratings denote the lowest
expectation of credit risk. They are assigned only in cases of exceptionally strong capacity for payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events.
AA: Very high credit quality. AA ratings denote expectations of very low credit risk. They indicate very strong capacity for payment of
financial commitments. This capacity is not significantly vulnerable to foreseeable events.
A: High credit quality. A ratings denote
expectations of low credit risk. The capacity for payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to adverse business or economic conditions than is the case for higher ratings.
BBB: Good credit quality. BBB ratings indicate that expectations of credit risk are currently low. The capacity for payment of financial
commitments is considered adequate but adverse business or economic conditions are more likely to impair this capacity.
BB: Speculative.
BB ratings indicate an elevated vulnerability to credit risk, particularly in the event of adverse changes in business or economic conditions over time; however, business or financial alternatives may be available to allow financial
commitments to be met.
B: Highly speculative. B ratings indicate that material credit risk is present.
CCC: Substantial credit risk. CCC ratings indicate that substantial credit risk is present.
CC: Very high levels of credit risk. CC ratings indicate very high levels of credit risk.
C: Exceptionally high levels of credit risk. C indicates exceptionally high levels of credit risk.
Corporate finance defaulted obligations typically are not assigned RD or D ratings but are instead rated in the CCC to
C rating categories, depending on their recovery prospects and other relevant characteristics. This approach better aligns obligations that have comparable overall expected loss but varying vulnerability to default and loss.
Note: Addition of a Plus (+) or minus (-) sign: Within rating categories, Fitch may use modifiers. The modifiers + or - may be
appended to a rating to denote relative status within major rating categories. For example, the rating category AA has three notch-specific rating levels (AA+; AA;
AA-; each a rating level). Such suffixes are not added to AAA ratings and ratings below the CCC category. For the short-term rating category of F1, a
+ may be appended. For Viability Ratings, the modifiers + or - may be appended to a rating to denote relative status within categories from aa to ccc.
CORPORATE AND TAX-EXEMPT COMMERCIAL PAPER RATINGS
SHORT-TERM ISSUE RATINGS
MOODYS GLOBAL
SHORT-TERM RATING SCALE
Ratings assigned on Moodys global long-term and short-term rating scales are forward-looking opinions of the
relative credit risks of financial obligations issued by non-financial corporates, financial institutions, structured finance vehicles, project finance vehicles, and public sector entities. Short-term ratings
are assigned to obligations with an original maturity of thirteen months or less and reflect both the likelihood of a default or impairment on contractual financial obligations and the expected financial loss suffered in the event of default or
impairment.
Moodys employs the following designations to indicate the relative repayment ability of rated issuers:
147
P-1: Issuers (or supporting institutions) rated Prime-1 have a superior ability to repay short-term debt obligations.
P-2: Issuers (or supporting institutions) rated Prime-2 have a strong
ability to repay short-term debt obligations.
P-3: Issuers (or supporting institutions) rated Prime-3 have an acceptable ability to repay short-term obligations.
NP: Issuers (or supporting
institutions) rated Not Prime do not fall within any of the Prime rating categories.
The following table indicates the long-term ratings consistent with
different short-term ratings when such long-term ratings exist. (Note: Structured finance short-term ratings are usually based either on the short-term rating of a support provider or on an assessment of cash flows available to retire the financial
obligation).
|
|
|
|
|
|
|
LONG-TERM |
|
|
|
SHORT-TERM RATING |
|
|
RATING |
|
|
|
|
|
|
|
|
|
Aaa |
|
|
|
|
|
|
Aa1 |
|
|
|
|
Aa2 |
|
|
|
|
Aa3 |
|
Prime-1 |
|
|
A1 |
|
|
|
|
A2 |
|
|
|
|
A3 |
|
|
|
|
Baa1 |
|
Prime-2 |
|
|
Baa2 |
|
|
|
|
Baa3 |
|
Prime-3 |
|
|
|
|
|
|
|
|
Ba1, Ba2, Ba3 B1, |
|
|
|
|
B2, B3 Caa1, Caa2, |
|
Not Prime |
|
|
Caa3 Ca, C |
|
|
|
|
S&P GLOBAL RATINGS SHORT-TERM ISSUE CREDIT RATINGS
S&P Global Ratings short-term ratings are generally assigned to those obligations considered short-term in the relevant market. Short-term ratings
are also used to indicate the creditworthiness of an obligor with respect to put features on long-term obligations. Medium term notes are assigned long-term ratings. Ratings are graded into several categories, ranging from A for the
highest-quality obligations to D for the lowest. These categories are as follows:
A-1: A
short-term obligation rated A-1 is rated in the highest category by S&P Global Ratings. The obligors capacity to meet its financial commitment on the obligation is strong. Within this
category, certain obligations are designated with a plus sign (+). This indicates that the obligors capacity to meet its financial commitments on these obligations is extremely strong.
A-2: A short-term obligation rated A-2 is somewhat more
susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligors capacity to meet its financial commitments on the obligation is satisfactory.
A-3: A short-term obligation rated A-3 exhibits adequate
protection parameters. However, adverse economic conditions or changing circumstances are more likely to weaken an obligors capacity to meet its financial commitments on the obligation.
B: A short-term obligation rated B is regarded as vulnerable and has significant speculative characteristics. The obligor currently has the
capacity to meet its financial commitments; however, it faces major ongoing uncertainties that could lead to the obligors inadequate capacity to meet its financial commitments.
C: A short-term obligation rated C is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic
conditions for the obligor to meet its financial commitments on the obligation.
D: A short-term obligation rated D is in default or in
breach of an imputed promise. For non-hybrid capital instruments, the D rating category is used when payments on an obligation are not made on the date due, unless S&P Global Ratings believes
that such payments will be made within any stated grace period. However, any stated grace period longer than five business days will be treated as five business days. The D rating also will be used upon the filing of a bankruptcy
petition or the taking of a similar action and where default on an obligation is a virtual certainty, for example due to automatic stay provisions. An obligations rating is lowered to D if it is subject to a distressed exchange
offer.
Dual Ratings - Dual ratings may be assigned to debt issues that have a put option or demand feature. The first component of the rating
addresses the likelihood of repayment of principal and interest as due, and the second component of the rating addresses only the demand feature. The first component of the rating can relate to either a short-term or long-term transaction and
accordingly use either short-term or long-term rating symbols. The second component of the rating relates to the put option and is assigned a short-term rating symbol (for example, AAA/A-1+ or A-1+/A-1). With U.S. municipal short-term demand debt, the U.S. municipal short-term note rating symbols are used for the first component of the rating (for
example, SP-1+/A-1+).
148
FITCHS SHORT-TERM ISSUER OR OBLIGATION RATINGS
A short-term issuer or obligation rating is based in all cases on the short-term vulnerability to default of the rated entity and relates to the capacity to
meet financial obligations in accordance with the documentation governing the relevant obligation. Short-term deposit ratings may be adjusted for loss severity. Short-term deposit ratings may be adjusted for loss severity. Short-Term Ratings are
assigned to obligations whose initial maturity is viewed as short term based on market convention. Typically, this means up to 13 months for corporate, sovereign, and structured obligations, and up to 36 months for obligations in U.S.
public finance markets.
F1: Highest short-term credit quality.
Indicates the strongest intrinsic capacity for timely payment of financial commitments; may have an added (+) to denote any exceptionally strong
credit feature.
F2: Good short-term credit quality.
Good intrinsic capacity for timely payment of financial commitments.
F3: Fair short-term credit quality.
The intrinsic
capacity for timely payment of financial commitments is adequate.
B: Speculative short-term credit quality.
Minimal capacity for timely payment of financial commitments, plus heightened vulnerability to near term adverse changes in financial and economic conditions.
C: High short-term default risk. Default is a real possibility.
RD: Restricted default.
Indicates an entity that has
defaulted on one or more of its financial commitments, although it continues to meet other financial obligations. Typically applicable to entity ratings only.
D: Default.
Indicates a broad-based default event for
an entity, or the default of a short-term obligation.
TAX-EXEMPT NOTE RATINGS
MOODYS U.S. MUNICIPAL SHORT-TERM DEBT RATINGS
While the global short-term prime rating scale is applied to US municipal tax-exempt commercial A-8 paper, these programs are typically backed by external letters of credit or liquidity facilities and their short-term prime ratings usually map to the long-term rating of the enhancing bank or financial
institution and not to the municipalitys rating. Other short-term municipal obligations, which generally have different funding sources for repayment, are rated using two additional short-term rating scales (i.e., the MIG and VMIG scale
discussed below).
The Municipal Investment Grade (MIG) scale is used to rate US municipal bond anticipation notes of up to five years maturity. Municipal
notes rated on the MIG scale may be secured by either pledged revenues or proceeds of a take-out financing received prior to note maturity. MIG ratings expire at the maturity of the obligation, and the
issuers long-term rating is only one consideration in assigning the MIG rating. MIG ratings are divided into three levelsMIG 1 through MIG 3while speculative grade short-term obligations are designated SG.
MIG 1: This designation denotes superior credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support,
or demonstrated broad-based access to the market for refinancing.
MIG 2: This designation denotes strong credit quality. Margins of protection are
ample, although not as large as in the preceding group.
MIG 3: This designation denotes acceptable credit quality. Liquidity and cash-flow
protection may be narrow, and market access for refinancing is likely to be less well-established.
SG: This designation denotes speculative-grade
credit quality. Debt instruments in this category may lack sufficient margins of protection.
Variable Municipal Investment Grade (VMIG) ratings of demand
obligations with unconditional liquidity support are mapped from the short-term debt rating (or counterparty assessment) of the support provider, or the underlying obligor in the absence of third party liquidity support, with VMIG 1 corresponding to
P-1, VMIG 2 to P-2, VMIG 3 to P-3 and SG to not prime. For example, the VMIG rating for an industrial revenue bond with Company
XYZ as the underlying obligor would normally have the same numerical modifier as Company XYZs prime rating. Transitions of VMIG ratings of demand obligations with conditional liquidity support, as shown in the diagram below, differ from
transitions on the Prime scale to reflect the risk that external liquidity support will terminate if the issuers long-term rating drops below investment grade.
VMIG 1: This designation denotes superior credit quality. Excellent protection is afforded by the superior short-term credit strength of the liquidity
provider and structural and legal protections that ensure the timely payment of purchase price upon demand.
VMIG 2: This designation denotes
strong credit quality. Good protection is afforded by the strong short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.
149
VMIG 3: This designation denotes acceptable credit quality. Adequate protection is afforded by the
satisfactory short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.
SG: This designation denotes speculative-grade credit quality. Demand features rated in this category may be supported by a liquidity provider that
does not have an investment grade short-term rating or may lack the structural and/or legal protections necessary to ensure the timely payment of purchase price upon demand.
* For VRDBs supported with conditional liquidity support, short-term ratings transition down at higher long-term ratings to reflect the risk of termination of
liquidity support as a result of a downgrade below investment grade.
VMIG ratings of VRDBs with unconditional liquidity support reflect the short-term
debt rating (or counterparty assessment) of the liquidity support provider with VMIG 1 corresponding to P-1, VMIG 2 to P-2, VMIG 3 to
P-3 and SG to not prime.
For more complete discussion of these rating transitions, please see Annex B of
Moodys Methodology titled Variable Rate Instruments Supported by Conditional Liquidity Facilities.
US Municipal Short-Term
Versus Long-Term Ratings
|
|
|
|
|
NOTES |
|
LONG-TERM RATING |
|
DEMAND OBLIGATIONS WITH CONDITIONAL LIQUIDITY
SUPPORT |
MIG 1 |
|
Aaa |
|
VMIG 1 |
|
|
Aa1 |
|
|
|
|
Aa2 |
|
|
|
|
Aa3 |
|
|
|
|
A1 |
|
|
|
|
A2 |
|
|
MIG 2 |
|
A3 |
|
VMIG 2 |
MIG 3 |
|
Baa1 |
|
VMIG 3* |
|
|
Baa2 |
|
SG |
|
|
Baa3 |
|
|
SG |
|
Ba1, Ba2, Ba3 B1, |
|
|
|
|
B2, B3 Caa1, Caa2, |
|
|
|
|
Caa3 Ca, C |
|
|
* |
For SBPA-backed VRDBs, the rating transitions are higher to allow for distance to downgrade to below investment
grade due to the presence of automatic termination events in the SBPAs. |
S&P GLOBAL RATINGS MUNICIPAL SHORT-TERM NOTE
RATINGS MUNICIPAL SHORT-TERM NOTE RATINGS
An S&P Global Ratings municipal note rating reflects S&P Global Ratings opinion about the
liquidity factors and market access risks unique to the notes. Notes due in three years or less will likely receive a note rating. Notes with an original maturity of more than three years will most likely receive a long-term debt rating. In
determining which type of rating, if any, to assign, S&P Global Ratings analysis will review the following considerations:
|
|
|
Amortization schedule the larger the final maturity relative to other maturities, the more likely it will
be treated as a note; and |
|
|
|
Source of payment the more dependent the issue is on the market for its refinancing, the more likely it
will be treated as a note. Note rating symbols are as follows: |
SP-1: Strong capacity to
pay principal and interest. An issue determined to possess a very strong capacity to pay debt service is given a plus (+) designation.
SP-2: Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes.
SP-3: Speculative capacity to pay principal and interest.
D: D is assigned upon failure to pay the note when due, completion of a distressed exchange offer, or the filing of a bankruptcy petition
or the taking of similar action and where default on an obligation is a virtual certainty, for example due to automatic stay provisions.
FITCH
PUBLIC FINANCE RATINGS
See FITCH SHORT-TERM ISSUER OR OBLIGATIONS RATINGS above.
150
APPENDIX B PORTFOLIO MANAGER INFORMATION
AXIOM INVESTORS LLC
(Axiom)
International Dynamic Growth Fund
PORTFOLIO MANAGERS AND OTHER ACCOUNTS MANAGED
Bradley Amoils, Dean Bumbaca, CFA, and Andrew Jacobson, CFA are jointly and primarily responsible for the day-to-day management of the funds portfolio.
The following table provides information regarding other
accounts for which each portfolio manager listed above has day-to-day management responsibilities. Accounts are grouped into three categories: (i) other investment
companies (and series thereof); (ii) other pooled investment vehicles; and (iii) other accounts. To the extent that any of these accounts pays advisory fees that are based on account performance (performance-based fees), information
on those accounts is specifically broken out. In addition, any assets denominated in foreign currencies have been converted into U.S. dollars using the exchange rates as of the applicable date. Also shown below the table is each portfolio
managers investment in the fund and similarly managed accounts.
The following table provides information as of October 31, 2022:
|
|
|
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|
|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Registered Investment Companies |
|
|
Other Pooled Investment Vehicles |
|
|
Other Accounts |
|
Portfolio Manager |
|
Number of Accounts |
|
|
Assets (in millions) |
|
|
Number of Accounts |
|
|
Assets (in millions) |
|
|
Number of Accounts |
|
|
Assets (in millions) |
|
Bradley Amoils |
|
|
0 |
|
|
$ |
0 |
|
|
|
15 |
|
|
$ |
3,711.17 |
|
|
|
4 |
|
|
$ |
2,928.14 |
|
Dean Bumbaca |
|
|
0 |
|
|
$ |
0 |
|
|
|
3 |
|
|
$ |
1,101.94 |
|
|
|
1 |
|
|
$ |
110.77 |
|
Andrew Jacobson |
|
|
4 |
|
|
$ |
270.03 |
|
|
|
30 |
|
|
$ |
7,974.09 |
|
|
|
22 |
|
|
$ |
5,891.07 |
|
Performance-Based Fees for Other Accounts Managed. Of the accounts listed in the table above, those for which
the subadvisor receives a fee based on investment performance are listed in the table below.
|
|
|
|
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|
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|
|
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|
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|
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|
|
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|
|
|
|
|
Other Registered Investment Companies |
|
|
Other Pooled Investment Vehicles |
|
|
Other Accounts |
|
Portfolio Manager |
|
Number of Accounts |
|
|
Assets (in millions) |
|
|
Number of Accounts |
|
|
Assets (in millions) |
|
|
Number of Accounts |
|
|
Assets (in millions) |
|
Bradley Amoils |
|
|
0 |
|
|
$ |
0 |
|
|
|
2 |
|
|
$ |
130.38 |
|
|
|
0 |
|
|
$ |
0 |
|
Dean Bumbaca |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
Andrew Jacobson |
|
|
0 |
|
|
$ |
0 |
|
|
|
2 |
|
|
$ |
130.38 |
|
|
|
8 |
|
|
$ |
1,211.00 |
|
Ownership of the Funds and Similarly Managed Accounts
The following table shows the dollar range of fund shares and shares of similarly managed accounts beneficially owned by the portfolio managers listed above as
of October 31, 2022. For purposes of this table, similarly managed accounts include all accounts that are managed (i) by the same portfolio managers that are jointly and primarily responsible for the day-to-day management of the fund; and (ii) with an investment style, objective, policies and strategies substantially similar to those that are used to manage the fund.
The portfolio managers ownership of fund shares is stated in the footnote that follows the table.
|
|
|
Portfolio Manager |
|
Dollar Range of Shares Owned1 |
|
|
Bradley Amoils |
|
over $1,000,000 |
|
|
Dean Bumbaca |
|
none |
|
|
Andrew Jacobson |
|
over $1,000,000 |
1 |
As of October 31, 2022, Bradley Amoils, Dean Bumbaca, and Andrew Jacobson beneficially owned $0, $0, and
$0, respectively, of the fund. |
POTENTIAL CONFLICTS OF INTEREST
Axiom conducts an annual review of our business practices to identify those that might pose a conflict of interest between Axiom and its clients. The firm has
adopted policies and procedures designed to mitigate any potential conflicts of interest. The Chief Compliance Officer assures that all relevant disclosure concerning potential conflicts of interest are included in Form ADV, and will review existing
policies and procedures designed to address such conflicts and will develop and implement additional policies and procedures, as needed. Axiom summarizes the results of the annual Conflicts of Interest review in the annual review of policies and
procedures in accordance with Rule 206(4)-7.
151
COMPENSATION
All employees receive a competitive base salary and bonus. Bonuses are a function of overall firm performance as well as individual contribution to that
performance. In addition, as the firm is 100% employee-owned, the opportunity to participate in the ownership through direct equity is offered to key contributors.
Portfolio Manager Compensation Structure: Base salary, equity partnership (all PMs are partners), and bonus. A percentage of the bonus is in the form of
deferred compensation on a vesting schedule. Axioms portfolio managers have a mandatory investment in the strategies they manage that are 100% vested after a 5-year period.
Analyst Compensation Structure: Base salary, equity partnership (if applicable), and bonus. A percentage of the analysts discretionary bonus comes in
the form of deferred compensation on a vesting schedule. Axiom is committed to providing a pathway for senior analysts to become partners of the firm and share in the long term economics which further aligns interests and best practices.
152
BOSTON COMMON ASSET MANAGEMENT, LLC
(Boston Common)
ESG International Equity
Fund
PORTFOLIO MANAGERS AND OTHER ACCOUNTS MANAGED
Praveen Abichandani, CFA, Corné Biemans, and Matthew Zalosh, CFA are jointly and primarily responsible for the day-to-day management of the funds portfolio.
The following table provides information regarding other
accounts for which each portfolio manager listed above has day-to-day management responsibilities. Accounts are grouped into three categories: (i) other investment
companies (and series thereof); (ii) other pooled investment vehicles; and (iii) other accounts. To the extent that any of these accounts pays advisory fees that are based on account performance (performance-based fees), information
on those accounts is specifically broken out. In addition, any assets denominated in foreign currencies have been converted into
U.S. dollars using the
exchange rates as of the applicable date. Also shown below the table is each portfolio managers investment in the fund and similarly managed accounts.
The following table provides information as of October 31, 2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Registered Investment Companies |
|
|
Other Pooled Investment Vehicles |
|
|
Other Accounts |
|
Portfolio Manager |
|
Number of Accounts |
|
|
Assets (in millions) |
|
|
Number of Accounts |
|
|
Assets (in millions) |
|
|
Number of Accounts |
|
|
Assets (in millions) |
|
Praveen Abichandani |
|
|
5 |
|
|
$ |
1,138.47 |
|
|
|
8 |
|
|
$ |
2,874.24 |
|
|
|
543 |
|
|
$ |
1,653.17 |
|
Corné Biemans |
|
|
4 |
|
|
$ |
1,117.59 |
|
|
|
6 |
|
|
$ |
2,656.55 |
|
|
|
533 |
|
|
$ |
1,889.88 |
|
Matthew Zalosh |
|
|
4 |
|
|
$ |
1,087.69 |
|
|
|
7 |
|
|
$ |
2,402.35 |
|
|
|
230 |
|
|
$ |
153.71 |
|
Performance-Based Fees for Other Accounts Managed. Of the accounts listed in the table above, those for which
the subadvisor receives a fee based on investment performance are listed in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Registered Investment Companies |
|
|
Other Pooled Investment Vehicles |
|
|
Other Accounts |
|
Portfolio Manager |
|
Number of Accounts |
|
|
Assets (in millions) |
|
|
Number of Accounts |
|
|
Assets (in millions) |
|
|
Number of Accounts |
|
|
Assets (in millions) |
|
Praveen Abichandani |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
Corné Biemans |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
Matthew Zalosh |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
Ownership of the Funds and Similarly Managed Accounts
The following table shows the dollar range of fund shares and shares of similarly managed accounts beneficially owned by the portfolio managers listed above as
of October 31, 2022. For purposes of this table, similarly managed accounts include all accounts that are managed (i) by the same portfolio managers that are jointly and primarily responsible for the day-to-day management of the fund; and (ii) with an investment style, objective, policies and strategies substantially similar to those that are used to manage the fund.
The portfolio managers ownership of fund shares is stated in the footnote that follows the table.
|
|
|
Portfolio Manager |
|
Dollar Range of Shares Owned1 |
|
|
Praveen Abichandani |
|
$50,001$100,000 |
|
|
Corné Biemans |
|
$100,001$500,000 |
|
|
Matthew Zalosh |
|
$100,001$500,000 |
1 |
As of October 31, 2022, Praveen Abichandani, Corné Biemans, and Matthew Zalosh beneficially owned
$50,001$100,000, $100,001$500,000, and $100,001 $500,000, respectively, of the fund. |
POTENTIAL CONFLICTS OF
INTEREST
Material conflicts of interest exist whenever a portfolio manager simultaneously manages multiple accounts. Even though Boston Common does
not charge performance-based fees, it has different fee structures and some clients pay a higher fee for management services. This creates an incentive for Boston Common to favor those accounts in order to increase its compensation. Boston Common
mitigates the risk of this conflict by using trade allocation policies that are designed to ensure that the funds and separately managed accounts are treated fairly. Reviews of transactions are made in order to ensure fairness of allocation and
price. The risk of conflicts of interest is also mitigated by the fact that the funds are managed in the same way as our separately managed model accounts in the same product. Further, compensation is based on the profitability of the business and
each investment professionals sector attribution and is not tied to the funds performance or the performance of specific accounts, which reduces the risk that one account will be favored over another.
153
In addition, conflicts of interest may arise during our proxy voting process. Boston Common surveys its proxy
advisory firm annually regarding many items, one of which is conflicts of interest. Its proxy advisory firm makes their conflict policies available online. Boston Common has the ability to access and review these policies.
Boston Common utilizes a custom proxy voting policy with its proxy advisory firm. The Boston Common team works with the custom voting team at the proxy
advisory firm to resolve any potential conflicts of interest both before the proxy voting season starts and if/when conflicts arise during the season. Boston Commons policy is to resolve any conflicts of interest to the clients benefit.
Boston Commons investment team is consulted if a question or potential conflict arises between Boston Common and its client. Boston Common also uses its proxy administrator, ISSInstitutional Shareholder Services, to vote proxies
according to specific, pre-determined guidelines. The retention of ISSInstitutional Shareholder Services is one way in which Boston Common resolves potential conflicts between its interests and those of
its clients.
The Director of Shareowner Engagement and members of the ESG Team will determine how proxy issues should be the voted. These decisions will
be made in accordance with Boston Commons social guidelines. The Director of Shareowner Engagement and the ESG Team will periodically consult with Boston Commons portfolio managers and analysts to avoid potential conflicts of interest
between social and economic issues. These consultations will take place at regularly scheduled meetings of Boston Commons investment team and notes will be maintained of these meetings. Boston Commons Chief Compliance Officer is
responsible for working with John Hancock to file Form N-PX in a timely manner. The funds voting record is posted to the funds website.
COMPENSATION
Boston Common offers its portfolio managers
a combination of cash compensation (a base salary and bonus) and a competitive benefits package. The bonus pool is determined based on the businesss profitability, then allocated among the team based on each employees individual
contribution.
Employees also participate in a 401(k) plan and receive profit sharing contributions. In addition, senior members of the team have the
opportunity to participate in direct ownership via the purchase of shares in the firm. The percentage of compensation from each of these sources varies by individual and based on the profitability of the business.
For portfolio managers, Boston Common emphasizes variable compensation arrangements based on investment returns and analytical contribution through
productivity. Boston Common monitors attribution analysis of all major products through the year and on a multi-year basis, with a focus at year end on rolling three-year returns. This is an important (but not sole) component of the year end
assessment of portfolio manager and investment team performance. The final levels are based on managements judgment of how effectively the employee is advancing the long-term goals of the firm and its clients. An employees year-end bonus can make up the majority of total compensation. Boston Common attempts to be competitive within its industry for firms of similar size. Its recruiting firms provide insight into compensation trends
within the local investment management industry that help Boston Common determine compensation targets for its staff.
Boston Common also has a profit
sharing plan for all employees and ownership grants for key professionals who Boston Common believes are critical to the long-term success of the firm. To date, priority in ownership grants has been on retaining key professionals and providing
proper incentives for them more so than on succession planning, since the firms senior professionals are still more than a decade from standard retirement age. Boston Common considers its portfolio managers as key professionals.
Additionally, as described in the Conflicts of Interest section, compensation is not tied to the performance of specific accounts, which reduces the risk that
one account will be favored over another.
154
BOSTON PARTNERS GLOBAL INVESTORS, INC.
(Boston Partners)
Disciplined Value
International Fund
PORTFOLIO MANAGERS AND OTHER ACCOUNTS MANAGED
Joseph F. Feeney, Jr., CFA1, Christopher K. Hart, CFA, and Joshua M. Jones, CFA, are jointly and primarily
responsible for the day-to-day management of the funds portfolio.
1 |
Effective December 31, 2023, Joseph F. Feeney, Jr. will no longer serve as a portfolio manager for
the fund, and Christopher K. Hart and Joshua M. Jones will continue to serve as portfolio managers and be jointly and primarily responsible for the day-to-day management
of the funds portfolio. |
The following table provides information regarding other accounts for which each portfolio manager listed
above has day-to-day management responsibilities. Accounts are grouped into three categories: (i) other investment companies (and series thereof); (ii) other pooled
investment vehicles; and (iii) other accounts. To the extent that any of these accounts pays advisory fees that are based on account performance (performance-based fees), information on those accounts is specifically broken out. In
addition, any assets denominated in foreign currencies have been converted into U.S. dollars using the exchange rates as of the applicable date. Also shown below the table is each portfolio managers investment in the fund and similarly managed
accounts.
The following table provides information as of October 31, 2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Registered Investment Companies |
|
|
Other Pooled Investment Vehicles |
|
|
Other Accounts |
|
Portfolio Manager |
|
Number of Accounts |
|
|
Assets (in millions) |
|
|
Number of Accounts |
|
|
Assets (in millions) |
|
|
Number of Accounts |
|
|
Assets (in millions) |
|
Joseph F. Feeney, Jr.* |
|
|
9 |
|
|
$ |
3,607 |
|
|
|
7 |
|
|
$ |
5,834 |
|
|
|
26 |
|
|
$ |
1,767 |
|
Christopher K. Hart |
|
|
4 |
|
|
$ |
2,448 |
|
|
|
7 |
|
|
$ |
5,834 |
|
|
|
26 |
|
|
$ |
1,767 |
|
Joshua M. Jones |
|
|
4 |
|
|
$ |
2,448 |
|
|
|
7 |
|
|
$ |
5,834 |
|
|
|
26 |
|
|
$ |
1,767 |
|
* |
As CIO, Joseph F. Feeney, Jr. is responsible for overseeing all of Boston Partners investment
strategies. |
Performance-Based Fees for Other Accounts Managed. Of the accounts listed in the table above, those for which
the subadvisor receives a fee based on investment performance are listed in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Registered Investment Companies |
|
|
Other Pooled Investment Vehicles |
|
|
Other Accounts |
|
Portfolio Manager |
|
Number of Accounts |
|
|
Assets (in millions) |
|
|
Number of Accounts |
|
|
Assets (in millions) |
|
|
Number of Accounts |
|
|
Assets (in millions) |
|
Joseph F. Feeney, Jr. |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
Christopher K. Hart |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
Joshua M. Jones |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
Ownership of the Funds and Similarly Managed Accounts
The following table shows the dollar range of fund shares and shares of similarly managed accounts beneficially owned by the portfolio managers listed above as
of October 31, 2022. For purposes of this table, similarly managed accounts include all accounts that are managed (i) by the same portfolio managers that are jointly and primarily responsible for the day-to-day management of the fund; and (ii) with an investment style, objective, policies and strategies substantially similar to those that are used to manage the fund.
The portfolio managers ownership of fund shares is stated in the footnote that follows the table.
|
|
|
Portfolio Manager |
|
Dollar Range of Shares Owned1 |
Joseph F. Feeney, Jr. |
|
$500,001$1,000,000 |
Christopher K. Hart |
|
$500,001$1,000,000 |
Joshua M. Jones |
|
$50,001$100,000 |
1 |
As of October 31, 2022, Joseph F. Feeney, Jr., Christopher K. Hart, and Joshua M. Jones beneficially
owned $500,001$1,000,000, $500,001$1,000,000, and $50,001$100,000, respectively, of the fund. |
POTENTIAL CONFLICTS
OF INTEREST
Compensation is determined based on several factors including performance, productivity, firm results and teamwork. Portfolio managers
benefit from Boston Partners revenues and profitability. But no portfolio managers are compensated based directly on fee revenue earned by Boston Partners on particular accounts in a way that would create a material conflict of interest in favoring
particular accounts over other accounts.
Execution and research services provided by brokers may not always be utilized in connection with the fund or
other client accounts that may have provided the commission or a portion of the commission paid to the broker providing the services. Boston Partners allocates brokerage commissions for these services in a manner that it believes is fair and
equitable and consistent with its fiduciary obligations to each of its clients.
155
Boston Partners views all assets under management in a particular investment strategy as one portfolio. When the
firm decides that a given security warrants a 1% position in client portfolios, it buys 1% in all portfolios unless individual client guidelines prohibit the firm from purchasing the security for such portfolio. Boston Partners generally aggregates
the target share amount for each account into one large order and distributes the shares on a prorated basis across the accounts.
If a portfolio manager
identifies a limited investment opportunity that may be suitable for more than one fund or other client account, the fund may not be able to take full advantage of that opportunity. To mitigate this conflict of interest, Boston Partners aggregates
orders of the funds it advises with orders from each of its other client accounts in order to ensure that all clients are treated fairly and equitably over time and consistent with its fiduciary obligations to each of its clients.
Accounts are generally precluded from simultaneously holding a security long and short. There are certain circumstances that would permit a long/ short
portfolio to take a short position in a security that is held long in another strategy. This happens very infrequently, and the contra position is generally not related to the fundamental views of the security (i.e.initiating a long position
in a security at year-end to take advantage of tax-loss selling as a short-term investment, or initiating a position based solely on its relative weight in the
benchmark). However, in certain situations, the investment constraints of a strategy, including but not limited to country, region, industry, or benchmark, may result in a different investment thesis for the same security. Each situation is fully
vetted and approved by the firms Chief Investment Officer or his designee.
COMPENSATION
All investment professionals receive a compensation package comprised of an industry competitive base salary, a discretionary bonus and long-term incentives.
Through our bonus program, key investment professionals are rewarded primarily for strong investment performance. We believe this aligns our Boston Partners team firmly with our clients objectives and provides the financial and work
environment incentives which keep our teams in place and has led to industry leading investment staff continuity and extremely low unplanned staff turnover.
Typically, bonuses are based upon a combination of one or more of the following four criteria:
|
|
|
Individual Contribution: an evaluation of the professionals individual contribution based on the
expectations established at the beginning of each year; |
|
|
|
Product Investment Performance: performance of the investment product(s) with which the individual is
involved versus the pre-designed index, based on the excess return; |
|
|
|
Investment Team Performance: the financial results of the investment group with our clients assets;
|
|
|
|
Firm-wide Performance: the overall financial performance of Boston Partners. |
|
|
|
Our long-term incentive program effectively confers a significant 20-30%
ownership interest in the value of the business to key employees. Annual awards are made by the Compensation Committee and are meant to equate to an additional 10-20% of the participants cash bonus awards.
|
The compensation program focuses on long term performance with an emphasis on 3- and 5-year results. The timing of receiving deferred compensation reinforces this emphasis. Roughly 50% of compensation is based on qualitative measures and roughly 50% is based on quantitative measures. These
compensation percentages can vary based on an individuals role in the firm.
Total revenues generated by any particular product affect the total
available bonus pool for the analysts and portfolio managers associated with that product. The discretionary bonus assessment is conducted annually. In the case of John Hancock Disciplined Value International Fund, product investment performance is
based on the funds 1-, 3-, and 5-year performance compared to its market benchmark, the Russell 1000 Value Index, and
compared to its consultant peer group for large cap value. Returns are evaluated on a pre-tax basis.
Firm.
Boston Partners maintains a long-term incentive program which effectively confers a 20-30% ownership stake in Boston Partners and is funded by the profitability and growth of the business. All investment
professionals participate in this plan which serves as a long-term wealth building tool that aligns the interests of our clients with the people responsible for managing their portfolios.
Direct Investments: Boston Partners offers or sub-advises several mutual fund vehicles that allow portfolio
managers and other employees to invest directly alongside our clients. In fact, it is common for senior portfolio managers to invest $1 million or more in the strategy or strategies that they manage. Direct investments are also facilitated
through Boston Partners 401(k) plan as Boston Partners managed mutual funds are widely available, investments are entirely voluntary, and are significantly used within the plan.
Deferred Compensation:
An important aspect of Boston
Partners incentive program is deferred compensation. Annual incentive compensation as well as long-term incentive compensation is deferred in part or in total for typically 3 to 5 years. Deferred compensation promotes organizational stability
and also facilitates significant re-investment in Boston Partners strategies. Deferred compensation is invested in established Boston Partners strategies. In addition, Boston Partners utilizes deferred
compensation to fund seed investments in new investment offerings. This allows for the establishment of a portfolio, the building of a track record and ultimately bring a new investment strategy to the marketplace.
156
GRAHAM CAPITAL MANAGEMENT, L.P.
(Graham)
Diversified Macro Fund
PORTFOLIO MANAGERS AND OTHER ACCOUNTS MANAGED
Pablo
Calderini and Kenneth Tropin are jointly and primarily responsible for the day-to-day management of the funds portfolio.
The following table provides information regarding other accounts for which each portfolio manager listed above has day-to-day management responsibilities. Accounts are grouped into three categories: (i) other investment companies (and series thereof); (ii) other pooled investment vehicles; and (iii) other
accounts. To the extent that any of these accounts pays advisory fees that are based on account performance (performance-based fees), information on those accounts is specifically broken out. In addition, any assets denominated in
foreign currencies have been converted into
U.S. dollars using the exchange rates as of the applicable date. Also shown below the table is each portfolio
managers investment in the fund and similarly managed accounts.
The following table provides information as of October 31, 2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Registered Investment Companies |
|
|
Other Pooled Investment Vehicles |
|
|
Other Accounts |
|
Portfolio Manager |
|
Number of Accounts |
|
|
Assets (in millions) |
|
|
Number of Accounts |
|
|
Assets (in millions) |
|
|
Number of Accounts |
|
|
Assets (in millions) |
|
Pablo Calderini |
|
|
5 |
|
|
$ |
2,708 |
|
|
|
50 |
|
|
$ |
7,993 |
|
|
|
27 |
|
|
$ |
7,163 |
|
Kenneth Tropin |
|
|
5 |
|
|
$ |
2,708 |
|
|
|
50 |
|
|
$ |
7,993 |
|
|
|
27 |
|
|
$ |
7,163 |
|
Performance-Based Fees for Other Accounts Managed. Of the accounts listed in the table above, those for which
the subadvisor receives a fee based on investment performance are listed in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Registered Investment Companies |
|
|
Other Pooled Investment Vehicles |
|
|
Other Accounts |
|
Portfolio Manager |
|
Number of Accounts |
|
|
Assets (in millions) |
|
|
Number of Accounts |
|
|
Assets (in millions) |
|
|
Number of Accounts |
|
|
Assets (in millions) |
|
Pablo Calderini |
|
|
0 |
|
|
$ |
0 |
|
|
|
38 |
|
|
$ |
6,757 |
|
|
|
20 |
|
|
$ |
3,159 |
|
Kenneth Tropin |
|
|
0 |
|
|
$ |
0 |
|
|
|
38 |
|
|
$ |
6,757 |
|
|
|
20 |
|
|
$ |
3,159 |
|
Ownership of the Funds and Similarly Managed Accounts
The following table shows the dollar range of fund shares and shares of similarly managed accounts beneficially owned by the portfolio managers listed above as
of October 31, 2022. For purposes of this table, similarly managed accounts include all accounts that are managed (i) by the same portfolio managers that are jointly and primarily responsible for the day-to-day management of the fund; and (ii) with an investment style, objective, policies and strategies substantially similar to those that are used to manage the fund.
The portfolio managers ownership of fund shares is stated in the footnote that follows the table.
|
|
|
Portfolio Manager |
|
Dollar Range of Shares Owned1 |
|
|
Pablo Calderini |
|
$10,001$50,000 |
|
|
Kenneth Tropin |
|
$10,001$50,000 |
1 |
As of October 31, 2022, Kenneth Tropin and Pablo Calderini beneficially owned $10,001$50,000 and
$10,001$50,000, respectively, of the fund. |
POTENTIAL CONFLICTS OF INTEREST
The portfolio managers may manage numerous accounts for multiple clients. These accounts may include collective investment funds and separate accounts managed
on behalf of institutional clients, including registered investment companies. The portfolio managers make investment decisions for each account based on the investment objectives and policies and other relevant investment considerations applicable
to that portfolio.
When the portfolio managers have responsibility for managing more than one account, potential conflicts of interest may arise. Those
conflicts could include preferential treatment of one account over others in terms of allocation of resources or of investment opportunities. For instance, Graham may receive fees from certain accounts that are higher than the fee it receives from
the fund, or it may receive a performance-based fee on certain accounts. In those instances, the portfolio managers may have an incentive to favor the higher and/or performance-based fee accounts over the fund. Graham has adopted policies and
procedures designed to address these potential material conflicts. For instance, Graham utilizes a system for allocating investment opportunities among accounts that is designed to provide a fair and equitable allocation.
COMPENSATION
The portfolio managers receive a salary, in
the case of Messrs. Calderini and Tropin, and a discretionary bonus and a formula bonus linked to performance of certain GCM Graham funds, in the case of Mr. Calderini. In addition, Mr. Tropin, as an indirect owner of Graham, is allocated
a portion of Grahams net income.
157
MANULIFE IM (US)
Balanced Fund
Emerging Markets Equity Fund
Financial Industries Fund
Fundamental Large Cap Core
Fund
Regional Bank Fund
Small Cap Core Fund
PORTFOLIO MANAGERS AND OTHER ACCOUNTS MANAGED
The following table shows the portfolio managers at Manulife IM (US) who are primarily responsible, or jointly and primarily responsible, for the day-to- day management of the stated funds portfolios.
|
|
|
Fund Managed |
|
Portfolio Managers |
|
|
Balanced Fund |
|
Susan A. Curry, Jeffrey N. Given, CFA, and Michael J. Scanlon, Jr., CFA |
|
|
Emerging Markets Equity Fund |
|
Bryony Deuchars, CFA, David Dugdale, PhD, CFA, Philip Ehrmann, Kathryn Langridge, Bhupinder Sachdev, CFA, and Talib Saifee |
|
|
Financial Industries Fund |
|
Susan A. Curry and Ryan P. Lentell, CFA |
|
|
Fundamental Large Cap Core Fund |
|
Emory W. Sanders, Jr., CFA, and Jonathan T. White, CFA |
|
|
Regional Bank Fund |
|
Susan A. Curry and Ryan P. Lentell, CFA |
|
|
Small Cap Core Fund |
|
Ryan Davies, CFA, Joseph Nowinski, and Bill Talbot, CFA |
The following table provides information regarding other accounts for which each portfolio manager listed above has day-to-day management responsibilities. Accounts are grouped into three categories: (i) other investment companies (and series thereof); (ii) other pooled investment
vehicles; and (iii) other accounts. To the extent that any of these accounts pays advisory fees that are based on account performance (performance-based fees), information on those accounts is specifically broken out. In addition,
any assets denominated in foreign currencies have been converted into
U.S. dollars using the exchange rates as of the applicable date. Also shown below
the table is each portfolio managers investment in the fund or funds he or she manages and any similarly managed accounts.
The following table
provides information as of October 31, 2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Registered Investment Companies |
|
|
Other Pooled Investment Vehicles |
|
|
Other Accounts |
|
Portfolio Manager |
|
Number of Accounts |
|
|
Assets (in millions) |
|
|
Number of Accounts |
|
|
Assets (in millions) |
|
|
Number of Accounts |
|
|
Assets (in millions) |
|
Susan A. Curry |
|
|
2 |
|
|
$ |
940 |
|
|
|
2 |
|
|
$ |
294 |
|
|
|
0 |
|
|
$ |
0 |
|
Ryan Davies |
|
|
0 |
|
|
$ |
0 |
|
|
|
6 |
|
|
$ |
100 |
|
|
|
0 |
|
|
$ |
0 |
|
Bryony Deuchars |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
David Dugdale |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
Philip Ehrmann |
|
|
0 |
|
|
$ |
0 |
|
|
|
4 |
|
|
$ |
533 |
|
|
|
0 |
|
|
$ |
0 |
|
Jeffrey N. Given |
|
|
16 |
|
|
$ |
30,466 |
|
|
|
34 |
|
|
$ |
6,838 |
|
|
|
19 |
|
|
$ |
10,050 |
|
Kathryn Langridge |
|
|
0 |
|
|
$ |
0 |
|
|
|
4 |
|
|
$ |
533 |
|
|
|
0 |
|
|
$ |
0 |
|
Ryan P. Lentell |
|
|
2 |
|
|
$ |
940 |
|
|
|
2 |
|
|
$ |
294 |
|
|
|
0 |
|
|
$ |
0 |
|
Joseph Nowinski |
|
|
0 |
|
|
$ |
0 |
|
|
|
6 |
|
|
$ |
100 |
|
|
|
0 |
|
|
$ |
0 |
|
Bhupinder Sachdev |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
Emory W. Sanders, Jr. |
|
|
5 |
|
|
$ |
3,168 |
|
|
|
28 |
|
|
$ |
6,484 |
|
|
|
9 |
|
|
$ |
2,813 |
|
Talib Saifee |
|
|
0 |
|
|
$ |
0 |
|
|
|
4 |
|
|
$ |
533 |
|
|
|
0 |
|
|
$ |
0 |
|
Michael J. Scanlon, Jr. |
|
|
0 |
|
|
$ |
0 |
|
|
|
4 |
|
|
$ |
260 |
|
|
|
0 |
|
|
$ |
0 |
|
Bill Talbot |
|
|
0 |
|
|
$ |
0 |
|
|
|
6 |
|
|
$ |
100 |
|
|
|
0 |
|
|
$ |
0 |
|
Jonathan T. White |
|
|
4 |
|
|
$ |
2,463 |
|
|
|
23 |
|
|
$ |
5,027 |
|
|
|
9 |
|
|
$ |
2,813 |
|
Performance-Based Fees for Other Accounts Managed. Of the accounts listed in the table above, those for which
the subadvisor receives a fee based on investment performance are listed in the table below.
158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Registered Investment Companies |
|
|
Other Pooled Investment Vehicles |
|
|
Other Accounts |
|
Portfolio Manager |
|
Number of Accounts |
|
|
Assets (in millions) |
|
|
Number of Accounts |
|
|
Assets (in millions) |
|
|
Number of Accounts |
|
|
Assets (in millions) |
|
Susan A. Curry |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
Ryan Davies |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
Bryony Deuchars |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
David Dugdale |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
Philip Ehrmann |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
Jeffrey N. Given |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
Kathryn Langridge |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
Ryan P. Lentell |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
Joseph Nowinski |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
Bhupinder Sachdev |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
Talib Saifee |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
Emory W. Sanders, Jr. |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
4 |
|
|
$ |
1,109 |
|
Michael J. Scanlon, Jr. |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
Bill Talbot |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
Jonathan T. White |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
4 |
|
|
$ |
1,109 |
|
Ownership of the Funds and Similarly Managed Accounts
The following table shows the dollar range of fund shares and shares of similarly managed accounts beneficially owned by the portfolio managers listed above as
of October 31, 2022. For purposes of this table, similarly managed accounts include all accounts that are managed (i) by the same portfolio managers that are jointly and primarily responsible for the day-to-day management of a fund, or by the same portfolio manager that is primarily responsible for the
day-to-day management of the fund, as applicable; and (ii) with an investment style, objective, policies and strategies substantially similar to those that are used
to manage the fund. The portfolio managers ownership of fund shares is stated in the footnote that follows the table.
|
|
|
Portfolio Manager |
|
Dollar Range of Shares Owned |
|
|
Balanced Fund1 |
|
|
|
|
Susan A. Curry |
|
$100,001$500,000 |
|
|
Jeffrey N. Given |
|
$100,001$500,000 |
|
|
Michael J. Scanlon, Jr. |
|
over $1,000,000 |
|
|
Emerging Markets Equity Fund2 |
|
|
|
|
Bryony Deuchars |
|
$10,001$50,000 |
|
|
David Dugdale |
|
$100,001$500,000 |
|
|
Philip Ehrmann |
|
$500,001$1,000,000 |
|
|
Kathryn Langridge |
|
$500,001$1,000,000 |
|
|
Bhupinder Sachdev |
|
$10,001$50,000 |
|
|
Tailib Saifee |
|
$100,001$500,000 |
|
|
Financial Industries Fund3 |
|
|
|
|
Susan A. Curry |
|
$500,001$1,000,000 |
|
|
Ryan P. Lentell |
|
$500,001$1,000,000 |
|
|
Fundamental Large Cap Core Fund4 |
|
|
|
|
Emory W. Sanders, Jr. |
|
over $1,000,000 |
|
|
Jonathan T. White |
|
$500,001$1,000,000 |
|
|
Regional Bank Fund5 |
|
|
|
|
Susan A. Curry |
|
$500,001$1,000,000 |
|
|
Ryan P. Lentell |
|
$500,001$1,000,000 |
|
|
Small Cap Core Fund6 |
|
|
159
|
|
|
Portfolio Manager |
|
Dollar Range of Shares Owned |
|
|
Ryan Davies |
|
$100,001$500,000 |
|
|
Joseph Nowinski |
|
$100,001$500,000 |
|
|
Bill Talbot |
|
$100,001$500,000 |
1 |
As of October 31, 2022, Susan A. Curry, Jeffrey N. Given, and Michael J. Scanlon, Jr. beneficially owned
$100,001$500,000, $100,001$500,000, and over $1,000,000, respectively, of Balanced Fund. |
2 |
As of October 31, 2022, Bryony Deuchars, David Dugdale, Philip Ehrmann, Kathryn Langridge, Bhupinder
Sachdev, and Tailib Saifee beneficially owned $0, $0, $0, $0, $0, and $0, respectively, of Emerging Markets Equity Fund. |
3 |
As of October 31, 2022, Susan A. Curry and Ryan P. Lentell beneficially owned $500,001$1,000,000 and
$500,001$1,000,000, respectively, of Financial Industries Fund. |
4 |
As of October 31, 2022, Emory W. Sanders, Jr. and Jonathan T. White beneficially owned over $1,000,000 and
$500,001$1,000,000, respectively, of Fundamental Large Cap Core Fund. |
5 |
As of October 31, 2022, Susan A. Curry and Ryan P. Lentell beneficially owned $500,001$1,000,000 and
$500,001$1,000,000, respectively, of Regional Bank Fund. |
6 |
As of October 31, 2022, Ryan Davies, Joseph Nowinski, and Bill Talbot beneficially owned
$100,001$500,000, $100,001$500,000, $100,001$500,000, respectively, of Small Cap Core Fund. |
POTENTIAL CONFLICTS OF
INTEREST
When a portfolio manager is responsible for the management of more than one account, the potential arises for the portfolio manager to favor
one account over another. The principal types of potential conflicts of interest that may arise are discussed below. For the reasons outlined below, the funds do not believe that any material conflicts are likely to arise out of a portfolio
managers responsibility for the management of the funds as well as one or more other accounts. The Advisor and Manulife IM (US) (the Subadvisor) have adopted procedures that are intended to monitor compliance with the policies
referred to in the following paragraphs. Generally, the risks of such conflicts of interests are increased to the extent that a portfolio manager has a financial incentive to favor one account over another. The Advisor and Subadvisor have structured
their compensation arrangements in a manner that is intended to limit such potential for conflicts of interests. See Compensation below.
|
|
|
A portfolio manager could favor one account over another in allocating new investment opportunities that have
limited supply, such as initial public offerings and private placements. If, for example, an initial public offering that was expected to appreciate in value significantly shortly after the offering was allocated to a single account, that account
may be expected to have better investment performance than other accounts that did not receive an allocation on the initial public offering. The Subadvisor has policies that require a portfolio manager to allocate such investment opportunities in an
equitable manner and generally to allocate such investments proportionately among all accounts with similar investment objectives. |
|
|
|
A portfolio manager could favor one account over another in the order in which trades for the accounts are
placed. If a portfolio manager determines to purchase a security for more than one account in an aggregate amount that may influence the market price of the security, accounts that purchased or sold the security first may receive a more favorable
price than accounts that made subsequent transactions. The less liquid the market for the security or the greater the percentage that the proposed aggregate purchases or sales represent of average daily trading volume, the greater the potential for
accounts that make subsequent purchases or sales to receive a less favorable price. When a portfolio manager intends to trade the same security for more than one account, the policies of the Subadvisor generally require that such trades be
bunched, which means that the trades for the individual accounts are aggregated and each account receives the same price. There are some types of accounts as to which bunching may not be possible for contractual reasons (such as directed
brokerage arrangements). Circumstances may also arise where the trader believes that bunching the orders may not result in the best possible price. Where those accounts or circumstances are involved, the Subadvisor will place the order in a manner
intended to result in as favorable a price as possible for such client. |
|
|
|
A portfolio manager could favor an account if the portfolio managers compensation is tied to the
performance of that account rather than all accounts managed by the portfolio manager. If, for example, the portfolio manager receives a bonus based upon the performance of certain accounts relative to a benchmark while other accounts are
disregarded for this purpose, the portfolio manager will have a financial incentive to seek to have the accounts that determine the portfolio managers bonus achieve the best possible performance to the possible detriment of other accounts.
Similarly, if the Subadvisor receives a performance-based advisory fee, the portfolio manager may favor that account, whether or not the performance of that account directly determines the portfolio managers compensation. The investment
performance on specific accounts is not a factor in determining the portfolio managers compensation. See Compensation below. Neither the Advisor nor the Subadvisor receives a performance-based fee with respect to any of the
accounts managed by the portfolio managers. |
|
|
|
A portfolio manager could favor an account if the portfolio manager has a beneficial interest in the account, in
order to benefit a large client or to compensate a client that had poor returns. For example, if the portfolio manager held an interest in an investment partnership that was one of the accounts managed by the portfolio manager, the portfolio manager
would have an economic incentive to favor the account in which the portfolio manager held an interest. The Subadvisor imposes certain trading restrictions and reporting requirements for accounts in which a portfolio manager or certain family members
have a personal interest in order to confirm that such accounts are not favored over other accounts. |
|
|
|
If the different accounts have materially and potentially conflicting investment objectives or strategies, a
conflict of interest may arise. For example, if a portfolio manager purchases a security for one account and sells the same security short for another account, such trading pattern could disadvantage either the account that is long or short. In
making portfolio manager assignments, the Subadvisor seeks to avoid such potentially conflicting situations. However, where a portfolio manager is responsible for accounts with differing investment objectives and policies, it is possible that the
portfolio manager will conclude that it is in the best interest of one account to sell a portfolio security while another account continues to hold or increase the holding in such security. |
160
COMPENSATION
The Subadvisor has adopted a system of compensation for portfolio managers and others involved in the investment process that is applied systematically among
investment professionals. At the Subadvisor, the structure of compensation of investment professionals is currently comprised of the following basic components: base salary and short- and long-term incentives. The following describes each component
of the compensation package for the individuals identified as a portfolio manager for the funds.
|
|
|
Base salary. Base compensation is fixed and normally reevaluated on an annual basis. The Subadvisor seeks to set
compensation at market rates, taking into account the experience and responsibilities of the investment professional. |
|
|
|
Incentives. Only investment professionals are eligible to participate in the short- and long-term incentive plan.
Under the plan, investment professionals are eligible for an annual cash award. The plan is intended to provide a competitive level of annual bonus compensation that is tied to the investment professional achieving superior investment performance
and aligns the financial incentives of the Subadvisor and the investment professional. Any bonus under the plan is completely discretionary, with a maximum annual bonus that may be well in excess of base salary. Payout of a portion of this bonus may
be deferred for up to five years. While the amount of any bonus is discretionary, the following factors are generally used in determining bonuses under the plan: |
|
|
Investment Performance: The investment performance of all accounts managed by the investment
professional over one, three and five-year periods are considered. The pre-tax performance of each account is measured relative to an appropriate peer group benchmark identified in the table below (for example
a Morningstar large cap growth peer group if the fund invests primarily in large cap stocks with a growth strategy). With respect to fixed income accounts, relative yields are also used to measure performance. This is the most heavily weighted
factor. |
|
|
Financial Performance: The profitability of the Subadvisor and its parent company are also considered in
determining bonus awards. |
|
|
Non-Investment Performance: To a lesser extent, intangible
contributions, including the investment professionals support of client service and sales activities, new fund/strategy idea generation, professional growth and development, and management, where applicable, are also evaluated when determining
bonus awards. |
|
|
In addition to the above, compensation may also include a revenue component for an investment team derived from
a number of factors including, but not limited to, client assets under management, investment performance, and firm metrics. |
|
|
|
Manulife equity awards. A limited number of senior investment professionals may receive options to purchase
shares of Manulife Financial stock. Generally, such option would permit the investment professional to purchase a set amount of stock at the market price on the date of grant. The option can be exercised for a set period (normally a number of years
or until termination of employment) and the investment professional would exercise the option if the market value of Manulife Financial stock increases. Some investment professionals may receive restricted stock grants, where the investment
professional is entitled to receive the stock at no or nominal cost, provided that the stock is forgone if the investment professionals employment is terminated prior to a vesting date. |
|
|
|
Deferred Incentives. Investment professionals may receive deferred incentives which are fully invested in
strategies managed by the team/individual as well as other Manulife Investment Management strategies. |
The Subadvisor also permits
investment professionals to participate on a voluntary basis in a deferred compensation plan, under which the investment professional may elect on an annual basis to defer receipt of a portion of their compensation until retirement. Participation in
the plan is voluntary.
|
|
|
Fund |
|
Benchmark Index for Incentive Period |
|
|
Balanced Fund |
|
Morningstar US OE Moderate Allocation |
|
|
Emerging Markets Equity Fund |
|
eVestment Emerging Markets All Cap Equity Universe Gross |
|
|
Financial Industries Fund |
|
Morningstar US OE Financial |
|
|
Fundamental Large Cap Core Fund |
|
Lipper Large Cap Core |
|
|
Regional Bank Fund |
|
S&P Composite 1500 Banks Index Total Return |
|
|
Small Cap Core Fund |
|
eA US Small Cap Core Equity |
161
PICTET ASSET MANAGEMENT SA
(Pictet AM)
Global Environmental
Opportunities Fund
Global Thematic Opportunities Fund
PORTFOLIO MANAGERS AND OTHER ACCOUNTS MANAGED
The
following table shows the portfolio managers at Pictet AM who are jointly and primarily responsible for the day-to-day management of the stated funds portfolios.
|
|
|
Fund Managed |
|
Portfolio Managers |
|
|
Global Environmental Opportunities Fund |
|
Luciano Diana, Yi Du, Gabriel Micheli, and Katie Self |
|
|
Global Thematic Opportunities Fund |
|
Hans Peter Portner, CFA and Gertjan van der Geer |
The following table provides information regarding other accounts for which each portfolio manager listed above has day-to-day management responsibilities. Accounts are grouped into three categories: (i) other investment companies (and series thereof); (ii) other pooled investment
vehicles; and (iii) other accounts. To the extent that any of these accounts pays advisory fees that are based on account performance (performance-based fees), information on those accounts is specifically broken out. In addition,
any assets denominated in foreign currencies have been converted into
U.S. dollars using the exchange rates as of the applicable date. Also shown below
the table is each portfolio managers investment in the fund he manages and similarly managed accounts.
The following table provides information as
of October 31, 2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Registered Investment Companies |
|
|
Other Pooled Investment Vehicles |
|
|
Other Accounts |
|
Portfolio Manager |
|
Number of Accounts |
|
|
Assets (in millions) |
|
|
Number of Accounts |
|
|
Assets (in millions) |
|
|
Number of Accounts |
|
|
Assets (in millions) |
|
Luciano Diana |
|
|
1 |
|
|
$ |
25 |
|
|
|
2 |
|
|
$ |
7,562 |
|
|
|
7 |
|
|
$ |
1,044 |
|
Yi Du |
|
|
1 |
|
|
$ |
25 |
|
|
|
2 |
|
|
$ |
7,562 |
|
|
|
7 |
|
|
$ |
1,044 |
|
Gabriel Micheli |
|
|
1 |
|
|
$ |
25 |
|
|
|
2 |
|
|
$ |
7,562 |
|
|
|
7 |
|
|
$ |
1,044 |
|
Katie Self |
|
|
1 |
|
|
$ |
25 |
|
|
|
2 |
|
|
$ |
7,562 |
|
|
|
7 |
|
|
$ |
1,044 |
|
Hans Peter Portner |
|
|
1 |
|
|
$ |
284 |
|
|
|
6 |
|
|
$ |
1,778 |
|
|
|
10 |
|
|
$ |
623 |
|
Gertjan van der Geer |
|
|
1 |
|
|
$ |
284 |
|
|
|
6 |
|
|
$ |
1,778 |
|
|
|
10 |
|
|
$ |
623 |
|
Performance-Based Fees for Other Accounts Managed. Of the accounts listed in the table above, those for which
the subadvisor receives a fee based on investment performance are listed in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Registered Investment Companies |
|
|
Other Pooled Investment Vehicles |
|
|
Other Accounts |
|
Portfolio Manager |
|
Number of Accounts |
|
|
Assets (in millions) |
|
|
Number of Accounts |
|
|
Assets (in millions) |
|
|
Number of Accounts |
|
|
Assets (in millions) |
|
Luciano Diana |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
Yi Du |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
Katie Self |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
Gabriel Micheli |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
Hans Peter Portner |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
Gertjan van der Geer |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
Ownership of the Funds and Similarly Managed Accounts
The following table shows the dollar range of fund shares and shares of similarly managed accounts beneficially owned by the portfolio managers listed above as
of October 31, 2022. For purposes of this table, similarly managed accounts include all accounts that are managed (i) by the same portfolio managers that are jointly and primarily responsible for the day-to-day management of the fund; and (ii) with an investment style, objective, policies and strategies substantially similar to those that are used to manage the fund.
The portfolio managers ownership of fund shares is stated in the footnote that follows the table.
|
|
|
Portfolio Manager |
|
Dollar Range of Shares Owned |
|
|
Global Environmental Opportunities Fund1 |
|
|
|
|
Luciano Diana |
|
$50,001$100,000 |
|
|
Yi Du |
|
$1$10,000 |
162
|
|
|
|
|
Portfolio Manager |
|
Dollar Range of Shares Owned |
|
Gabriel Micheli |
|
$ |
1$10,000 |
|
Katie Self |
|
|
none |
|
Global Thematic Opportunities Fund2
|
|
|
|
|
Hans Peter Portner |
|
$ |
500,001$1,000,000 |
|
Gertjan van der Geer |
|
$ |
100,001$500,000 |
|
1 |
As of October 31, 2022, Luciano Diana, Yi Du, Gabriel Micheli, and Katie Self beneficially owned $0, $0,
$0, and $0, respectively, of Global Environmental Opportunities Fund. |
2 |
As of October 31, 2022, Hans Peter Portner and Gertjan van der Geer beneficially owned $0 and $0,
respectively, of Global Thematic Opportunities Fund. |
POTENTIAL CONFLICTS OF INTEREST
Pictet AM has a fiduciary duty to manage its clients assets in accordance with the funds stated investment strategies, in accordance with the
Financial Conduct Authority, the Financial Market Supervisory Authority and SEC rules (Rules), and also to manage any conflicts of interest arising between either Pictet AM and its client, or an employee and the client. The Pictet AM Compliance
manual sets out how conflicts of interest between Pictet AM and the client are handled, and the detailed Pictet AM Code of Ethics sets out the standards required of employees which addresses conflicts of interests between employees and the
firms clients. In addition, Pictet AM has also issued an internal policy on conflicts of interest. Compliance with the funds stated investment strategies, the Rules and the Code of Ethics (especially Personal Account Dealing) is
monitored on a regular basis by Pictet AMs compliance department. However, all members of staff have an obligation to report any breaches of which they become aware. All breaches identified are recorded and reported to Pictet AMs
Compliance and Business Risk departments, who will oversee and approve any corrective action, which should take place as soon as reasonably practicable. In accordance with general fiduciary and regulatory law, Pictet AM discloses that the following
conflicts of interest may arise among others:
|
|
|
Pictet AM or an associate (which is, broadly, an entity within Pictet AM) may undertake regulated activities for
other clients; |
|
|
|
a director or employee of Pictet AM or of an associate may be a director of, hold or deal in securities of, or is
otherwise interested in any company whose securities are held or dealt in on your behalf; |
|
|
|
a transaction is effected in securities issued by an associate or the client of an associate;
|
|
|
|
a transaction is effected in securities in respect of which Pictet AM or an associate may benefit from a
commission, fee, mark-up or mark-down payable otherwise than by a client, and/or Pictet AM or an associate also may be remunerated by the counterparty to any such transaction; |
|
|
|
Pictet AM deals on a clients behalf with, or in the securities of, an associate; |
|
|
|
Pictet AM may act as agent for a client in relation to transactions in which it also is acting as agent for the
account of other customers and/or associates; |
|
|
|
a transaction is effected in units or shares of in-house funds or
connected investment trusts or of any company of which Pictet AM or an associate is the manager, operator, banker, adviser, custodian or trustee; |
|
|
|
Pictet AM may effect transactions involving placings and/or new issues with an associate which may be acting as
principal or receiving agents commission; |
|
|
|
a transaction is effected in securities of a company for which Pictet AM or an associate has underwritten, or
managed or arranged an issue or offer for sale, within the previous 12 months; |
|
|
|
a transaction is effected in securities in respect of which Pictet AM or an associate, or a director or employee
of Pictet AM or an associate, is contemporaneously trading or has traded on its own account or has either a long or short position. |
If
Pictet AMs organizational arrangements and all reasonable efforts taken to prevent or manage conflicts of interest are not sufficient to ensure, with reasonable confidence, that the material risks of damage to the interests of a client will be
prevented, Pictet AM will clearly disclose the specific description of the nature and sources of the conflict to the client. Such disclosure will be made prior to the conclusion of a contract, and in a durable medium to the client and include
sufficient detail of the conflict and the steps undertaken to mitigate these risks, to enable the client to take an informed decision with respect to the service in the context of which the conflicts of interest arise. As at the date of this
statement, Pictet AM does not have any conflicts where the measures in place do not sufficiently mitigate the conflict and the risk of harm to the client. In an extreme case where we consider that the conflict of interest is too great and cannot be
managed in any other way (including by disclosure), we may decline to act for the client.
COMPENSATION
Pictet AMs remuneration scheme is directly related to the performance of the individual, his/her team and of the institutional asset management division
under the Pictet AM Group. For the investment staff and senior management team, remuneration comprises salary, bonus and the Pictet Group parts. The bonus and parts elements of compensation are structured to reflect individual performance and the
long-term value of the individual to the group. To increase the objectivity of the assessment, the Pictet AM Group uses Balanced Scorecards (BSC) to enable a direct link to be made between the calculation of the discretionary element of
remuneration, the performance of the individual, his or her unit and Pictet AM. An element of pay is also linked to the profits of the Pictet Group as a whole. The BSC includes a range of quantitative and qualitative objectives, each of which is
linked to the overall objectives of Pictet AM Groups business and weighted according to its relative significance. Among the precisely measurable objectives are risk adjusted investment performance, revenue growth on new business and client
retention. For investment managers, the dominant
163
factor is investment performance. For the funds, the managers performance is measured on an after-tax basis against the index. Qualitative measures are classified under processes & innovation, and people & skills, and include team management, recruitment goals and peer cooperation. Pictet
AM employees are also eligible to participate in Pictet Groups pension and insurance plans.
164
PZENA INVESTMENT MANAGEMENT, LLC
(Pzena)
Classic Value Fund
PORTFOLIO MANAGERS AND OTHER ACCOUNTS MANAGED
John J.
Flynn, Richard S. Pzena, and Benjamin S. Silver, CFA, CPA, are jointly and primarily responsible for the day-to-day management of the funds portfolio.
The following table provides information regarding other accounts for which each portfolio manager listed above has day-to-day management responsibilities. Accounts are grouped into three categories: (i) other investment companies (and series thereof); (ii) other pooled investment vehicles; and (iii) other
accounts. To the extent that any of these accounts pays advisory fees that are based on account performance (performance-based fees), information on those accounts is specifically broken out. In addition, any assets denominated in
foreign currencies have been converted into U.S. dollars using the exchange rates as of the applicable date. Also shown below the table is each portfolio managers investment in the fund and similarly managed accounts.
The following table provides information as of October 31, 2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Registered Investment Companies |
|
|
Other Pooled Investment Vehicles |
|
|
Other Accounts |
|
Portfolio Manager |
|
Number of Accounts |
|
|
Assets (in millions) |
|
|
Number of Accounts |
|
|
Assets (in millions) |
|
|
Number of Accounts |
|
|
Assets (in millions) |
|
John J. Flynn |
|
|
7 |
|
|
$ |
9,603 |
|
|
|
10 |
|
|
$ |
279 |
|
|
|
84 |
|
|
$ |
3,181 |
|
Richard S. Pzena |
|
|
5 |
|
|
$ |
9,424 |
|
|
|
8 |
|
|
$ |
205 |
|
|
|
28 |
|
|
$ |
994 |
|
Benjamin S. Silver |
|
|
8 |
|
|
$ |
11,209 |
|
|
|
31 |
|
|
$ |
10,938 |
|
|
|
99 |
|
|
$ |
5,869 |
|
Performance-Based Fees for Other Accounts Managed. Of the accounts listed in the table above, those for which
the subadvisor receives a fee based on investment performance are listed in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Registered Investment Companies |
|
|
Other Pooled Investment Vehicles |
|
|
Other Accounts |
|
Portfolio Manager |
|
Number of Accounts |
|
Assets (in millions) |
|
|
Number of Accounts |
|
|
Assets (in millions) |
|
|
Number of Accounts |
|
|
Assets (in millions) |
|
John J. Flynn |
|
2 |
|
$ |
8,880 |
|
|
|
1 |
|
|
$ |
16 |
|
|
|
0 |
|
|
$ |
0 |
|
Richard S. Pzena |
|
2 |
|
$ |
8,880 |
|
|
|
2 |
|
|
$ |
108 |
|
|
|
0 |
|
|
$ |
0 |
|
Benjamin S. Silver |
|
3 |
|
$ |
10,486 |
|
|
|
4 |
|
|
$ |
234 |
|
|
|
0 |
|
|
$ |
0 |
|
Ownership of the Funds and Similarly Managed Accounts
The following table shows the dollar range of fund shares and shares of similarly managed accounts beneficially owned by the portfolio managers listed above as
of October 31, 2022. For purposes of this table, similarly managed accounts include all accounts that are managed (i) by the same portfolio managers that are jointly and primarily responsible for the day-to-day management of the fund; and (ii) with an investment style, objective, policies and strategies substantially similar to those that are used to manage the fund.
The portfolio managers ownership of fund shares is stated in the footnote that follows the table.
|
|
|
Portfolio Manager |
|
Dollar Range of Shares Owned1 |
John J. Flynn |
|
$100,001$500,000 |
Richard S. Pzena |
|
over $1,000,000 |
Benjamin S. Silver |
|
$500,001$1,000,000 |
1 |
As of October 31, 2022, John J. Flynn, Richard S. Pzena, and Benjamin S. Silver beneficially owned
$100,001$500,000, over $1,000,000, and $500,001$1,000,000, respectively, of the fund. |
POTENTIAL CONFLICTS OF INTEREST
When a portfolio manager is responsible for the management of more than one account, the potential arises for the portfolio manager to favor one
account over another. The principal types of potential conflicts of interest that may arise are discussed below. For the reasons outlined below, the fund does not believe that any material conflicts are likely to arise out of a portfolio
managers responsibility for the management of the fund as well as one or more other accounts. All investment decisions in the portfolio are made unanimously by the funds portfolio management team so no single portfolio manager may act
unilaterally. The subadvisor has adopted procedures that are intended to monitor compliance with the policies referred to in the following paragraphs. Generally, the risks of such conflicts of interests are increased to the extent that a portfolio
manager has a financial incentive to favor one account over another. The subadvisor has structured its compensation arrangements in a manner that is intended to limit such potential for conflicts of interests. See Compensation below.
|
|
|
A portfolio manager could favor one account over another in allocating new investment opportunities that have
limited supply, such as IPOs and private placements. If, for example, an IPO that was expected to appreciate in value significantly shortly after the offering was allocated to a single
|
165
|
account, that account may be expected to have better investment performance than other accounts that did not receive an allocation on the IPO. The subadvisor has policies that require a portfolio
manager to allocate such investment opportunities in an equitable manner and generally to allocate such investments proportionately among all accounts with similar investment objectives. |
|
|
|
A portfolio manager could favor one account over another in the order in which trades for the accounts are
placed. If a portfolio manager determines to purchase a security for more than one account in an aggregate amount that may influence the market price of the security, accounts that purchased or sold the security first may receive a more favorable
price than accounts that made subsequent transactions. The less liquid the market for the security or the greater the percentage that the proposed aggregate purchases or sales represent of average daily trading volume, the greater the potential for
accounts that make subsequent purchases or sales to receive a less favorable price. When a portfolio manager intends to trade the same security for more than one account, the procedures of the subadvisor generally result in such trades being
bunched, which means that the trades for the individual accounts are aggregated and each account receives the same price. There are some types of accounts as to which bunching may not be possible for contractual reasons (such as directed
brokerage arrangements). Circumstances also may arise where the trader believes that bunching the orders may not result in the best possible price. Where those accounts or circumstances are involved, the subadvisor will place the order in a manner
intended to result in as favorable a price as possible for such client. |
|
|
|
A portfolio manager may favor an account if the portfolio managers compensation is tied to the performance
of that account rather than all accounts managed by the portfolio manager. If, for example, the portfolio manager receives a bonus based upon the performance of certain accounts relative to a benchmark while other accounts are disregarded for this
purpose, the portfolio manager will have a financial incentive to seek to have the accounts that determine the portfolio managers bonus achieve the best possible performance to the possible detriment of other accounts. Similarly, if the
Advisor or the subadvisor receives a performance-based advisory fee, the portfolio manager may favor that account, whether or not the performance of that account directly determines the portfolio managers compensation. Additionally, to prevent
conflicts of interest associated with managing accounts with different compensation structures, Pzena generally requires portfolio decisions to be made on a strategy-specific basis and pre-allocation of all
client orders based on specific fee-neutral criteria. The investment performance on specific accounts is not a factor in determining the portfolio managers compensation. See Compensation
below. |
|
|
|
A portfolio manager may favor an account if the portfolio manager has a beneficial interest in the account, in
order to benefit a large client or to compensate a client that had poor returns. For example, if the portfolio manager held an interest in an investment partnership that was one of the accounts managed by the portfolio manager, the portfolio manager
would have an economic incentive to favor the account in which the portfolio manager held an interest. The subadvisor imposes certain trading restrictions and reporting requirements for accounts in which a portfolio manager or certain family members
have a personal interest in order to confirm that such accounts are not favored over other accounts. |
|
|
|
If the different accounts have materially and potentially conflicting investment objectives or strategies, a
conflict of interest may arise. For example, where a portfolio manager is responsible for accounts with differing investment objectives and policies, it is possible that the portfolio manager will conclude that it is in the best interest of one
account to sell a portfolio security while another account continues to hold or increase the holding in such security. While these accounts have many similarities, the investment performance of each account will be different due to differences in
fees, expenses and cash flows. |
COMPENSATION
Portfolio managers and other investment professionals at Pzena are compensated through a combination of a fixed base salary (set annually), discretionary bonus
and equity ownership, if appropriate due to superior performance. The time frame that Pzena examines for bonus compensation is annual. Pzena considers both quantitative and qualitative factors when determining performance bonuses; however,
performance bonuses are not based on investment performance or assets under management. For investment professionals, Pzena examines such things as effort, efficiency, ability to focus on the correct issues, stock modeling ability, and ability to
successfully interact with company management. However, Pzena always looks at the person as a whole and contributions that he/she has made and is likely to make in the future. Pzena avoids a compensation model that is driven by individual security
performance, as this can lead to short-term thinking which is contrary to the firms value investment philosophy.
Ownership is provided to
professionals who have contributed meaningfully to the long-term success of the organization. Partnership eligibility is determined by the Firms Executive Committee, typically requiring a period of employment of five years at the Firm. Our
overriding criteria on a persons eligibility for partnership is our assessment that we want to work with that individual for the rest of his or her career. Employees invited into the partnership generally receive an initial share grant at no
cost to them and are subsequently offered economically attractive opportunities to exchange cash compensation for additional shares.
166
SUSTAINABLE GROWTH ADVISERS, LP
(SGA)
U.S. Global Leaders Growth Fund
PORTFOLIO MANAGERS AND OTHER ACCOUNTS MANAGED
Hrishikesh Gupta, Kishore Rao, and Robert L. Rohn are jointly and primarily responsible for the
day-to-day management of the funds portfolio.
The following table
provides information regarding other accounts for which each portfolio manager listed above has day-to-day management responsibilities. Accounts are grouped into three
categories: (i) other investment companies (and series thereof); (ii) other pooled investment vehicles; and (iii) other accounts. To the extent that any of these accounts pays advisory fees that are based on account performance
(performance-based fees), information on those accounts is specifically broken out. In addition, any assets denominated in foreign currencies have been converted into U.S. dollars using the exchange rates as of the applicable date. Also
shown below the table is each portfolio managers investment in the fund and similarly managed accounts.
The following table provides information as
of October 31, 2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Registered Investment Companies |
|
|
Other Pooled Investment Vehicles |
|
|
Other Accounts |
|
Portfolio Manager |
|
Number of Accounts |
|
|
Assets (in millions) |
|
|
Number of Accounts |
|
|
Assets (in millions) |
|
|
Number of Accounts |
|
|
Assets (in millions) |
|
Hrishikesh Gupta |
|
|
11 |
|
|
$ |
8,771.54 |
|
|
|
31 |
|
|
$ |
7,125.04 |
|
|
|
60 |
|
|
$ |
3,404.97 |
|
Kishore Rao |
|
|
13 |
|
|
$ |
8,920.73 |
|
|
|
33 |
|
|
$ |
7,212.34 |
|
|
|
62 |
|
|
$ |
3,419.61 |
|
Robert L. Rohn |
|
|
11 |
|
|
$ |
8,771.54 |
|
|
|
31 |
|
|
$ |
7,125.04 |
|
|
|
60 |
|
|
$ |
3,404.97 |
|
Performance-Based Fees for Other Accounts Managed. Of the accounts listed in the table above, those for which
the subadvisor receives a fee based on investment performance are listed in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Registered Investment Companies |
|
|
Other Pooled Investment Vehicles |
|
|
Other Accounts |
|
Portfolio Manager |
|
Number of Accounts |
|
|
Assets (in millions) |
|
|
Number of Accounts |
|
|
Assets (in millions) |
|
|
Number of Accounts |
|
|
Assets (in millions) |
|
Hrishikesh Gupta |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
1 |
|
|
$ |
73.23 |
|
Kishore Rao |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
1 |
|
|
$ |
73.23 |
|
Robert L. Rohn |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
1 |
|
|
$ |
73.23 |
|
Ownership of the Funds and Similarly Managed Accounts
The following table shows the dollar range of fund shares and shares of similarly managed accounts beneficially owned by the portfolio managers listed above as
of October 31, 2022. For purposes of this table, similarly managed accounts include all accounts that are managed (i) by the same portfolio managers that are jointly and primarily responsible for the day-to-day management of the fund; and (ii) with an investment style, objective, policies and strategies substantially similar to those that are used to manage the fund.
The portfolio managers ownership of fund shares is stated in the footnote that follows the table.
|
|
|
Portfolio Manager |
|
Dollar Range of Shares Owned1 |
Hrishikesh Gupta |
|
$500,001$1,000,000 |
Kishore Rao |
|
$500,001$1,000,000 |
Robert L. Rohn |
|
over $1,000,000 |
1 |
As of October 31, 2022, Hrishikesh Gupta, Kishore Rao, and Robert L. Rohn beneficially owned
$500,001$1,000,000, $500,001$1,000,000, and over $1,000,000, respectively, of the fund. |
POTENTIAL CONFLICTS OF INTEREST
When a portfolio manager is responsible for the management of more than one account, the potential arises for the portfolio manager to favor one
account over another. The principal types of potential conflicts of interest that may arise are discussed below. For the reasons outlined below, the Fund does not believe that any material conflicts are likely to arise out of a portfolio
managers responsibility for the management of the Fund as well as one or more other accounts. The subadvisor has adopted procedures that are intended to monitor compliance with the policies referred to in the following paragraphs. Generally,
the risks of such conflicts of interests are increased to the extent that a portfolio manager has a financial incentive to favor one account over another. The subadvisor has structured its compensation arrangements in a manner that is intended to
limit such potential for conflicts of interests, including by not using performance-based compensation that is tied to any specific account performance for any employee. See Compensation below.
|
|
|
A portfolio manager could favor one account over another in allocating new investment opportunities that have
limited supply, such as IPOs and private placements. If, for example, an IPO that was expected to appreciate in value significantly shortly after the offering was allocated to a single account, that account may be expected to have better investment
performance than other accounts that did not receive an allocation on the IPO. |
167
The subadvisor has policies that require a portfolio manager to allocate such investment
opportunities in an equitable manner and generally to allocate such investments proportionately among all accounts with similar investment objectives.
|
|
|
A portfolio manager could favor one account over another in the order in which trades for the accounts are
placed. If a portfolio manager determines to purchase a security for more than one account in an aggregate amount that may influence the market price of the security, accounts that purchased or sold the security first may receive a more favorable
price than accounts that made subsequent transactions. The less liquid the market for the security or the greater the percentage that the proposed aggregate purchases or sales represent of average daily trading volume, the greater the potential for
accounts that make subsequent purchases or sales to receive a less favorable price. When a portfolio manager intends to trade the same security for more than one account, the procedures of the subadvisor generally result in such trades being
bunched, which means that the trades for the individual accounts are aggregated and each account receives the same price. There are some types of accounts as to which bunching may not be possible for contractual reasons (such as directed
brokerage arrangements). Circumstances also may arise where the trader believes that bunching the orders may not result in the best possible price. Where those accounts or circumstances are involved, the subadvisor will place the order in a manner
intended to result in as favorable a price as possible for such client. |
|
|
|
A portfolio manager may favor an account if the portfolio managers compensation is tied to the performance
of that account rather than all accounts managed by the portfolio manager. If, for example, the portfolio manager receives a bonus based upon the performance of certain accounts relative to a benchmark while other accounts are disregarded for this
purpose, the portfolio manager will have a financial incentive to seek to have the accounts that determine the portfolio managers bonus achieve the best possible performance to the possible detriment of other accounts. Similarly, if the
Advisor or the subadvisor receives a performance-based advisory fee, the portfolio manager may favor that account, whether or not the performance of that account directly determines the portfolio managers compensation. The investment
performance on specific accounts is not a factor in determining the portfolio managers compensation. See Compensation below. |
|
|
|
A portfolio manager may favor an account if the portfolio manager has a beneficial interest in the account, in
order to benefit a large client or to compensate a client that had poor returns. For example, if the portfolio manager held an interest in an investment partnership that was one of the accounts managed by the portfolio manager, the portfolio manager
would have an economic incentive to favor the account in which the portfolio manager held an interest. The subadvisor imposes certain trading restrictions and reporting requirements for accounts in which a portfolio manager or certain family members
have a personal interest in order to confirm that such accounts are not favored over other accounts. |
|
|
|
If the different accounts have materially and potentially conflicting investment objectives or strategies, a
conflict of interest may arise. For example, where a portfolio manager is responsible for accounts with differing investment objectives and policies, it is possible that the portfolio manager will conclude that it is in the best interest of one
account to sell a portfolio security while another account continues to hold or increase the holding in such security. While these accounts have many similarities, the investment performance of each account will be different due to differences in
fees, expenses and cash flows. |
COMPENSATION
SGA has adopted a system of compensation for portfolio managers that seeks to align the financial interests of the investment professionals with those of SGA.
The compensation of each of SGAs three principals/portfolio managers is based upon (i) a fixed base compensation and (ii) SGAs financial performance. SGAs compensation arrangements with its investment professionals are
not determined on the basis of specific funds or accounts managed by the investment professional. All investment professionals receive customary benefits that are offered generally to all salaried employees of SGA. Additionally, most members of the
investment team are equity owners in the firm and are entitled to their proportional participation in the firms profits. A substantial portion of total compensation of staff members is expected to come from the equity participation in SGA.
Incentive Compensation.
SGA retains for the benefit
of its partners and employees almost 50% of its profits through continued direct equity ownership of the firm as well as an additional participation in the profitability of the firm through an incremental equity-like incentive program referred to as
Performance Shares that is linked directly to client long-term success. The Performance Shares plan is funded by 17.5% of the profits of the firm and is distributed internally in an equity-like manner based on long-term, individual
contribution to client success. The allocation of this Performance Shares payment is determined annually by SGAs three founding principals.
To
ensure these Performance Shares are broadly distributed to investment team members, the founders have limited their participation to a maximum of 1% each. The above-referenced Performance Shares (i.e. allocation of 17.5% of the profits of the firm)
is paid 80% in cash and the remaining 20% is deferred over a three year period.
Deferred Compensation. In addition to the existing partnership
equity interests noted above, SGA employees are able to earn the right to acquire additional shares in the company.
Other Compensation. SGA
partners and employees receive a comprehensive benefits package including an annual contribution to a tax-deferred retirement account.
168
TRILLIUM ASSET MANAGEMENT, LLC
(Trillium)
ESG Large Cap Core Fund
PORTFOLIO MANAGERS AND OTHER ACCOUNTS MANAGED
Samantha DAmore1, Elizabeth R. Levy, CFA, Mitali Prasad, CFA, and Cheryl I. Smith, Ph.D., CFA, are
jointly and primarily responsible for the day-to-day management of the funds portfolio.
1 As of September 14, 2023, Samantha DAmore was added as a portfolio manager of the fund.
The following table provides information regarding other accounts for which each portfolio manager listed above has day-to-day management responsibilities. Accounts are grouped into three categories: (i) other investment companies (and series thereof); (ii) other pooled investment vehicles; and (iii) other
accounts. To the extent that any of these accounts pays advisory fees that are based on account performance (performance-based fees), information on those accounts is specifically broken out. In addition, any assets denominated in
foreign currencies have been converted into U.S. dollars using the exchange rates as of the applicable date. Also shown below the table is each portfolio managers investment in the fund and similarly managed accounts.
The following table provides information as of July 31, 2023 (for Samantha DAmore) and October 31, 2022 (for the other portfolio managers):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Registered Investment Companies |
|
|
Other Pooled Investment Vehicles |
|
|
Other Accounts |
|
Portfolio Manager |
|
Number of Accounts |
|
|
Assets (in millions) |
|
|
Number of Accounts |
|
|
Assets (in millions) |
|
|
Number of Accounts |
|
|
Assets (in millions) |
|
Samantha DAmore |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
Elizabeth R. Levy |
|
|
1 |
|
|
$ |
35.65 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
1434 |
|
|
$ |
1,267.63 |
|
Mitali Prasad |
|
|
1 |
|
|
$ |
35.65 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
652 |
|
|
$ |
732.44 |
|
Cheryl I. Smith |
|
|
1 |
|
|
$ |
374.61 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
1119 |
|
|
$ |
1,018.45 |
|
Performance-Based Fees for Other Accounts Managed. Of the accounts listed in the table above, those for which the
subadvisor receives a fee based on investment performance are listed in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Registered Investment
Companies |
|
|
Other Pooled Investment
Vehicles |
|
|
Other Accounts |
|
Portfolio Manager |
|
Number of
Accounts |
|
|
Assets (in millions) |
|
|
Number of Accounts |
|
|
Assets (in millions) |
|
|
Number of
Accounts |
|
|
Assets (in millions) |
|
Samantha DAmore |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
Elizabeth R. Levy |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
Mitali Prasad |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
Cheryl I. Smith |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
Ownership of the Funds and Similarly Managed Accounts
The following table shows the dollar range of fund shares and shares of similarly managed accounts beneficially owned by the portfolio managers listed above as
of July 31, 2023 (for Samantha DAmore) and October 31, 2022 (for the other portfolio managers). For purposes of this table, similarly managed accounts include all accounts that are managed (i) by the same portfolio
managers that are jointly and primarily responsible for the day-to-day management of the fund; and (ii) with an investment style, objective, policies and strategies
substantially similar to those that are used to manage the fund. The portfolio managers ownership of fund shares is stated in the footnote that follows the table.
|
|
|
Portfolio Manager |
|
Dollar Range of Shares Owned |
Samantha DAmore1 |
|
None |
Elizabeth R. Levy2 |
|
$100,001$500,000 |
Mitali Prasad2 |
|
$1$10,000 |
Cheryl I. Smith2 |
|
over $1,000,000 |
1 |
As of July 31, 2023, Samantha DAmore beneficially owned $0 of ESG Large Cap Core Fund.
|
2 |
As of October 31, 2022, Elizabeth R. Levy, Mitali Prasad, and Cheryl I. Smith beneficially owned
$100,001$500,000, $1$10,000, and over $1,000,000, respectively, of ESG Large Cap Core Fund. |
POTENTIAL CONFLICTS OF
INTEREST
Actual or apparent material conflicts of interest may arise when a portfolio manager has day-to-day management responsibilities with respect
to more than one investment account or in other circumstances. Portfolio managers of investment companies managed by Trillium may be presented with potential conflicts of interests in the allocation of investment opportunities, the allocation of
their time and investment ideas, and the allocation of
169
aggregated orders among investment company accounts and other accounts managed by the portfolio managers, affiliated client accounts, and any accounts in which the portfolio managers may have
personal investments.
Portfolio managers are eligible to participate in the Companys 401k profit-sharing plan. Contributions to this plan and
allocations to individual employees are determined on an annual basis based on a variety of factors such as Company and individual performance. Additionally, incentive compensation is based in part on quantitative assessment of performance of
investment strategies. Trillium reviews both short- and longer-term performance to determine variable compensation. Trillium also conducts ongoing monitoring of strategy risk exposures, which helps ensure that portfolio managers do not take undue
risk to achieve higher compensation. Trillium believes such inherent conflicts of interest in managing accounts for various clients are controlled and mitigated by its Trade Allocation Policy, Code of Ethics and other compliance policies and
procedures to which the portfolio managers are subject. In addition, Trillium does not charge any performance-based fees.
COMPENSATION
Portfolio managers are compensated with fixed base salaries and variable bonuses consistent with industry standards.
Base Salary. Salaries are not based on the performance of investment companies managed by Trillium or their overall net assets, but rather are based on
the portfolio managers position and years of experience.
Incentive Compensation. Portfolio managers are eligible to receive a bonus based on
Trilliums profitability and individual contribution to Trilliums business. Contribution to Trillium includes investment performance, participation in advocacy, and client or sales interactions as needed. Portfolio managers are reviewed
using a combination of qualitative and quantitative measures based on their input to the investment management process and the overall success of Trillium. Trillium pays the variable component once per year.
Deferred Compensation. Portfolio managers participate in a deferred compensation plan which includes mandatory deferral and vesting of a percentage of
overall variable compensation which exceeds a certain cash threshold. Deferrals vest over three years and are allocated by the participant to any combination of investment choices included in the plan.
Other Compensation. Employees are eligible to participate in a firm-wide profit-sharing plan, which may receive a discretionary annual contribution
from Trilliums income stream.
170
WELLINGTON MANAGEMENT COMPANY LLP
(Wellington Management)
Infrastructure
Fund Seaport Long/Short Fund
PORTFOLIO MANAGERS AND OTHER ACCOUNTS MANAGED
The following table shows the portfolio managers at Wellington Management who are jointly and primarily responsible for the day-to-day management of the stated funds portfolios.
|
|
|
Fund |
|
Portfolio Managers |
|
|
Infrastructure Fund |
|
Timothy J. Casaletto, CFA, and G. Thomas Levering |
|
|
Seaport Long/Short Fund1 |
|
Jennifer N. Berg, CFA, Ann C. Gallo, Bruce L. Glazer, Wen Shi, Phd, CFA, |
|
|
|
|
Rebecca D. Sykes, CFA, Michael G. Toman, and Keith White |
1 |
As of December 31, 2023 (the Effective Date), Ann C. Gallo will be retiring as a portfolio manager
of the fund and Wen Shi, PhD, CFA, will no longer serve as a portfolio manager of the fund. As of the Effective Date, Jennifer N. Berg, CFA, Bruce L. Glazer, Rebecca D. Sykes, CFA, Michael G. Toman and Keith E. White will continue to serve as
portfolio managers of the fund and will be jointly and primarily responsible for the day-to-day management of the funds portfolio. |
The following table provides information regarding other accounts for which each portfolio manager listed above has day-to-day management responsibilities. Accounts are grouped into three categories: (i) other investment companies (and series thereof); (ii) other pooled investment vehicles; and (iii) other
accounts. To the extent that any of these accounts pays advisory fees that are based on account performance (performance-based fees), information on those accounts is specifically broken out. In addition, any assets denominated in
foreign currencies have been converted into
U.S. dollars using the exchange rates as of the applicable date. Also shown below the table is each portfolio
managers investment in the fund he or she manages and any similarly managed accounts.
The following table provides information as of
October 31, 2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Registered Investment Companies |
|
|
Other Pooled Investment Vehicles |
|
|
Other Accounts |
|
Portfolio Manager |
|
Number of Accounts |
|
|
Assets (in millions) |
|
|
Number of Accounts |
|
|
Assets (in millions) |
|
|
Number of Accounts |
|
|
Assets (in millions) |
|
Jennifer N. Berg |
|
|
7 |
|
|
$ |
330.61 |
|
|
|
32 |
|
|
$ |
1,264.78 |
|
|
|
47 |
|
|
$ |
1,373.30 |
|
Timothy J. Casaletto |
|
|
1 |
|
|
$ |
4.39 |
|
|
|
5 |
|
|
$ |
52.15 |
|
|
|
7 |
|
|
$ |
51.67 |
|
Ann C. Gallo |
|
|
4 |
|
|
$ |
1,108.50 |
|
|
|
24 |
|
|
$ |
6,165.90 |
|
|
|
8 |
|
|
$ |
2,941.90 |
|
Bruce L. Glazer |
|
|
14 |
|
|
$ |
1,451.20 |
|
|
|
36 |
|
|
$ |
1,314.35 |
|
|
|
54 |
|
|
$ |
1,002.94 |
|
G. Thomas Levering |
|
|
17 |
|
|
$ |
6,800.26 |
|
|
|
44 |
|
|
$ |
3,762.80 |
|
|
|
52 |
|
|
$ |
1,571.20 |
|
Wen Shi |
|
|
11 |
|
|
$ |
722.78 |
|
|
|
31 |
|
|
$ |
1,842.72 |
|
|
|
71 |
|
|
$ |
1,970.91 |
|
Rebecca D. Sykes |
|
|
13 |
|
|
$ |
1,307.85 |
|
|
|
49 |
|
|
$ |
6,347.97 |
|
|
|
60 |
|
|
$ |
4,430.59 |
|
Michael G. Toman |
|
|
0 |
|
|
$ |
0 |
|
|
|
5 |
|
|
$ |
270.46 |
|
|
|
0 |
|
|
$ |
0 |
|
Keith E. White |
|
|
1 |
|
|
$ |
1,263.55 |
|
|
|
4 |
|
|
$ |
2,378.01 |
|
|
|
0 |
|
|
$ |
0 |
|
Performance-Based Fees for Other Accounts Managed. Of the accounts listed in the table above, those for which
the subadvisor receives a fee based on investment performance are listed in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Registered Investment Companies |
|
|
Other Pooled Investment Vehicles |
|
|
Other Accounts |
|
Portfolio Manager |
|
Number of Accounts |
|
|
Assets (in millions) |
|
|
Number of Accounts |
|
|
Assets (in millions) |
|
|
Number of Accounts |
|
|
Assets (in millions) |
|
Jennifer N. Berg |
|
|
0 |
|
|
$ |
0 |
|
|
|
17 |
|
|
$ |
933.69 |
|
|
|
11 |
|
|
$ |
308.77 |
|
Timothy J. Casaletto |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
3 |
|
|
$ |
35.33 |
|
Ann C. Gallo |
|
|
0 |
|
|
$ |
0 |
|
|
|
11 |
|
|
$ |
1,016.00 |
|
|
|
2 |
|
|
$ |
1.910.24 |
|
Bruce L. Glazer |
|
|
1 |
|
|
$ |
41.15 |
|
|
|
13 |
|
|
$ |
683.86 |
|
|
|
11 |
|
|
$ |
159.81 |
|
G. Thomas Levering |
|
|
2 |
|
|
$ |
5,978.00 |
|
|
|
19 |
|
|
$ |
2,476.67 |
|
|
|
11 |
|
|
$ |
329.66 |
|
Wen Shi |
|
|
1 |
|
|
$ |
17.34 |
|
|
|
9 |
|
|
$ |
355.35 |
|
|
|
10 |
|
|
$ |
563.26 |
|
Rebecca D. Sykes |
|
|
1 |
|
|
$ |
6.44 |
|
|
|
13 |
|
|
$ |
466.67 |
|
|
|
14 |
|
|
$ |
1,855.24 |
|
Michael G. Toman |
|
|
0 |
|
|
$ |
0 |
|
|
|
5 |
|
|
$ |
270.46 |
|
|
|
0 |
|
|
$ |
0 |
|
Keith E. White |
|
|
1 |
|
|
$ |
1,263.55 |
|
|
|
4 |
|
|
$ |
2,378.01 |
|
|
|
0 |
|
|
$ |
0 |
|
171
Ownership of the Funds and Similarly Managed Accounts
The following table shows the dollar range of fund shares and shares of similarly managed accounts beneficially owned by the portfolio managers listed above as
of October 31, 2022. For purposes of this table, similarly managed accounts include all accounts that are managed (i) by the same portfolio managers that are jointly and primarily responsible for the
day-to-day management of a fund, or by the same portfolio manager that is primarily responsible for the
day-to-day management of the fund, as applicable; and (ii) with an investment style, objective, policies and strategies substantially similar to those that are used
to manage the fund. The portfolio managers ownership of fund shares is stated in the footnote that follows the table.
|
|
|
Portfolio Manager |
|
Dollar Range of Shares Owned |
|
|
Infrastructure Fund1 |
|
|
|
|
Timothy J. Casaletto |
|
none |
|
|
G. Thomas Levering |
|
over $1,000,000 |
|
|
Seaport Long/Short Fund2 |
|
|
|
|
Jennifer N. Berg |
|
none |
|
|
Ann C. Gallo |
|
$100,001$500,000 |
|
|
Bruce L. Glazer |
|
none |
|
|
Wen Shi |
|
none |
|
|
Rebecca D. Sykes |
|
none |
|
|
Michael G. Toman |
|
none |
|
|
Keith E. White |
|
$10,001$50,000 |
1 |
As of October 31, 2022, Timothy J. Casaletto and G. Thomas Levering beneficially owned $0 and over
$1,000,000, respectively, of Infrastructure Fund. |
2 |
As of October 31, 2022, Jennifer N. Berg, Ann C. Gallo, Bruce L. Glazer, Wen Shi, Rebecca D. Sykes,
Michael G. Toman, and Keith E. White beneficially owned $0, $100,001$500,000, $0, $0, $0, $0, and $10,001$50,000, respectively, of Seaport Long/Short Fund. |
POTENTIAL CONFLICTS OF INTEREST
Individual investment
professionals at Wellington Management manage multiple accounts for multiple clients. These accounts may include mutual funds, separate accounts (assets managed on behalf of institutions such as pension funds, insurance companies, foundations, or
separately managed account programs sponsored by financial intermediaries), bank common trust accounts, and hedge funds. Each funds managers listed in the prospectus who are primarily responsible for the day-to-day management of the funds (Investment Professionals) generally manage accounts in several different investment styles. These accounts may have investment objectives, strategies, time
horizons, tax considerations and risk profiles that differ from those of the relevant fund. The Investment Professionals make investment decisions for each account, including the relevant fund, based on the investment objectives, policies,
practices, benchmarks, cash flows, tax and other relevant investment considerations applicable to that account. Consequently, the Investment Professionals may purchase or sell securities, including IPOs, for one account and not another account, and
the performance of securities purchased for one account may vary from the performance of securities purchased for other accounts. Alternatively, these accounts may be managed in a similar fashion to the relevant fund and thus the accounts may have
similar, and in some cases nearly identical, objectives, strategies and/or holdings to that of the relevant fund.
An Investment Professional or other
investment professionals at Wellington Management may place transactions on behalf of other accounts that are directly or indirectly contrary to investment decisions made on behalf of the relevant fund, or make investment decisions that are similar
to those made for the relevant fund, both of which have the potential to adversely impact the relevant fund depending on market conditions. For example, an investment professional may purchase a security in one account while appropriately selling
that same security in another account. Similarly, an Investment Professional may purchase the same security for the relevant fund and one or more other accounts at or about the same time. In those instances the other accounts will have access to
their respective holdings prior to the public disclosure of the relevant funds holdings. In addition, some of these accounts have fee structures, including performance fees, which are or have the potential to be higher, in some cases
significantly higher, than the fees Wellington Management receives for managing the relevant fund. Messrs. Casaletto, Glazer, Levering, Shi, Toman, and White and Mses. Berg, Gallo, and Sykes also manage accounts, which pay performance allocations to
Wellington Management or its affiliates. Because incentive payments paid by Wellington Management to the Investment Professional are tied to revenues earned by Wellington Management and, where noted, to the performance achieved by the manager in
each account, the incentives associated with any given account may be significantly higher or lower than those associated with other accounts managed by a given Investment Professional. Therefore, portfolio managers and other investment team members
have an incentive to favor accounts that have the potential to provide higher incentive compensation for them as individuals. Wellington Management manages the conflict created by these incentive arrangements through our policies on the allocation
of investment opportunities, including the allocation of equity IPOs, as well as after-the-fact monitoring and review of client accounts to assess dispersion among
accounts with similar mandates. Finally, the Investment Professionals may hold shares or investments in the other pooled investment vehicles and/or other accounts identified above.
172
Wellington Managements goal is to meet its fiduciary obligation to treat all clients fairly and provide
high quality investment services to all of its clients. Wellington Management has adopted and implemented policies and procedures, including brokerage and trade allocation policies and procedures, which it believes address the conflicts associated
with managing multiple accounts for multiple clients. In addition, Wellington Management monitors a variety of areas, including compliance with primary account guidelines, the allocation of IPOs, and compliance with the firms Code of Ethics,
and places additional investment restrictions on investment professionals who manage hedge funds and certain other accounts.
Furthermore, senior
investment and business personnel at Wellington Management periodically review the performance of Wellington Managements investment professionals. Although Wellington Management does not track the time an investment professional spends on a
single account, Wellington Management does periodically assess whether an investment professional has adequate time and resources to effectively manage the investment professionals various client mandates.
COMPENSATION
Wellington Management receives a fee based
on the assets under management of the funds as set forth in an Investment Subadvisory Agreement between Wellington Management and the Advisor with respect to each fund. Wellington Management pays its investment professionals out of its total
revenues, including the advisory fees earned with respect to each fund. The following information relates to the fiscal year ended October 31, 2022.
Wellington Managements compensation structure is designed to attract and retain high-caliber investment professionals necessary to deliver high quality
investment management services to its clients. Wellington Managements compensation of each funds managers listed in the prospectus who are primarily responsible for the
day-to-day management of the funds (Investment Professionals) includes a base salary and incentive components. The base salary for each Investment
Professional who is a partner (a Partner) of Wellington Management Group LLP, the ultimate holding company of Wellington Management, is generally a fixed amount that is determined by the managing partners of Wellington Management Group
LLP. Each Investment Professional is eligible to receive an incentive payment based on the revenues earned by Wellington Management from the fund managed by the Investment Professional and generally each other account managed by such Investment
Professional. Each Investment Professionals incentive payment relating to the relevant fund, is linked to the gross pre-tax performance of the portion of the fund managed by the Investment
Professional over one, three, and five year periods, with an emphasis on five year results. Wellington Management applies similar incentive compensation
structures (although the benchmarks or peer groups, time periods and rates may differ) to other accounts managed by these Investment Professionals, including accounts with performance fees.
Portfolio-based incentives across all accounts managed by an investment professional can, and typically do, represent a significant portion of an investment
professionals overall compensation; incentive compensation varies significantly by individual and can vary significantly from year to year. The Investment Professionals may also be eligible for bonus payments based on their overall
contribution to Wellington Managements business operations. Senior management at Wellington Management may reward individuals as it deems appropriate based on other factors. Each Partner is eligible to participate in a Partner-funded tax
qualified retirement plan, the contributions to which are made pursuant to an actuarial formula. Messrs. Glazer, Levering, and White, and Mses. Berg, Gallo, and Sykes are Partners.
173
APPENDIX C PROXY VOTING POLICIES AND PROCEDURES
JOHN HANCOCK FUNDS
PROXY VOTING POLICIES AND PROCEDURES
(Updated December
10, 2019)
Overview
Each fund of the Trust or any
other registered investment company (or series thereof) (each, a fund) is required to disclose its proxy voting policies and procedures in its registration statement and, pursuant to Rule 30b1-4
under the 1940 Act, file annually with the Securities and Exchange Commission and make available to shareholders its actual proxy voting record.
Investment Company Act
An investment company is required
to disclose in its SAI either (a) a summary of the policies and procedures that it uses to determine how to vote proxies relating to portfolio securities or (b) a copy of its proxy voting policies.
A fund is also required by Rule 30b1-4 of the Investment Company Act of 1940 to file Form N-PX annually with the SEC, which contains a record of how the fund voted proxies relating to portfolio securities. For each matter relating to a portfolio security considered at any shareholder meeting, Form N-PX is required to include, among other information, the name of the issuer of the security, a brief identification of the matter voted on, whether and how the fund cast its vote, and whether such vote was for or
against management. In addition, a fund is required to disclose in its SAI and its annual and semi-annual reports to shareholders that such voting record may be obtained by shareholders, either by calling a toll-free number or through the
funds website, at the funds option.
Advisers Act
Under Advisers Act Rule 206(4)-6, investment advisers are required to adopt proxy voting policies and procedures, and
investment companies typically rely on the policies of their advisers or sub-advisers.
Policy
The Majority of the Independent Board of Trustees (the Board) of each registered investment company of the Trusts, has adopted these proxy voting
policies and procedures (the Trust Proxy Policy).
It is the Advisers policy to comply with Rule
206(4)-6 of the Advisers Act and Rule 30b1-4 of the 1940 Act as described above. In general, Advisers defer proxy voting decisions to the
sub-advisers managing the Funds. It is the policy of the Trusts to delegate the responsibility for voting proxies relating to portfolio securities held by a Fund to the Funds respective Adviser or, if
the Funds Adviser has delegated portfolio management responsibilities to one or more investment sub-adviser(s), to the funds sub-adviser(s), subject to the
Boards continued oversight. The sub-adviser for each Fund shall vote all proxies relating to securities held by each Fund and in that connection, and subject to any further policies and procedures
contained herein, shall use proxy voting policies and procedures adopted by each sub-adviser in conformance with Rule 206(4)-6 under the Advisers Act.
If an instance occurs where a conflict of interest arises between the shareholders and the designated sub-adviser,
however, Advisers retain the right to influence and/or direct the conflicting proxy voting decisions in the best interest of shareholders.
Delegation
of Proxy Voting Responsibilities
It is the policy of the Trust to delegate the responsibility for voting proxies relating to portfolio securities held
by a fund to the funds investment adviser (adviser) or, if the funds adviser has delegated portfolio management responsibilities to one or more investment sub-adviser(s), to the
funds sub-adviser(s), subject to the Boards continued oversight. The sub-adviser for each fund shall vote all proxies relating to securities held by each
fund and in that connection, and subject to any further policies and procedures contained herein, shall use proxy voting policies and procedures adopted by each sub-adviser in conformance with Rule 206(4)-6 under the Investment Advisers Act of 1940, as amended (the Advisers Act).
Except as noted below
under Material Conflicts of Interest, the Trust Proxy Policy with respect to a Fund shall incorporate that adopted by the Funds sub-adviser with respect to voting proxies held by its clients (the Sub-adviser Proxy Policy). Each Sub-adviser Policy, as it may be amended from time to time, is hereby incorporated by reference into the Trust Proxy Policy. Each
sub-adviser to a Fund is directed to comply with these policies and procedures in voting proxies relating to portfolio securities held by a fund, subject to oversight by the Funds adviser and by the
Board. Each Adviser to a Fund retains the responsibility, and is directed, to oversee each sub- advisers compliance with these policies and procedures, and to adopt and implement such additional policies
and procedures as it deems necessary or appropriate to discharge its oversight responsibility. Additionally, the Trusts Chief Compliance Officer (CCO) shall conduct such monitoring and supervisory activities as the CCO or the Board
deems necessary or appropriate in order to appropriately discharge the CCOs role in overseeing the sub-advisers compliance with these policies and procedures.
The delegation by the Board of the authority to vote proxies relating to portfolio securities of the funds is entirely voluntary and may be revoked by the
Board, in whole or in part, at any time.
Voting Proxies of Underlying Funds of a Fund of Funds
A. Where the Fund of Funds is not the Sole Shareholder of the Underlying Fund
With respect to voting proxies relating to the shares of an underlying fund (an Underlying Fund) held by a Fund of the Trust operating as a fund of
funds (a Fund of Funds) in reliance on Section 12(d)(1)(G) of the 1940 Act where the Underlying Fund has shareholders other than the Fund of Funds which are not other Fund of Funds, the Fund of Funds will vote proxies relating to
shares of the Underlying Fund in the same proportion as the vote of all other holders of such Underlying Fund shares.
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B. Where the Fund of Funds is the Sole Shareholder of the Underlying Fund
In the event that one or more Funds of Funds are the sole shareholders of an Underlying Fund, the Adviser to the Fund of Funds or the Trusts will vote proxies
relating to the shares of the Underlying Fund as set forth below unless the Board elects to have the Fund of Funds seek voting instructions from the shareholders of the Funds of Funds in which case the Fund of Funds will vote proxies relating to
shares of the Underlying Fund in the same proportion as the instructions timely received from such shareholders.
1. Where Both the Underlying Fund and
the Fund of Funds are Voting on Substantially Identical Proposals
In the event that the Underlying Fund and the Fund of Funds are voting on
substantially identical proposals (the Substantially Identical Proposal), then the Adviser or the Fund of Funds will vote proxies relating to shares of the Underlying Fund in the same proportion as the vote of the shareholders of the
Fund of Funds on the Substantially Identical Proposal.
2. Where the Underlying Fund is Voting on a Proposal that is Not Being Voted on by the Fund of
Funds
(a) Where there is No Material Conflict of Interest Between the Interests of the Shareholders of the Underlying Fund and the Adviser
Relating to the Proposal
In the event that the Fund of Funds is voting on a proposal of the Underlying Fund and the Fund of Funds is not also
voting on a substantially identical proposal and there is no material conflict of interest between the interests of the shareholders of the Underlying Fund and the Adviser relating to the Proposal, then the Adviser will vote proxies relating to the
shares of the Underlying Fund pursuant to its Proxy Voting Procedures.
(b) Where there is a Material Conflict of Interest Between the Interests of the
Shareholders of the Underlying Fund and the Adviser Relating to the Proposal
In the event that the Fund of Funds is voting on a proposal of the
Underlying Fund and the Fund of Funds is not also voting on a substantially identical proposal and there is a material conflict of interest between the interests of the shareholders of the Underlying Fund and the Adviser relating to the Proposal,
then the Fund of Funds will seek voting instructions from the shareholders of the Fund of Funds on the proposal and will vote proxies relating to shares of the Underlying Fund in the same proportion as the instructions timely received from such
shareholders. A material conflict is generally defined as a proposal involving a matter in which the Adviser or one of its affiliates has a material economic interest.
Material Conflicts of Interest
If (1) a sub-adviser to a Fund becomes aware that a vote presents a material conflict between the interests of (a) shareholders of the Fund; and (b) the Funds Adviser,
sub-adviser, principal underwriter, or any of their affiliated persons, and (2) the sub-adviser does not propose to vote on the particular issue in the manner
prescribed by its Sub-adviser Proxy Policy or the material conflict of interest procedures set forth in its Sub-adviser Proxy Policy are otherwise triggered, then the sub-adviser will follow the material conflict of interest procedures set forth in its Sub-adviser Proxy Policy when voting such proxies.
If a Sub-adviser Proxy Policy provides that in the case of a material conflict of interest between Fund shareholders
and another party, the sub-adviser will ask the Board to provide voting instructions, the sub-adviser shall vote the proxies, in its discretion, as recommended by an
independent third party, in the manner prescribed by its Sub-adviser Proxy Policy or abstain from voting the proxies.
Proxy Voting Committee(s)
The Advisers will from time to
time, and on such temporary or longer-term basis as they deem appropriate, establish one or more Proxy Voting Committees. A Proxy Voting Committee shall include the Advisers CCO and may include legal counsel. The terms of reference and the
procedures under which a Proxy Voting Committee will operate will be reviewed from time to time by the Legal and Compliance Department. Records of the deliberations and proxy voting recommendations of a Proxy Voting Committee will be maintained in
accordance with applicable law, if any, and these Proxy Procedures. Requested shareholder proposals or other Shareholder Advocacy in the name of a Fund must be submitted for consideration pursuant to the Shareholder Advocacy Policy and Procedures.
Securities Lending Program
Certain of the Funds
participate in a securities lending program with the Trusts through an agent lender. When a Funds securities are out on loan, they are transferred into the borrowers name and are voted by the borrower, in its discretion. Where a sub-adviser determines, however, that a proxy vote (or other shareholder action) is materially important to the clients account, the sub-adviser should request that the
agent recall the security prior to the record date to allow the sub-adviser to vote the securities.
Disclosure
of Proxy Voting Policies and Procedures in the Trusts Statement of Additional Information (SAI)
The Trust shall include in its SAI a
summary of the Trust Proxy Policy and of the Sub-adviser Proxy Policy included therein. (In lieu of including a summary of these policies and procedures, the Trust may include each full Trust Proxy Policy and Sub-adviser Proxy Policy in the SAI.)
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Disclosure of Proxy Voting Policies and Procedures in Annual and Semi-Annual Shareholder Reports
The Trusts shall disclose in annual and semi-annual shareholder reports that a description of the Trust Proxy Policy, including the Sub- adviser Proxy Policy, and the Trusts proxy voting record for the most recent 12 months ended June 30 are available on the Securities and Exchange Commissions (SEC) website, and without
charge, upon request, by calling a specified toll-free telephone number. The Trusts will send these documents within three business days of receipt of a request, by first-class mail or other means designed to ensure equally prompt delivery. The Fund
Administration Department is responsible for preparing appropriate disclosure regarding proxy voting for inclusion in shareholder reports and distributing reports. The Legal Department supporting the Trusts is responsible for reviewing such
disclosure once it is prepared by the Fund Administration Department.
Filing of Proxy Voting Record on Form N-PX
The Trusts will annually file their complete proxy voting record with the SEC on Form N-PX. The Form N-PX shall be filed for the twelve months ended June 30 no later than August 31 of that year. The Fund Administration department, supported by the Legal Department supporting the Trusts, is responsible for
the annual filing.
Regulatory Requirement
Rule 206(4)-6 of the Advisers Act and Rule 30b1-4 of the 1940 Act
Reporting
Disclosures in SAI: The Trusts shall disclose in annual and semi-annual shareholder reports that a description of the Trust Proxy Policy,
including the Sub-adviser Proxy Policy, and the Trusts proxy voting record for the most recent 12 months ended June 30.
Form N-PX: The proxy voting service will file Form N-PX for each
twelve-month period ending on June 30. The filing must be submitted to the SEC on or before August 31 of each year.
Procedure
Review of Sub-advisers Proxy Voting The Trusts have delegated proxy voting authority with respect to Fund
portfolio securities in accordance with the Trust Policy, as set forth above.
Consistent with this delegation, each
sub-adviser is responsible for the following:
1. Implementing written policies and procedures, in compliance with
Rule 206(4)-6 under the Advisers Act, reasonably designed to ensure that the sub-adviser votes portfolio securities in the best interest of shareholders of the Trusts.
2. Providing the Advisers with a copy and description of the Sub-adviser Proxy Policy prior to being approved by
the Board as a sub-adviser, accompanied by a certification that represents that the Sub-adviser Proxy Policy has been adopted in conformance with Rule 206(4)-6 under the Advisers Act. Thereafter, providing the Advisers with notice of any amendment or revision to that Sub-adviser Proxy Policy or with a description thereof.
The Advisers are required to report all material changes to a Sub-adviser Proxy Policy quarterly to the Board. The CCOs annual written compliance report to the Board will contain a summary of the
material changes to each Sub-adviser Proxy Policy during the period covered by the report.
3. Providing the
Adviser with a quarterly certification indicating that the sub-adviser did vote proxies of the funds and that the proxy votes were executed in a manner consistent with the
Sub-adviser Proxy Policy. If the sub-adviser voted any proxies in a manner inconsistent with the Sub-adviser Proxy Policy, the sub-adviser will provide the Adviser with a report detailing the exceptions.
Adviser Responsibilities The Trusts
have retained a proxy voting service to coordinate, collect, and maintain all proxy-related information, and to prepare and file the Trusts reports on Form N-PX with the SEC.
The Advisers, in accordance with their general oversight responsibilities, will periodically review the voting records maintained by the proxy voting service
in accordance with the following procedures:
1. Receive a file with the proxy voting information directly from each
sub-adviser on a quarterly basis.
2. Select a sample of proxy votes from the files submitted by the sub-advisers and compare them against the proxy voting service files for accuracy of the votes.
3. Deliver instructions
to shareholders on how to access proxy voting information via the Trusts semi-annual and annual shareholder reports.
The Fund Administration
Department, in conjunction with the Legal Department supporting the Trusts, is responsible for the foregoing procedures.
Proxy Voting Service
Responsibilities Proxy voting services retained by the Trusts are required to undertake the following procedures:
The proxy voting services proxy disclosure system will collect fund-specific and/or account-level voting records, including votes cast by multiple sub- advisers or third-party voting services.
The proxy voting services proxy disclosure system will provide the following reporting features:
1. multiple report export options;
2. report customization by
fund-account, portfolio manager, security, etc.; and
3. account details available for vote auditing.
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Form N-PX Preparation and Filing: |
The Advisers will be responsible for oversight and completion of the filing of the Trusts reports on Form N-PX
with the SEC. The proxy voting service will prepare the EDGAR version of Form N-PX and will submit it to the adviser for review and approval prior to filing with the SEC. The proxy voting service will file
Form N-PX for each twelve-month period ending on June 30. The filing must be submitted to the SEC on or before August 31 of each year. The Fund Administration Department, in conjunction with the Legal
Department supporting the Trusts, is responsible for the foregoing procedures.
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The Fund Administration Department in conjunction with the CCO oversees compliance with this policy.
The Fund Administration Department maintains operating procedures affecting the administration and disclosure of the Trusts proxy voting records.
The Trusts Chief Legal Counsel is responsible for including in the Trusts SAI information regarding the Advisers and each sub-advisers proxy
voting policies as required by applicable rules and form requirements.
Key Contacts
Investment Compliance
Escalation/Reporting Violations
All John Hancock employees are required to report any known or suspected violation of this policy to the CCO of the Funds.
Related Policies and Procedures
7B Registration
Statements and Prospectuses
Document Retention Requirements
The Fund Administration Department and The CCOs Office is responsible for maintaining all documentation created in connection with this policy. Documents
will be maintained for the period set forth in the Records Retention Schedule. See Compliance Policy: Books and Records.
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JOHN HANCOCK VARIABLE TRUST ADVISERS LLC
JOHN HANCOCK INVESTMENT MANAGEMENT LLC
PROXY VOTING
POLICIES AND PROCEDURES
Updated December 1, 2019
Overview
The SEC adopted Rule 206(4)-6 under the Advisers Act, which requires investment advisers with voting authority to adopt and implement written policies and procedures that are reasonably designed to ensure that the investment adviser
votes client securities in the best interest of clients. The procedures must include how the investment adviser addresses material conflicts that may arise between the interests of the investment adviser and those of its clients. The Advisers are
registered investment advisers under the Advisers Act and serve as the investment advisers to the Funds. The Advisers generally retain one or more sub-advisers to manage the assets of the Funds, including
voting proxies with respect to a Funds portfolio securities. From time to time, however, the Advisers may elect to manage directly the assets of a Fund, including voting proxies with respect to such Funds portfolio securities, or a
Funds Board may otherwise delegate to the Advisers authority to vote such proxies. Rule 206(4)-6 under the Advisers Act requires that a registered investment adviser adopt and implement written policies
and procedures reasonably designed to ensure that it votes proxies with respect to a clients securities in the best interest of the client.
Firms
are required by Advisers Act Rule 204-2(c)(2) to maintain records of their voting policies and procedures, a copy of each proxy statement that the investment adviser receives regarding client securities, a
record of each vote cast by the investment adviser on behalf of a client, a copy of any document created by the investment adviser that was material to making a decision how to vote proxies on behalf of a client, and a copy of each written client
request for information on how the adviser voted proxies on behalf of the client, as well as a copy of any written response by the investment adviser to any written or oral client request for information on how the adviser voted that clients
proxies.
Investment companies must disclose information about the policies and procedures used to vote proxies on the investment companys portfolio
securities and must file the funds proxy voting record with the SEC annually on Form N-PX.
Pursuant
thereto, the Advisers have adopted and implemented these proxy voting policies and procedures (the Proxy Procedures).
Policy
It is the Advisers policy to comply with Rule 206(4)-6 and Rule
204-2(c)(2) under the Advisers Act as described above. In general, the Advisers delegate proxy voting decisions to the sub-advisers managing the funds. If an instance
occurs where a conflict of interest arises between the shareholders and a particular sub-adviser, however, the Adviser retains the right to influence and/or direct the conflicting proxy voting decisions.
Regulatory Requirement
Rule 206(4)-6 under the Advisers Act
Reporting
Form-N-PX
Advisers will
provide the Board with notice and a copy of any amendments or revisions to the Procedures and will report quarterly to the Board all material changes to these Proxy Procedures.
The CCOs annual written compliance report to the Board will contain a summary of material changes to the Proxy Procedures during the period covered by
the report.
If the Advisers or the Designated Person vote any proxies in a manner inconsistent with either these Proxy Procedures or a Funds proxy
voting policies and procedures, the CCO will provide the Board with a report detailing such exceptions.
Procedure
Fiduciary Duty
The Advisers have a fiduciary duty to vote
proxies on behalf of a Fund in the best interest of the Fund and its shareholders.
Voting of Proxies - Advisers
The Advisers will vote proxies with respect to a Funds portfolio securities when authorized to do so by the Fund and subject to the Funds proxy
voting policies and procedures and any further direction or delegation of authority by the Funds Board. The decision on how to vote a proxy will be made by the person(s) to whom the Advisers have from time to time delegated such responsibility
(the Designated Person). The Designated Person may include the Funds portfolio manager(s) or a Proxy Voting Committee, as described below.
When voting proxies with respect to a Funds portfolio securities, the following standards will apply:
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The Designated Person will vote based on what it believes is in the best interest of the Fund and its
shareholders and in accordance with the Funds investment guidelines. |
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Each voting decision will be made independently. To assist with the analysis of voting issues and/or to carry out
the actual voting process the Designated Person may enlist the services of (1) reputable professionals (who may include persons employed by or otherwise associated with the Advisers or any of its affiliated persons) or (2) independent
proxy evaluation services such as Institutional Shareholder Services. However, the ultimate decision as to how to vote a proxy will remain the responsibility of the Designated Person. |
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The Advisers believe that a good management team of a company will generally act in the best interests of the
company. Therefore, the Designated Person will take into consideration as a key factor in voting proxies with respect to securities of a company that are held by the Fund the quality of the companys management. In general, the Designated
Person will vote as recommended by company management except in situations where the Designated Person believes such recommended vote is not in the best interests of the Fund and its shareholders. |
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As a general principle, voting with respect to the same portfolio securities held by more than one Fund should be
consistent among those Funds having substantially the same investment mandates. |
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The Advisers will provide the Fund, from time to time in accordance with the Funds proxy voting policies
and procedures and any applicable laws and regulations, a record of the Advisers voting of proxies with respect to the Funds portfolio securities. |
Material Conflicts of Interest
In carrying out its proxy
voting responsibilities, the Advisers will monitor and resolve potential material conflicts (Material Conflicts) between the interests of (a) a Fund and (b) the Advisers or any of its affiliated persons. Affiliates of the
Advisers include Manulife Financial Corporation and its subsidiaries. Material Conflicts may arise, for example, if a proxy vote relates to matters involving any of these companies or other issuers in which the Advisers or any of their affiliates
has a substantial equity or other interest.
If the Advisers or a Designated Person become aware that a proxy voting issue may present a potential
Material Conflict, the issue will be referred to the Advisers Legal Department and/or the Office of the CCO. If the Legal Department and/or the Office of the CCO, as applicable determines that a potential Material Conflict does exist, a Proxy
Voting Committee will be appointed to consider and resolve the issue. The Proxy Voting Committee may make any determination that it considers reasonable and may, if it chooses, request the advice of an independent, third-party proxy service on how
to vote the proxy.
Voting Proxies of Underlying Funds of a Fund of Funds
The Advisers or the Designated Person will vote proxies with respect to the shares of a Fund that are held by another Fund that operates as a Fund of Funds in
the manner provided in the proxy voting policies and procedures of the Fund of Funds (including such policies and procedures relating to material conflicts of interest) or as otherwise directed by the board of trustees or directors of the Fund of
Funds.
Proxy Voting Committee(s)
The Advisers will
from time to time, and on such temporary or longer-term basis as they deem appropriate, establish one or more Proxy Voting Committees. A Proxy Voting Committee shall include the Advisers CCO and may include legal counsel. The terms of
reference and the procedures under which a Proxy Voting Committee will operate will be reviewed from time to time by the Legal and Compliance Department. Records of the deliberations and proxy voting recommendations of a Proxy Voting Committee will
be maintained in accordance with applicable law, if any, and these Proxy Procedures. Requested shareholder proposals or other Shareholder Advocacy must be submitted for consideration pursuant to the Shareholder Advocacy Policy and Procedures.
Voting of Proxies - SubAdvisers In the case of proxies voted by a sub-adviser to a Fund pursuant to the
Funds proxy voting procedures, the Advisers will request the sub-adviser to certify to the Advisers that the sub-adviser has voted the Funds proxies as
required by the Funds proxy voting policies and procedures and that such proxy votes were executed in a manner consistent with these Proxy Procedures and to provide the Advisers with a report detailing any instances where the sub-adviser voted any proxies in a manner inconsistent with the Funds proxy voting policies and procedures. The COO of the Advisers will then report to the Board on a quarterly basis regarding the sub-adviser certification and report to the Board any instance where the sub-adviser voted any proxies in a manner inconsistent with the Funds proxy voting policies and
procedures.
The Fund Administration Department maintains procedures affecting all administration functions for the mutual funds. These procedures detail
the disclosure and administration of the Trusts proxy voting records.
The Trusts Chief Legal Counsel is responsible for including, in the SAI
of each Trust, information about the proxy voting of the Advisers and each sub-adviser.
Reporting to Fund
Boards
The CCO of the Advisers will provide the Board with a copy of these Proxy Procedures, accompanied by a certification that represents that the
Proxy Procedures have been adopted by the Advisers in conformance with Rule 206(4)-6 under the Advisers Act. Thereafter, the Advisers will provide the Board with notice and a copy of any amendments or
revisions to the Procedures and will report quarterly to the Board all material changes to these Proxy Procedures.
The CCOs annual written
compliance report to the Board will contain a summary of material changes to the Proxy Procedures during the period covered by the report.
If the
Advisers or the Designated Person vote any proxies in a manner inconsistent with either these Proxy Procedures or a Funds proxy voting policies and procedures, the CCO will provide the Board with a report detailing such exceptions.
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Key Contacts
Investment Compliance
Escalation/Reporting Violations
All John Hancock employees are required to report any known or suspected violation of this policy to the CCO of the Funds.
Related Policies and Procedures
N/A
Document Retention Requirements
The Advisers will retain
(or arrange for the retention by a third party of) such records relating to proxy voting pursuant to these Proxy Procedures as may be required from time to time by applicable law and regulations, including the following:
1. |
These Proxy Procedures and all amendments hereto; |
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All proxy statements received regarding Fund portfolio securities; |
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Records of all votes cast on behalf of a Fund; |
4. |
Records of all Fund requests for proxy voting information; |
5. |
Any documents prepared by the Designated Person or a Proxy Voting Committee that were material to or
memorialized the basis for a voting decision; |
6. |
All records relating to communications with the Funds regarding Conflicts; and |
7. |
All minutes of meetings of Proxy Voting Committees. |
The Office of the CCO, and/or the Legal Department are responsible for maintaining the documents set forth above as needed and deemed
appropriate. Such documents will be maintained in the Office of the CCO, and/or the Legal Department for the period set forth in the Records Retention Schedule.
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AXIOM INVESTORS LLC
PROXY VOTING POLICIES AND GUIDELINES
Effective January
2022
I. |
General Policies and Potential Conflicts of Interest |
Axiom Investors, LLC (Axiom) has adopted these proxy voting policies and guidelines (the Policies) with respect to securities owned by
clients for which Axiom serves as investment adviser and has the power to vote proxies. Rule 206(4)-6 under the Investment Advisers Act of 1940 (the Advisers Act) requires investment advisers that
have voting authority with respect to securities held in their clients accounts to exercise a duty of care by monitoring corporate actions and voting proxies. To satisfy its duty of loyalty, an adviser must cast proxy votes in the best
interests of its clients and not in a way that advances the advisers interests above those of its clients. In addition to these SEC requirements governing registered investment advisers, our proxy voting policies reflect the long-standing
fiduciary standards and responsibilities for ERISA accounts set out in Department of Labor Bulletin 94-2, 29 C.F.R. 2509.94-2 (July 29, 1994), as well as the 2019 SEC
guidance regarding proxy voting.1
The Policies are designed to reasonably ensure that Axiom votes proxies in the best interest of clients for which it has
voting authority, and describe how Axiom addresses material conflicts between its interests and those of its clients with respect to proxy voting. Under the Policies, Axiom will generally vote proxies by considering those factors that would affect
the value of the securities held in clients accounts.
As a general matter, Axiom considers, but is not required to adhere to, the proxy voting
guidelines established by Institutional Shareholder Services Inc. (ISS) when casting proxy votes on behalf of clients.
ISS is an independent
third party that specializes in providing a variety of fiduciary-level proxy related services to institutional investment managers. ISS provides Axiom with in-depth research, voting recommendations, vote
execution and recordkeeping. However, Axiom recognizes that there are certain types of proposals that may result in different voting positions being taken with respect to the different issuers. Some items that otherwise would be acceptable will be
voted against the proponent when it is seeking extremely broad flexibility without offering adequate justification. In addition, Axiom generally votes consistently on the same matter when securities of an issuer are held by multiple client accounts.
Axiom reviews proxy issues on a case-by-case basis, and there are instances when our judgment of the anticipated effect on the best interests of our clients may warrant
exceptions to the policies on specific issues set forth in Section II.
Axiom is responsible for identifying potential conflicts of interest in the process of voting proxies on behalf of its clients. Examples of potential conflicts
of interest include situations where Axiom or personnel of Axiom: (1) provide services to a company whose management is soliciting proxies; (2) have a material business relationship with a proponent of a proxy proposal and this business
relationship may influence how the proxy vote is cast; or (3) have a business or personal relationship with participants in a proxy contest, corporate directors or candidates for directorships.
Axiom may address material conflicts between its interests and those of its advisory clients by using any of the following methods: (1) adopting a policy
of disclosing the conflict to clients and obtaining their consent before voting; (2) basing the proxy vote on pre-determined voting guidelines if the application of the guidelines to the matter presented
to clients involves minimal discretion on the part of Axiom; or (3) using the recommendations of an independent third party.
In the event that Axiom
becomes aware of a conflict of interest between Axiom and ISS, Axiom will make an independent decision on how to vote, which may or may not be consistent with ISS guidelines. ISS will then execute the vote as directed by Axiom.
II. |
Axioms Policies on Specific Issues |
Axiom will typically support ISSs recommendation on management proposals. However, in the event that Axiom decide to vote a proxy (or a particular
proposal within a proxy) in a manner different from the ISS recommendation, Axiom will document the reasons supporting the decision.
Axiom will typically support ISSs recommendation on shareholder proposals. However, in the event that Axiom decides to vote a proxy (or a particular
proposal within a proxy) in a manner different from the ISS recommendation, Axiom will document the reasons supporting the decision.
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Deviation from ISS Guidelines |
If ISS is (i) unable to complete or provide its research and analysis regarding a security on a timely basis, or (ii) Axiom determines that voting in
accordance with ISS guidelines is not in the best interest of the client, Axiom will not vote in accordance with ISS guidelines. In such cases, Axiom will make an independent decision on how to vote, which may or may not be consistent with ISS
guidelines. ISS will then execute the vote as directed by Axiom.
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D. |
Foreign Issuers Share Blocking |
In accordance with local law or business practices, many foreign companies prevent the sales of shares that have been voted for a certain period beginning
prior to the shareholder meeting and ending on the day following the meeting (share blocking). Depending on the country in which a company is domiciled, the blocking period may begin a stated number of days prior to the meeting (e.g.,
one, three or five days) or on a date established by the company. While practices vary, in many countries the block period can be continued for a longer period if the shareholder meeting is adjourned and postponed to a later date. Similarly,
practices vary widely as to the ability of a shareholder to have the block restriction lifted early
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(e.g., in some countries shares generally can be unblocked up to two days prior to the meeting
whereas in other countries the removal of the block appears to be discretionary with the issuers transfer agent). Due to these restrictions, Axiom must balance the benefits to its clients of voting proxies against the potentially serious
portfolio management consequences of a reduced flexibility to sell the underlying shares at the most advantageous time. In many cases, the disadvantage of being unable to sell the stock regardless of changing conditions outweighs the advantages of
voting at the shareholder meeting for routine items. Accordingly, Axiom generally will not vote those proxies in the absence of an unusual, highly material vote.
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E. |
Foreign Issuers Beneficial Owner Meeting Attendance Requirement |
Some foreign markets require the Beneficial Owner to attend a meeting in order to cast a vote. Accordingly, Axiom will generally not vote those proxies.
At times, Axiom and/or ISS may not be able to vote proxies on behalf of clients when our clients lend securities to third parties beyond our control.
III. |
Procedures for Reviewing and Voting Proxies |
Whenever possible proxy solicitations from securities held for client accounts who have delegated proxy voting responsibility to Axiom are sent directly by the
clients custodian to Axioms proxy voting vendor, ISS, Axiom will use its best judgment to vote proxies in the best interests of its clients and will typically follow the recommendations of ISS. In the event that Axiom decides to vote a
proxy (or a particular proposal within a proxy) in a manner different from the ISS recommendation, Axiom will document the reasons supporting the decision.
Any proposal where Axiom has decided to vote differently than the ISS recommendation and it is determined a material conflict of interest
exists between Axiom and its clients as a result of voting differently on such proposal, that proposal will be directed to the Chief Compliance Officer for consideration. The Chief Compliance Officer will recommend to the Chief Investment Officer
and Portfolio Manager the appropriate voting response for such proposal by applying one of the methods identified in Section I.B. of the Policies. For each proposal for which a material conflict of interest exists and Axiom
votes contrary to ISS, the Chief Compliance Officer shall prepare a memorandum (a Material Conflict Memorandum), to be kept with the record of the proxy vote, that identifies the material conflict of interest and the method used for
determining how to vote on the proposal.
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B. |
Amending Axioms Policies on Specific Issues |
Axiom will periodically review Axioms Policies on Specific Issues to ensure that they contain appropriate guidance for determining how votes will be cast
on a variety of matters and the underlying rationale for such determination.
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C. |
Supplemental Information of Issuers |
In the event that Axiom becomes aware that an issuer intends to file or has filed with the SEC supplemental information in response to ISS voting
recommendation, whether or not Axiom received or intends to follow such recommendation, the Chief Compliance Officer will review such supplemental information. If Axiom has not yet executed the related proxy vote(s) or provided instructions to ISS,
the Chief Compliance Officer will provide the supplemental information to the relevant Portfolio Manager(s). If Axiom has already executed the related proxy vote(s) or provided instructions to ISS, the Chief Compliance Officer will review the
supplemental information and, if determined to be material to the related proxy vote(s), will provide the supplemental information to the relevant Portfolio Manager(s) in order to permit reconsideration of the related proxy vote(s). The Portfolio
Manager shall communicate to the Chief Compliance Officer whether or not the previously provided voting instructions should be changed.
IV. |
Proxy Voting Audit Procedures and Oversight of Third-Party Proxy Voting |
When Axiom is voting in accordance with ISS guidelines, Axiom will review a sampling of the pre-populated
votes on the ISS electronic voting platform before ISS executes the vote. In instances of voting not in accordance with ISS guidelines, Axiom will itself pre-populate votes on the ISS
electronic voting platform before ISS executes the vote.
Periodically, a random sample of the proxies voted by ISS will be audited by Axiom to ensure ISS
is voting in accordance with applicable ISS guidelines or consistent with Axioms direction, as applicable, and in order to further evaluate whether Axioms voting determinations were consistent with the Policies and in its clients
best interest.
Axiom will review, no less frequently than annually, ISS, (or any other third-party proxy voting service, as applicable) its policies and
methodologies. This review will include, among others, the following topics and determinations:
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whether ISS has the capacity and competence to adequately analyze proxy issues, including the adequacy and
quality of its staffing, personnel and/ or technology and any material changes in the ISS staffing and technology since the last review; |
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whether ISS has an effective process for seeking timely input from issuers and its clients with respect to its
proxy voting policies, methodologies and peer group constructions; |
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whether ISS engages with issuers, including its process for ensuring that it has complete and accurate
information about the issuer and each particular matter, and ISS process, if any, for investment advisers to access the issuers views about ISS voting recommendations; |
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whether Axiom has sufficient information on and understanding of ISS methodologies and the factors
underlying ISS voting recommendations, including an understanding of how ISS obtains information relevant to its voting recommendations and how it engages with issuers and third parties; |
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whether ISS is independent and can make recommendations in an impartial manner in the best interest of
Axioms clients. This analysis will include a review of (i) any ISS actual or potential conflicts known to Axiom, (ii) ISS policies and procedures on identifying, disclosing and addressing conflicts of interest, and
(iii) whether ISS is disclosing its actual or potential conflicts to Axiom in a timely, transparent and accessible manner; |
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ISS internal controls, including but not limited to a review of ISS business continuity plan,
methodologies with respect to implementing Axioms voting instructions, proxy record keeping and internal and independent third-party audit certifications; |
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the extent to which ISS has access to non-public information regarding
how Axiom intends to vote a Clients securities and would be permitted to utilize this information in a manner that would not be in the best interest of Axioms Clients (e.g., Axiom may consider the extent to which ISS would be permitted
to share such information (including information on aggregated voting intentions of ISS clients) with third parties); |
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any factual errors, potential incompleteness, or potential methodological weaknesses in the ISS analysis
known to Axiom and whether such errors, incompleteness or weaknesses materially affected ISS voting recommendations. Axiom will also access ISS process for disclosure to Axiom and efforts to correct any such identified errors,
incompleteness or weaknesses. |
In connection with this oversight function, Axiom will ensue that ISS (or any other third-party proxy
voting service, as applicable), is prepared to provide additional information to Axiom to assist it with gaining a better understanding of the services that the proxy advisory firm provides, as well as confirming that these services align with
Axioms own fiduciary duties. Further in connection with this oversight function, Axiom will obtain information about and possibly consider alternative service providers.
V. |
Annual Review of Policies |
Axiom will review, no less frequently than annually, the adequacy of the Policies and the effectiveness of the implementation and determination whether the
Policies are reasonably designed to ensure that Axiom casts proxy votes on behalf of its clients in the best interest of such clients.
Axiom will disclose in its Form ADV Part 2A that clients may contact Axiom in order to obtain information on how Axiom voted such clients proxies, and to
request a copy of the Policies. If a client requests this information, the Axiom will prepare a written response to the client that lists, with respect to each voted proxy that the client has inquired: (i) the name of the issuer, (ii) the
proposal voted upon and (iii) how Axiom voted the clients proxy. A summary of the Policies will be included in Axioms Form ADV Part 2, which is delivered to all clients. The summary will be updated whenever the Policies are updated.
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VII. |
Recordkeeping and Client Reporting |
In accordance with Rule 204-2 under the Advisers Act, Axiom shall retain the following documents for not less than five
years from the end of the year in which the proxies were voted, the first two years in Axioms office:
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The Policies and any additional procedures created pursuant to the Policies; |
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a copy of each proxy statement Axiom receives regarding securities held on behalf of its clients,
including any supplemental information an issuer files with the SEC that Axiom becomes aware of; |
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a record of each vote cast by Axiom on behalf of its clients; |
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a copy of any document created by Axiom that was material to making its voting decision or that
memorializes the basis for such decision; and |
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a copy of each written request from a client, and response to the client, for information on how Axiom
voted the clients proxies. |
1 |
Commission Guidance Regarding Proxy Voting Responsibilities of Investment Advisers, Release Nos. IA-5325; IC-33605 (Aug. 21, 2019); Commission Interpretation and Guidance Regarding Applicability of the Proxy Rules to Proxy Voting Advice, Release No. 34-86721 (Aug. 21, 2019). |
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BOSTON COMMON ASSET MANAGEMENT
Effective Date: March 2022
PROXY VOTING POLICIES AND
PROCEDURES
I. |
GENERAL POLICY STATEMENT |
Boston Common Asset Management, LLC (Boston Common) is a registered investment adviser under the Investment Advisers Act of 1940, as amended (the
Advisers Act). Its authority to vote proxies is derived from Rule 206(4)-6 under the Advisers Act, its advisory agreements and similar documents. Boston Common votes proxies on behalf of clients
who have not specifically opted to retain those responsibilities. Boston Common votes proxies of accounts it manages directly, as well as the proxies of sub-advised accounts. As a registered investment
adviser, Boston Common has a legal and fiduciary duty to act in the best interest of each client as determined, among other things, by the clients investment objectives, Boston Commons comprehensive social guidelines, and if applicable,
the social responsibility guidelines set out in the clients advisory agreement. As a socially responsible investment adviser, Boston Common engages in shareowner activism on behalf of clients, which may also include engaging in active
dialogues with management or filing shareholder proposals.
II. |
PROXY VOTING GUIDELINES |
Boston Commons proxy voting guidelines are designed to promote best global corporate governance practices wherever possible. The guidelines advocate for
increased board independence and diversity, disclosure, transparency and management accountability to shareowners. To achieve these objectives, Boston Common does not always vote with the recommendations of management.
Boston Common pays particular attention to nominations for boards of directors. For U.S. companies, Boston Common may vote against the election of the board of
directors if there are not at least thirty-percent women and the board does not contain both a woman and a racial minority representative, or if the board is not comprised of a majority of independent directors. For
non-U.S. companies, Boston Common may vote against the election of the board of directors if the board is not comprised of 1) at least 30% women in Canada and Australia, 2) at least 33% women in the UK,
Ireland and Europe, 3) at least two women in India, 4) at least 40% women in France, Italy and Norway, and 5) at least one woman in all other regions. For non-U.S. companies, Boston Common may vote against the
election of the board of directors if the board is not comprised of at least one racial minority in the UK, Ireland, Australia and Canada.
Boston Common
carefully evaluates the merit of shareholder-sponsored resolutions and will likely vote in favor of resolutions that encourage management to increase disclosure, board independence and diversity, and transparency and accountability on corporate
governance, social, and environmental issues. For example, Boston Common generally supports resolutions requiring increased disclosure on a companys policies and practices relating to the environment, executive compensation, human rights, and
labor and employment. Boston Common also files shareholder proposals related to these issues on behalf of its clients. Boston Common may vote against any item that would tend to give a companys management a blank check or that
would encourage the entrenchment of management. Examples include classified boards, restrictions against cumulative voting, establishment of different classes of stock, excessive compensation, poor stewardship, golden parachutes, or any activity
that could be viewed as a poison pill maneuver. This would also include proposals that seek to expand the number of options, re-price options, or other actions that would excessively dilute common
stock shares.
There may be instances in which Boston Common will not vote proxies. This may happen, for example, if a portfolio holds foreign securities
and the cost of voting the securities is prohibitively expensive. Boston Common will weigh the costs and benefits of voting on foreign companies proxy proposals and will make an informed decision as to whether voting a given proxy is prudent
and in clients interests. As part of this determination, it will consider whether the effect of all of clients votes on the value of the investment will outweigh the cost of voting.
Boston Commons policy is to resolve any conflicts of interest to the clients benefit. Boston Commons Proxy Committee is consulted if a
question or potential conflict arises between Boston Common and its client. Boston Common also uses its proxy administrator, ISSInstitutional Shareholder Services, to vote proxies according to specific,
pre-determined guidelines. The retention of ISSInstitutional Shareholder Services is one way in which Boston Common resolves potential conflicts between its interests and those of its clients.
Using ISSInstitutional Shareholder Services and the guidelines provided to it, Boston Common votes proxies as the fiduciary of ERISA clients assets
unless the plans fiduciary has specifically retained the right to vote proxies. As is the case with all its clients, Boston Common votes proxies for ERISA clients for the clients benefit. Boston Commons duties in voting proxies for
ERISA clients include the duty of loyalty, prudence, compliance with the plan, and a duty to avoid prohibited transactions.
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III. |
PROXY VOTING PROCEDURES |
Boston Common has adopted the following procedures, which it believes are reasonably designed to ensure that proxies are voted in the best interests of clients
and in accordance with its fiduciary duties and Rule 206(4)-6 under the Advisers Act.
a. Boston
Commons Proxy Committee has oversight of the firms proxy voting policies and procedures. At least annually, the Proxy Committee shall review and approve Boston Commons proxy voting policies and procedures and any updates thereto.
b. The Chief Compliance Officer will develop and authorize Boston Commons proxy voting policies and procedures, subject to the
initial approval of the Proxy Committee. These procedures will be implemented by the Chief Compliance Officer or by Boston Common personnel under the supervision of the Chief Compliance Officer. These procedures include:
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i. Providing a copy of these Proxy Policies and Procedures to relevant Boston Common personnel;
ii. Providing all new clients with a copy of these Proxy Voting Policies and Procedures;
iii. Ensuring that the allocation of proxy voting responsibility between Boston Common and the client is clearly established and documented in
the client intake process;
iv. Overseeing the process by which client accounts are properly set up with ISSInstitutional Shareholder
Services and the clients custodian bank;
v. Coordinating with ISS - Institutional Shareholder Services;
vi. Providing ISS - Institutional Shareholder Services with guidelines for voting client proxies;
vii. As applicable, overseeing the process by which Boston Common personnel vote proxies in override situations, to ensure proxies are being
voted in accordance with any special restrictions imposed by the client;
viii. Responding to client requests for documentation showing how
their proxies were voted, maintaining a log of such requests and maintaining copies of communications with clients regarding proxy voting.
The Chief
Compliance Officer, or his or her delegate, shall ensure that pursuant to Rule 204-2(c) of the Advisers Act, Boston Common (or as to items (ii) and (iii), ISS - Institutional Shareholder Services on Boston
Commons behalf), retains the following documents:
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A copy of Boston Commons Proxy Voting Policies and Procedures, as amended from time to time;
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ii. |
Proxy statements received regarding client securities; |
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A record of each vote cast; and |
iv. A copy of any document created by Boston Common that (a) was material to a decision on how to vote a proxy; or (b) memorializes
the basis for that decision.
These documents will be kept in an easily accessible place for a period of five years, the first two in the offices of Boston
Common.
The Director of Shareowner Engagement and members of the ESG Team will determine how proxy issues should be the voted. These decisions will be
made in accordance with Boston Commons comprehensive social guidelines. The Director of Shareowner Engagement and the ESG Team will periodically consult with Boston Commons portfolio managers and analysts to avoid potential conflicts of
interest between social and economic issues. These consultations will take place at meetings of Boston Commons investment team and notes will be maintained of these meetings.
The Chief Compliance Officer will work with ISS Institutional Shareholder Services to obtain an official proxy voting record for Boston Commons
registered investment companies. The Chief Compliance Officer will coordinate with the Fund Administration group of each mutual fund to coordinate the filing of such record with the SEC on Form N-PX.
IV. |
Disclosure to Clients |
A copy of the Boston Commons proxy policies and procedures, as updated from time to time, are available upon request.
V. |
Proxy Voting Vendor Oversight |
Boston Commons proxy vendor, ISS Institutional Shareholder Services, will be included in the annual compliance vendor due diligence review. Boston
Common will review the due diligence package prepared by ISS which includes a disclosure of the firms Conflicts Policy, Affiliated Relationships and Form ADV, among other items.
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BOSTON PARTNERS GLOBAL INVESTORS, INC.
PROXY VOTING POLICIES AND PROCEDURES
MARCH 2022
PROXY VOTING POLICY AND PROCEDURES SUMMARY
Boston Partners Global Investors, Inc. (Boston Partners) is an investment adviser comprised of two divisions, Boston Partners and Weiss,
Peck & Greer Partners (WPG). Boston Partners Governance Committee (the Committee) is comprised of representatives from portfolio management, securities analyst, portfolio research, quantitative research,
investor relations, sustainability and engagement, and legal/compliance teams. The Committee is responsible for administering and overseeing Boston Partners proxy voting process. The Committee makes decisions on proxy policy, establishes
formal Boston Partners Proxy Voting Policies (the Proxy Voting Policies) and updates the Proxy Voting Policies as necessary, but no less frequently than annually. In addition, the Committee, in its sole discretion, delegates
certain functions to internal departments and/or engages third- party vendors to assist in the proxy voting process. Finally, members of the Committee are responsible for evaluating and resolving conflicts of interest relating to Boston
Partners proxy voting process.
To assist Boston Partners in carrying out our responsibilities with respect to proxy activities, Boston Partners has
engaged Institutional Shareholder Services Inc. (ISS), a third-party corporate governance research service, which is registered as an investment adviser. ISS receives all proxy-related materials for securities held in client accounts and
votes the proposals in accordance with Boston Partners Proxy Voting Policies. ISS assists Boston Partners with voting execution through an electronic vote management system that allows ISS to
pre-populate and automatically submit votes in accordance with Boston Partners Proxy Voting Policies. While Boston Partners may consider ISSs recommendations on proxy issues, Boston Partners bears
ultimate responsibility for proxy voting decisions and can change votes via ISS electronic voting platform at any time before a meetings cut-off date. ISS also provides recordkeeping and
vote-reporting services.
How Boston Partners Votes
For those clients who delegate proxy voting authority to Boston Partners, Boston Partners has full discretion over votes cast on behalf of clients. All proxy
votes on behalf of clients are voted the same way; however, Boston Partners may refrain from voting proxies for certain clients in certain markets. These arrangements are outlined in respective client investment management agreements. Boston
Partners may also refrain from voting proxies on behalf of clients when shares are out on loan; when share blocking is required to vote; where it is not possible to vote shares; where there are legal or operational difficulties; where Boston
Partners believes the administrative burden and/ or associated cost exceeds the expected benefit to a client; or where not voting or abstaining produces the desired outcome.
Boston Partners meets with ISS at least annually to review ISS policy changes, themes, methodology, and to review the Proxy Voting Policies. The information is
taken to the Committee to discuss and decide what changes, if any, need to be made to the Proxy Voting Policies for the upcoming year.
The Proxy Voting
Policies provide standard positions on likely issues for the upcoming proxy season. In determining how proxies should be voted, including those proxies the Proxy Voting Policies do not address or where the Proxy Voting Policies application is
ambiguous, Boston Partners primarily focuses on maximizing the economic value of its clients investments. This is accomplished through engagements with Boston Partners analysts and issuers, as well as independent research conducted by
Boston Partners Sustainability and Engagement Team. In the case of social and political responsibility issues that, in its view, do not primarily involve financial considerations, it is Boston Partners objective to support shareholder
proposals that it believes promote good corporate citizenship. If Boston Partners believes that any research provided by ISS or other sources is incorrect, that research is ignored in the proxy voting decision, which is escalated to the Committee so
that all relevant facts can be discussed, and a final vote determination can be made. Boston Partners is alerted to proposals that may require more detailed analysis via daily system generated refer notification emails. These emails prompt the
Committee Secretary to call a Committee meeting to discuss the items in question.
Although Boston Partners has instructed ISS to vote in accordance with
the Proxy Voting Policies, Boston Partners retains the right to deviate from the Proxy Voting Policies if, in its estimation, doing so would be in the best interest of clients.
Conflicts
Boston Partners believes clients are
sufficiently insulated from any actual or perceived conflicts Boston Partners may encounter between its interests and those of its clients because Boston Partners votes proxies based on the predetermined Proxy Voting Policies. However, as noted,
Boston Partners may deviate from the Proxy Voting Policies in certain circumstances, or the Proxy Voting Policies may not address certain proxy voting proposals. If a member of Boston Partners research or portfolio management team recommends
that Boston Partners vote a particular proxy proposal in a manner inconsistent with the Proxy Voting Policies or if the Proxy Voting
Policies do not
address a particular proposal, Boston Partners will adhere to certain procedures designed to ensure that the decision to vote the particular proxy proposal is based on the best interest of Boston Partners clients. These procedures require the
individual requesting a deviation from the Proxy Voting Policies to complete a Conflicts Questionnaire (the Questionnaire) along with written documentation of the economic rationale supporting the request. The Questionnaire seeks to
identify possible relationships with the parties involved in the proxy that may not be apparent. Based on the responses to the Questionnaire, the Committee (or a subset of the Committee) will determine whether it believes a material conflict of
interest is present. If a material conflict of interest is found to exist, Boston Partners will vote in accordance with client instructions, seek the recommendation of an independent third-party or resolve the conflict in such other manner as Boston
Partners believes is appropriate, including by making its own determination that a particular vote is, notwithstanding the conflict, in the best interest of clients.
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Oversight
Meetings and upcoming votes are reviewed by the Committee Secretary with a focus on votes against management. Votes on behalf of Boston Partners clients
are reviewed and compared against ISS recommendations. When auditing vote instructions, which Boston Partners does at least annually, ballots voted for a specified period are requested from ISS, and a sample of those meetings are reviewed by
Boston Partners Operations Team. The information is then forwarded to compliance/ the Committee Secretary for review. Any perceived exceptions are reviewed with ISS and an analysis of what the potential vote impact would have been is
conducted. ISS most recent SOC-1 indicates they have their own control and audit personnel and procedures, and a sample of ballots are randomly selected on a quarterly basis. ISS compares ballots to
applicable vote instructions recorded in their database. Due diligence meetings with ISS are conducted periodically.
Disclosures
A copy of Boston Partners Proxy Voting Policies and Procedures, as updated from time to time, as well as information regarding the voting of securities
for a client account are available upon request from your Boston Partners relationship manager. A copy of Boston Partners Proxy Voting Policies and Procedures are also available at https://www.boston-partners.com/. For general inquires,
contact (617) 832-8153.
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GRAHAM CAPITAL MANAGEMENT, L.P.
1. |
PROXY VOTING AND CLASS ACTIONS |
Graham has adopted policies and procedures (the Proxy Voting Policies and Procedures) which have been designed to ensure that Graham complies with
the requirements of Rule 206(4)-6 and Rule 204-2(c)(2) under the Advisers Act, and reflect Grahams commitment to vote all Client securities for which it exercises
voting authority in a manner consistent with the best interest of the Client. Employees who have the authority to vote Client securities must familiarize themselves with and strictly adhere to Grahams Proxy Voting Policies and Procedures.
Although the Advisers Act does not obligate advisers to adopt policies and procedures in respect of participating in class actions, in its capacity as a
fiduciary to its Clients Graham has nonetheless adopted such policies and procedures.
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B. |
Proxy Voting Policies and Procedures |
Graham has selected and retained ISS Governance Services to assist in the proxy voting process. The CCO manages Grahams relationship with ISS. The CCO
ensures that ISS votes all proxies according to Grahams general guidance, and retains all required documentation associated with proxy voting.
Graham has approved a list of proxy voting guidelines that ISS generally follows when recommending how to vote on particular proxies. The following guidelines
reflect ISS general approach on certain key proxy proposals; however, these guidelines represent only a small number of proposals and the guidelines are much broader in scope and more detailed.
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Auditor Ratification. ISS generally recommends to vote FOR proposals to ratify auditors except where
(i) the auditor has a financial interest or association with the company, (ii) there is reason to believe the auditor has rendered an opinion that is neither accurate nor indicative of the companys financial position, (iii) poor
accounting practices have been identified that rise to a serious level of concern or (iv) fees for non-audit services are excessive; |
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Board of Directors. ISS generally recommends to vote FOR director nominees except where (i) the board
lacks accountability coupled with sustained poor performance relative to peers, (ii) the board demonstrates a lack of responsiveness (e.g., in responding to shareholder proposals, takeover offers, issues that resulted in one or more directors
receiving more than 50% withhold/against votes, etc.), (iii) there are defects in the composition of the board (e.g., unacceptable attendance at board and committee meetings, directors serve on excessive number of boards of other companies, etc.),
and (iv) the board lacks sufficient controls or features to ensure its independence; |
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Capital Structure Changes. ISS generally recommends to vote (i) FOR proposals to increase the number
of shares where the primary purpose is to issue shares in connection with a transaction on the same ballot, (ii) AGAINST proposals to increase the number of shares of a class with superior voting rights, (iii) AGAINST proposals to increase
the number of shares if a vote for a reverse stock split is on the same ballot, and (iv) AGAINST proposals to create a new class of common stock, except under certain conditions; |
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Executive Compensation. ISS Generally recommends to vote (i) AGAINST advisory votes on executive
compensation if there is a significant misalignment between CEO pay and company performance, the company maintains problematic pay practices or the board exhibits a significant level of poor communications and responsiveness to shareholders,
(ii) AGAINST/WITHHOLD from the members of the compensation committee or full board as applicable where there is no management-say-on pay item on the ballot, and in
other instances, and (iii) AGAINST an equity plan if there is a performance misalignment and the CEOs pay is skewed towards non-performance based equity awards. |
Portfolio Managers that wish to deviate from ISSs proxy recommendations must provide the CCO with a written explanation of the reason for the deviation,
as well as a representation that the employee and Graham are not conflicted in making the chosen voting decision.
Because Graham generally will vote
proxies based upon the recommendations of ISS, there is little to no risk of a conflict of interest arising. However, in instances that might involve a conflict of interest between Graham and its Clients, such as where a portfolio manager wishes to
deviate from ISSs recommendation or such other instances as Graham may determine, the CCO, in conjunction with the compliance committee as appropriate, will review the relevant facts and determine whether or not a material conflict of interest
may arise due to business, personal or family relationships of Graham, its owners, its employees or its affiliates, with persons having an interest in the outcome of the vote. If a material conflict exists, Graham will take steps to ensure that its
voting decision is based on the best interests of the Client and is not a product of the conflict. Graham shall keep appropriate records demonstrating how such conflicts were resolved.
ISS will retain, on Grahams behalf, the following information in connection with each proxy vote:
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The security ticker symbol or CUSIP, as applicable; |
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The shareholder meeting date; |
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The number of shares that Graham voted; |
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A brief identification of the matter voted on; |
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Whether the matter was proposed by the Issuer or a security holder; |
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Whether Graham cast a vote; |
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How Graham cast its vote (for the proposal, against the proposal, or abstain); and |
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Whether Graham cast its vote with or against management. |
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With respect to each registered investment company for which Graham provides discretionary subadvisory services,
Graham will provide each fund with a copy of Grahams proxy voting policy. In addition, when requested, Graham will provide such funds with information concerning Grahams proxy voting policy and voting results as required to enable such
funds to file periodic proxy voting reports.
As a fiduciary, Graham always seeks to act in the best interest of its Clients, with good faith, loyalty, and due care. Accordingly, with respect to class
actions involving any Graham Funds, Graham will determine whether the fund will (a) participate in a recovery achieved through a class action, (b) opt out of the class action and separately pursue its own remedy, or (c) opt out of the
class action and not pursue its own remedy. Grahams legal department oversees the completion of Proof of Claim forms and any associated documentation the submission of such documents to the claim administrator, and the receipt of any recovered
monies. Graham will maintain documentation associated with participation in class actions by any Graham Funds. Consistent with its procedures for selecting and monitoring service providers and its fiduciary obligation to Clients, Graham may utilize
third-party service providers to facilitate the processing and administration of class action claims.
Graham, for itself or on behalf of its funds,
generally does not serve as the lead plaintiff in class actions because the costs of such participation typically exceed any extra benefits that accrue to lead plaintiffs.
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D. |
Disclosures to Investors |
Graham includes a description of its policies and procedures regarding proxy voting and class actions in Part 2 of the Form ADV, along with a statement that
Investors can contact Graham to obtain a copy of these policies and procedures and information about how Graham voted proxies.
Any request for information
about proxy voting or class actions should be promptly forwarded to the CCO, who will respond to any such requests.
As a matter of policy, Graham does not
disclose how it expects to vote on upcoming proxies. Additionally, Graham does not disclose the way it voted proxies to unaffiliated third parties without a legitimate need to know such information.
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MANULIFE INVESTMENT MANAGEMENT
GLOBAL PROXY VOTING POLICY
AND PROCEDURES
April 2021
Executive summary
Each investment team at Manulife Investment Management (Manulife IM)1 is responsible for investing in line with its investment philosophy and clients
objectives. Manulife IMs approach to proxy voting aligns with its organizational structure and encourages best practices in governance and management of environmental and social risks and opportunities. Manulife IM has adopted and implemented
proxy voting policies and procedures to ensure that proxies are voted in the best interests of its clients for whom it has proxy voting authority.
This
global proxy voting policy and procedures (policy) applies to each of the Manulife IM advisory affiliates listed in Appendix A. In seeking to adhere to local regulatory requirements of the jurisdiction in which an advisory affiliate operates,
additional procedures specific to that affiliate may be implemented to ensure compliance, where applicable. The policy is not intended to cover every possible situation that may arise in the course of business, but rather to act as a decision-making
guide. It is therefore subject to change and interpretation from time to time as facts and circumstances dictate.
Statement of policy
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The right to vote is a basic component of share ownership and is an important control mechanism to ensure that a
company is managed in the best interests of its shareholders. Where clients delegate proxy voting authority to Manulife IM, Manulife IM has a fiduciary duty to exercise voting rights responsibly. |
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Where Manulife IM is granted and accepts responsibility for voting proxies for client accounts, it will seek to
ensure proxies are received and voted in the best interests of the client with a view to maximize the economic value of their equity securities, unless it determines that it is in the best interests of the client to refrain from voting a given
proxy. |
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If there is any potential material proxy-related conflict of interest between Manulife IM and its clients,
identification and resolution processes are in place to provide for determination in the best interests of the client. |
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Manulife IM will disclose information about its proxy voting policies and procedures to its clients.
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Manulife IM will maintain certain records relating to proxy voting. |
Philosophy on sustainable investing
Manulife IMs
commitment to sustainable investment2 is focused on protecting and enhancing the value of our clients investments and, as active owners in the companies in which we invest, we believe that voting at shareholder meetings can contribute to the
long-term sustainability of our investee companies. Manulife IM will seek to exercise the rights and responsibilities associated with equity ownership, on behalf of its clients, with a focus on maximizing long-term shareholder returns, as well as
enhancing and improving the operating strength of the companies to create sustainable value for shareholders.
Manulife IM invests in a wide range of
securities across the globe, ranging from large multinationals to smaller early stage companies, and from well- developed markets to emerging and frontier markets. Expectations of those companies vary by market to reflect local standards,
regulations and laws. Manulife IM believes, however, that successful companies across regions are generally better positioned over the long-term if they have:
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Robust oversight, including a strong and effective board with independent and objective leaders working on behalf
of shareholders; |
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Mechanisms to mitigate risk such as effective internal controls, board expertise covering a firms unique
risk profile, and routine use of key performance indicators to measure and assess long-term risks; |
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A management team aligned with shareholders through remuneration structures that incentivize long-term
performance through the judicious and sustainable stewardship of company resources; |
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Transparent and thorough reporting of the components of the business that are most significant to shareholders
and stakeholders with focus on the firms long-term success; and |
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Management focused on all forms of capital including environmental, social, and human capital.
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The Manulife Investment Management voting principles (voting principles) outlined in Appendix B provide guidance for our voting
decisions. An active decision to invest in a firm reflects a positive conviction in the investee company and we generally expect to be supportive of management for that reason. Manulife IM may seek to challenge managements recommendations,
however, if they contravene these voting principles or Manulife IM otherwise determines that doing so is in the best interest of its clients.
Manulife IM
also regularly engages with boards and management on environmental, social or corporate governance issues consistent with the principles stipulated in our sustainable investing statement and our ESG engagement policy. Manulife IM may, through these
engagements, request certain changes of the portfolio company to mitigate risks or maximize opportunities. In the context of preparing for a shareholder meeting, Manulife IM will review progress on requested changes for those companies engaged. In
an instance where Manulife IM determines that the issuer has not made sufficient improvements on an issue, then we may take voting action to demonstrate our concerns.
In rare circumstances, Manulife IM may consider filing, or co-filing, a shareholder resolution at an investee company.
This may occur where our team has engaged with management regarding a material sustainability risk or opportunity, and where we determine that the company has not made
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satisfactory progress on the matter within a reasonable time period. Any such decision will be in the sole
discretion of Manulife IM and acted on where we believe filing, or co-filing, a proposal is in the best interests of our clients.
Manulife IM may also divest of holdings in a company where portfolio managers are dissatisfied with company financial performance, strategic direction, and/or
management of material sustainability risks or opportunities.
Procedures
Receipt of ballots and proxy materials
Proxies received
are reconciled against the clients holdings, and the custodian bank will be notified if proxies have not been forwarded to the proxy service provider when due.
Voting proxies
Manulife IM has adopted the voting
principles contained in Appendix B of this policy.
Manulife IM has deployed the services of a proxy voting services provider to ensure the timely casting
of votes, and to provide relevant and timely proxy voting research to inform our voting decisions. Through this process, the proxy voting services provider populates initial recommended voting decisions that are aligned with the Manulife IM voting
principles outlined in Appendix B. These voting recommendations are then submitted, processed, and ultimately tabulated. Manulife IM retains the authority and operational functionality to submit different voting instructions after these initial
recommendations from the proxy voting services provider have been submitted, based on Manulife IMs assessment of each situation. As Manulife IM reviews voting recommendations and decisions, as articulated below, Manulife IM will often change
voting instructions based on those reviews. Manulife IM periodically reviews the detailed policies created by the proxy voting service provider to ensure consistency with our voting principles, to the extent this is possible.
Manulife IM also has procedures in place to review additional materials submitted by issuers often in response to voting recommendations made by proxy voting
service providers. Manulife IM will review additional materials related to proxy voting decisions in those situations where Manulife IM becomes aware of those additional materials, is considering voting contrary to management, and where Manulife IM
owns 2% or more of the subject issuer as aggregated across the funds.
Portfolio managers actively review voting options and make voting decisions for
their holdings. Where Manulife IM holds a significant ownership position in an issuer, the rationale for a portfolio managers voting decision is specifically recorded, including whether the vote cast aligns with the recommendations of the
proxy voting services provider or has been voted differently. A significant ownership position in an investment is defined as those cases where Manulife IM holds at least 2% of a companys issued share capital in aggregate across all Manulife
IM client accounts.
The Manulife IM ESG research and integration team (ESG team) is an important resource for portfolio management teams on proxy matters.
This team provides advice on specific proxy votes for individual issuers if needed. ESG team advice is supplemental to the research and recommendations provided by our proxy voting services provider. In particular, ESG analysts actively review
voting resolutions for companies in which:
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Manulife IMs aggregated holdings across all client accounts represent 2% or greater of issued capital;
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A meeting agenda includes shareholder resolutions related to environmental and social risk management issues, or
where the subject of a shareholder resolution is deemed to be material to our investment decision; or |
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Manulife IM may also review voting resolutions for issuers where an investment team engaged with the firm within
the previous two years to seek a change in behavior. |
After review, the ESG team may provide research and advice to investment staff in
line with the voting principles.
Manulife IM also has an internal proxy voting working group (working group) comprising senior managers from across
Manulife IM including the equity investment team, legal, compliance, and the ESG team. The working group operates under the auspices of the Manulife IM Public Markets Sustainable Investing Committee. The working group regularly meets to review and
discuss voting decisions on shareholder proposals or instances where a portfolio manager recommends a vote different than the recommendation of the proxy voting services provider.
Manulife IM clients retain the authority, and may choose, to lend shareholdings. Manulife IM, however, generally retains the ability to restrict shares from
being lent and to recall shares on loan in order to preserve proxy voting rights. Manulife IM is focused in particular on preserving voting rights for issuers where funds hold 2% or more of an issuer as aggregated across funds. Manulife IM has a
process in place to systematically restrict and recall shares on a best efforts basis for those issuers where we own an aggregate of 2% or more.
Manulife
IM may refrain from voting a proxy where we have agreed with a client in advance to limit the situations in which we will execute votes. Manulife IM may also refrain from voting due to logistical considerations that may have a detrimental effect on
our ability to vote. These issues may include, but are not limited to:
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Costs associated with voting the proxy exceed the expected benefits to clients; |
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Underlying securities have been lent out pursuant to a clients securities lending program and have not been
subject to recall; |
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Short notice of a shareholder meeting; |
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Requirements to vote proxies in person; |
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Restrictions on a nonnationals ability to exercise votes, determined by local market regulation;
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Restrictions on the sale of securities in proximity to the shareholder meeting (i.e. share blocking);
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Requirements to disclose commercially sensitive information that may be made public (i.e. reregistration);
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Requirements to provide local agents with power of attorney to facilitate the voting instructions (such proxies
are voted on a best-efforts basis); or |
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The inability of a clients custodian to forward and process proxies electronically. |
If a Manulife IM portfolio manager believes it is in the best interest of a client to vote proxies in a manner inconsistent with the policy, the portfolio
manager will submit new voting instructions to a member of the ESG team with rationale for the new instructions. The ESG team will then support the portfolio manager in developing voting decision rationale that aligns with this policy and the voting
principles. The ESG team will then submit the vote change to the working group. The working group will review the change and ensure that the rationale is sound, and the decision will promote the long- term success of the issuer.
On occasion, there may be proxy votes that are not within the research and recommendation coverage universe of the proxy voting service provider. Portfolio
managers responsible for the proxy votes will provide voting recommendations to the ESG team and those items may be escalated to the working group for review to ensure that the voting decision rationale is sound, and the decision will promote the
long-term success of the issuer. the Manulife IM proxy operations team will be notified of the voting decisions and execute the votes accordingly.
Manulife IM does not engage in the practice of empty voting (a term embracing a variety of factual circumstances that result in a partial, or
total, separation of the right to vote at a shareholders meeting from beneficial ownership of the shares on the meeting date). Manulife IM prohibits investment managers from creating large hedge positions solely to gain the vote while avoiding
economic exposure to the market. Manulife IM will not knowingly vote borrowed shares (for example, shares borrowed for short sales and hedging transactions).
Engagement of the proxy voting service provider
Manulife
IM has contracted with a third-party proxy service provider to assist with the proxy voting process. Except in instances where a client retains voting authority, Manulife IM will instruct custodians of client accounts to forward all proxy statements
and materials received in respect of client accounts to the proxy service provider.
Manulife IM has engaged its proxy voting service provider to:
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Research and make voting recommendations; |
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Ensure proxies are voted and submitted in a timely manner; |
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Provide alerts when issuers file additional materials related to proxy voting matters; |
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Perform other administrative functions of proxy voting; |
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Maintain records of proxy statements and provide copies of such proxy statements promptly upon request;
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Maintain records of votes cast; and |
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Provide recommendations with respect to proxy voting matters in general. |
Scope of proxy voting authority
Manulife IM and our
clients shape the proxy voting relationship by agreement provided there is full and fair disclosure and informed consent. Manulife IM may agree with clients to other proxy voting arrangements in which Manulife IM does not assume proxy voting
responsibility or will only vote in limited circumstances.3
While the application of our fiduciary duty in the context of proxy voting will vary with the
scope of the voting authority we assume, we acknowledge the relationship in all cases remains that of a fiduciary to the client. Beyond the general discretion retained by Manulife IM to withhold from voting as outlined above, Manulife IM may enter a
specific agreement with a client not to exercise voting authority on certain matters where the cost of voting would be high or the benefit to the client would be low.
Disclosure of proxy votes
Manulife IM may inform company
management of our voting intentions ahead of casting the vote. This is in line with Manulife IMs objective to provide the opportunity for companies to better understand our investment process, policies, and objectives.
We will not intentionally disclose to anyone else, including other investors, our voting intention prior to casting the vote. Manulife IM keeps records of
proxy voting available for inspection by clients, regulatory authorities, or government agencies. Manulife IM quarterly discloses voting records aggregated across funds.4
Conflicts of interest
Manulife IM has an established
infrastructure designed to identify conflicts of interest throughout all aspects of the business. Proxy voting proposals may raise conflicts between the interests of Manulife IMs clients and the interests of Manulife IM, its affiliates, or
employees. Apparent conflicts are reviewed by the working group to determine whether there is a conflict of interest and, if so, whether the conflict is material. Manulife IM shall consider any of the following circumstances a potential material
conflict of interest:
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Manulife IM has a business relationship or potential relationship with the issuer; |
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Manulife IM has a business relationship with the proponent of the proxy proposal; or |
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Manulife IM members, employees, or consultants have a personal or other business relationship with managers of
the business such as top-level executives, corporate directors or director candidates. |
In
addressing any such potential material conflict Manulife IM will seek to ensure proxy votes are cast in the advisory clients best interests and are not affected by Manulife IMs potential conflict. In the event a potential material
conflict of interest exists, the working group or its designee will either (i)
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review the proxy voting decisions to ensure robust rationale, that the voting decision will protect or enhance
shareholder value over the long term, and is in line with the best interest of the client; (ii) vote such proxy according to the specific recommendation of the proxy voting services provider; (iii) abstain; or (iv) request the client
vote such proxy. The basis for the voting decision, including the process for the determination of the decision that is in the best interests of the client, is recorded.
Voting shares of Manulife Financial Corporation
Manulife
Financial Corporation (MFC) is the publicly listed parent company of Manulife IM. Generally, legislation restricts the ability of a public company (and its subsidiaries) to hold shares in itself within its own accounts. Accordingly, the MFC share
investment policy outlines the limited circumstances in which MFC or its subsidiaries may, or may not, invest or hold shares in MFC on behalf of MFC or its subsidiaries.5
The MFC share investment policy does not apply to investments made on behalf of unaffiliated third parties, which remain assets of the client.6 Such investing
may be restricted, however, by specific client guidelines, other Manulife policies, or other applicable laws.
Where Manulife IM is charged with voting MFC
shares, we will execute votes in proportion with all other shareholders (i.e., proportional or echo vote). This is intended to neutralize the effect of our vote on the meeting outcome.
Policy responsibility and oversight
The working group
oversees and monitors the policy and Manulife IMs proxy voting function. The working group is responsible for reviewing regular reports, potential conflicts of interest, vote changes and nonroutine proxy voting items. The working group also
oversees the third-party proxy voting service provider. The working group will meet at least monthly and report to the Manulife IM public markets sustainable investing committee and, where requested, the Manulife IM operating committee.
Manulife IMs proxy operations team is responsible for the daily administration of the proxy voting process for all Manulife IM operations that have
contracted with a third-party proxy voting services provider. Significant proxy voting issues identified by Manulife IMs proxy operations team are escalated to the chief compliance officer or its designee, and the working group.
The working group is responsible for the proper oversight of any service providers hired by Manulife IM to assist it in the proxy voting process. This
oversight includes:
Annual due diligence: Manulife IM conducts an annual due diligence review of the proxy voting research service provider. This
oversight includes an evaluation of the service providers industry reputation, points of risk, compliance with laws and regulations, and technology infrastructure. Manulife IM also reviews the providers capabilities to meet Manulife
IMs requirements, including reporting competencies; the adequacy and quality of the proxy advisory firms staffing and personnel; the quality and accuracy of sources of data and information; the strength of policies and procedures that
enable it to make proxy voting recommendations based on current and accurate information; and the strength of policies and procedures to address conflicts of interest of the service provider related to its voting recommendations.
Regular Updates: Manulife also requests that the proxy voting research service provider deliver updates regarding any business changes that alter that
firms ability to provide independent proxy voting advice and services aligned with our policies.
Additional oversight in process: Manulife IM
has additional control mechanisms built into the proxy voting process to act as checks on the service provider and ensure that decisions are made in the best interest of our clients. These mechanisms include:
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Sampling prepopulated votes: Where we use a third-party research provider for either voting
recommendations or voting execution (or both), we may assess prepopulated votes shown on the vendors electronic voting platform before such votes are cast to ensure alignment with the voting principles. |
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Decision scrutiny from the working group: Where our voting policies and procedures do not address how to
vote on a particular matter, or where the matter is highly contested or controversial (e.g., major acquisitions involving takeovers or contested director elections where a shareholder has proposed its own slate of directors), review by the working
group may be necessary or appropriate to ensure votes cast on behalf of its client are cast in the clients best interest. |
Recordkeeping and reporting
Manulife IM provides clients
with a copy of the voting policy on request and it is also available on our website at manulifeim.com/institutional. Manulife IM describes its proxy voting procedures to its clients in the relevant or required disclosure document and discloses to
its clients the process to obtain information on how Manulife IM voted that clients proxies.
Manulife IM keeps records of proxy voting activities
and those records include proxy voting policies and procedures, records of votes cast on behalf of clients, records of client requests for proxy voting information; and any documents generated in making a vote decision. These documents are available
for inspection by clients, regulatory authorities, or government agencies.
Manulife IM discloses voting records on its website and those records are
updated on a quarterly basis. The voting records generally reflect the voting decisions made for retail, institutional and other client funds in the aggregate.
Policy amendments and exceptions
This policy is subject
to periodic review by the proxy voting working group. The working group may suggest amendments to this policy and any such amendments must be approved by the Manulife IM public markets sustainable investing committee and the Manulife IM operating
committee.
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Any deviation from this policy will only be permitted with the prior approval of the chief investment officer or
chief administrative officer (or their designee), with the counsel of the chief compliance officer/general counsel.
Appendix A. Manulife IM advisory
affiliates in scope of policy and investment management business only.
Manulife Investment Management Limited
Manulife Investment Management (North America) Limited
Manulife
Investment Management (Hong Kong) Limited
PT Manulife Aset Manajemen Indonesia*
Manulife Investment Management (Japan) Limited
Manulife
Investment Management (Malaysia) Bhd. Manulife Investment
Management and Trust Corporation
Manulife Investment Management (Singapore) Pte. Ltd. Manulife IM (Switzerland) LLC
Manulife Investment Management (Taiwan) Co., Ltd.*
Manulife
Investment Management (Europe) Limited
Manulife Investment Management (US) LLC
Manulife Investment Fund Management (Vietnam) Company Limited*
*By reason of certain local regulations and laws with respect to voting, for example, manual/physical voting processes or the absence of a third-party proxy
voting service provider for those jurisdictions, Manulife Investment Fund Management (Vietnam) Company Limited, and PT Manulife Aset Manajemen Indonesia do not engage a third-party service provider to assist in their proxy voting processes. Manulife
Investment Management (Taiwan) Co., Ltd. Uses the third-party proxy voting service provider to execute votes for non-Taiwanese entities only.
APPENDIX B. Manulife IM voting principles
Manulife IM
believes that strong management of all forms of corporate capital, whether financial, social, or environmental will mitigate risks, create opportunities, and drive value over the long term. Manulife IM reviews and considers environmental, social,
and corporate governance risks and opportunities in our investment decisions. Once invested, Manulife IM continues our oversight through active ownership, which includes portfolio company engagement and proxy voting of underlying shares. We believe
proxy voting is a vital component of this continued oversight as it provides a voice for minority shareholders regarding management actions.
Manulife IM
has developed some key principles that generally drive our proxy voting decisions and engagements. We believe these principles preserve value and generally lead to outcomes that drive positive firm performance. These principles dictate our voting on
issues ranging from director elections and executive compensation to the preservation of shareholder rights and stewardship of environmental and social capital. Manulife IM also adopts positions on certain sustainability topics and these voting
principles should be read in conjunction with those position statements. Currently, we have a climate change statement and an executive compensation statement that also help guide proxy voting decisions on those matters. The facts and circumstances
of each issuer are unique, and Manulife IM may deviate from these principles where we believe doing so will preserve or create value over the long term. These principles also do not address the specific content of all proposals voted around the
globe, but provide a general lens of value preservation, value creation, risk management, and protection of shareholder rights through which Manulife IM analyzes all voting matters.
I. Boards and directors: Manulife IM uses the following principles to review proposals covering director elections and board structure in the
belief that they encourage engaged and accountable leadership of a firm.
a. Board independence: The most effective boards are composed of
directors with a diverse skill set that can provide an objective view of the business, oversee management, and make decisions in the best interest of the shareholder body at large. To create and preserve this voice, boards should have a significant
number of non-executive, independent directors. The actual number of independent directors can vary by market and Manulife IM accounts for these differences when reviewing the independence of the board.
Ideally, however, there is an independent majority among directors at a given firm.
b. Committee independence: Manulife IM also prefers that
key board committees are composed of independent directors. Specifically, the audit, nomination and compensation committees should be entirely or majority composed of independent directors.
c. Attendance: A core part of a directors duties is to remain an engaged and productive participant at board and committee meetings.
Directors should, therefore, attend at least 75% of board and committee meetings in the aggregate over the course of a calendar year.
d.
Diversity: In line with the principles expressed in relation to board of independence above, Manulife IM believes boards with strong gender representation are better equipped to manage risks and oversee business resilience over the long term
compared to firms with low gender balance. Manulife IM generally expects boards to have at least one woman on the board and encourages companies to aspire to a higher balance of gender representation. Manulife IM also may hold boards in certain
markets to a higher standard as market requirements and expectations change. In Canada, Europe, the United Kingdom, and Ireland, for example, we encourage boards to achieve at least one-third female
representation. We generally
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encourage boards to achieve racial and ethnic diversity among their members. We may, in the future, hold
nomination committee chairs accountable where the board does not appear to have racial or ethnically diverse members.
e. Classified/staggered
boards: Manulife IM prefers that directors be subject to election and re-election on an annual basis. Annual elections operate to hold directors accountable for their actions in a given year in a timely
manner. Shareholders should have the ability to voice concerns through a director vote and to potentially remove problematic directors if necessary. Manulife IM generally opposes the creation of classified or staggered director election cycles
designed to extend director terms beyond one year. Manulife IM also supports proposals to eliminate these structures.
f. Overboarding:
Manulife IM believes directors should limit their outside board seats in order to ensure that they have the time and attention to provide their director role at a firm in question. Generally, this means directors should not sit on more than five
public company boards. The role of CEO requires an individuals significant time and attention. Directors holding the role of CEO at any public firm, therefore, generally should not sit on more than three public company boards inclusive of the
firm at which they hold the CEO role.
g. Independent chair/CEO: Governance failures can occur where a manager has firm control over a board
through the combination of the chair/CEO roles. Manulife IM generally supports the separation of the chair/CEO roles as a means to prevent board capture by management. We may evaluate proposals to separate the chair/CEO roles on a case-by-case basis, for example, however, considering such factors as the establishment of a strong lead independent director role or the temporary need for the combination of
the CEO/chair roles to help the firm through a leadership transition.
h. Vote standard: Manulife IM generally supports a vote standard that
allows resolutions to pass, or fail, based on a majority voting standard. Manulife IM generally expects companies to adopt a majority vote standard for director elections and supports the elimination of a plurality vote standard except in the case
of contested elections.
i. Contested elections: Where there is a proxy contest or a directors election is otherwise contested,
Manulife IM evaluates the proposals on a case- by-case basis. Consideration is given to firm performance, whether there have been significant failures of oversight, and whether the proponent for change makes a
compelling case that board turnover will drive firm value.
j. Significant and problematic actions or omissions: Manulife IM believes boards
should be held accountable to shareholders in instances where there is a significant failure of oversight that has led to a loss of firm value, transparency failure or otherwise curtailed shareholder rights. Manulife IM generally considers
withholding from, or voting against, certain directors in these situations. Some examples of actions that might warrant a vote against directors include, but are not limited to, the following:
Failure of oversight: Manulife IM may take action against directors where there has been a significant negative event leading to a loss of shareholder
value and stakeholder confidence. A failure may manifest itself in multiple ways, including adverse auditor opinions, material misstatements, failures of leadership and governance, failure to manage ESG risks, environmental or human rights
violations, and poor sustainability reporting.
Adoption of anti-takeover mechanism: Boards should generally review takeover offers independently
and objectively in consideration of the potential value created or lost for shareholders. Manulife IM generally holds boards accountable when they create or prolong certain mechanisms, bylaws or article amendments that act to frustrate genuine
offers that may lead to value creation for shareholders. These can include poison pills; classes of shares with differential voting rights; classified, or staggered, board structures; and unilateral bylaw amendments and supermajority voting
provisions.
Problematic executive compensation practices: Manulife IM encourages companies to adopt best practices for executive compensation in
the markets in which they operate. Generally, this means that pay should be aligned with performance. Manulife IM may hold directors accountable where this alignment is not robust. We may also hold boards accountable where they have not adequately
responded to shareholder votes against a previous proposal on remuneration or have adopted problematic agreements or practices (e.g., golden parachutes, repricing of options).
Bylaw/article adoption and amendments: Shareholders should have the ability to vote on any change to company articles or bylaws that will materially
change their rights as shareholders. Any amendments should require only a majority of votes to pass. Manulife IM will generally hold directors accountable where a board has amended or adopted bylaw and/or article provisions that significantly
curtail shareholder rights.
Engagement responsiveness: Manulife IM regularly engages with issuers to discuss ESG risks and opportunities and may
request changes from firms during these discussions. Manulife IM may vote against certain directors where we have engaged with an issuer and requested certain changes, but the firm has not made sufficient progress on those matters.
II. Environmental and social proposals: Manulife IM expects its portfolio companies to manage material environmental and social issues affecting
their businesses, whether risks or opportunities, with a view towards long-term value preservation and creation. 7 Manulife IM expects firms to identify material environmental and social risks and opportunities specific to their businesses, to
develop strategies to manage those matters, and to provide meaningful, substantive reporting while demonstrating progress year over year against their management plans. Proposals touching on management of risks and opportunities related to
environmental and social issues are often put forth as shareholder proposals but can be proposed by management as well. Manulife IM generally supports shareholder proposals that request greater transparency or adherence to internationally recognized
standards and principles regarding material environmental and social risks and opportunities.
a. The magnitude of the risk/opportunity:
Manulife IM evaluates the level of materiality of a certain environmental or social issue identified in a proposal as it pertains to the firms ability to generate value over the long term. This review includes deliberation of the effect an
issue will have on the financial statements and/or the cost of capital.
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b. The firms current management of the risk/opportunity: Manulife IM analyzes a firms
current approach to an issue to determine whether the firm has robust plans, infrastructure, and reporting to mitigate the risk or embrace the opportunity. Recent controversies, litigation, or penalties related to a given risk are also considered.
c. The firms current disclosure framework: Manulife IM expects firms to disclose enough information for shareholders to assess the
companys management of environmental and social risks and opportunities material to the business. Manulife IM may support proposals calling for enhanced firm disclosure regarding environmental and social issues where additional information
would help our evaluation of a companys exposure, and response, to those factors.
d. Legislative or regulatory action of a
risk/opportunity: When reviewing proposals on environmental or social factors, Manulife IM considers whether a given risk or opportunity is currently addressed by local regulation or law in the markets in which a firm operates and whether those
rules are designed to adequately manage an issue. Manulife IM also considers whether a firm should proactively address a matter in anticipation of future legislation or regulation.
e. Cost to, or disruption of, the business: When reviewing environmental and social proposals, Manulife IM assesses the potential cost of the
requested action against the benefit provided to the firm and its shareholders. Particular attention is paid to proposals that request actions that are overly prescriptive on management or that request a firm exit markets or operations that are
essential to its business.
III. Shareholder rights: Manulife IM generally supports management or shareholder proposals that protect, or
improve, shareholder rights and opposes proposals that remove, or curtail, existing rights.
a. Shareholder rights plans (poison pills):
Manulife IM generally opposes mechanisms intended to frustrate genuine takeover offers. Manulife IM may, however, support shareholder rights plans where the plan has a trigger of 20% ownership or more and will expire in three years or less. In
conjunction with these requirements, Manulife IM evaluates the companys strategic rationale for adopting the poison pill.
b. Supermajority
voting: Shareholders should have the ability to direct change at a firm based on a majority vote. Manulife IM generally opposes the creation, or continuation, of any bylaw, charter, or article provisions that require approval of more than a
majority of shareholders for amendment of those documents. Manulife IM may consider supporting such a standard where the supermajority requirement is intended to protect minority shareholders.
c. Proxy access: Manulife IM believes that shareholders have a right to appoint representatives to the board that best protect their interests.
The power to propose nominees without holding a proxy contest is a way to protect that right and is potentially less costly to management and shareholders. Accordingly, Manulife IM generally supports creation of a proxy access right (or similar
power at non-U.S. firms) provided there are reasonable thresholds of ownership and a reasonable number of shareholders can aggregate ownership to meet those thresholds.
d. Written consent: Written consent provides shareholders the power to formally demand board action outside of the context of an annual general
meeting. Shareholders can use written consent as a nimble method of holding boards accountable. Manulife IM generally supports the right of written consent so long as that right is reasonably tailored to reflect the will of a majority of
shareholders. Manulife IM may not support such a right, however, where there is a holder with a significant, or controlling, stake. Manulife IM evaluates the substance of any written actual consent proposal in line with these principles.
e. Right to call a special meeting: Manulife IM is supportive of the shareholder right to call a special meeting. This right allows shareholders
to quickly respond to events which can significantly affect firm value. Manulife IM believes that a 10% ownership threshold to call a special meeting reasonably protects this shareholder right while reducing the possibility of undue distraction for
management.
IV. Executive compensation: Manulife IM encourages companies to align executive incentives with shareholder interests when
designing executive compensation plans. Companies should provide shareholders with transparent, comprehensive, and substantive disclosure regarding executive compensation that aids shareholder assessment of the alignment between executive pay and
firm performance. Companies should also have the flexibility to design remuneration programs that fit a firms business model, business sector and industry, and overall corporate strategy. No one template of executive remuneration can fit all
companies.
a. Advisory votes on executive compensation: While acknowledging that there is no singular model for executive compensation,
Manulife IM closely scrutinizes companies that have certain concerning practices which may include:
i. Misalignment between pay and company
performance: Pay should generally move in tandem with corporate performance. Firms where CEO pay remains flat, or increases, though corporate performance remains down relative to peers, are particularly concerning.
ii. One-time grants: A firms one-time grant to an
executive, outside of the normal salary, bonus, and long-term award structure, may be indicative of an overall failure of the board to design an effective remuneration plan. A company should have a robust justification for making grants outside of
the normal remuneration framework.
iii. Significant quantity of nonperformance-based pay: Executive pay should generally be weighted more
heavily toward performance-based remuneration to create the alignment between pay and performance. Companies should provide a robust explanation for any significant awards made that vest solely based on time or are not otherwise tied to performance.
iv. Lack of rigor in performance targets: Performance targets should challenge managers to improve corporate performance and outperform
peers. Targets should, where applicable, generally align with, or even outpace, guidance; incentivize outperformance against a peer group; and otherwise remain challenging.
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v. Lack of disclosure: Transparency is essential to shareholder analysis and understanding of
executive remuneration at a company. Manulife IM expects firms to clearly disclose all major components of remuneration. This includes disclosure of amounts, performance metrics and targets, vesting terms, and pay outcomes.
vi. Repricing of options: Resetting the exercise price of outstanding options significantly undermines the incentive nature of the initial option
grant. Though a firm may have a strong justification for repricing options, Manulife IM believes that firms should put such decisions to a shareholder vote. Manulife IM may generally oppose an advisory vote on executive compensation where a company
has repriced outstanding options for executives without that shareholder approval.
vii. Adoption of problematic severance agreements (golden
parachutes): Manulife IM believes managers should be incentivized to pursue and complete transactions that may benefit shareholders. Severance agreements, if structured appropriately, can provide such inducements. At the same time, however, the
significant payment associated with severance agreements could potentially drive managers to pursue transactions at the expense of shareholder value. Manulife IM may generally oppose an executive remuneration proposal where a firm has adopted, or
amended, an agreement with an executive that contains an excise tax gross-up provision, permits accelerated vesting of equity upon a
change-in-control, allows an executive to unilaterally trigger the severance payment, or pays out in an amount greater than 300% of salary and bonus combined.
V. Capital structure: Manulife IM believes firms should balance the need to raise capital and encourage investment with the rights and interests
of the existing shareholder body. Evaluation of proposals to issue shares, repurchase shares, conduct stock splits, or otherwise restructure capital, is conducted on a
case-by-case basis with some specific requests covered here:
a.
Common stock authorization: Requests to increase the pool of shares authorized for issuance are evaluated on a case-by-case basis with consideration given to the
size of the current pool, recent use of authorized shares by management, and the company rationale for the proposed increase. Manulife IM also generally supports these increases where the company intends to execute a split of shares or pay a stock
dividend.
b. Reverse stock splits: Manulife IM generally supports proposals for a reverse stock split if the company plans to
proportionately reduce the number of shares authorized for issue in order to mitigate against the risk of excessive dilution to our holdings. We may also support these proposals in instances where the firm needs to quickly raise capital in order to
continue operations.
c. Dual class voting structure: Voting power should align with economic interest at a given firm. Manulife IM generally
opposes the creation of new classes of stock with differential voting rights and supports the elimination of these structures.
VI. Corporate
transactions and restructurings: Manulife IM reviews mergers, acquisitions, restructurings, and reincorporations on a case-by-case basis through the lens of whether
the transaction will create shareholder value. Considerations include fairness of the terms, valuation of the event, changes to management and leadership, realization of synergies and efficiencies, and whether the rationale for a strategic shift is
compelling.
VII. Cross shareholding: Cross shareholding is a practice where firms purchase equity shares of business partners, customers, or
suppliers in support of those relationships. Manulife IM generally discourages this practice as it locks up firm capital that could be allotted to income-generating investments or otherwise returned to shareholders. Manulife IM will review cross
shareholding practices at issuers and we encourage issuers to keep cross share holdings below 20% of net assets.
VIII. Audit-related issues:
Manulife IM believes that an effective auditor will remain independent and objective in its review of company reporting. Firm should be transparent regarding auditor fees and others services provided by an auditor that may create a conflict of
interest. Manulife IM uses the below principles to guide voting decisions related to auditors.
a. Auditor ratification: Manulife IM
generally approves the reappointment of the auditor absent evidence that they have either failed in their duties or appear to have a conflict that may not allow independent and objective oversite of a firm.
b. Auditor rotation: If Manulife IM believes that the independence and objectivity of an auditor maybe impaired at a firm, we may support a
proposal requesting a rotation of auditor. Reasons to support the rotation of the auditor can include a significant failure in the audit function and excessive tenure of the auditor at the firm.
1 |
Manulife Investment Management is the unified global brand for Manulifes global wealth and asset
management business, which serves individual investors and institutional clients in three businesses: retirement, retail and institutional asset management (Public markets and private markets). |
2 |
Further information on Sustainable Investing at Manulife IM can be found at manulifeim.com/institutional.
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3 |
We acknowledge SEC guidance on this issue from August 2019, which lists several nonexhaustive examples of
possible voting arrangements between the client and investment advisor, including (i) an agreement with the client to exercise voting authority pursuant to specific parameters designed to serve the clients best interest; (ii) an
agreement with the client to vote in favor of all proposals made by particular shareholder proponents; or (iii) an agreement with the client to vote in accordance with the voting recommendations of management of the issuer. All such
arrangements could be subject to conditions depending on instruction from the client. |
4 |
Manulife IM aggregated voting records are available through this site
manulifeim.com/institutional/us/en/sustainability. |
5 |
This includes general funds, affiliated segregated funds or separate accounts, and affiliated mutual / pooled
funds. |
6 |
This includes assets managed or advised for unaffiliated third parties, such as unaffiliated mutual/pooled
funds and unaffiliated institutional advisory portfolios. |
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PICTET ASSET MANAGEMENT
May 2022
PROXY VOTING
The following principles are used to define the securities eligible for proxy voting10:
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For actively managed funds, we aim to vote on 100% of equity holdings. |
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For passively managed funds, we aim to vote on companies representing 80% of underlying benchmarks by weight11.
This target may be revised upwards or downwards for specific strategies depending on factors such as portfolio size, geography or market capitalization. |
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For segregated accounts, including mandates and third-party (i.e.
sub-advisory) mutual funds managed by Pictet Asset Management, clients who delegate the exercise of voting rights to us have the choice between Pictet Asset Managements voting guidelines or their own
voting guidelines. |
The overarching purpose of our voting is to protect and promote the rights and long-term interests of our clients as shareholders. We consider it our
responsibility to engage with and challenge companies management to ensure that the issuers we invest in on our clients behalf are well-run, adhere to their strategy and deliver shareholder value.
We aim to support a strong culture of corporate governance, effective management of environmental and social issues and comprehensive reporting according to credible standards.
In line with Good Corporate Governance Practices12, our proxy voting upholds best practice in corporate
governance including board and management, executive remuneration, risk management and shareholder rights. Given that the long-term interests of shareholders are the paramount objective, we do not always support the management of companies and may
vote against management from time to time. We also reserve the right to deviate from our voting guidelines to take into account company-specific circumstances.
The complete version of these guidelines can be found under the following links:
https://www.issgovernance.com/file/policy/active/specialty/Sustainability-International-Voting-Guidelines.pdf
https://www.issgovernance.com/file/policy/active/specialty/Sustainability-US-Voting-Guidelines.pdf
Pictet Asset Managements voting guidelines are reviewed every year and adapted as appropriate to reflect the specificities of certain
regions and/or ownership structures.
4.4 |
Research & Decision Making |
To assist us in performing our proxy voting responsibilities, Pictet Asset Management uses the services of third-party specialists to provide research and to
facilitate the execution of voting decisions at all relevant company meetings worldwide.
Third party specialists are tasked with collecting meeting
notices for all holdings and researching the implications of every resolution according to voting guidelines defined by Pictet Asset Management. All recommendations are communicated to relevant investment teams and the Environmental Social
Governance (ESG) team.
Pictet Asset Management retains full discretion over all voting decisions and always reserves the right to deviate from third party
voting recommendations, on a case by case basis, in order to act in the best interests of our clients. Such divergences may be initiated by investment teams or by the ESG team and must be supported by written rationale.
In instances when consensus cannot be reached between the investments teams and ESG team, the decision is escalated to relevant Chief Investment Officers
(CIOs) and, if necessary, the Head of Investments.
Security lending can impair our ability to execute our voting rights. As a result, investment teams wishing to exercise full voting rights have two options:
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Recalling shares on loan on a
case-by-case basis |
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Removing a portfolio from the securities lending pool |
4.6 |
Shareholder Resolutions |
Shareholder resolutions at Annual General Meetings (AGMs)/Extraordinary General Meetings (EGMs) are evaluated in accordance with Pictet Asset Managements
voting guidelines. Evaluations are based on their own merits and are supported when they would improve the companys corporate governance or business profile at a reasonable cost.
Pictet Asset Management does not usually assume the role of an activist investor and does not initiate shareholder resolutions or shareholder groups. However,
Pictet Asset Management may consider supporting the submission of shareholder resolutions initiated by third-parties, or joining shareholder groups, based on the following criteria:
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How would the proposal enhance or protect shareholder value in the short-term and long-term?
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Liquidity and other technical issues that may impact specific portfolios, such as a share blocking period between
the submission and the general assembly. |
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Legal and compliance issues (such as concert party action or transparency requirements relating to ownership
size). |
Supporting the submission of a shareholder resolution, including the number of shares and corresponding accounts earmarked to
support the submission, is subject to agreement by relevant investment teams and the ESG team. In cases where no consensus is reached, the decision is escalated to the relevant Chief Investment Officer and, if necessary, the Head of Investments.
10 |
This activity does not include indirect investments through third-party funds that we invest in on behalf of
our clients, where we expect those managers to exercise their votes according to their own policy and report accordingly to relevant Pictet Asset Management entities. |
11 |
We do not exercise voting rights in share blocking markets across passive strategies. |
12 |
See Appendix D for further details on Good Corporate Governance Practices. |
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PZENA INVESTMENT MANAGEMENT
PROXY VOTING
Revised July 2021
INTRODUCTION
As a registered investment adviser and
fiduciary, Pzena Investment Management, LLC (PIM) exercises our responsibility, where applicable, to vote in a manner that, in our judgement, is solely in the clients best interest and will maximize long-term shareholder value. The
following policies and procedures have been established to ensure decision making is consistent with PIMs fiduciary responsibilities and applicable regulations under the Investment Company Act, Advisers Act, and ERISA.
GENERAL APPROACH
Each proxy that comes to PIM to be
voted shall be evaluated per the prudent process described below, in terms of what is in the best interest of our clients. We deem the best interest of clients to be solely that which maximizes shareholder value and yields the best economic results
(e.g., higher stock prices, long-term financial health, and stability). We will not subordinate the interests of our clients to any non-pecuniary interests nor will we promote
non-pecuniary benefits or goals unrelated to our clients long-term financial interests.
PIMs standard
Investment Advisory Agreement provides that until notified by the client to the contrary, PIM shall have the right to vote all proxies for securities held in that clients account. Where PIM has voting responsibility on behalf of a client, and
absent any client specific instructions, we generally follow the Voting Guidelines (Guidelines) set forth below. These Guidelines, however, are not intended as rigid rules and do not cover all possible proxy topics. Each proxy issue will
be considered individually and PIM reserves the right to evaluate each proxy vote on a case-by-case basis, as long as voting decisions reflect what is in the best
interest of our clients.
To the extent that, in voting proxies for an account subject to ERISA, PIM determines that ERISA would require voting a proxy in
a manner different from these Guidelines, PIM may override these Guidelines as necessary in order to comply with ERISA. Additionally, because clients, including ERISA clients, do not pay any additional fees or expenses specifically related to our
proxy voting, there is not a need to consider the costs related to proxy voting impacting the value of an investment or investment performance.
In those
instances where PIM does not have proxy voting responsibility, we shall forward any proxy materials to the client or to such other person as the client designates.
Proxy Voting Limitations
While, subject to the
considerations discussed above, PIM uses our best efforts to vote proxies, in certain circumstances it may be impractical or impossible to do so. Such instances include but are not limited to share blocking, securities lending, if PIM concludes that
abstention is in our clients economic interests and/or the value of the portfolio holding is indeterminable or insignificant.
VOTING
GUIDELINES
The following Guidelines summarize PIMs positions on various issues of concern to investors and give an indication of how portfolio
securities generally will be voted. These Guidelines are not exhaustive and do not cover all potential voting issues or the intricacies that may surround individual proxy votes. Actual proxy votes may also differ from the Guidelines presented, as we
will evaluate each individual proxy on its own merit.
It is also worth noting that PIM considers the reputation, experience and competence of a
companys management and board when it researches and evaluates the merits of investing in a particular security. In general, PIM has confidence in the abilities and motives of the board and management of the companies in which we invest.
1) ROUTINE BUSINESS
PIM will typically vote in accordance with
the board and management on the items below and other routine issues when adequate information on the proposal is provided.
i. Change in
date and place of annual meeting (if not associated with a takeover);
ii. Change in company name;
iii. Approval of financial statements;
iv. Reincorporation (unless to prevent takeover attempts);
v. Stock splits; or
vi. Amend
bylaws/articles of association to bring in line with changes in local laws and regulations.
PIM will oppose vague, overly broad,
open-ended, or general other business proposals for which insufficient detail or explanation is provided or risks or consequences of a vote in favor cannot be ascertained.
2) CAPITAL STRUCTURE
Stock Issuance
PIM will consider on a case-by-case basis all
proposals to increase the issuance of common stock, considering company-specific factors that include, at a minimum:
i. Past board
performance (use of authorized shares during the prior three years);
ii. Stated purpose for the increase;
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iii. Risks to shareholders of not approving the request; or
iv. Potential dilutive impact.
PIM will generally vote for such proposals (without preemptive rights) up to a maximum of 20% more than currently issued capital over a
specified period, while taking into account managements prior use of these preemptive rights. PIM will, however, vote against such proposals if restrictions on discounts are inadequate and/or the limit on the number of times the mandate may be
refreshed are not in line with local market practices.
3) AUDIT SERVICES
PIM is likely to support the approval of auditors unless,
i. Independence is compromised;
ii. Non-audit (other) fees are greater than the sum of the audit fees1, audit-related fees2 and permissible tax fees3;
iii. There is reason to believe the independent auditor has rendered an opinion which is neither accurate nor indicative of the companys
financial position; or
iv. Serious concerns about accounting practices are identified such as fraud, misapplication of Generally Accepted
Accounting Principles (GAAP) and material weaknesses identified in Section 404 disclosures of the Sarbanes-Oxley Act of 2002.
PIM will also apply a case-by-case assessment to shareholder
proposals asking companies to prohibit their auditors from engaging in non-audit services (or capping the level of non-audit services), taking into account whether the non-audit fees are excessive (per the formula above) and whether the company has policies and procedures in place to limit non-audit services or otherwise prevent conflicts of
interest.
4) COMPENSATION
PIM supports
reasonable incentive programs designed to attract and retain key talent. PIM typically supports managements discretion to set compensation for executive officers, so long as the plan aligns management and shareholder interests. PIM evaluates
each plan in detail to assess whether the plan provides adequate incentive to reward long-term performance and the impact on shareholder value (e.g. dilution).
Say on Pay
PIM
prefers a shareholder vote on compensation plans to provide a mechanism to register discontent with the plan itself or management team performance. As long as such proposals are non-binding and worded in a
generic manner (unrestrictive to actual company plans), PIM will support them. In evaluating these proposals, PIM will generally consider, at minimum: company performance, pay practices relative to industry peers, potentially problematic pay
practices and/or past unresponsive behavior.
Circumstances where PIM may oppose these proposals include:
i. Restricts the companys ability to hire new, suitable management; or
ii. Restricts an otherwise responsible management team in some other way harmful to the company.
Pay for Performance
PIM will generally support plans under which 50% or more of the shares awarded to top executives are tied to performance goals. Maintaining
appropriate pay-for-performance alignment means executive pay practices must be designed to attract, retain, and appropriately motivate the key employees who drive
shareholder value creation over the long term. Our evaluation of this issue will take into consideration, among other factors, the link between pay and performance; the mix between fixed and variable pay; performance goals; equity-based plan costs;
and dilution.
Incentive Options
PIM is generally supportive of incentive options that provide the appropriate degree of pay-for-performance alignment (as per the above) and are therefore in shareholder best interest. PIM will vote on a case-by-case
basis depending on certain plan features and equity grant practices, where positive factors may counterbalance negative factors, and vice versa.
However, the following would generally cause PIM to vote against a management incentive arrangement:
i. The proposed plan is in excess of 10% of shares;
ii. Company has issued 3% or more of outstanding shares in a single year in the recent past;
iii. The new plan replaces an existing plan before the existing plans termination date and some other terms of the new plan are likely to
be adverse to the maximization of investment returns; or
iv. The proposed plan resets options, or similarly compensates executives, for
declines in a companys stock price. This includes circumstances where a plan calls for exchanging a lower number of options with lower strike prices for an existing larger volume of options with high strike prices, even when the option
valuations might be considered the same total value. However, this would not include instances where such a plan seeks to retain key executives who have been undercompensated in the past.
Golden Parachutes / Severance Agreements
PIM will vote on a case-by-case basis, considering at minimum
existing change-in-control arrangements maintained with named executive officers and new or extended arrangements.
PIM will generally vote against such proposals if:
i. The proposed arrangement is excessive or not reasonable in light of similar arrangements for other executives in the company or in the
companys industry;
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ii. The proposed parachute or severance arrangement is considerably more financially attractive
than continued employment. Although PIM will apply a case-by-case analysis of this issue, as a general rule, a proposed severance arrangement which is three or more
times greater than the affected executives then current compensation shall be voted against; or
iii. The triggering mechanism in the
proposed arrangement is solely within the recipients control (e.g., resignation).
Tax Deductibility
Votes to amend existing plans to increase shares reserved and to qualify for tax deductibility under the provisions of Section 162(m)
should be considered on a case-by-case basis, considering the overall impact of the amendment(s).
Pay Peer Groups
PIM prefers that compensation peer groups are based on the industry, not size, revenue or balance sheet.
5) BOARD
Director Elections
PIM generally will evaluate director nominees individually and as a group based on our assessment of record and reputation, business knowledge
and background, shareholder value mindedness, accessibility, corporate governance abilities, time commitment, attention and awareness, independence, and character. PIM will apply a
case-by-case approach to determine whether to vote for or against directors nominated by outside parties whose interests may conflict with our interests as shareholders,
regardless of whether management agrees with the nomination.
Board Independence
PIM will generally withhold votes from or vote against any insiders on audit, compensation or nominating committees, and from any insiders and
affiliated outsiders on boards that are not at least majority independent. PIM also prefers companies to have compensation and audit committees composed of entirely independent directors.
PIM may vote in favor of any such directors in exceptional circumstances where the company has shown significant improvement.
Board Size
PIM
believes there is no optimal size or composition that fits every company. However, PIM prefers that the number of directors cannot be altered significantly without shareholder approval; otherwise potentially allowing the size of the board to be used
as an anti-takeover defense.
Board Tenure
PIM believes that any restrictions on a directors tenure, such as a mandatory retirement age or length of service limits, could harm
shareholder interests by forcing experienced and knowledgeable directors off the board. However, PIM prefers that boards do not have more than 50% of members serving for longer than ten years to avoid board entrenchment and group-think.
Chairman/CEO
PIM will evaluate and vote proposals to separate the Chairman and CEO positions in a company on a case-by-case basis based on our assessment of the strength of the companys governing structure, the independence of the board and compliance with NYSE and NASDAQ listing requirements, among other
factors. When the positions of Chairman and CEO are combined, PIM prefers that the company has a lead independent director to provide some independent oversight.
Cumulative Voting
PIM will generally vote against proposals to establish cumulative voting, as this leads to misaligned voting and economic interest in a
company. PIM will, however, vote in favor of proposals for cumulative voting at controlled companies where insider voting power is greater than 50%.
Director Over-Boarding
PIM will vote such proposals on a case-by-case basis but
prefers that directors do not sit on more than three additional boards. In evaluating these proposals PIM will consider, at minimum, management tenure, director business expertise and director performance.
Classified Boards
PIM generally opposes classified boards because this makes a change in board control more difficult and hence may reduce the accountability of
the board to shareholders. However, these proposals will be evaluated on a case-by-case basis and will consider, at minimum, company and director performance.
Board Diversity
PIM is generally supportive of a diverse board (age, race, gender etc.) that is representative of its customers and stakeholders. That said,
PIM does not believe in board quotas or any restrictions on director tenure that could harm shareholder interests by preventing qualified board candidates from being nominated or forcing experienced or knowledgeable directors off the board.
6) SHAREHOLDER RIGHTS
In general PIM does not
support any proposals designed to limit shareholder rights; below we have outlined some of the issues we consider most important.
Special Meetings
PIM generally supports proposals enabling shareholders to call a special meeting of a company so long as at least a 15% threshold with a one-year holding period is necessary for shareholders to do so. However, on a case-by-case basis, a 10% threshold may be deemed more
appropriate should particular circumstances warrant; for example, in instances where executive compensation or governance has been an issue for a company.
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One Share, One Vote
PIM is generally opposed to proposals to create dual-class capitalization structures as these provide disparate voting rights to different
groups of shareholders with similar economic investments. However, PIM will review proposals to eliminate a dual-class structure on a case-by-case basis, considering, at
minimum, managements prior record.
Supermajority
PIM does not support supermajority voting provisions with respect to corporate governance issues unless it would be in the best interest of
shareholders. In general, vesting a minority with veto power over shareholder decisions could deter tender offers and hence adversely affect shareholder value.
Proxy Access
PIM
will assess these proposals on a case-by-case basis but generally supports proxy access proposals that include an ownership level and holding period of at least 3% for
three years or 10% for one year.
7) SOCIAL/ENVIRONMENTAL
PIM will consider environmental and social proposals on their own merits and make a case-by-case assessment. PIM will consider supporting proposals that address material issues if we believe they will protect and/or enhance the long-term value of the company.
While PIM is generally supportive of resolutions seeking additional ESG disclosures, such proposals will be evaluated on a case-by-case basis, taking into consideration whether the requested disclosure is material, incremental and of reasonable cost to the business.
8) ANTI-TAKEOVER
PIM generally supports
anti-takeover measures that are in the best interest of shareholders and does not support anti-takeover measures such as poison pills that entrench management and/or thwart maximization of investment returns.
ROLES & RESPONSIBILITIES
Role
of ISS
PIM has engaged Institutional Shareholder Services (ISS) to provide a proxy analysis with research and a vote recommendation for
each shareholder meeting of the companies in our client portfolios. In engaging and continuing to engage ISS, PIM has determined that, where applicable, ISS proxy voting guidelines are consistent with ERISAs fiduciary duties including that the
votes are made in the best interest of our clients, focus on yielding the best economic results for our clients. ISS also votes, records and generates a voting activity report for our clients and assists us with recordkeeping and the mechanics of
voting. In no circumstance shall ISS have the authority to vote proxies except in accordance with standing or specific instructions given to it by PIM. PIM retains responsibility for instructing ISS how to vote, and we still apply our own Guidelines
as set forth herein. PIM does not utilize pre-population or automated voting except as a safeguard mechanism designed to ensure that, in the unlikely event that we fail to submit vote instructions for a
particular proxy, our shares will still get voted. If PIM does not issue instructions for a particular vote, the default is for ISS to mark the ballots in accordance with our Guidelines (when they specifically cover the item being voted on), and to
refer all other items back to PIM for instruction (when there is no PIM policy covering the vote).
When voting a proxy for a security that PIMs
Research team does not cover, we will vote in accordance with our Guidelines (when they specifically cover the item being voted on) and defer to ISSs recommendations on all other items.
Periodically, PIMs Vendor Management Committee conducts a due diligence review of ISS, through which it reviews and evaluates certain key policies and
procedures submitted to us by ISS. On a quarterly basis, PIM reviews proxy voting reports for a sample of accounts by comparing and reconciling them against one another and against our internal holdings information for those accounts. PIM also
samples and reviews proxy votes when testing our Proxy Voting Policy, as part of our regular compliance testing procedures. Further, PIM reviews ISS procedures for receiving additional information from issuers after a proxy has been sent,
incorporating that information into its recommendations, and sending that information and/or updated recommendations to PIM.
Role of Analyst
The analyst who is responsible for covering the company also votes the associated proxies since they have first-hand
in-depth knowledge of the company. In evaluating proxy issues, the analyst will utilize a variety of sources to help come to a decision:
i. Information gathered through in-depth research and on-going
company analyses performed by our investment team in making buy, sell and hold decisions for our client portfolios. This process includes regular external engagements with senior management of portfolio companies and internal discussions with
Portfolio Managers (PMs) and the Chief Investment Officer (CIO), as needed;
ii. ISS reports to help identify and
flag factual issues of relevance and importance;
iii. Information from other sources, including the management of a company presenting a
proposal, shareholder groups, and other independent proxy research services; and/or
iv. Where applicable, any specific guidelines
designated in writing by a client.
Proxy Voting Committee
To help make sure that PIM votes client proxies in accordance with our fiduciary obligation to maximize shareholder value, we have established a Proxy Voting
Committee (the Committee) which is responsible for overseeing the Guidelines. The Committee consists of representatives from Legal and Research, including our Chief Compliance Officer (CCO), Director of Research
(DOR), and at least one PM (who represents the interests of all PIMs
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portfolio managers and is responsible for obtaining and expressing their opinions at committee meetings). The
Committee will meet at least once annually and as often as necessary to oversee our approach to proxy voting.
The DOR is responsible for monitoring the
analysts compliance with the Guidelines, the CCO is responsible for monitoring overall compliance with these procedures and an internally-designated Proxy Coordinator is responsible for day-to-day proxy voting activities.
CONFLICTS OF INTEREST
PIM is sensitive to conflicts of interest that may arise in the proxy voting process. PIM believes that application of the Guidelines should, in most cases,
adequately address any potential conflicts of interest. However, if an actual or potential material conflict of interest has been identified, PIM has put in place a variety of different mitigation strategies as outlined below.
A potential material conflict of interest could exist in the following situations:
i. PIM manages any pension or other assets affiliated with a publicly traded company, and also holds that companys or an affiliated
companys securities in one or more client portfolios;
ii. PIM has a client relationship with an individual who is a corporate
director, or a candidate for a corporate directorship of a public company whose securities are in one or more client portfolios; or
iii. A
PIM officer, director or employee, or an immediate family member thereof is a corporate director, or a candidate for a corporate directorship of a public company whose securities are in one or more client portfolios. For purposes hereof, an
immediate family member is generally defined as a spouse, child, parent, or sibling.
If a potential material conflict of interest exists, the following
procedures will be followed:
i. If our proposed vote is consistent with the Guidelines, above, we will vote in accordance with our
proposed vote;
ii. If our proposed vote is inconsistent with or not covered by our Guidelines, but is consistent with the recommendations
of ISS, we will vote in accordance with ISS recommendations; and
iii. If our proposed vote is inconsistent with or not covered by our
Guidelines, and is inconsistent with the recommendations of ISS, the CCO and the DOR (or their respective designees) (the Conflicts Committee) will review the potential conflict and determine whether the potential conflict is material.
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If the Conflicts Committee determines that the potential conflict is not material, we will vote in accordance
with the proposed vote. |
b. If the Conflicts Committee determines the potential conflict is material, the Conflicts
Committee will review the proposed vote, the analysis and rationale for the vote recommendation, the recommendations of ISS and any other information the Conflicts Committee may deem necessary in order to determine whether the proposed vote is
reasonable and not influenced by any material conflicts of interest. The Conflicts Committee may seek to interview the research analysts or portfolio managers or any other party it may deem necessary for making its determination.
i. If the Conflicts Committee determines the proposed vote is reasonable and not influenced by any conflicts of interest, we will vote in
accordance with our proposed vote.
ii. If the Conflicts Committee cannot determine that the proposed vote is reasonable and not influenced
by any conflict of interest, the Conflicts Committee will determine the best course of action in the best interest of the clients which may include deferring to the ISS recommendation or notifying each client who holds the relevant securities of the
potential conflict, to seek such clients voting instruction.
On an annual basis, we will review and assess the conflicts policies and Code of
Conduct that ISS posts on its website for sufficiency in addressing potential conflict of interest, self-dealing and improper influence issues that may affect voting recommendations by ISS. PIM will also periodically review samples of ISS
recommendations for voting proxies, after the vote has occurred, to ensure that ISS recommendations are consistent with ISS proxy voting guidelines, as applicable. PIMs analysts also incorporate information regarding ISS
potential conflicts of interest into their process when evaluating and voting proxies, and on a quarterly basis, our DOR reviews an updated list of ISS significant client relationships.
Other Situations
Client Conflict
Where PIM manages the assets of a proponent of a shareholder proposal for a company whose securities are in one or more client portfolios, the following
guidance should be followed:
i. The identity of the proponent of a shareholder proposal shall not be given any substantive weight (either
positive or negative) and shall not otherwise influence an analysts determination whether a vote for or against a proposal is in the best interest of our clients.
ii. Where PIM determines that it is in the best interest of our clients to vote against that proposal, a designated member of PIMs client
service team will notify the client-proponent and give that client the option to direct PIM in writing to vote the clients proxy differently than it is voting the proxies of our other clients.
iii. If the proponent of a shareholder proposal is a PIM client whose assets under management with PIM constitute 30% or more of PIMs
total assets under management, and PIM has determined that it is in the best interest of our clients to vote for that proposal, PIM will disclose its intention to vote for such proposal to each additional client who also holds the securities of the
company soliciting the vote on such proposal and for whom PIM has authority to vote proxies. If a client does not object to the vote within three business days of delivery of such disclosure, PIM will be free to vote such clients proxy as
stated in such disclosure.
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Analyst Conflict
If the analyst voting the proxy also beneficially owns shares of the company in his/her personal trading accounts, they must notify the Proxy Coordinator and
the DOR must sign off on the analysts votes for that company. It is the responsibility of each analyst to disclose such personal interest and obtain such approval. Any other owner, partner, officer, director, or employee of PIM who has a
personal or financial interest in the outcome of the vote is prohibited from attempting to influence the proxy voting decision of PIM personnel responsible for voting client securities.
VOTING PROCEDURES
If an analyst desires to vote contrary
to the Guidelines set forth in this proxy voting policy or the written proxy voting policy designated by a specific client, the analyst will discuss the vote with the CIO, and/or DOR and/or a PM for the strategy in which the security is held. The
CIO, DOR and/or the PM, shall, in turn, determine how to vote the proxy based on the analysts recommendation and the long-term economic impact such vote will have on the securities held in client portfolios. If the CIO, DOR and/or the PM agree
with the analysts recommendation and determine that a contrary vote is advisable the analyst will provide written documentation of the reasons for the vote.
Vote Processing
It is understood that PIMs
and ISS ability to commence voting proxies for new or transferred accounts is dependent upon the actions of custodians and banks in updating their records and forwarding proxies. PIM will not be liable for any action or inaction by any
Custodian or bank with respect to proxy ballots and voting.
Client Communication
PIM will include a copy of these proxy voting policies and procedures, as they may be amended from time to time, in each new account pack sent to prospective
clients. We also will update our ADV disclosures regarding these policies and procedures to reflect any material additions or other changes to them, as needed. Such ADV disclosures will include an explanation of how to request copies of these
policies and procedures as well as any other disclosures required by Rule 206(4)-6 of the Advisers Act.
Return Proxies
The CCO or designee shall send or
cause to be sent (or otherwise communicate) all votes to the company or companies soliciting the proxies within the applicable time period designated for return of such votes, unless not possible to do so due to late receipt or other exigent
circumstances.
CORPORATE ACTIONS
PIM is responsible
for monitoring both mandatory (e.g. calls, cash dividends, exchanges, mergers, spin-offs, stock dividends and stock splits) and voluntary (e.g. rights offerings, exchange offerings, and tender offers) corporate actions. Operations personnel will
ensure that all corporate actions received are promptly reviewed and recorded in PIMs portfolio accounting system, and properly executed by the custodian banks for all eligible portfolios. On a daily basis, a file of PIMs security
database is sent to a third-party service, Vantage, via an automated upload which then provides corporate action information for securities included in the file. This information is received and acted upon by the Operations personnel responsible for
corporate action processing. In addition, PIM receives details on voluntary and mandatory corporate actions from the custodian banks via email or online system and all available data is used to properly understand each corporate event.
Voluntary Corporate Actions
The Portfolio
Management team is responsible for providing guidance to Operations on the course of action to be taken for each voluntary corporate action received in accordance with the standards described above for proxy voting, including, but not limited to,
acting in the best interest of clients to maximize long-term shareholder value and yield the best economic results. In some instances, if consistent with such standards, the Portfolio Management team may maintain standing instructions on particular
event types. As appropriate, Legal and Compliance may be consulted to determine whether certain clients may participate in certain corporate actions. Operations personnel will then notify each custodian bank, either through an online interface, via
email, or with a signed faxed document of the election selected. Once all necessary information is received and the corporate action has been vetted, the event is processed in the portfolio accounting system and filed electronically. A log of
holdings information related to the corporate action is maintained for each portfolio in order to confirm accuracy of processing.
CLASS ACTIONS
PIM shall not have any responsibility to initiate, consider or participate in any bankruptcy, class action or other litigation against or involving any
issue of securities held in or formerly held in a client account or to advise or take any action on behalf of a client or former client with respect to any such actions or litigation.
RECORD KEEPING
PIM or ISS, on PIMs behalf,
maintains (i) copies of the proxy materials received by PIM for client securities; (ii) records of proxies that were not received and what actions were taken to obtain them; (iii) votes cast on behalf of clients by account;
(iv) records of any correspondence made regarding specific proxies and the voting thereof; (v) client requests for proxy voting information (including reports to mutual fund clients for whom PIM has proxy voting authority containing
information they need to satisfy their annual reporting obligations under Rule 30b-1-4 and to complete Form N-PX); (vi) documents
prepared by PIM to inform and/or memorialize a voting decision, including these policies and procedures and any documentation related to a material conflict of interest; and (vii) records of any deviations from broad Guidelines. Such records
will be maintained for a minimum of six years.
POLICY REVIEW
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The Proxy Voting Committee reviews these Voting Guidelines and procedures at least annually and makes such
changes as it deems appropriate, considering current trends and developments in corporate governance and related issues, as well as operational issues facing PIM and applicable regulations under the Investment Company Act, Advisers Act and ERISA.
1 |
Audit fees shall mean fees for statutory audits, comfort letters, attest services, consents, and review of
filings with the SEC |
2 |
Audit-related fees shall mean fees for employee benefit plan audits, due diligence related to M&A, audits
in connection with acquisitions, internal control reviews, consultation on financial accounting and reporting standards |
3 |
Tax fees shall mean fees for tax compliance (tax returns, claims for refunds and tax payment planning) and tax
consultation and planning (assistance with tax audits and appeals, tax advice relating to M&A, employee benefit plans and requests for rulings or technical advice from taxing authorities) |
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SUSTAINABLE GROWTH ADVISERS, LP
PROXY VOTING POLICY AND PROCEDURES
Amendment Dated
April 8, 2020
5.2.8 Proxy Voting Policies and Procedures
Sustainable Growth recognizes that the act of managing assets of clients consisting of equity securities can include the voting of proxies related to such
equity securities. Each client can either: (i) delegate the power to vote proxies to the adviser; or (ii) retain the authority to vote his or her proxy. Where a client has delegated the power to vote proxies in his or her account,
Sustainable Growth will vote the proxies in a manner that is in the best interests of the client. When Sustainable Growth has such responsibility, it will follow the Proxy Voting Policies and Procedures.
Sustainable Growth when administering the voting of proxies will comply with Commission Guidance Regarding Proxy Voting Responsibilities of Investment
Advisers (August 29, 2019). Sustainable Growth may also take into consideration proxy voting guidance of other regulators including the EU, UK, Canadian and Australia regulatory authorities (as applicable).
5.2.8.1.1 |
Proxy Voting Responsibility |
At the inception of each investment adviser-client relationship, Sustainable Growth shall require the client to indicate whether the client or Sustainable
Growth is responsible for voting proxies in one or more of the following documents:
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Clients investment advisory contract; or |
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Separate agreement between client and Sustainable Growth authorizing Sustainable Growth to vote clients
proxies. |
5.2.8.1.2 |
Client Responsibility to Vote Proxies |
If Sustainable Growth receives proxies related to a clients securities and Sustainable Growth is not responsible for voting such proxies, Sustainable
Growth shall make arrangements with the client and/or clients custodian or take such other steps to ensure that the client timely receives such proxies.
5.2.8.1.3 |
Firm Responsibility to Vote Proxies |
Unless the power to vote proxies for a client is reserved to that client (or in the case of an employee benefit plan, the plans trustee or other
fiduciaries), Sustainable Growth is responsible for voting the proxies related to that account. When exercising its authority to vote proxies, Sustainable Growth shall:
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satisfy its duties of care and loyalty to each client with respect to voting that clients proxies;
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conduct a reasonable investigation into matters on which the Sustainable Growth votes; |
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consider whether voting all of its clients shares the same and/or in accordance with a uniform voting
policy would be in the best interest of each of its clients, including the potential effect of the vote on the value of a clients investments that have different investment objectives; |
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make the determination with respect to each proxy vote that its vote or recommendation is in the best interest of
the client; and |
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not place its own interests ahead of the interests of any client with respect to any proxy vote or
recommendation. |
5.2.8.1.4 |
Proxy Voting Responsibility Monitoring |
The Portfolio Manager shall maintain records identifying those clients where Sustainable Growth exercises proxy voting authority and those clients where
Sustainable Growth does not have such authority.
5.2.8.2 |
Retaining Third Party Proxy Advisory Firms |
Sustainable Growth may retain a third-party company (Third Party Proxy Advisory Firm) to provide it with research and recommendations with voting
client proxies only after Sustainable Growth:
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Obtains and reviews the proxy voting policies and procedures of the Third Party Proxy Advisory Firm (or summaries
of such policies and procedures), and finds them acceptable and in the best interests of its clients; |
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Determines that the Third Party Proxy Advisory Firm has the capacity and competency to analyze proxy issues;
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Considers the following: |
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the adequacy and quality of the Third Party Proxy Advisory Firms staffing, personnel, and technology;
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how the Third Party Proxy Advisory Firm incorporates appropriate input in formulating its methodologies and
construction of issuer peer groups; |
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where relevant, how the Third Party Proxy Advisory Firm, in constructing peer groups, takes into account the
unique characteristics regarding the issuer, to the extent available, such as the issuers size; its governance structure; its industry and any particular practices unique to that industry; its history; and its financial position;
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the extent to which the Third Party Proxy Advisory Proxy Firm has adequately disclosed its methodologies in
formulating voting recommendations; |
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the nature of any third-party information sources that the Third Party Proxy Advisory Firm uses as a basis for
its voting recommendations; and |
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how the Third Party Proxy Advisory Firm would expect to engage with issuers and third parties;
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Obtains sufficient information from the Third Party Proxy Advisory Firm initially and on an ongoing basis to
conclude that the Third Party Proxy Advisory Firm is independent and can make recommendations in an impartial manner; |
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Requires the Third Party Proxy Advisory Firm to disclose any relevant facts concerning the Firms
relationships with issuers of publicly traded securities that are the subject of the proxy, such as the amount of compensation the Third Party Proxy Advisory Firm receives from such issuers; |
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Obtains representations from the Third Party Proxy Advisory Firm that it faced no conflict of interest with
respect to recommendations or votes and that it will promptly inform Sustainable Growth if there is a conflict of interest; and |
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Obtains representations from the Third Party Proxy Advisory Firm that no member of its staff providing services
to issuers of publicly traded companies play a role in the preparation of its analyses or vote on proxy issues. |
5.2.8.3 |
Third Party Proxy Advisory Firm Advice |
In the event Sustainable Growth retains a Third-Party Proxy Advisory Firm to assist it in voting proxies received from issuers, Sustainable Growth shall:
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vote proxies in a manner that is in the best interest of its clients; |
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exercise its independent judgment when deciding how to vote a proxy, while taking into account any
recommendations from the Third-Party Proxy Advisory Firm; |
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the internal guidelines published by the Third-Party Proxy Advisory Firm to ensure the firm is following its
guidelines, including how such firm addresses conflicts of interest; |
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reports prepared by the Third-Party Proxy Advisory Firm for accuracy; |
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the Third-Party Proxy Advisory Firms efforts to correct any identified material deficiencies in the
Third-Party Proxy Advisory Firms analysis; |
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periodically review the Third Party Proxy Advisory Firms disclosure to Sustainable Growth regarding the
sources of information and methodologies used in formulating voting recommendations or executing voting instructions; |
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request the Third Party Proxy Advisory Firm to notify Sustainable Growth regarding business changes it considers
relevant (e.g., with respect to the Third Party Proxy Advisory Firms capacity and competency to provide independent proxy voting advice or carry out voting instructions); |
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inquire whether the Third Party Proxy Advisory Firm appropriately updates its methodologies, guidelines, and
voting recommendations on an ongoing basis, including in response to feedback from issuers and their shareholders; and |
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periodically review how Sustainable Growth has voted client proxies and compare to the recommendations of the
Third-Party Proxy Advisory Firm and, if applicable, investigate high correlations between its votes and Third Party Proxy Advisory Firm recommendations (which may suggest rote reliance on proxy advisory firms). |
5.2.8.3 |
Proxy Voting Guidelines |
Sustainable Growth shall vote proxies related to securities held by any client in a manner solely in the best interests of the client. Sustainable Growth shall
consider only those factors that relate to the clients investment, including how its vote will economically impact and affect the value of the clients investment. Proxy votes will be cast in favor of proposals that maintain or strengthen
the shared interests of shareholders and management, increase shareholder value, and maintain or increase the rights of shareholders. Proxy votes will be cast against proposals having the opposite effect. In voting on each and every issue,
Sustainable Growth shall vote in a prudent and diligent fashion and only after a careful evaluation of the issue presented on the ballot.
Prior to
electing to follow any specific guidelines, Sustainable Growth will:
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Determine the impact of following such guidelines on all clients, including whether the guidelines would be more
appropriate for one group of clients and not for others; |
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Identify any direct or indirect benefits that might flow to Sustainable Growth as a result of choosing one
guideline over other guidelines; |
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Address any conflicts of interest raised by the selection of such guidelines by following the Proxy Voting
Conflicts of Interest section of these Procedures; and |
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Refrain from using such guidelines if it provides an advantage to one group of clients while disadvantaging or
otherwise not being in the best interest of any of the remaining clients. |
Sustainable Growth has adopted the following
specific voting guidelines:
5.2.8.3.1 |
Corporate Governance |
Unless exceptional circumstances exist, Sustainable Growth will vote against proposals that make it more difficult to replace Board members, including
proposals to:
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Overweight management on the Board |
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Introduce cumulative voting |
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Introduce unequal voting rights |
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Create super majority voting |
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Establish pre-emptive rights |
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Sustainable Growth will vote against proposals that make it more difficult for a company to be taken over by outsiders, and in favor of proposals that attempt
to do the opposite.
5.2.8.3.3 |
Capital Structure |
Sustainable Growth will vote against proposals to move the company to another jurisdiction less favorable to shareholders interests, or to restructure
classes of stock in such a way as to benefit one class of shareholders at the expense of another, such as dual classes (A and B shares) of stock.
5.2.8.3.4 |
Outside Directors |
Sustainable Growth will vote against any proposal to allow the Chief Executive Officer of a company to appoint outside directors, and in favor of any proposal
to eliminate this ability.
5.2.8.3.5 |
Social & Environmental Considerations |
Sustainable Growth takes into consideration environmental, social and governance issues both in its investment process and proxy voting. Sustainable Growth
will generally support standards-based ESG proposals that enhance long-term shareholder value while aligning the interests of an issuer with those of society at large. In particular, Sustainable Growth will focus on proxy proposals seeking greater
transparency and adherence to internationally recognized standards and principals.
In determining how to vote Sustainable Growth will analyze and
consider the following:
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Whether the proposal is well framed and reasonable |
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Whether the proposal (if adopted) would have either a positive/negative impact on the issuers short or long
term share value |
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The percentage of sales, assets and/or earnings affected |
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Whether the issuer has already appropriately or adequately addressed the matter(s) at issue
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The issuers analysis and recommendation on the proposal |
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The issuers past practices with respect to the proposal (ie., past controversies, fines, litigation with
respect to any such environmental and/or social practices) |
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How other companies have addressed similar issues and proposals |
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Other risk factors including economic and reputational risks that may impact the issuers business
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5.2.8.4 |
Proxy Voting Conflicts of Interest |
Sustainable Growth recognizes that conflicts between itself and clients may arise in voting the proxies of issuers of equity securities and that these
conflicts must be addressed. The designated Investment Committee member is responsible for identifying potential conflicts of interest in regard to the proxy voting process. Where appropriate, Sustainable Growth will use one of the following methods
to resolve such conflicts, provided such method results in a decision to vote the proxies that is based on the clients best interest and is not the product of the conflict:
1 |
provide the client with sufficient information regarding the shareholder vote and Sustainable
Growths potential conflict to the client and obtain the clients consent before voting; |
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vote securities based on a pre-determined voting policy;
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vote client securities based upon the recommendations of a Third-Party Proxy Advisory that itself does
not have a conflict of interest; or |
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request the client to engage another party to determine how the proxies should be voted.
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Third Party Proxy Advisory Firm
If Sustainable Growth utilizes a Third Party Proxy Advisory Firm, Sustainable Growth will review such firms policies and procedures regarding how it
identifies and addresses conflicts of interest.
5.2.8.5 |
Proxy Voting Review |
Sustainable Growth periodically will review the votes cast for clients.
Sustainable Growth will test whether its casting of votes on behalf of clients is consistently following its voting policies and procedures including:
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sampling proxy votes that relate to proposals that may require more issuer-specific analysis (e.g., mergers and
acquisition transactions, dissolutions, conversions, or consolidations); and |
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sampling proxy votes to determine whether they were consistent with its voting policies and procedures and in its
clients best interest. |
Third-Party Proxy Advisory Firm Voting
If Sustainable Growth retains a Third-Party Proxy Advisory Firm to provide voting recommendations, Sustainable Growth will periodically evaluate whether the
Third-Party Proxy Advisory Firms voting recommendations are consistent with its voting policies and procedures and in the clients best interest.
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TRILLIUM ASSET MANAGEMENT, LLC
PROXY VOTING AND REPORTING
October 23, 2020
Trilliums policy is to seek to vote our clients proxies in accordance with their best interests, both their financial interest and their values.
Trilliums clients seek out our services in part because they share our devotion to aligning stakeholders values and objectives, combining impactful investment solutions with active ownership with the goal to provide positive impact,
long-term value, and social dividends. Trilliums Proxy Voting Committee refines the proxy voting guidelines on an annual basis in an effort to be consistent with these goals. While the specific details of the guidelines will change
in accordance with current and upcoming issues, Trillium bases the underlying decisions on the considered finding that proxy voting decisions must incorporate financial, environmental, social, governance, and market wide considerations.
The Chief Advocacy Officer and the Chief Compliance Officer periodically sample proxy voting records in an effort to make sure proxies are voted consistent
with clients best interests as conveyed in the proxy voting policy. In instances where the proxy voting guidelines do not address how Trillium should vote on shares held in Trillium strategies, the Proxy Voting Committee will review the item
and assess how to vote in the clients best interest. In instances where the proxy voting guidelines do not address how Trillium should vote on shares not held in Trillium strategies, the Chief Advocacy Officer will review the item and refer it
to the relevant investment manager, the Proxy Voting Committee, or vote per the providers recommendation in accordance with the clients best interest.
Trillium seeks to identify any conflicts of interests in voting proxies including identifying any Funds affiliate of a public company in which the Funds
may invest. Any such conflicts will be reviewed by the Chief Advocacy Officer or Chief Compliance Officer to determine how to mitigate the conflict. The conflict will be reported to the CEO, COO or the CCO to determine if the Funds need to be
notified. If there is a conflict of interest between Trillium and a client or Fund in respect to voting a proxy, Trillium will vote directly in line with the proxy voting policy.
The Chief Advocacy Officer has primary responsibility for coordinating the voting of client and Funds proxies. Trillium engages a third-party provider to
assist with the administration of proxy voting. Trillium relies upon a third-party proxy voting service provider to implement Trilliums proxy voting policy and assist with the administrative aspects of voting on behalf of clients. The Proxy
Voting Committee annually, and on a periodic basis, periodically reviews the performance of the provider to seek to determine if services are sufficiently accurate, transparent, complete, effective, and otherwise adequate to meet our
responsibilities. Further, the Proxy Policy Committee periodically reviews information, policies, and procedures provided by the provider regarding potential and actual conflicts of interest to determine if they create potential or actual conflicts
with the services provided to Trillium. This annual review also considers the adequacy and timeliness of the providers policies and procedures.
Trillium
does not borrow or lend shares for the primary purpose of voting them. Certain Funds have a securities lending program whereby they lend shares to third parties. In order to vote loaned shares at issuer annual and special meetings, it is necessary
to attempt to recall those shares prior to a companys record date. The Funds Portfolio Managers provide a designated member of the Shareholder Advocacy team with a list of all currently loaned shares. If the Shareholder Advocacy team
member finds that any company on the list has a record date within one month, they report that finding to the Funds Portfolio Managers so that they can attempt to recall the shares.
Trillium is responsible for the collection of information and the preparation and filing of Form N-PX. Trillium will
provide the necessary information and review Form N-PX for accuracy and completeness.
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WELLINGTON MANAGEMENT
GLOBAL PROXY POLICY AND PROCEDURES
September 1, 2020
INTRODUCTION
Wellington Management has adopted
and implemented policies and procedures that it believes are reasonably designed to ensure that proxies are voted in the best interests of clients for whom it exercises proxy-voting discretion.
Wellington Managements Proxy Voting Guidelines (the Guidelines) set forth broad guidelines and positions on common proxy issues that
Wellington Management uses in voting on proxies In addition, Wellington Management also considers each proposal in the context of the issuer, industry and country or countries in which the issuers business is conducted. The Guidelines are not
rigid rules and the merits of a particular proposal may cause Wellington Management to enter a vote that differs from the Guidelines. Wellington Management seeks to vote all proxies with the goal of increasing long-term client value and, while
client investment strategies may differ, applying this common set of guidelines is consistent with the investment objective of achieving positive long-term investment performance for each client.
STATEMENT OF POLICY
Wellington Management:
1 |
Votes client proxies for which clients have affirmatively delegated proxy-voting authority, in writing,
unless it has arranged in advance with the client to limit the circumstances in which it would exercise voting authority or determines that it is in the best interest of one or more clients to refrain from voting a given proxy.
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Votes all proxies in the best interests of the client for whom it is voting. |
3 |
Identifies and resolves all material proxy-related conflicts of interest between the firm and its
clients in the best interests of the client. |
RESPONSIBILITY AND OVERSIGHT
The Investment Research Group (Investment Research) monitors regulatory requirements with respect to proxy voting and works with the firms
Legal and Compliance Group and the Investment Stewardship Committee to develop practices that implement those requirements. Investment Research also acts as a resource for portfolio managers and research analysts on proxy matters as needed. Day-to-day administration of the proxy voting process is the responsibility of Investment Research. The Investment Stewardship Committee is responsible for oversight of the
implementation of the Global Proxy Policy and Procedures, review and approval of the Guidelines, identification and resolution of conflicts of interest, and for providing advice and guidance on specific proxy votes for individual issuers. The
Investment Stewardship Committee reviews the Global Proxy Policy and Procedures annually.
PROCEDURES
Use of Third-Party Voting Agent
Wellington Management
uses the services of a third-party voting agent for research, voting recommendations, and to manage the administrative aspects of proxy voting. The voting agent processes proxies for client accounts, casts votes based on the Guidelines and maintains
records of proxies voted. Wellington Management complements the research received by its primary voting agent with research from another voting agent.
Receipt of Proxy
If a client requests that Wellington
Management votes proxies on its behalf, the client must instruct its custodian bank to deliver all relevant voting material to Wellington Management or its voting agent.
Reconciliation
Each public security proxy received by
electronic means is matched to the securities eligible to be voted and a reminder is sent to any custodian or trustee that has not forwarded the proxies as due. This reconciliation is performed at the ballot level. Although proxies received for
private securities, as well as those received in non- electronic format, are voted as received, Wellington Management is not able to reconcile these ballots, nor does it notify custodians of non-receipt.
Research
In addition to proprietary investment research undertaken by Wellington Management investment professionals, Investment Research conducts proxy research
internally, and uses the resources of a number of external sources including third-party voting agents to keep abreast of developments in corporate governance and of current practices of specific companies.
Proxy Voting
Following the reconciliation process, each
proxy is compared against the Guidelines, and handled as follows:
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Generally, issues for which explicit proxy voting guidance is provided in the Guidelines (i.e., For,
Against, Abstain) are voted in accordance with the Guidelines. |
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Issues identified as
case-by-case in the Guidelines are further reviewed by Investment Research. In certain circumstances, further input is needed, so the issues are forwarded to
the relevant research analyst and/or portfolio manager(s) for their input. |
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Absent a material conflict of interest, the portfolio manager has the authority to decide the final vote.
Different portfolio managers holding the same securities may arrive at different voting conclusions for their clients proxies. |
Wellington Management reviews a subset of the voting record to ensure that proxies are voted in accordance with these Global Proxy Policy and Procedures
and the Guidelines; and ensures that documentation and reports, for clients and for internal purposes, relating to the voting of proxies are promptly and properly prepared and disseminated.
Material Conflict of Interest Identification and Resolution Processes
Wellington Managements broadly diversified client base and functional lines of responsibility serve to minimize the number of, but not prevent, material
conflicts of interest it faces in voting proxies. Annually, the Investment Stewardship Committee sets standards for identifying material conflicts based on client, vendor, and lender relationships, and publishes those standards to individuals
involved in the proxy voting process. In addition, the Investment Stewardship Committee encourages all personnel to contact Investment Research about apparent conflicts of interest, even if the apparent conflict does not meet the published
materiality criteria. Apparent conflicts are reviewed by designated members of the Investment Stewardship Committee to determine if there is a conflict and if so whether the conflict is material.
If a proxy is identified as presenting a material conflict of interest, the matter must be reviewed by designated members of the Investment Stewardship
Committee, who will resolve the conflict and direct the vote. In certain circumstances, the designated members may determine that the full Investment Stewardship Committee should convene.
OTHER CONSIDERATIONS
In certain instances, Wellington
Management may be unable to vote or may determine not to vote a proxy on behalf of one or more clients. While not exhaustive, the following are potential instances in which a proxy vote might not be entered.
Securities Lending
In general, Wellington Management
does not know when securities have been lent out pursuant to a clients securities lending program and are therefore unavailable to be voted. Efforts to recall loaned securities are not always effective, but, in rare circumstances, Wellington
Management may determine voting would outweigh the benefit to the client resulting from use of securities for lending and recommend that a client attempt to have its custodian recall the security to permit voting of related proxies.
Share Blocking and Re-registration
Certain countries
impose trading restrictions or requirements regarding re-registration of securities held in omnibus accounts in order for shareholders to vote a proxy. The potential impact of such requirements is evaluated
when determining whether to vote such proxies.
Lack of Adequate Information, Untimely Receipt of Proxy Materials, or Excessive Costs
Wellington Management may abstain from voting a proxy when the proxy statement or other available information is inadequate to allow for an informed vote, when
the proxy materials are not delivered in a timely fashion or when, in Wellington Managements judgment, the costs exceed the expected benefits to clients (such as when powers of attorney or consularization are required).
ADDITIONAL INFORMATION
Wellington Management maintains
records related to proxies pursuant to Rule 204-2 of the Investment Advisers Act of 1940 (the Advisers Act), the Employee Retirement Income Security Act of 1974, as amended (ERISA), and
other applicable laws. In addition, Wellington Management discloses annually how it has exercised its voting rights for significant votes, as require by the EU Shareholder Rights Directive II (SRD II).
Wellington Management provides clients with a copy of its Global Proxy Policy and Procedures, including the Guidelines, upon written request. In
addition, Wellington Management will provide specific client information relating to proxy voting to a client upon written request.
Dated: 1 September
2020
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