REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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[X]
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Pre‑Effective Amendment No.
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Post‑Effective Amendment No. 52
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[X]
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and
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
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[X]
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Amendment No. 54
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[X]
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immediately upon filing pursuant to paragraph (b)
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on date pursuant to paragraph (b)
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60 days after filing pursuant to paragraph (a)(1)
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on ______________ pursuant to paragraph (a)(1)
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75 days after filing pursuant to paragraph (a)(2)
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on pursuant to paragraph (a)(2) of Rule 485.
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PROSPECTUS
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ROUNDHILL SPORTS BETTING & IGAMING ETF
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OTHER SERVICE PROVIDERS
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DISTRIBUTION PLAN
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ROUNDHILL SPORTS BETTING & iGAMING ETF
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1 Year: $77
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3 Years: $240
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(i)
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“Pure-Play” Companies - iGaming companies whose primary business model and/or growth prospects are directly linked to sports betting. For these companies, continued growth in sports betting is expected to be critical to their economic success going forward.
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(ii)
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“Core” Companies - iGaming companies with substantial operations and/or growth prospects linked to sports betting. These companies have other iGaming (non-sports betting) business units driving their economics, and thus are less affected by the growth of sports betting than pure-play companies. In time, growth in the industry and/or investments in their sports betting units may lead these companies to become pure-play companies if their sports betting operations become a primary
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(iii)
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“Non-Core” Companies - iGaming companies with some operations and/or growth prospects linked to sports betting. These companies derive the majority of their revenue from other gaming/gambling business lines not directly related to sports betting. In time, growth in the industry and/or investments in their sports betting units may lead these companies to become “core” companies if their sports betting operations become a relevant driver of economic performance. It is unlikely, based on current information, that the sports betting offerings of non-core companies would become the primary driver of such economic performance going forward.
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iGaming and Sports Betting Companies Risk. The iGaming and sports betting industry is characterized by an increasingly high degree of competition among a large number of participants including from participants performing illegal activities or unregulated companies. Expansion of iGaming and sports betting in other jurisdictions (both regulated and unregulated) could increase competition with traditional betting companies, which could have an adverse impact on their financial condition, operations and cash flows. In a broader sense, iGaming and sports betting companies face competition from all manner of leisure and entertainment activities, including shopping, athletic events, television and movies, concerts and travel. In addition, established jurisdictions could award additional licenses or permit the expansion or relocation of existing sports betting companies. These companies also may be subject to increasing regulatory constraints, particularly with respect to cybersecurity and privacy. In addition to the costs of complying with such constraints, the unintended disclosure of confidential information, whether because of an error or a cybersecurity event, could adversely affect the reputation, profitability and value of these companies.
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Concentration Risk. Because the Fund’s assets will be concentrated in an industry or group of industries to the extent the Index concentrates in a particular industry or group of industries, the Fund is subject to loss due to adverse occurrences that may affect that industry or group of industries.
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Consumer Discretionary Sector Risk. Consumer discretionary companies are companies that provide non-essential goods and services, such as retailers, media companies and consumer services. These companies manufacture products and provide discretionary services directly to the consumer, and the success of these companies tied closely to the performance of the overall domestic and international economy, interest rates, competition and consumer confidence.
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Currency Exchange Rate Risk. The Fund may invest in investments denominated in non-U.S. currencies or in securities that provide exposure to such currencies. Changes in currency exchange rates and the relative value of non-U.S. currencies will affect the value of the Fund’s investment and the value of your Shares. Currency exchange rates can be very volatile and can change quickly and unpredictably. As a result, the value of an investment in the Fund may change quickly and without warning and you may lose money.
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Cybersecurity Risk. Cybersecurity incidents may allow an unauthorized party to gain access to Fund assets, customer data (including private shareholder information), or proprietary information, or cause the Fund, the Adviser, the Sub-Adviser and/or other service providers (including custodians, transfer agents and financial intermediaries) to suffer data breaches or data corruption. Additionally, cybersecurity failures or breaches of the electronic systems of the Fund, the Adviser, the Sub-Adviser or the Fund's other service providers, market makers, Authorized Participants or the issuers of securities in which the Fund invests have the ability to cause disruptions and negatively impact the Fund's business operations, potentially resulting in financial losses to the Fund and its shareholders. In an extreme case, a shareholder’s ability to redeem Fund shares may be affected.
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Depositary Receipt Risk. Depositary Receipts involve risks similar to those associated with investments in foreign securities, such as changes in political or economic conditions of other countries and changes in the exchange rates of foreign currencies. Depositary Receipts listed on U.S. exchanges are issued by banks or trust companies, and entitle the holder to all dividends and capital gains that are paid out on the underlying foreign shares (“Underlying Shares”). When the Fund invests in Depositary Receipts as a substitute for an investment directly in the Underlying Shares, the Fund is exposed to the risk that the Depositary Receipts may not provide a return that corresponds precisely with that of the Underlying Shares.
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Equity Market Risk. The equity securities held in the Fund’s portfolio may experience sudden, unpredictable drops in value or long periods of decline in value. This may occur because of factors that affect securities markets generally or factors affecting specific issuers, industries, sectors or companies in which the Fund invests. Common stocks are generally exposed to greater risk than other types of securities, such as preferred stocks and debt obligations, because common stockholders generally have inferior rights to receive payment from issuers.
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ETF Risks. The Fund is an ETF, and, as a result of an ETF’s structure, it is exposed to the following risks:
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Authorized Participants, Market Makers, and Liquidity Providers Concentration Risk. The Fund has a limited number of financial institutions that may act as Authorized Participants (“APs”). In addition, there may be a limited number of market makers and/or liquidity providers in the marketplace. To the extent either of the following events occur, Shares may trade at a material discount to NAV and possibly face delisting: (i) APs exit the business or otherwise become unable to process creation and/or redemption orders and no other APs step forward to perform these services, or (ii) market makers and/or liquidity providers exit the business or significantly reduce their business activities and no other entities step forward to perform their functions.
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Costs of Buying or Selling Shares. Due to the costs of buying or selling Shares, including brokerage commissions imposed by brokers and bid/ask spreads, frequent trading of Shares may significantly reduce investment results and an investment in Shares may not be advisable for investors who anticipate regularly making small investments.
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Shares May Trade at Prices Other Than NAV. As with all ETFs, Shares may be bought and sold in the secondary market at market prices. Although it is expected that the market price of Shares will approximate the Fund’s NAV, there may be times when the market price of Shares is more than the NAV intra-day (premium) or less than the NAV intra-day (discount) due to supply and demand of Shares or during periods of market volatility. This risk is heightened in times of market volatility, periods of steep market declines, and periods when there is limited trading activity for Shares in the secondary market, in which case such premiums or discounts may be significant. Because securities held by the Fund may trade on foreign exchanges that are closed when the Fund’s primary listing exchange is open, the Fund is likely to experience premiums and discounts greater than those of domestic ETFs.
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Trading. Although Shares are listed for trading on the NYSE Arca, Inc. (the “Exchange”) and may be traded on U.S. exchanges other than the Exchange, there can be no assurance that Shares will trade with any volume, or at all, on any stock exchange. In stressed market conditions, the liquidity of Shares may begin to mirror the liquidity of the Fund’s underlying portfolio holdings, which can be significantly less liquid than Shares.
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Foreign Securities Risk. Investments in non-U.S. securities involve certain risks that may not be present with investments in U.S. securities. For example, investments in non-U.S. securities may be subject to risk of loss due to foreign currency fluctuations or to political or economic instability. Investments in non-U.S. securities also may be subject to withholding or other taxes and may be subject to additional trading, settlement, custodial, and operational risks. These and other factors can make investments in the Fund more volatile and potentially less liquid than other types of investments.
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Geographic Investment Risk. To the extent the Fund invests a significant portion of its assets in the securities of companies of a single country or region, it is more likely to be impacted by events or conditions affecting that country or region.
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Illiquidity Risk. Illiquidity risk exists when particular investments are difficult to purchase or sell, possibly preventing the Fund from selling these illiquid investments at an advantageous price or at the time desired. A lack of liquidity may also cause the value of investments to decline. Illiquid investments may also be difficult to value.
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Market Capitalization Risk.
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Large-Capitalization Investing. The securities of large-capitalization companies may be relatively mature compared to smaller companies and therefore subject to slower growth during times of economic expansion. Large-capitalization companies may also be unable to respond quickly to new competitive challenges, such as changes in technology and consumer tastes.
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Mid-Capitalization Investing. The securities of mid-capitalization companies may be more vulnerable to adverse issuer, market, political, or economic developments than securities of large-capitalization companies. The securities of mid-capitalization companies generally trade in lower volumes and are subject to greater and more unpredictable price changes than large capitalization stocks or the stock market as a whole.
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Small-Capitalization Investing. The securities of small-capitalization companies may be more vulnerable to adverse issuer, market, political, or economic developments than securities of large- or mid-capitalization companies. The securities of small-capitalization companies generally trade in lower volumes and are subject to greater and more unpredictable price changes than large- or mid-capitalization stocks or the stock market as a whole. There is typically less publicly available information concerning smaller-capitalization companies than for larger, more established companies.
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New Index Provider Risk. The Index was created by and is owned and maintained by the Adviser, which has not previously been an index provider or investment adviser for a registered fund, which may create additional risks for investing in the Fund. There is no assurance that the Adviser will compile the Index accurately, or that the Index will be reconstituted, rebalanced, calculated or disseminated accurately.
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Non-Diversification Risk. Because the Fund is “non-diversified,” it may invest a greater percentage of its assets in the securities of a single issuer or a small number of issuers than if it was a diversified fund. As a result, a decline in the value of an investment in a single issuer or a small number of issuers could cause the Fund’s overall value to decline to a greater degree than if the Fund held a more diversified portfolio. This may increase the Fund’s volatility and have a greater impact on the Fund’s performance. However, the Fund intends to comply with the diversification requirements of the Internal Revenue Code of 1986, as amended (the “Code”) to qualify for treatment as a regulated investment company (“RIC”). For more information, please see the section entitled “Federal Income Taxes” in the SAI.
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Passive Investment Risk. The Fund is not actively managed and its sub-adviser would not sell shares of an equity security due to current or projected underperformance of a security industry or sector, unless that security is removed from the Index or the selling of shares of that security is otherwise required upon a rebalancing of the Index as addressed in the Index methodology.
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Tracking Error Risk. As with all index funds, the performance of the Fund and its Index may differ from each other for a variety of reasons. For example, the Fund incurs operating expenses and portfolio transaction costs not incurred by the Index. In addition, the Fund may not be fully invested in the securities of the Index at all times or may hold securities not included in the Index.
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Portfolio Managers
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Andrew Serowik and Travis Trampe have been portfolio managers of the Fund since its inception in 2019. Mr. Serowik joined the Sub-Adviser in 2018. Mr. Trampe joined the Sub-Adviser in 2018.
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iGaming and Sports Betting Companies Risk. The iGaming and sports betting industry is characterized by an increasingly high degree of competition among a large number of participants including from participants performing illegal activities or unregulated companies. Expansion of iGaming and sports betting in other jurisdictions (both regulated and unregulated) could increase competition with traditional betting companies, which could have an adverse impact on their financial condition, operations and cash flows. In a broader sense, iGaming and sports betting companies face competition from all manner of leisure and entertainment activities, including shopping, athletic events, television and movies, concerts and travel. In addition, established jurisdictions could award additional licenses or permit the expansion or relocation of existing sports betting companies. These companies also may be subject to increasing regulatory constraints, particularly with respect to cybersecurity and privacy. In addition to the costs of complying with such constraints, the unintended disclosure of confidential information, whether because of an error or a cybersecurity event, could adversely affect the reputation, profitability and value of these companies.
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Concentration Risk. Because the Fund’s assets will be concentrated in an industry or group of industries to the extent the Index concentrates in a particular industry or group of industries, the Fund is subject to loss due to adverse occurrences that may affect
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Consumer Discretionary Sector Risk. Consumer discretionary companies are companies that provide non-essential goods and services, such as retailers, media companies and consumer services. These companies manufacture products and provide discretionary services directly to the consumer, and the success of these companies is tied closely to the performance of the overall domestic and international economy, interest rates, competition and consumer confidence. Success depends heavily on disposable household income and consumer spending. Changes in demographics and consumer tastes can also affect the demand for, and success of, consumer discretionary products in the marketplace.
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Currency Exchange Rate Risk. Changes in currency exchange rates and the relative value of non-U.S. currencies will affect the value of the Fund’s investments and the value of your Shares. Because the Fund’s NAV is determined on the basis of U.S. dollars, the U.S. dollar value of your investment in the Fund may go down if the value of the local currency of the non-U.S. markets in which the Fund invests depreciates against the U.S. dollar. This is true even if the local currency value of securities in the Fund’s holdings goes up. Conversely, the dollar value of your investment in the Fund may go up if the value of the local currency appreciates against the U.S. dollar. The value of the U.S. dollar measured against other currencies is influenced by a variety of factors. These factors include: national debt levels and trade deficits, changes in balances of payments and trade, domestic and foreign interest and inflation rates, global or regional political, economic or financial events, monetary policies of governments, actual or potential government intervention, and global energy prices. Political instability, the possibility of government intervention and restrictive or opaque business and investment policies may also reduce the value of a country’s currency. Government monetary policies and the buying or selling of currency by a country’s government may also influence exchange rates. Currency exchange rates can be very volatile and can change quickly and unpredictably. As a result, the value of an investment in the Fund may change quickly and without warning, and you may lose money.
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Cybersecurity Risk. Cybersecurity incidents may allow an unauthorized party to gain access to Fund assets, customer data (including private shareholder information), or proprietary information, or cause the Fund, the Adviser, the Sub-Adviser and/or other service providers (including custodians, transfer agents and financial intermediaries) to suffer data breaches or data corruption. Additionally, cybersecurity failures or breaches of the electronic systems of the Fund, the Adviser, the Sub-Adviser or the Fund's other service providers, market makers, Authorized Participants or the issuers of securities in which the Fund invests have the ability to cause disruptions and negatively impact the Fund's business operations, potentially resulting in financial losses to the Fund and its shareholders. A cybersecurity incident may disrupt the processing of shareholder transactions, impact the Fund’s ability to calculate its net asset value, and prevent shareholders from redeeming their shares.
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Depositary Receipt Risk. The Fund may hold the securities of non-U.S. companies in the form of ADRs and GDRs. ADRs are negotiable certificates issued by a U.S. financial institution that represent a specified number of shares in a foreign stock and trade on a U.S. national securities exchange, such as the New York Stock Exchange (“NYSE”). Sponsored ADRs are issued with the support of the issuer of the foreign stock underlying the ADRs and carry all of the rights of common shares, including voting rights. GDRs are similar to ADRs, but may be issued in bearer form and are typically offered for sale globally and held by a foreign branch of an international bank. The underlying issuers of certain depositary receipts, particularly unsponsored or unregistered depositary receipts, are under no obligation to distribute shareholder communications to the holders of such receipts, or to pass through to them any voting rights with respect to the deposited securities. Issuers of unsponsored depositary receipts are not contractually obligated to disclose material information in the U.S. and, therefore, such information may not correlate to the market value of the unsponsored depositary receipt. The underlying securities of the ADRs and GDRs in the Fund’s portfolio are usually denominated or quoted in currencies other than the U.S. Dollar. As a result, changes in foreign currency exchange rates may affect the value of the Fund’s portfolio. In addition, because the underlying securities of ADRs and GDRs trade on foreign exchanges at times when the U.S. markets are not open for trading, the value of the securities underlying the ADRs and GDRs may change materially at times when the U.S. markets are not open for trading, regardless of whether there is an active U.S. market for Shares.
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Equity Market Risk. Common stocks are susceptible to general stock market fluctuations and to volatile increases and decreases in value as market confidence in and perceptions of their issuers change. These investor perceptions are based on various and unpredictable factors including: expectations regarding government, economic, monetary and fiscal policies; inflation and interest rates; economic expansion or contraction; and global or regional political, economic and banking crises. If you held common stock, or common stock equivalents, of any given issuer, you would generally be exposed to greater risk than if you held preferred stocks and debt obligations of the issuer because common stockholders, or holders of equivalent interests, generally have inferior rights to receive payments from issuers in comparison with the rights of preferred stockholders, bondholders, and other creditors of such issuers.
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Authorized Participants, Market Makers, and Liquidity Providers Concentration Risk. The Fund has a limited number of financial institutions that may act as APs. In addition, there may be a limited number of market makers and/or liquidity providers in the marketplace. To the extent either of the following events occur, Shares may trade at a material discount to NAV and possibly face delisting: (i) APs exit the business or otherwise become unable to process creation and/or redemption orders and no other APs step forward to perform these services, or (ii) market makers and/or liquidity providers exit the business or significantly reduce their business activities and no other entities step forward to perform their functions.
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Costs of Buying or Selling Shares. Investors buying or selling Shares in the secondary market will pay brokerage commissions or other charges imposed by brokers, as determined by that broker. Brokerage commissions are often a fixed amount and may be a significant proportional cost for investors seeking to buy or sell relatively small amounts of Shares. In addition, secondary market investors will also incur the cost of the difference between the price at which an investor is willing to buy Shares (the “bid” price) and the price at which an investor is willing to sell Shares (the “ask” price). This difference in bid and ask prices is often referred to as the “spread” or “bid/ask spread.” The bid/ask spread varies over time for Shares based on trading volume and market liquidity, and is generally lower if Shares have more trading volume and market liquidity and higher if Shares have little trading volume and market liquidity. Further, a relatively small investor base in the Fund, asset swings in the Fund and/or increased market volatility may cause increased bid/ask spreads. Due to the costs of buying or selling Shares, including bid/ask spreads, frequent trading of Shares may significantly reduce investment results and an investment in Shares may not be advisable for investors who anticipate regularly making small investments.
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Shares May Trade at Prices Other Than NAV. As with all ETFs, Shares may be bought and sold in the secondary market at market prices. Although it is expected that the market price of Shares will approximate the Fund’s NAV, there may be times when the market price of Shares is more than the NAV intra-day (premium) or less than the NAV intra-day (discount) due to supply and demand of Shares or during periods of market volatility. This risk is heightened in times of market volatility, periods of steep market declines. The market price of Shares during the trading day, like the price of any exchange-traded security, includes a “bid/ask” spread charged by the exchange specialist, market makers or other participants that trade Shares. In times of severe market disruption, the bid/ask spread can increase significantly. At those times, Shares are most likely to be traded at a discount to NAV, and the discount is likely to be greatest when the price of Shares is falling fastest, which may be the time that you most want to sell your Shares. The Adviser believes that, under normal market conditions, large market price discounts or premiums to NAV will not be sustained because of arbitrage opportunities.
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Trading. Although Shares are listed for trading on the Exchange and may be listed or traded on U.S. and non-U.S. stock exchanges other than the Exchange, there can be no assurance that an active trading market for such Shares will develop or be maintained. Trading in Shares may be halted due to market conditions or for reasons that, in the view of the Exchange, make trading in Shares inadvisable. In addition, trading in Shares on the Exchange is subject to trading halts caused by extraordinary market volatility pursuant to Exchange “circuit breaker” rules, which temporarily halt trading on the Exchange when a decline in the S&P 500 Index during a single day reaches certain thresholds (e.g., 7%, 13%, and 20%). Additional rules applicable to the Exchange may halt trading in Shares when extraordinary volatility causes sudden, significant swings in the market price of Shares. There can be no assurance that Shares will trade with any volume, or at all, on any stock exchange. In stressed market conditions, the liquidity of Shares may begin to mirror the liquidity of the Fund’s underlying portfolio holdings, which can be significantly less liquid than Shares.
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Foreign Securities Risk. Investments in non-U.S. securities involve certain risks that may not be present with investments in U.S. securities. For example, investments in non-U.S. securities may be subject to risk of loss due to foreign currency fluctuations or to political or economic instability. There may be less information publicly available about a non-U.S. issuer than a U.S. issuer. Non-U.S. issuers may be subject to different accounting, auditing, financial reporting and investor protection standards than U.S. issuers. Investments in non-U.S. securities may be subject to withholding or other taxes and may be subject to additional trading, settlement,
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Geographic Investment Risk. To the extent that the Fund invests a significant portion of its assets in the securities of companies of a single country or region, it is more likely to be impacted by events or conditions affecting that country or region. For example, political and economic conditions and changes in regulatory, tax, or economic policy in a country could significantly affect the market in that country and in surrounding or related countries and have a negative impact on the Fund’s performance. Currency developments or restrictions, political and social instability, and changing economic conditions have resulted in significant market volatility.
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Illiquidity Risk. Illiquidity risk exists when particular investments are difficult to purchase or sell, possibly preventing the Fund from selling these illiquid investments at an advantageous price or at the time desired. A lack of liquidity may also cause the value of investments to decline. Illiquid investments may also be difficult to value.
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Market Capitalization Risk
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Large-Capitalization Investing. The securities of large-capitalization companies may be relatively mature compared to smaller companies and therefore subject to slower growth during times of economic expansion. Large-capitalization companies may also be unable to respond quickly to new competitive challenges, such as changes in technology and consumer tastes.
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Mid-Capitalization Investing. The securities of mid-capitalization companies may be more vulnerable to adverse issuer, market, political, or economic developments than securities of large-capitalization companies. The securities of mid-capitalization companies generally trade in lower volumes and are subject to greater and more unpredictable price changes than large capitalization stocks or the stock market as a whole. Some medium capitalization companies have limited product lines, markets, financial resources, and management personnel and tend to concentrate on fewer geographical markets relative to large-capitalization companies.
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Small-Capitalization Investing. The securities of small-capitalization companies may be more vulnerable to adverse issuer, market, political, or economic developments than securities of larger-capitalization companies. The securities of small-capitalization companies generally trade in lower volumes and are subject to greater and more unpredictable price changes than larger capitalization stocks or the stock market as a whole. Some small capitalization companies have limited product lines, markets, and financial and managerial resources and tend to concentrate on fewer geographical markets relative to larger capitalization companies. There is typically less publicly available information concerning smaller-capitalization companies than for larger, more established companies. Small-capitalization companies also may be particularly sensitive to changes in interest rates, government regulation, borrowing costs and earnings.
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New Index Provider Risk. The Index was created by and is owned and maintained by the Adviser, which has not previously been an index provider or investment adviser for a registered fund, which may create additional risks for investing in the Fund. There is no assurance that the Adviser will compile the Index accurately, or that the Index will be reconstituted, rebalanced, calculated or disseminated accurately.
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Non-Diversification Risk. Because the Fund is “non-diversified,” it may invest a greater percentage of its assets in the securities of a single issuer or a small number of issuers than if it was a diversified fund. As a result, a decline in the value of an investment in a single issuer or a small number of issuers could cause the Fund’s overall value to decline to a greater degree than if the Fund held a more diversified portfolio. This may increase the Fund’s volatility and have a greater impact on the Fund’s performance. However, the Fund intends to comply with the diversification requirements of the Code to qualify for treatment as a RIC. For more information, please see the section entitled “Federal Income Taxes” in the SAI.
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Passive Investment Risk. The Fund invests in the securities included in, or representative of, its Index regardless of its investment merit. The Fund does not attempt to outperform its respective Index or take defensive positions in declining markets. As a result, the Fund’s performance may be adversely affected by a general decline in the market segments relating to its Index. The returns from the types of securities in which the Fund invests may underperform returns from the various general securities markets or different asset classes. This may cause the Fund to underperform other investment vehicles that invest in different asset classes. Different types of securities (for example, large-, mid- and small-capitalization stocks) tend to go through cycles of doing better or worse than the general securities markets. In the past, these periods have lasted for as long as several years.
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Tracking Error Risk. As with all index funds, the performance of the Fund and the Index may differ from each other for a variety of reasons. For example, the Fund incurs operating expenses and portfolio transaction costs not incurred by the Index. In addition, the Fund may not be fully invested in the securities of the Index at all times or may hold securities not included in the Index. The use of sampling techniques may affect the Fund’s ability to achieve close correlation with the Index. The Fund may use a representative
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Adviser
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Roundhill Financial Inc.
575 5th Avenue, 14th Floor,
New York, New York 10017
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Transfer Agent, and Administrator
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U.S. Bancorp Fund Services, LLC
d/b/a U.S. Bank Global Fund Services
615 East Michigan Street
Milwaukee, Wisconsin 53202
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Sub-Adviser
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Exchange Traded Concepts, LLC
10900 Hefner Pointe Drive, Suite 207
Oklahoma City, Oklahoma 73120
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Distributor
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Foreside Fund Services, LLC
Three Canal Plaza, Suite 100
Portland, Maine 04101
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Custodian
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U.S. Bank National Association
1555 N. Rivercenter Drive, Suite 302
Milwaukee, Wisconsin 53212 |
Legal Counsel
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Morgan, Lewis & Bockius LLP
1111 Pennsylvania Avenue, NW Washington, DC 20004-2541 |
Independent Registered Public Accounting Firm
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Cohen & Company, Ltd.
1350 Euclid Avenue, Suite 800
Cleveland, Ohio 44115
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Free of charge from the SEC’s EDGAR database on the SEC’s website at http://www.sec.gov; or
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Free of charge from the Fund’s Internet web site at https://www.roundhillinvestments.com; or
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For a fee, by e-mail request to publicinfo@sec.gov.
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1.
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Concentrate its investments (i.e., hold more than 25% of its total assets) in any industry or group of related industries, except that the Fund will concentrate to approximately the same extent that the Index concentrates in the securities of such particular industry or group of related industries. For purposes of this limitation, securities of the U.S. government (including its agencies and instrumentalities), repurchase agreements collateralized by U.S. government securities, investment companies, and tax-exempt securities of state or municipal governments and their political subdivisions are not considered to be issued by members of any industry.
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2.
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Borrow money or issue senior securities (as defined under the 1940 Act), except to the extent permitted under the 1940 Act.
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3.
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Make loans, except to the extent permitted under the 1940 Act.
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4.
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Purchase or sell real estate unless acquired as a result of ownership of securities or other instruments, except to the extent permitted under the 1940 Act. This shall not prevent the Fund from investing in securities or other instruments backed by real estate, real estate investment trusts or securities of companies engaged in the real estate business.
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5.
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Purchase or sell physical commodities unless acquired as a result of ownership of securities or other instruments, except to the extent permitted under the 1940 Act. This shall not prevent the Fund from purchasing or selling options and futures contracts or from investing in securities or other instruments backed by physical commodities.
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6.
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Underwrite securities issued by other persons, except to the extent permitted under the 1940 Act.
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1.
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The Fund will not hold illiquid assets in excess of 15% of its net assets. An illiquid asset is any asset which may not be sold or disposed of in the ordinary course of business within seven days at approximately the value at which the Fund has valued the investment.
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2.
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The Fund invests, under normal circumstances, at least 80% of its net assets (plus borrowings for investment purposes) in securities issued by Sports Betting and iGaming Companies.*
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Name and Year of Birth
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Position Held with the Trust
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Term of Office and Length of Time Served
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Principal Occupation(s) During Past 5 Years
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Number of Portfolios in Fund Complex Overseen by Trustee
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Other Directorships Held by Trustee During Past 5 Years
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Independent Trustees
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John L. Jacobs
Year of birth: 1959
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Trustee and Audit Committee Chair
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Indefinite term; since 2017
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Chairman of Alerian, Inc. (Since June 2018; Executive Director of Center for Financial Markets and Policy (Since 2016; Founder and CEO of Q3 Advisors, LLC (financial consulting firm) (since 2015); Distinguished Policy Fellow and Executive Director, Center for Financial Markets and Policy, Georgetown University (since 2015); Senior Advisor, Nasdaq OMX Group (2015–2016); Executive Vice President, Nasdaq OMX Group (2013–2015).
|
11
|
Procure ETF Trust II (2 portfolios); Horizons ETF Trust I (3 portfolios)
|
Koji Felton
Year of birth: 1961
|
Trustee
|
Indefinite term; since 2019
|
Counsel, Kohlberg Kravis Roberts & Co. L.P. (investment firm) (2013–2015); Counsel, Dechert LLP (law firm) (2011–2013)
|
11
|
Independent Trustee, Series Portfolios Trust (9 portfolios)
|
Pamela H. Conroy
Year of birth: 1961
|
Trustee and Nominating and Governance Committee Chair
|
Indefinite term; since 2019
|
Retired; formerly Executive Vice President, Chief Operating Officer & Chief Compliance Officer, Institutional Capital Corporation (investment firm) (1994–2008)
|
11
|
Frontier Funds, Inc (8 portfolios).
|
Interested Trustee
|
|||||
Paul R. Fearday, CPA
Year of birth: 1979
|
Trustee and Chairman
|
Indefinite term; since 2019
|
Senior Vice President, U.S. Bancorp Fund Services, LLC (since 2008); Manager, PricewaterhouseCoopers LLP (accounting firm) (2002–2008)
|
11
|
None.
|
Name and Year of Birth
|
Position(s) Held with the Trust
|
Term of Office and Length of Time Served
|
Principal Occupation(s) During Past 5 Years
|
Gregory Bakken
Year of birth: 1983
|
President and Principal Executive Officer
|
Indefinite term, February 2019
|
Vice President, U.S. Bancorp Fund Services, LLC (since 2006)
|
Travis G. Babich
Year of birth: 1980
|
Treasurer and Principal Financial Officer
|
Indefinite term, September 2019
|
Vice President, U.S. Bancorp Fund Services, LLC (since 2005)
|
Kacie M. Gronstal
Year of birth: 1992
|
Assistant Treasurer
|
Indefinite term, March 2019
|
Officer, U.S. Bancorp Fund Services, LLC (since 2014)
|
Kent Barnes
Year of birth: 1968
|
Secretary
|
Indefinite term, February 2019
|
Vice President, U.S. Bancorp Fund Services, LLC (since 2018); Chief Compliance Officer, Rafferty Asset Management, LLC (2016 to 2018); Vice President, U.S. Bancorp Fund Services, LLC (2007 to 2016)
|
Steve Jensen
Year of birth: 1957 |
Chief Compliance Officer
|
Indefinite term, February 2019
|
Senior Vice President, U.S. Bancorp Fund Services, LLC (since 2011)
|
Name
|
Aggregate Compensation
From the Fund
|
Total Compensation From Fund Complex
Paid to Trustees
|
Interested Trustee
|
||
Paul R. Fearday1
|
$0
|
$0
|
Independent Trustees
|
||
John L. Jacobs
|
$0
|
$11,000
|
Koji Felton1
|
$0
|
$9,167
|
Pamela H. Conroy1
|
$0
|
$9,667
|
Portfolio Manager
|
Registered
Investment Companies |
Other Pooled
Investment Vehicles |
Other Accounts
|
|||
Number of Accounts
|
Total Assets in the Accounts
|
Number of Accounts
|
Total Assets in the Accounts
|
Number of Accounts
|
Total Assets in the Accounts
|
|
Andrew Serowik
|
12
|
$285.3 million
|
0
|
$0
|
0
|
$0
|
Travis Trampe
|
12
|
$285.3 million
|
0
|
$0
|
0
|
$0
|
|
Coverage
|
||
1.
|
||
2.
|
||
3.
|
||
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2 of 72
|
4.
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I S S G O V E R N A N C E . C O M
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3 of 72
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5.
|
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I S S G O V E R N A N C E . C O M
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4 of 72
|
6.
|
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7.
|
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I S S G O V E R N A N C E . C O M
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5 of 72
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8.
|
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I S S G O V E R N A N C E . C O M
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6 of 72
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I S S G O V E R N A N C E . C O M
|
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7 of 72
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▪
|
U.S. Domestic Issuers – which have a majority of outstanding shares held in the U.S. and meet other criteria, as determined by the SEC, and are subject to the same disclosure and listing standards as U.S. incorporated companies – are generally covered under standard U.S. policy guidelines.
|
▪
|
Foreign Private Issuers (FPIs) – which do not meet the Domestic Issuer criteria and are exempt from most disclosure requirements (e.g., they do not file DEF14A reports) and listing standards (e.g., for required levels of board and committee independence) – are covered under a combination of policy guidelines:
|
¤
|
FPI Guidelines (see the Americas Regional Proxy Voting Guidelines), which apply certain minimum independence and disclosure standards in the evaluation of key proxy ballot items, such as the election of directors and approval of financial reports; and
|
¤
|
For other issues, guidelines for the market that is responsible for, or most relevant to, the item on the ballot.
|
I S S G O V E R N A N C E . C O M
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8 of 72
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1.
|
B o a r d o f D i r e c t o r s
|
▪
|
Independent directors comprise 50 percent or less of the board;
|
▪
|
The non-independent director serves on the audit, compensation, or nominating committee;
|
▪
|
The company lacks an audit, compensation, or nominating committee so that the full board functions as that committee; or
|
▪
|
The company lacks a formal nominating committee, even if the board attests that the independent directors fulfill the functions of such a committee.
|
I S S G O V E R N A N C E . C O M
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9 of 72
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1. Executive Director
1.1. Current employee or current officer1 of the company or one of its affiliates2.
2. Non-Independent Non-Executive Director
Board Identification
2.1. Director identified as not independent by the board.
Controlling/Significant Shareholder
2.2. Beneficial owner of more than 50 percent of the company's voting power (this may be aggregated if voting power is distributed among more than one member of a group).
Former CEO/Interim Officer
2.3. Former CEO of the company. 3, 4
2.4. Former CEO of an acquired company within the past five years.4
2.5. Former interim officer if the service was longer than 18 months. If the service was between 12 and 18
months an assessment of the interim officer’s employment agreement will be made.5
Non-CEO Executives
2.6. Former officer1 of the company, an affiliate2, or an acquired firm within the past five years.
2.7. Officer1 of a former parent or predecessor firm at the time the company was sold or split off from the parent/predecessor within the past five years.
2.8. Officer1, former officer, or general or limited partner of a joint venture or partnership with the company.
Family Members
2.9. Immediate family member6 of a current or former officer1 of the company or its affiliates2 within the last five years.
2.10. Immediate family member6 of a current employee of company or its affiliates2 where additional factors raise concern (which may include, but are not limited to, the following: a director related to numerous employees; the company or its affiliates employ relatives of numerous board members; or a non- Section 16 officer in a key strategic role).
Transactional, Professional, Financial, and Charitable Relationships
2.11. Currently provides (or an immediate family member6 provides) professional services7 to the company, to an affiliate2 of the company or an individual officer of the company or one of its affiliates in excess of $10,000 per year.
2.12. Is (or an immediate family member6 is) a partner in, or a controlling shareholder or an employee of, an organization which provides professional services7 to the company, to an affiliate2 of the company, or an individual officer of the company or one of its affiliates in excess of $10,000 per year.
2.13. Has (or an immediate family member6 has) any material transactional relationship8 with the company or its affiliates2 (excluding investments in the company through a private placement).
2.14. Is (or an immediate family member6 is) a partner in, or a controlling shareholder or an executive officer of, an organization which has any material transactional relationship8 with the company or its affiliates2 (excluding investments in the company through a private placement).
2.15. Is (or an immediate family member6 is) a trustee, director, or employee of a charitable or non-profit organization that receives material grants or endowments8 from the company or its affiliates2.
Other Relationships
2.16. Party to a voting agreement9 to vote in line with management on proposals being brought to shareholder vote.
2.17. Has (or an immediate family member6 has) an interlocking relationship as defined by the SEC involving members of the board of directors or its Compensation Committee.10
2.18. Founder11 of the company but not currently an employee.
2.19. Any material12 relationship with the company.
3. Independent Director
3.1. No material12 connection to the company other than a board seat.
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I S S G O V E R N A N C E . C O M
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10 of 72
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Footnotes:
1.
The definition of officer will generally follow that of a “Section 16 officer” (officers subject to Section 16 of the Securities and Exchange Act of 1934) and includes the chief executive, operating, financial, legal, technology, and accounting officers of a company (including the president, treasurer, secretary, controller, or any vice president in charge of a principal business unit, division, or policy function). Current interim officers are included in this category. For private companies, the equivalent positions are applicable. A non-employee director serving as an officer due to statutory requirements (e.g. corporate secretary) will generally be classified as a Non-Independent Non-Executive Director under 2.19: “Any material relationship with the company.” However, if the company provides explicit disclosure that the director is not receiving additional compensation exceeding $10,000 per year for serving in that capacity, then the director will be classified as an Independent Director.
2.
“Affiliate” includes a subsidiary, sibling company, or parent company. ISS uses 50 percent control ownership by the parent company as the standard for applying its affiliate designation.
3.
Includes any former CEO of the company prior to the company’s initial public offering (IPO).
4.
When there is a former CEO of a special purpose acquisition company (SPAC) serving on the board of an acquired company, ISS will generally classify such directors as independent unless determined otherwise taking into account the following factors: the applicable listing standards determination of such director’s independence; any operating ties to the firm; and the existence of any other conflicting relationships or related party transactions.
5.
ISS will look at the terms of the interim officer’s employment contract to determine if it contains severance pay, long-term health and pension benefits, or other such standard provisions typically contained in contracts of permanent, non-temporary CEOs. ISS will also consider if a formal search process was under way for a full-time officer at the time.
6.
“Immediate family member” follows the SEC’s definition of such and covers spouses, parents, children, step-parents, step- children, siblings, in-laws, and any person (other than a tenant or employee) sharing the household of any director, nominee for director, executive officer, or significant shareholder of the company.
7.
Professional services can be characterized as advisory in nature, generally involve access to sensitive company information or to strategic decision-making, and typically have a commission- or fee-based payment structure. Professional services generally include but are not limited to the following: investment banking/financial advisory services, commercial banking (beyond deposit services), investment services, insurance services, accounting/audit services, consulting services, marketing services, legal services, property management services, realtor services, lobbying services, executive search services, and IT consulting services. The following would generally be considered transactional relationships and not professional services: deposit services, IT tech support services, educational services, and construction services. The case of participation in a banking syndicate by a non-lead bank should be considered a transactional (and hence subject to the associated materiality
test) rather than a professional relationship. “Of Counsel” relationships are only considered immaterial if the individual does not receive any form of compensation (in excess of $10,000 per year) from, or is a retired partner of, the firm providing the professional service. The case of a company providing a professional service to one of its directors or to an entity with which one of its directors is affiliated, will be considered a transactional rather than a professional relationship. Insurance services and marketing services are assumed to be professional services unless the company explains why such services are not advisory.
8.
A material transactional relationship, including grants to non-profit organizations, exists if the company makes annual payments to, or receives annual payments from, another entity, exceeding the greater of: $200,000 or 5 percent of the
recipient’s gross revenues, for a company that follows NASDAQ listing standards; or the greater of $1,000,000 or 2 percent of the recipient’s gross revenues, for a company that follows NYSE listing standards. For a company that follows neither of the preceding standards, ISS will apply the NASDAQ-based materiality test. (The recipient is the party receiving the financial proceeds from the transaction).
9. Dissident directors who are parties to a voting agreement pursuant to a settlement or similar arrangement may be classified as Independent Directors if an analysis of the following factors indicates that the voting agreement does not compromise their alignment with all shareholders’ interests: the terms of the agreement; the duration of the standstill provision in the agreement; the limitations and requirements of actions that are agreed upon; if the dissident director nominee(s) is subject to the standstill; and if there any conflicting relationships or related party transactions.
10. Interlocks include: executive officers serving as directors on each other’s compensation or similar committees (or, in the absence of such a committee, on the board); or executive officers sitting on each other’s boards and at least one serves on the other’s compensation or similar committees (or, in the absence of such a committee, on the board).
11. The operating involvement of the founder with the company will be considered; if the founder was never employed by the company, ISS may deem him or her an Independent Director.
12. For purposes of ISS’s director independence classification, “material” will be defined as a standard of relationship (financial, personal or otherwise) that a reasonable person might conclude could potentially influence one’s objectivity in the boardroom in a manner that would have a meaningful impact on an individual's ability to satisfy requisite fiduciary standards on behalf of shareholders.
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11 of 72
|
▪
|
Medical issues/illness;
|
▪
|
Family emergencies; and
|
▪
|
Missing only one meeting (when the total of all meetings is three or fewer).
|
▪
|
Sit on more than five public company boards; or
|
▪
|
Are CEOs of public companies who sit on the boards of more than two public companies besides their own— withhold only at their outside boards4.
|
▪
|
Until Feb. 1, 2021, a firm commitment, as stated in the proxy statement, to appoint at least one woman to the board within a year;
|
▪
|
The presence of a woman on the board at the preceding annual meeting and a firm commitment to appoint at least one woman to the board within a year; or
|
▪
|
Other relevant factors as applicable.
|
I S S G O V E R N A N C E . C O M
|
|
12 of 72
|
▪
|
The board failed to act on a shareholder proposal that received the support of a majority of the shares cast in the previous year or failed to act on a management proposal seeking to ratify an existing charter/bylaw provision that received opposition of a majority of the shares cast in the previous year. Factors that will be considered are:
|
¤
|
Disclosed outreach efforts by the board to shareholders in the wake of the vote;
|
¤
|
Rationale provided in the proxy statement for the level of implementation;
|
¤
|
The subject matter of the proposal;
|
¤
|
The level of support for and opposition to the resolution in past meetings;
|
¤
|
Actions taken by the board in response to the majority vote and its engagement with shareholders;
|
¤
|
The continuation of the underlying issue as a voting item on the ballot (as either shareholder or management proposals); and
|
¤
|
Other factors as appropriate.
|
▪
|
The board failed to act on takeover offers where the majority of shares are tendered;
|
▪
|
At the previous board election, any director received more than 50 percent withhold/against votes of the shares cast and the company has failed to address the issue(s) that caused the high withhold/against vote.
|
▪
|
The company’s previous say-on-pay received the support of less than 70 percent of votes cast. Factors that will be considered are:
|
¤
|
The company's response, including:
|
¤
|
Disclosure of engagement efforts with major institutional investors, including the frequency and timing of engagements and the company participants (including whether independent directors participated);
|
¤
|
Disclosure of the specific concerns voiced by dissenting shareholders that led to the say-on-pay opposition;
|
¤
|
Disclosure of specific and meaningful actions taken to address shareholders' concerns;
|
¤
|
Other recent compensation actions taken by the company;
|
¤
|
Whether the issues raised are recurring or isolated;
|
¤
|
The company's ownership structure; and
|
¤
|
Whether the support level was less than 50 percent, which would warrant the highest degree of responsiveness.
|
▪
|
The board implements an advisory vote on executive compensation on a less frequent basis than the frequency that received the plurality of votes cast.
|
▪
|
The company has a poison pill that was not approved by shareholders5. However, vote case-by-case on nominees if the board adopts an initial pill with a term of one year or less, depending on the disclosed rationale for the adoption, and other factors as relevant (such as a commitment to put any renewal to a shareholder vote).
|
▪
|
The board makes a material adverse modification to an existing pill, including, but not limited to, extension, renewal, or lowering the trigger, without shareholder approval.
|
I S S G O V E R N A N C E . C O M
|
|
13 of 72
|
▪
|
A classified board structure;
|
▪
|
A supermajority vote requirement;
|
▪
|
Either a plurality vote standard in uncontested director elections, or a majority vote standard in contested elections;
|
▪
|
The inability of shareholders to call special meetings;
|
▪
|
The inability of shareholders to act by written consent;
|
▪
|
A multi-class capital structure; and/or
|
▪
|
A non-shareholder-approved poison pill.
|
▪
|
The board's rationale for adopting the bylaw/charter amendment without shareholder ratification;
|
▪
|
Disclosure by the company of any significant engagement with shareholders regarding the amendment;
|
▪
|
The level of impairment of shareholders' rights caused by the board's unilateral amendment to the bylaws/charter;
|
▪
|
The board's track record with regard to unilateral board action on bylaw/charter amendments or other entrenchment provisions;
|
▪
|
The company's ownership structure;
|
▪
|
The company's existing governance provisions;
|
▪
|
The timing of the board's amendment to the bylaws/charter in connection with a significant business development; and
|
▪
|
Other factors, as deemed appropriate, that may be relevant to determine the impact of the amendment on shareholders.
|
▪
|
Classified the board;
|
▪
|
Adopted supermajority vote requirements to amend the bylaws or charter; or
|
▪
|
Eliminated shareholders' ability to amend bylaws.
|
I S S G O V E R N A N C E . C O M
|
|
14 of 72
|
▪
|
Supermajority vote requirements to amend the bylaws or charter;
|
▪
|
A classified board structure; or
|
▪
|
Other egregious provisions.
|
▪
|
The presence of a shareholder proposal addressing the same issue on the same ballot;
|
▪
|
The board's rationale for seeking ratification;
|
▪
|
Disclosure of actions to be taken by the board should the ratification proposal fail;
|
▪
|
Disclosure of shareholder engagement regarding the board’s ratification request;
|
▪
|
The level of impairment to shareholders' rights caused by the existing provision;
|
▪
|
The history of management and shareholder proposals on the provision at the company’s past meetings;
|
▪
|
Whether the current provision was adopted in response to the shareholder proposal;
|
▪
|
The company's ownership structure; and
|
▪
|
Previous use of ratification proposals to exclude shareholder proposals.
|
▪
|
The company’s governing documents impose undue restrictions on shareholders’ ability to amend the bylaws.
|
I S S G O V E R N A N C E . C O M
|
|
15 of 72
|
▪
|
The non-audit fees paid to the auditor are excessive;
|
▪
|
The company receives an adverse opinion on the company’s financial statements from its auditor; or
|
▪
|
There is persuasive evidence that the Audit Committee entered into an inappropriate indemnification agreement with its auditor that limits the ability of the company, or its shareholders, to pursue legitimate legal recourse against the audit firm.
|
▪
|
Poor accounting practices are identified that rise to a level of serious concern, such as: fraud; misapplication of GAAP; and material weaknesses identified in Section 404 disclosures. Examine the severity, breadth, chronological sequence, and duration, as well as the company’s efforts at remediation or corrective actions, in determining whether withhold/against votes are warranted.
|
▪
|
There is an unmitigated misalignment between CEO pay and company performance (pay for performance);
|
▪
|
The company maintains significant problematic pay practices; or
|
▪
|
The board exhibits a significant level of poor communication and responsiveness to shareholders.
|
▪
|
The company fails to include a Say on Pay ballot item when required under SEC provisions, or under the
|
▪
|
The company fails to include a Frequency of Say on Pay ballot item when required under SEC provisions.
|
▪
|
The presence of an anti-pledging policy, disclosed in the proxy statement, that prohibits future pledging activity;
|
▪
|
The magnitude of aggregate pledged shares in terms of total common shares outstanding, market value, and trading volume;
|
▪
|
Disclosure of progress or lack thereof in reducing the magnitude of aggregate pledged shares over time;
|
I S S G O V E R N A N C E . C O M
|
|
16 of 72
|
▪
|
Disclosure in the proxy statement that shares subject to stock ownership and holding requirements do not include pledged company stock; and
|
▪
|
Any other relevant factors.
|
▪
|
Material failures of governance, stewardship, risk oversight7, or fiduciary responsibilities at the company;
|
▪
|
Failure to replace management as appropriate; or
|
▪
|
Egregious actions related to a director’s service on other boards that raise substantial doubt about his or her
|
▪
|
Long-term financial performance of the company relative to its industry;
|
▪
|
Management’s track record;
|
▪
|
Background to the contested election;
|
▪
|
Nominee qualifications and any compensatory arrangements;
|
▪
|
Strategic plan of dissident slate and quality of the critique against management;
|
▪
|
Likelihood that the proposed goals and objectives can be achieved (both slates); and
|
▪
|
Stock ownership positions.
|
I S S G O V E R N A N C E . C O M
|
|
17 of 72
|
▪
|
The reasonableness/scope of the request; and
|
▪
|
The company’s existing disclosure on its current CEO succession planning process.
|
▪
|
The company has proxy access8, thereby allowing shareholders to nominate directors to the company’s ballot;
|
▪
|
The company has adopted a majority vote standard, with a carve-out for plurality voting in situations where there are more nominees than seats, and a director resignation policy to address failed elections.
|
I S S G O V E R N A N C E . C O M
|
|
18 of 72
|
▪
|
Eliminate entirely directors' and officers' liability for monetary damages for violating the duty of care.
|
▪
|
Expand coverage beyond just legal expenses to liability for acts that are more serious violations of fiduciary obligation than mere carelessness.
|
▪
|
Expand the scope of indemnification to provide for mandatory indemnification of company officials in connection with acts that previously the company was permitted to provide indemnification for, at the discretion of the company's board (i.e., "permissive indemnification"), but that previously the company was not required to indemnify.
|
▪
|
If the director was found to have acted in good faith and in a manner that s/he reasonably believed was in the best interests of the company; and
|
▪
|
If only the director’s legal expenses would be covered.
|
▪
|
The company’s board committee structure, existing subject matter expertise, and board nomination provisions relative to that of its peers;
|
▪
|
The company’s existing board and management oversight mechanisms regarding the issue for which board
|
▪
|
The company’s disclosure and performance relating to the issue for which board oversight is sought and any significant related controversies; and
|
▪
|
The scope and structure of the proposal.
|
▪
|
Existing oversight mechanisms (including current committee structure) regarding the issue for which board oversight is sought;
|
▪
|
Level of disclosure regarding the issue for which board oversight is sought;
|
▪
|
Company performance related to the issue for which board oversight is sought;
|
▪
|
Board committee structure compared to that of other companies in its industry sector; and
|
▪
|
The scope and structure of the proposal.
|
I S S G O V E R N A N C E . C O M
|
|
19 of 72
|
▪
|
The scope and rationale of the proposal;
|
▪
|
The company's current board leadership structure;
|
▪
|
The company's governance structure and practices;
|
▪
|
Company performance; and
|
▪
|
Any other relevant factors that may be applicable.
|
▪
|
A majority non-independent board and/or the presence of non-independent directors on key board committees;
|
▪
|
A weak or poorly-defined lead independent director role that fails to serve as an appropriate counterbalance to a combined CEO/chair role;
|
▪
|
The presence of an executive or non-independent chair in addition to the CEO, a recent recombination of the role of CEO and chair, and/or departure from a structure with an independent chair;
|
▪
|
Evidence that the board has failed to oversee and address material risks facing the company;
|
▪
|
A material governance failure, particularly if the board has failed to adequately respond to shareholder concerns or if the board has materially diminished shareholder rights; or
|
▪
|
Evidence that the board has failed to intervene when management’s interests are contrary to shareholders'
|
I S S G O V E R N A N C E . C O M
|
|
20 of 72
|
▪
|
Ownership threshold: maximum requirement not more than three percent (3%) of the voting power;
|
▪
|
Ownership duration: maximum requirement not longer than three (3) years of continuous ownership for each member of the nominating group;
|
▪
|
Aggregation: minimal or no limits on the number of shareholders permitted to form a nominating group;
|
▪
|
Cap: cap on nominees of generally twenty-five percent (25%) of the board.
|
▪
|
Established a communication structure that goes beyond the exchange requirements to facilitate the exchange of information between shareholders and members of the board;
|
▪
|
Effectively disclosed information with respect to this structure to its shareholders;
|
▪
|
Company has not ignored majority-supported shareholder proposals or a majority withhold vote on a director nominee; and
|
▪
|
The company has an independent chair or a lead director, according to ISS’ definition. This individual must be
|
I S S G O V E R N A N C E . C O M
|
|
21 of 72
|
2.
|
A u d i t - R e l a t ed
|
▪
|
The terms of the auditor agreement—the degree to which these agreements impact shareholders' rights;
|
▪
|
The motivation and rationale for establishing the agreements;
|
▪
|
The quality of the company’s disclosure; and
|
▪
|
The company’s historical practices in the audit area.
|
▪
|
An auditor has a financial interest in or association with the company, and is therefore not independent;
|
▪
|
There is reason to believe that the independent auditor has rendered an opinion that is neither accurate nor indicative of the company’s financial position;
|
▪
|
Poor accounting practices are identified that rise to a serious level of concern, such as fraud or misapplication of GAAP; or
|
▪
|
Fees for non-audit services (“Other” fees) are excessive.
|
▪
|
Non-audit (“other”) fees > audit fees + audit-related fees + tax compliance/preparation fees
|
▪
|
The tenure of the audit firm;
|
▪
|
The length of rotation specified in the proposal;
|
▪
|
Any significant audit-related issues at the company;
|
▪
|
The number of Audit Committee meetings held each year;
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▪
|
The number of financial experts serving on the committee; and
|
▪
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Whether the company has a periodic renewal process where the auditor is evaluated for both audit quality and competitive price.
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3.
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S h a r e h o l d e r R i g h t s & D e f e n s e s
|
▪
|
Any impediments to shareholders' ability to amend the bylaws (i.e. supermajority voting requirements);
|
▪
|
The company's ownership structure and historical voting turnout;
|
▪
|
Whether the board could amend bylaws adopted by shareholders; and
|
▪
|
Whether shareholders would retain the ability to ratify any board-initiated amendments.
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|
▪
|
The company's stated rationale for adopting such a provision;
|
▪
|
Disclosure of past harm from shareholder lawsuits in which plaintiffs were unsuccessful or shareholder lawsuits outside the jurisdiction of incorporation;
|
▪
|
The breadth of application of the bylaw, including the types of lawsuits to which it would apply and the definition of key terms; and
|
▪
|
Governance features such as shareholders' ability to repeal the provision at a later date (including the vote standard applied when shareholders attempt to amend the bylaws) and their ability to hold directors accountable through annual director elections and a majority vote standard in uncontested elections.
|
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|
▪
|
The ownership threshold (NOL protective amendments generally prohibit stock ownership transfers that would result in a new 5-percent holder or increase the stock ownership percentage of an existing 5-percent holder);
|
▪
|
The value of the NOLs;
|
▪
|
Shareholder protection mechanisms (sunset provision or commitment to cause expiration of the protective amendment upon exhaustion or expiration of the NOL);
|
▪
|
The company's existing governance structure including: board independence, existing takeover defenses, track record of responsiveness to shareholders, and any other problematic governance concerns; and
|
▪
|
Any other factors that may be applicable.
|
▪
|
Shareholders have approved the adoption of the plan; or
|
▪
|
The board, in its exercise of its fiduciary responsibilities, determines that it is in the best interest of shareholders under the circumstances to adopt a pill without the delay in adoption that would result from seeking stockholder approval (i.e., the “fiduciary out” provision). A poison pill adopted under this fiduciary out will be put to a shareholder ratification vote within 12 months of adoption or expire. If the pill is not approved by a majority of the votes cast on this issue, the plan will immediately terminate.
|
▪
|
No lower than a 20 percent trigger, flip-in or flip-over;
|
▪
|
A term of no more than three years;
|
▪
|
No dead-hand, slow-hand, no-hand, or similar feature that limits the ability of a future board to redeem the pill;
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|
▪
|
Shareholder redemption feature (qualifying offer clause); if the board refuses to redeem the pill 90 days after a qualifying offer is announced, 10 percent of the shares may call a special meeting or seek a written consent to vote on rescinding the pill.
|
▪
|
The ownership threshold to transfer (NOL pills generally have a trigger slightly below 5 percent);
|
▪
|
The value of the NOLs;
|
▪
|
Shareholder protection mechanisms (sunset provision, or commitment to cause expiration of the pill upon exhaustion or expiration of NOLs);
|
▪
|
The company's existing governance structure including: board independence, existing takeover defenses, track record of responsiveness to shareholders, and any other problematic governance concerns; and
|
▪
|
Any other factors that may be applicable.
|
▪
|
The scope and structure of the proposal;
|
▪
|
The company's stated confidential voting policy (or other relevant policies) and whether it ensures a "level playing field" by providing shareholder proponents with equal access to vote information prior to the annual meeting;
|
▪
|
The company's vote standard for management and shareholder proposals and whether it ensures consistency and fairness in the proxy voting process and maintains the integrity of vote results;
|
▪
|
Whether the company's disclosure regarding its vote counting method and other relevant voting policies with respect to management and shareholder proposals are consistent and clear;
|
▪
|
Any recent controversies or concerns related to the company's proxy voting mechanics;
|
▪
|
Any unintended consequences resulting from implementation of the proposal; and
|
▪
|
Any other factors that may be relevant.
|
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|
▪
|
The presence of a shareholder proposal addressing the same issue on the same ballot;
|
▪
|
The board's rationale for seeking ratification;
|
▪
|
Disclosure of actions to be taken by the board should the ratification proposal fail;
|
▪
|
Disclosure of shareholder engagement regarding the board’s ratification request;
|
▪
|
The level of impairment to shareholders' rights caused by the existing provision;
|
▪
|
The history of management and shareholder proposals on the provision at the company’s past meetings;
|
▪
|
Whether the current provision was adopted in response to the shareholder proposal;
|
▪
|
The company's ownership structure; and
|
▪
|
Previous use of ratification proposals to exclude shareholder proposals.
|
▪
|
The election of fewer than 50 percent of the directors to be elected is contested in the election;
|
▪
|
One or more of the dissident’s candidates is elected;
|
▪
|
Shareholders are not permitted to cumulate their votes for directors; and
|
▪
|
The election occurred, and the expenses were incurred, after the adoption of this bylaw.
|
▪
|
Reasons for reincorporation;
|
▪
|
Comparison of company's governance practices and provisions prior to and following the reincorporation; and
|
▪
|
Comparison of corporation laws of original state and destination state.
|
▪
|
Shareholders' current right to act by written consent;
|
▪
|
The consent threshold;
|
▪
|
The inclusion of exclusionary or prohibitive language;
|
▪
|
Investor ownership structure; and
|
▪
|
Shareholder support of, and management's response to, previous shareholder proposals.
|
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|
▪
|
An unfettered9 right for shareholders to call special meetings at a 10 percent threshold;
|
▪
|
A majority vote standard in uncontested director elections;
|
▪
|
No non-shareholder-approved pill; and
|
▪
|
An annually elected board.
|
▪
|
Shareholders’ current right to call special meetings;
|
▪
|
Minimum ownership threshold necessary to call special meetings (10 percent preferred);
|
▪
|
The inclusion of exclusionary or prohibitive language;
|
▪
|
Investor ownership structure; and
|
▪
|
Shareholder support of, and management’s response to, previous shareholder proposals.
|
▪
|
Vote for management or shareholder proposals to reduce supermajority vote requirements. However, for companies with shareholder(s) who have significant ownership levels, vote case-by-case, taking into account:
|
▪
|
Ownership structure;
|
▪
|
Quorum requirements; and
|
▪
|
Vote requirements.
|
I S S G O V E R N A N C E . C O M
|
|
29 of 72
|
4.
|
C a p i t a l / R e s t r u c t u r i n g
|
▪
|
Past Board Performance:
|
¤
|
The company's use of authorized shares during the last three years;
|
▪
|
The Current Request:
|
¤
|
Disclosure in the proxy statement of the specific purposes of the proposed increase;
|
¤
|
Disclosure in the proxy statement of specific and severe risks to shareholders of not approving the request; and
|
¤
|
The dilutive impact of the request as determined relative to an allowable increase calculated by ISS (typically 100 percent of existing authorized shares) that reflects the company's need for shares and total shareholder returns.
|
A.
|
Most companies: 100 percent of existing authorized shares.
|
B.
|
Companies with less than 50 percent of existing authorized shares either outstanding or reserved for issuance: 50 percent of existing authorized shares.
|
C.
|
Companies with one- and three-year total shareholder returns (TSRs) in the bottom 10 percent of the
|
D.
|
Companies at which both conditions (B and C) above are both present: 25 percent of existing authorized shares.
|
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|
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30 of 72
|
▪
|
The company discloses a compelling rationale for the dual-class capital structure, such as:
|
▪
|
The company's auditor has concluded that there is substantial doubt about the company's ability to continue as a going concern; or
|
▪
|
The new class of shares will be transitory;
|
▪
|
The new class is intended for financing purposes with minimal or no dilution to current shareholders in both the short term and long term; and
|
▪
|
The new class is not designed to preserve or increase the voting power of an insider or significant shareholder.
|
▪
|
The size of the company;
|
▪
|
The shareholder base; and
|
▪
|
The liquidity of the stock.
|
▪
|
Past Board Performance:
|
¤
|
The company's use of authorized preferred shares during the last three years;
|
▪
|
The Current Request:
|
¤
|
Disclosure in the proxy statement of the specific purposes for the proposed increase;
|
¤
|
Disclosure in the proxy statement of specific and severe risks to shareholders of not approving the request;
|
¤
|
In cases where the company has existing authorized preferred stock, the dilutive impact of the request as determined by an allowable increase calculated by ISS (typically 100 percent of existing authorized shares) that reflects the company's need for shares and total shareholder returns; and
|
¤
|
Whether the shares requested are blank check preferred shares that can be used for antitakeover purposes.
|
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|
|
31 of 72
|
▪
|
More simplified capital structure;
|
▪
|
Enhanced liquidity;
|
▪
|
Fairness of conversion terms;
|
▪
|
Impact on voting power and dividends;
|
▪
|
Reasons for the reclassification;
|
▪
|
Conflicts of interest; and
|
▪
|
Other alternatives considered.
|
▪
|
The number of authorized shares will be proportionately reduced; or
|
▪
|
The effective increase in authorized shares is equal to or less than the allowable increase calculated in accordance with ISS' Common Stock Authorization policy.
|
▪
|
Stock exchange notification to the company of a potential delisting;
|
▪
|
Disclosure of substantial doubt about the company's ability to continue as a going concern without additional financing;
|
▪
|
The company's rationale; or
|
▪
|
Other factors as applicable.
|
▪
|
Greenmail,
|
▪
|
The use of buybacks to inappropriately manipulate incentive compensation metrics,
|
▪
|
Threats to the company's long-term viability, or
|
▪
|
Other company-specific factors as warranted.
|
I S S G O V E R N A N C E . C O M
|
|
32 of 72
|
▪
|
Adverse governance changes;
|
▪
|
Excessive increases in authorized capital stock;
|
▪
|
Unfair method of distribution;
|
▪
|
Diminution of voting rights;
|
▪
|
Adverse conversion features;
|
▪
|
Negative impact on stock option plans; and
|
▪
|
Alternatives such as spin-off.
|
▪
|
Purchase price;
|
▪
|
Fairness opinion;
|
▪
|
Financial and strategic benefits;
|
▪
|
How the deal was negotiated;
|
▪
|
Conflicts of interest;
|
▪
|
Other alternatives for the business;
|
▪
|
Non-completion risk.
|
▪
|
Impact on the balance sheet/working capital;
|
▪
|
Potential elimination of diseconomies;
|
▪
|
Anticipated financial and operating benefits;
|
▪
|
Anticipated use of funds;
|
▪
|
Value received for the asset;
|
▪
|
Fairness opinion;
|
▪
|
How the deal was negotiated;
|
▪
|
Conflicts of interest.
|
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|
|
33 of 72
|
▪
|
Dilution to existing shareholders' positions;
|
▪
|
Terms of the offer - discount/premium in purchase price to investor, including any fairness opinion; termination penalties; exit strategy;
|
▪
|
Financial issues - company's financial situation; degree of need for capital; use of proceeds; effect of the financing on the company's cost of capital;
|
▪
|
Management's efforts to pursue other alternatives;
|
▪
|
Control issues - change in management; change in control, guaranteed board and committee seats; standstill provisions; voting agreements; veto power over certain corporate actions; and
|
▪
|
Conflict of interest - arm's length transaction, managerial incentives.
|
▪
|
The reasons for the change;
|
▪
|
Any financial or tax benefits;
|
▪
|
Regulatory benefits;
|
▪
|
Increases in capital structure; and
|
▪
|
Changes to the articles of incorporation or bylaws of the company.
|
▪
|
Increases in common or preferred stock in excess of the allowable maximum (see discussion under “Capital”);
|
▪
|
Adverse changes in shareholder rights.
|
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|
|
34 of 72
|
▪
|
Offer price/premium;
|
▪
|
Fairness opinion;
|
▪
|
How the deal was negotiated;
|
▪
|
Conflicts of interest;
|
▪
|
Other alternatives/offers considered; and
|
▪
|
Non-completion risk.
|
▪
|
Whether the company has attained benefits from being publicly-traded (examination of trading volume, liquidity, and market research of the stock);
|
▪
|
Balanced interests of continuing vs. cashed-out shareholders, taking into account the following:
|
▪
|
Are all shareholders able to participate in the transaction?
|
▪
|
Will there be a liquid market for remaining shareholders following the transaction?
|
▪
|
Does the company have strong corporate governance?
|
▪
|
Will insiders reap the gains of control following the proposed transaction?
|
▪
|
Does the state of incorporation have laws requiring continued reporting that may benefit shareholders?
|
▪
|
Percentage of assets/business contributed;
|
▪
|
Percentage ownership;
|
▪
|
Financial and strategic benefits;
|
▪
|
Governance structure;
|
▪
|
Conflicts of interest;
|
▪
|
Other alternatives; and
|
▪
|
Non-completion risk.
|
▪
|
Management’s efforts to pursue other alternatives;
|
▪
|
Appraisal value of assets; and
|
▪
|
The compensation plan for executives managing the liquidation.
|
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|
|
35 of 72
|
▪
|
Valuation - Is the value to be received by the target shareholders (or paid by the acquirer) reasonable? While the fairness opinion may provide an initial starting point for assessing valuation reasonableness, emphasis is placed on the offer premium, market reaction, and strategic rationale.
|
▪
|
Market reaction - How has the market responded to the proposed deal? A negative market reaction should cause closer scrutiny of a deal.
|
▪
|
Strategic rationale - Does the deal make sense strategically? From where is the value derived? Cost and revenue synergies should not be overly aggressive or optimistic, but reasonably achievable. Management should also have a favorable track record of successful integration of historical acquisitions.
|
▪
|
Negotiations and process - Were the terms of the transaction negotiated at arm's-length? Was the process fair and equitable? A fair process helps to ensure the best price for shareholders. Significant negotiation "wins" can also signify the deal makers' competency. The comprehensiveness of the sales process (e.g., full auction, partial auction, no auction) can also affect shareholder value.
|
▪
|
Conflicts of interest - Are insiders benefiting from the transaction disproportionately and inappropriately as compared to non-insider shareholders? As the result of potential conflicts, the directors and officers of the company may be more likely to vote to approve a merger than if they did not hold these interests. Consider whether these interests may have influenced these directors and officers to support or recommend the merger. The CIC figure presented in the "ISS Transaction Summary" section of this report is an aggregate figure that can in certain cases be a misleading indicator of the true value transfer from shareholders to insiders. Where such figure appears to be excessive, analyze the underlying assumptions to determine whether a potential conflict exists.
|
▪
|
Governance - Will the combined company have a better or worse governance profile than the current governance profiles of the respective parties to the transaction? If the governance profile is to change for the worse, the burden is on the company to prove that other issues (such as valuation) outweigh any deterioration in governance.
|
▪
|
Dilution to existing shareholders' position: The amount and timing of shareholder ownership dilution should be weighed against the needs and proposed shareholder benefits of the capital infusion. Although newly issued common stock, absent preemptive rights, is typically dilutive to existing shareholders, share price appreciation is often the necessary event to trigger the exercise of "out of the money" warrants and convertible debt. In these instances from a value standpoint, the negative impact of dilution is mitigated by the increase in the company's stock price that must occur to trigger the dilutive event.
|
▪
|
Terms of the offer (discount/premium in purchase price to investor, including any fairness opinion, conversion features, termination penalties, exit strategy):
|
¤
|
The terms of the offer should be weighed against the alternatives of the company and in light of company's financial condition. Ideally, the conversion price for convertible debt and the exercise price for warrants should be at a premium to the then prevailing stock price at the time of private placement.
|
¤
|
When evaluating the magnitude of a private placement discount or premium, consider factors that influence the discount or premium, such as, liquidity, due diligence costs, control and monitoring costs, capital scarcity, information asymmetry, and anticipation of future performance.
|
▪
|
Financial issues:
|
¤
|
The company's financial condition;
|
I S S G O V E R N A N C E . C O M
|
|
36 of 72
|
¤
|
Degree of need for capital;
|
¤
|
Use of proceeds;
|
¤
|
Effect of the financing on the company's cost of capital;
|
¤
|
Current and proposed cash burn rate;
|
¤
|
Going concern viability and the state of the capital and credit markets.
|
▪
|
Management's efforts to pursue alternatives and whether the company engaged in a process to evaluate alternatives: A fair, unconstrained process helps to ensure the best price for shareholders. Financing alternatives can include joint ventures, partnership, merger, or sale of part or all of the company.
|
▪
|
Control issues:
|
¤
|
Change in management;
|
¤
|
Change in control;
|
¤
|
Guaranteed board and committee seats;
|
¤
|
Standstill provisions;
|
¤
|
Voting agreements;
|
¤
|
Veto power over certain corporate actions; and
|
¤
|
Minority versus majority ownership and corresponding minority discount or majority control premium.
|
▪
|
Conflicts of interest:
|
¤
|
Conflicts of interest should be viewed from the perspective of the company and the investor.
|
¤
|
Were the terms of the transaction negotiated at arm's length? Are managerial incentives aligned with shareholder interests?
|
▪
|
Market reaction:
|
¤
|
The market's response to the proposed deal. A negative market reaction is a cause for concern. Market reaction may be addressed by analyzing the one-day impact on the unaffected stock price.
|
▪
|
Estimated value and financial prospects of the reorganized company;
|
▪
|
Percentage ownership of current shareholders in the reorganized company;
|
▪
|
Whether shareholders are adequately represented in the reorganization process (particularly through the existence of an Official Equity Committee);
|
▪
|
The cause(s) of the bankruptcy filing, and the extent to which the plan of reorganization addresses the cause(s);
|
▪
|
Existence of a superior alternative to the plan of reorganization; and
|
▪
|
Governance of the reorganized company.
|
▪
|
Valuation - Is the value being paid by the SPAC reasonable? SPACs generally lack an independent fairness opinion and the financials on the target may be limited. Compare the conversion price with the intrinsic value of the target company provided in the fairness opinion. Also, evaluate the proportionate value of the combined entity attributable to the SPAC IPO shareholders versus the pre-merger value of SPAC. Additionally, a private company discount may be applied to the target, if it is a private entity.
|
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|
|
37 of 72
|
▪
|
Market reaction - How has the market responded to the proposed deal? A negative market reaction may be a cause for concern. Market reaction may be addressed by analyzing the one-day impact on the unaffected stock price.
|
▪
|
Deal timing - A main driver for most transactions is that the SPAC charter typically requires the deal to be complete within 18 to 24 months, or the SPAC is to be liquidated. Evaluate the valuation, market reaction, and potential conflicts of interest for deals that are announced close to the liquidation date.
|
▪
|
Negotiations and process - What was the process undertaken to identify potential target companies within specified industry or location specified in charter? Consider the background of the sponsors.
|
▪
|
Conflicts of interest - How are sponsors benefiting from the transaction compared to IPO shareholders? Potential conflicts could arise if a fairness opinion is issued by the insiders to qualify the deal rather than a third party or if management is encouraged to pay a higher price for the target because of an 80 percent rule (the charter requires that the fair market value of the target is at least equal to 80 perecnt of net assets of the SPAC). Also, there may be sense of urgency by the management team of the SPAC to close the deal since its charter typically requires a transaction to be completed within the 18-24 month timeframe.
|
▪
|
Voting agreements - Are the sponsors entering into enter into any voting agreements/tender offers with shareholders who are likely to vote against the proposed merger or exercise conversion rights?
|
▪
|
Governance - What is the impact of having the SPAC CEO or founder on key committees following the proposed merger?
|
▪
|
Length of request: Typically, extension requests range from two to six months, depending on the progression of the SPAC's acquistion process.
|
▪
|
Pending transaction(s) or progression of the acquisition process: Sometimes an intial business combination was already put to a shareholder vote, but, for varying reasons, the transaction could not be consummated by the termination date and the SPAC is requesting an extension. Other times, the SPAC has entered into a definitive transaction agreement, but needs additional time to consummate or hold the shareholder meeting.
|
▪
|
Added incentive for non-redeeming shareholders: Sometimes the SPAC sponsor (or other insiders) will contribute, typically as a loan to the company, additional funds that will be added to the redemption value of each public share as long as such shares are not redeemed in connection with the extension request. The purpose of the "equity kicker" is to incentivize shareholders to hold their shares through the end of the requested extension or until the time the transaction is put to a shareholder vote, rather than electing redeemption at the extension proposal meeting.
|
▪
|
Prior extension requests: Some SPACs request additional time beyond the extension period sought in prior extension requests.
|
▪
|
Tax and regulatory advantages;
|
▪
|
Planned use of the sale proceeds;
|
▪
|
Valuation of spinoff;
|
▪
|
Fairness opinion;
|
▪
|
Benefits to the parent company;
|
▪
|
Conflicts of interest;
|
▪
|
Managerial incentives;
|
▪
|
Corporate governance changes;
|
▪
|
Changes in the capital structure.
|
I S S G O V E R N A N C E . C O M
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|
38 of 72
|
▪
|
Hiring a financial advisor to explore strategic alternatives;
|
▪
|
Selling the company; or
|
▪
|
Liquidating the company and distributing the proceeds to shareholders.
|
▪
|
Prolonged poor performance with no turnaround in sight;
|
▪
|
Signs of entrenched board and management (such as the adoption of takeover defenses);
|
▪
|
Strategic plan in place for improving value;
|
▪
|
Likelihood of receiving reasonable value in a sale or dissolution; and
|
▪
|
The company actively exploring its strategic options, including retaining a financial advisor.
|
I S S G O V E R N A N C E . C O M
|
|
39 of 72
|
5.
|
C o m p e n s at i o n
|
1.
|
Maintain appropriate pay-for-performance alignment, with emphasis on long-term shareholder value: This principle encompasses overall executive pay practices, which must be designed to attract, retain, and appropriately motivate the key employees who drive shareholder value creation over the long term. It will take into consideration, among other factors, the link between pay and performance; the mix between fixed and variable pay; performance goals; and equity-based plan costs;
|
2.
|
Avoid arrangements that risk “pay for failure”: This principle addresses the appropriateness of long or
|
3.
|
Maintain an independent and effective compensation committee: This principle promotes oversight of executive pay programs by directors with appropriate skills, knowledge, experience, and a sound process for compensation decision-making (e.g., including access to independent expertise and advice when needed);
|
4.
|
Provide shareholders with clear, comprehensive compensation disclosures: This principle underscores the importance of informative and timely disclosures that enable shareholders to evaluate executive pay practices fully and fairly;
|
5.
|
Avoid inappropriate pay to non-executive directors: This principle recognizes the interests of shareholders in ensuring that compensation to outside directors is reasonable and does not compromise their
|
▪
|
There is an unmitigated misalignment between CEO pay and company performance (pay for performance);
|
▪
|
The company maintains significant problematic pay practices;
|
▪
|
The board exhibits a significant level of poor communication and responsiveness to shareholders.
|
▪
|
There is no SOP on the ballot, and an against vote on an SOP would otherwise be warranted due to pay-for- performance misalignment, problematic pay practices, or the lack of adequate responsiveness on compensation issues raised previously, or a combination thereof;
|
▪
|
The board fails to respond adequately to a previous SOP proposal that received less than 70 percent support of votes cast;
|
▪
|
The company has recently practiced or approved problematic pay practices, such as option repricing or option backdating; or
|
▪
|
The situation is egregious.
|
I S S G O V E R N A N C E . C O M
|
|
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|
1.
|
Peer Group11 Alignment:
|
▪
|
The degree of alignment between the company's annualized TSR rank and the CEO's annualized total pay rank within a peer group, each measured over a three-year period.
|
▪
|
The rankings of CEO total pay and company financial performance within a peer group, each measured over a three-year period.
|
▪
|
The multiple of the CEO's total pay relative to the peer group median in the most recent fiscal year.
|
2.
|
Absolute Alignment12 – the absolute alignment between the trend in CEO pay and company TSR over the prior five fiscal years – i.e., the difference between the trend in annual pay changes and the trend in annualized TSR during the period.
|
▪
|
The ratio of performance- to time-based incentive awards;
|
▪
|
The overall ratio of performance-based compensation to fixed or discretionary pay;
|
▪
|
The rigor of performance goals;
|
▪
|
The complexity and risks around pay program design;
|
▪
|
The transparency and clarity of disclosure;
|
▪
|
The company's peer group benchmarking practices;
|
▪
|
Financial/operational results, both absolute and relative to peers;
|
▪
|
Special circumstances related to, for example, a new CEO in the prior FY or anomalous equity grant practices (e.g., bi-annual awards);
|
▪
|
Realizable pay13 compared to grant pay; and
|
▪
|
Any other factors deemed relevant.
|
▪
|
Problematic practices related to non-performance-based compensation elements;
|
▪
|
Incentives that may motivate excessive risk-taking or present a windfall risk; and
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▪
|
Pay decisions that circumvent pay-for-performance, such as options backdating or waiving performance requirements.
|
▪
|
Repricing or replacing of underwater stock options/SARs without prior shareholder approval (including cash buyouts and voluntary surrender of underwater options);
|
▪
|
Extraordinary perquisites or tax gross-ups;
|
▪
|
New or materially amended agreements that provide for:
|
¤
|
Excessive termination or CIC severance payments (generally exceeding 3 times base salary and average/target/most recent bonus);
|
¤
|
CIC severance payments without involuntary job loss or substantial diminution of duties ("single" or "modified single" triggers) or in connection with a problematic Good Reason definition;
|
¤
|
CIC excise tax gross-up entitlements (including "modified" gross-ups);
|
¤
|
Multi-year guaranteed awards that are not at risk due to rigorous performance conditions;
|
▪
|
Liberal CIC definition combined with any single-trigger CIC benefits;
|
▪
|
Insufficient executive compensation disclosure by externally-managed issuers (EMIs) such that a reasonable assessment of pay programs and practices applicable to the EMI's executives is not possible;
|
▪
|
Any other provision or practice deemed to be egregious and present a significant risk to investors.
|
▪
|
Reason and motive for the options backdating issue, such as inadvertent vs. deliberate grant date changes;
|
▪
|
Duration of options backdating;
|
▪
|
Size of restatement due to options backdating;
|
▪
|
Corrective actions taken by the board or compensation committee, such as canceling or re-pricing backdated options, the recouping of option gains on backdated grants; and
|
▪
|
Adoption of a grant policy that prohibits backdating and creates a fixed grant schedule or window period for equity grants in the future.
|
▪
|
Failure to respond to majority-supported shareholder proposals on executive pay topics; or
|
▪
|
Failure to adequately respond to the company's previous say-on-pay proposal that received the support of less than 70 percent of votes cast, taking into account:
|
¤
|
Disclosure of engagement efforts with major institutional investors, including the frequency and timing of engagements and the company participants (including whether independent directors participated);
|
¤
|
Disclosure of the specific concerns voiced by dissenting shareholders that led to the say-on-pay opposition;
|
¤
|
Disclosure of specific and meaningful actions taken to address shareholders' concerns;
|
¤
|
Other recent compensation actions taken by the company;
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¤
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Whether the issues raised are recurring or isolated;
|
¤
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The company's ownership structure; and
|
¤
|
Whether the support level was less than 50 percent, which would warrant the highest degree of responsiveness.
|
▪
|
Single- or modified-single-trigger cash severance;
|
▪
|
Single-trigger acceleration of unvested equity awards;
|
▪
|
Full acceleration of equity awards granted shortly before the change in control;
|
▪
|
Acceleration of performance awards above the target level of performance without compelling rationale;
|
▪
|
Excessive cash severance (generally >3x base salary and bonus);
|
▪
|
Excise tax gross-ups triggered and payable;
|
▪
|
Excessive golden parachute payments (on an absolute basis or as a percentage of transaction equity value); or
|
▪
|
Recent amendments that incorporate any problematic features (such as those above) or recent actions (such as extraordinary equity grants) that may make packages so attractive as to influence merger agreements that may not be in the best interests of shareholders; or
|
▪
|
The company's assertion that a proposed transaction is conditioned on shareholder approval of the golden parachute advisory vote.
|
▪
|
Plan Cost: The total estimated cost of the company’s equity plans relative to industry/market cap peers, measured by the company's estimated Shareholder Value Transfer (SVT) in relation to peers and considering both:
|
¤
|
SVT based on new shares requested plus shares remaining for future grants, plus outstanding unvested/unexercised grants; and
|
¤
|
SVT based only on new shares requested plus shares remaining for future grants.
|
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|
▪
|
Plan Features:
|
¤
|
Quality of disclosure around vesting upon a change in control (CIC);
|
¤
|
Discretionary vesting authority;
|
¤
|
Liberal share recycling on various award types;
|
¤
|
Lack of minimum vesting period for grants made under the plan;
|
¤
|
Dividends payable prior to award vesting.
|
▪
|
Grant Practices:
|
¤
|
The company’s three-year burn rate relative to its industry/market cap peers;
|
¤
|
Vesting requirements in CEO's recent equity grants (3-year look-back);
|
¤
|
The estimated duration of the plan (based on the sum of shares remaining available and the new shares requested, divided by the average annual shares granted in the prior three years);
|
¤
|
The proportion of the CEO's most recent equity grants/awards subject to performance conditions;
|
¤
|
Whether the company maintains a sufficient claw-back policy;
|
¤
|
Whether the company maintains sufficient post-exercise/vesting share-holding requirements.
|
▪
|
Awards may vest in connection with a liberal change-of-control definition;
|
▪
|
The plan would permit repricing or cash buyout of underwater options without shareholder approval (either by expressly permitting it – for NYSE and Nasdaq listed companies – or by not prohibiting it when the company has a history of repricing – for non-listed companies);
|
▪
|
The plan is a vehicle for problematic pay practices or a significant pay-for-performance disconnect under certain circumstances;
|
▪
|
The plan is excessively dilutive to shareholders' holdings;
|
▪
|
The plan contains an evergreen (automatic share replenishment) feature; or
|
▪
|
Any other plan features are determined to have a significant negative impact on shareholder interests.
|
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|
▪
|
Amend the terms of outstanding options or SARs to reduce the exercise price of such outstanding options or SARs;
|
▪
|
Cancel outstanding options or SARs in exchange for options or SARs with an exercise price that is less than the exercise price of the original options or SARs;
|
▪
|
Cancel underwater options in exchange for stock awards; or
|
▪
|
Provide cash buyouts of underwater options.
|
▪
|
Severity of the pay-for-performance misalignment;
|
▪
|
Whether problematic equity grant practices are driving the misalignment; and/or
|
▪
|
Whether equity plan awards have been heavily concentrated to the CEO and/or the other NEOs.
|
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|
▪
|
Addresses administrative features only; or
|
▪
|
Seeks approval for Section 162(m) purposes only, and the plan administering committee consists entirely of independent directors, per ISS’ Classification of Directors. Note that if the company is presenting the plan to shareholders for the first time for any reason (including after the company’s initial public offering), or if the proposal is bundled with other material plan amendments, then the recommendation will be case-by-case (see below).
|
▪
|
Seeks approval for Section 162(m) purposes only, and the plan administering committee does not consist entirely of independent directors, per ISS’ Classification of Directors.
|
▪
|
If the proposal requests additional shares and/or the amendments include a term extension or addition of full value awards as an award type, the recommendation will be based on the Equity Plan Scorecard evaluation as well as an analysis of the overall impact of the amendments.
|
▪
|
If the plan is being presented to shareholders for the first time (including after the company's IPO), whether or not additional shares are being requested, the recommendation will be based on the Equity Plan Scorecard evaluation as well as an analysis of the overall impact of any amendments.
|
▪
|
If there is no request for additional shares and the amendments do not include a term extension or addition of full value awards as an award type, then the recommendation will be based entirely on an analysis of the overall impact of the amendments, and the EPSC evaluation will be shown only for informational purposes.
|
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|
▪
|
Purchase price is at least 85 percent of fair market value;
|
▪
|
Offering period is 27 months or less; and
|
▪
|
The number of shares allocated to the plan is 10 percent or less of the outstanding shares.
|
▪
|
Broad-based participation;
|
▪
|
Limits on employee contribution, which may be a fixed dollar amount or expressed as a percent of base salary;
|
▪
|
Company matching contribution up to 25 percent of employee’s contribution, which is effectively a discount
|
▪
|
No discount on the stock price on the date of purchase when there is a company matching contribution.
|
▪
|
Historic trading patterns--the stock price should not be so volatile that the options are likely to be back “in- the-money” over the near term;
|
▪
|
Rationale for the re-pricing--was the stock price decline beyond management's control?;
|
▪
|
Is this a value-for-value exchange?;
|
▪
|
Are surrendered stock options added back to the plan reserve?;
|
▪
|
Timing--repricing should occur at least one year out from any precipitous drop in company's stock price;
|
▪
|
Option vesting--does the new option vest immediately or is there a black-out period?;
|
▪
|
Term of the option--the term should remain the same as that of the replaced option;
|
▪
|
Exercise price--should be set at fair market or a premium to market;
|
▪
|
Participants--executive officers and directors must be excluded.
|
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|
▪
|
Executive officers and non-employee directors are excluded from participating;
|
▪
|
Stock options are purchased by third-party financial institutions at a discount to their fair value using option pricing models such as Black-Scholes or a Binomial Option Valuation or other appropriate financial models; and
|
▪
|
There is a two-year minimum holding period for sale proceeds (cash or stock) for all participants.
|
▪
|
Eligibility;
|
▪
|
Vesting;
|
▪
|
Bid-price;
|
▪
|
Term of options;
|
▪
|
Cost of the program and impact of the TSOs on company’s total option expense; and
|
▪
|
Option repricing policy.
|
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|
|
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|
▪
|
If the equity plan under which non-employee director grants are made is on the ballot, whether or not it warrants support; and
|
▪
|
An assessment of the following qualitative factors:
|
¤
|
The relative magnitude of director compensation as compared to companies of a similar profile;
|
¤
|
The presence of problematic pay practices relating to director compensation;
|
¤
|
Director stock ownership guidelines and holding requirements;
|
¤
|
Equity award vesting schedules;
|
¤
|
The mix of cash and equity-based compensation;
|
¤
|
Meaningful limits on director compensation;
|
¤
|
The availability of retirement benefits or perquisites; and
|
¤
|
The quality of disclosure surrounding director compensation.
|
▪
|
The total estimated cost of the company’s equity plans relative to industry/market cap peers, measured by the company’s estimated Shareholder Value Transfer (SVT) based on new shares requested plus shares remaining for future grants, plus outstanding unvested/unexercised grants;
|
▪
|
The company’s three-year burn rate relative to its industry/market cap peers (in certain circumstances); and
|
▪
|
The presence of any egregious plan features (such as an option repricing provision or liberal CIC vesting risk).
|
▪
|
The relative magnitude of director compensation as compared to companies of a similar profile;
|
▪
|
The presence of problematic pay practices relating to director compensation;
|
▪
|
Director stock ownership guidelines and holding requirements;
|
▪
|
Equity award vesting schedules;
|
▪
|
The mix of cash and equity-based compensation;
|
▪
|
Meaningful limits on director compensation;
|
▪
|
The availability of retirement benefits or perquisites; and
|
▪
|
The quality of disclosure surrounding director compensation.
|
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|
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|
▪
|
The company’s past practices regarding equity and cash compensation;
|
▪
|
Whether the company has a holding period or stock ownership requirements in place, such as a meaningful retention ratio (at least 50 percent for full tenure); and
|
▪
|
Whether the company has a rigorous claw-back policy in place.
|
▪
|
The percentage/ratio of net shares required to be retained;
|
▪
|
The time period required to retain the shares;
|
▪
|
Whether the company has equity retention, holding period, and/or stock ownership requirements in place and the robustness of such requirements;
|
▪
|
Whether the company has any other policies aimed at mitigating risk taking by executives;
|
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|
|
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|
▪
|
Executives' actual stock ownership and the degree to which it meets or exceeds the proponent’s suggested holding period/retention ratio or the company’s existing requirements; and
|
▪
|
Problematic pay practices, current and past, which may demonstrate a short-term versus long-term focus.
|
▪
|
The company’s current level of disclosure of its executive compensation setting process, including how the
|
▪
|
If any problematic pay practices or pay-for-performance concerns have been identified at the company; and
|
▪
|
The level of shareholder support for the company's pay programs.
|
▪
|
First, vote for shareholder proposals advocating the use of performance-based equity awards, such as performance contingent options or restricted stock, indexed options or premium-priced options, unless the proposal is overly restrictive or if the company has demonstrated that it is using a “substantial” portion of performance-based awards for its top executives. Standard stock options and performance-accelerated awards do not meet the criteria to be considered as performance-based awards. Further, premium-priced options should have a meaningful premium to be considered performance-based awards.
|
▪
|
Second, assess the rigor of the company’s performance-based equity program. If the bar set for the performance-based program is too low based on the company’s historical or peer group comparison, generally vote for the proposal. Furthermore, if target performance results in an above target payout, vote for the shareholder proposal due to program’s poor design. If the company does not disclose the performance metric of the performance-based equity program, vote for the shareholder proposal regardless of the outcome of the first step to the test.
|
▪
|
Set compensation targets for the plan’s annual and long-term incentive pay components at or below the peer group median;
|
▪
|
Deliver a majority of the plan’s target long-term compensation through performance-vested, not simply time- vested, equity awards;
|
▪
|
Provide the strategic rationale and relative weightings of the financial and non-financial performance metrics or criteria used in the annual and performance-vested long-term incentive components of the plan;
|
▪
|
Establish performance targets for each plan financial metric relative to the performance of the company’s
|
▪
|
Limit payment under the annual and performance-vested long-term incentive components of the plan to when the company’s performance on its selected financial performance metrics exceeds peer group median performance.
|
I S S G O V E R N A N C E . C O M
|
|
51 of 72
|
▪
|
What aspects of the company’s annual and long-term equity incentive programs are performance driven?
|
▪
|
If the annual and long-term equity incentive programs are performance driven, are the performance criteria and hurdle rates disclosed to shareholders or are they benchmarked against a disclosed peer group?
|
▪
|
Can shareholders assess the correlation between pay and performance based on the current disclosure?
|
▪
|
What type of industry and stage of business cycle does the company belong to?
|
▪
|
Adoption, amendment, or termination of a 10b5-1 Plan must be disclosed within two business days in a Form 8-K;
|
▪
|
Amendment or early termination of a 10b5-1 Plan is allowed only under extraordinary circumstances, as determined by the board;
|
▪
|
Ninety days must elapse between adoption or amendment of a 10b5-1 Plan and initial trading under the plan;
|
▪
|
Reports on Form 4 must identify transactions made pursuant to a 10b5-1 Plan;
|
▪
|
An executive may not trade in company stock outside the 10b5-1 Plan;
|
▪
|
Trades under a 10b5-1 Plan must be handled by a broker who does not handle other securities transactions for the executive.
|
▪
|
If the company has adopted a formal recoupment policy;
|
▪
|
The rigor of the recoupment policy focusing on how and under what circumstances the company may recoup incentive or stock compensation;
|
▪
|
Whether the company has chronic restatement history or material financial problems;
|
▪
|
Whether the company’s policy substantially addresses the concerns raised by the proponent;
|
▪
|
Disclosure of recoupment of incentive or stock compensation from senior executives or lack thereof; or
|
▪
|
Any other relevant factors.
|
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|
|
52 of 72
|
▪
|
The triggering mechanism should be beyond the control of management;
|
▪
|
The amount should not exceed three times base amount (defined as the average annual taxable W-2 compensation during the five years prior to the year in which the change of control occurs);
|
▪
|
Change-in-control payments should be double-triggered, i.e., (1) after a change in control has taken place, and
|
▪
|
The frequency and timing of the company's share buybacks;
|
▪
|
The use of per-share metrics in incentive plans;
|
▪
|
The effect of recent buybacks on incentive metric results and payouts; and
|
▪
|
Whether there is any indication of metric result manipulation.
|
▪
|
The company's current treatment of equity upon employment termination and/or in change-in-control situations (i.e., vesting is double triggered and/or pro rata, does it allow for the assumption of equity by acquiring company, the treatment of performance shares, etc.);
|
I S S G O V E R N A N C E . C O M
|
|
53 of 72
|
▪
|
Current employment agreements, including potential poor pay practices such as gross-ups embedded in those agreements.
|
I S S G O V E R N A N C E . C O M
|
|
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|
6.
|
R o u t i n e / Mi s c e l l a n e o u s
|
I S S G O V E R N A N C E . C O M
|
|
55 of 72
|
7.
|
S o c i a l a n d E n v i r o n m e n t a l I s s u e s
|
▪
|
If the issues presented in the proposal are more appropriately or effectively dealt with through legislation or government regulation;
|
▪
|
If the company has already responded in an appropriate and sufficient manner to the issue(s) raised in the proposal;
|
▪
|
Whether the proposal's request is unduly burdensome (scope or timeframe) or overly prescriptive;
|
▪
|
The company's approach compared with any industry standard practices for addressing the issue(s) raised by the proposal;
|
▪
|
Whether there are significant controversies, fines, penalties, or litigation associated with the company's environmental or social practices;
|
▪
|
If the proposal requests increased disclosure or greater transparency, whether reasonable and sufficient information is currently available to shareholders from the company or from other publicly available sources; and
|
▪
|
If the proposal requests increased disclosure or greater transparency, whether implementation would reveal proprietary or confidential information that could place the company at a competitive disadvantage.
|
▪
|
The company has already published a set of animal welfare standards and monitors compliance;
|
▪
|
The company’s standards are comparable to industry peers; and
|
▪
|
There are no recent significant fines, litigation, or controversies related to the company’s and/or its suppliers' treatment of animals.
|
▪
|
The company is conducting animal testing programs that are unnecessary or not required by regulation;
|
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|
|
56 of 72
|
▪
|
The company is conducting animal testing when suitable alternatives are commonly accepted and used by industry peers; or
|
▪
|
There are recent, significant fines or litigation related to the company’s treatment of animals.
|
▪
|
The potential impact of such labeling on the company's business;
|
▪
|
The quality of the company’s disclosure on GE product labeling, related voluntary initiatives, and how this
|
▪
|
Company’s current disclosure on the feasibility of GE product labeling.
|
▪
|
Whether the company has adequately disclosed mechanisms in place to prevent abuses;
|
▪
|
Whether the company has adequately disclosed the financial risks of the products/practices in question;
|
▪
|
Whether the company has been subject to violations of related laws or serious controversies; and
|
▪
|
Peer companies’ policies/practices in this area.
|
I S S G O V E R N A N C E . C O M
|
|
57 of 72
|
▪
|
The potential for reputational, market, and regulatory risk exposure;
|
▪
|
Existing disclosure of relevant policies;
|
▪
|
Deviation from established industry norms;
|
▪
|
Relevant company initiatives to provide research and/or products to disadvantaged consumers;
|
▪
|
Whether the proposal focuses on specific products or geographic regions;
|
▪
|
The potential burden and scope of the requested report;
|
▪
|
Recent significant controversies, litigation, or fines at the company.
|
▪
|
The company already discloses similar information through existing reports such as a supplier code of conduct and/or a sustainability report;
|
▪
|
The company has formally committed to the implementation of a toxic/hazardous materials and/or product safety and supply chain reporting and monitoring program based on industry norms or similar standards within a specified time frame; and
|
▪
|
The company has not been recently involved in relevant significant controversies, fines, or litigation.
|
▪
|
The company’s current level of disclosure regarding its product safety policies, initiatives, and oversight
|
▪
|
Current regulations in the markets in which the company operates; and
|
▪
|
Recent significant controversies, litigation, or fines stemming from toxic/hazardous materials at the company.
|
▪
|
Recent related fines, controversies, or significant litigation;
|
▪
|
Whether the company complies with relevant laws and regulations on the marketing of tobacco;
|
▪
|
Whether the company’s advertising restrictions deviate from those of industry peers;
|
▪
|
Whether the company entered into the Master Settlement Agreement, which restricts marketing of tobacco to youth; and
|
▪
|
Whether restrictions on marketing to youth extend to foreign countries.
|
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|
|
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|
▪
|
Whether the company complies with all laws and regulations;
|
▪
|
The degree that voluntary restrictions beyond those mandated by law might hurt the company’s
|
▪
|
The risk of any health-related liabilities.
|
▪
|
Whether the company already provides current, publicly-available information on the impact that climate change may have on the company as well as associated company policies and procedures to address related risks and/or opportunities;
|
▪
|
The company's level of disclosure compared to industry peers; and
|
▪
|
Whether there are significant controversies, fines, penalties, or litigation associated with the company's climate change-related performance.
|
▪
|
The company already discloses current, publicly-available information on the impacts that GHG emissions may have on the company as well as associated company policies and procedures to address related risks and/or opportunities;
|
▪
|
The company's level of disclosure is comparable to that of industry peers; and
|
▪
|
There are no significant, controversies, fines, penalties, or litigation associated with the company's GHG emissions.
|
▪
|
Whether the company provides disclosure of year-over-year GHG emissions performance data;
|
▪
|
Whether company disclosure lags behind industry peers;
|
▪
|
The company's actual GHG emissions performance;
|
▪
|
The company's current GHG emission policies, oversight mechanisms, and related initiatives; and
|
▪
|
Whether the company has been the subject of recent, significant violations, fines, litigation, or controversy related to GHG emissions.
|
I S S G O V E R N A N C E . C O M
|
|
59 of 72
|
▪
|
The company complies with applicable energy efficiency regulations and laws, and discloses its participation in energy efficiency policies and programs, including disclosure of benchmark data, targets, and performance measures; or
|
▪
|
The proponent requests adoption of specific energy efficiency goals within specific timelines.
|
▪
|
The scope and structure of the proposal;
|
▪
|
The company's current level of disclosure on renewable energy use and GHG emissions; and
|
▪
|
The company's disclosure of policies, practices, and oversight implemented to manage GHG emissions and mitigate climate change risks.
|
▪
|
The gender and racial minority representation of the company’s board is reasonably inclusive in relation to
|
▪
|
The board already reports on its nominating procedures and gender and racial minority initiatives on the board and within the company.
|
▪
|
The degree of existing gender and racial minority diversity on the company’s board and among its executive officers;
|
▪
|
The level of gender and racial minority representation that exists at the company’s industry peers;
|
▪
|
The company’s established process for addressing gender and racial minority board representation;
|
▪
|
Whether the proposal includes an overly prescriptive request to amend nominating committee charter language;
|
▪
|
The independence of the company’s nominating committee;
|
▪
|
Whether the company uses an outside search firm to identify potential director nominees; and
|
▪
|
Whether the company has had recent controversies, fines, or litigation regarding equal employment practices.
|
I S S G O V E R N A N C E . C O M
|
|
60 of 72
|
▪
|
The company publicly discloses equal opportunity policies and initiatives in a comprehensive manner;
|
▪
|
The company already publicly discloses comprehensive workforce diversity data; and
|
▪
|
The company has no recent significant EEO-related violations or litigation.
|
▪
|
The company's current policies and disclosure related to both its diversity and inclusion policies and practices and its compensation philosophy on fair and equitable compensation practices;
|
▪
|
Whether the company has been the subject of recent controversy, litigation, or regulatory actions related to gender, race, or ethnicity pay gap issues; and
|
▪
|
Whether the company's reporting regarding gender, race, or ethnicity pay gap policies or initiatives is lagging its peers.
|
▪
|
The company’s current level of disclosure of its workplace health and safety performance data, health and safety management policies, initiatives, and oversight mechanisms;
|
▪
|
The nature of the company’s business, specifically regarding company and employee exposure to health and
|
▪
|
Recent significant controversies, fines, or violations related to workplace health and safety; and
|
▪
|
The company's workplace health and safety performance relative to industry peers.
|
▪
|
The company’s compliance with applicable regulations and guidelines;
|
▪
|
The company’s current level of disclosure regarding its security and safety policies, procedures, and
|
▪
|
The existence of recent, significant violations, fines, or controversy regarding the safety and security of the
|
▪
|
Current disclosure of applicable policies and risk assessment report(s) and risk management procedures;
|
▪
|
The impact of regulatory non-compliance, litigation, remediation, or reputational loss that may be associated with failure to manage the company’s operations in question, including the management of relevant community and stakeholder relations;
|
▪
|
The nature, purpose, and scope of the company’s operations in the specific region(s);
|
▪
|
The degree to which company policies and procedures are consistent with industry norms; and
|
▪
|
The scope of the resolution.
|
▪
|
The company's current level of disclosure of relevant policies and oversight mechanisms;
|
I S S G O V E R N A N C E . C O M
|
|
61 of 72
|
▪
|
The company's current level of such disclosure relative to its industry peers;
|
▪
|
Potential relevant local, state, or national regulatory developments; and
|
▪
|
Controversies, fines, or litigation related to the company's hydraulic fracturing operations.
|
▪
|
Operations in the specified regions are not permitted by current laws or regulations;
|
▪
|
The company does not currently have operations or plans to develop operations in these protected regions; or
|
▪
|
The company’s disclosure of its operations and environmental policies in these regions is comparable to industry peers.
|
▪
|
The nature of the company’s business;
|
▪
|
The current level of disclosure of the company's existing related programs;
|
▪
|
The timetable and methods of program implementation prescribed by the proposal;
|
▪
|
The company’s ability to address the issues raised in the proposal; and
|
▪
|
How the company's recycling programs compare to similar programs of its industry peers.
|
▪
|
The company already discloses similar information through existing reports or policies such as an environment, health, and safety (EHS) report; a comprehensive code of corporate conduct; and/or a diversity report; or
|
▪
|
The company has formally committed to the implementation of a reporting program based on Global Reporting Initiative (GRI) guidelines or a similar standard within a specified time frame.
|
▪
|
The company's current disclosure of relevant policies, initiatives, oversight mechanisms, and water usage metrics;
|
▪
|
Whether or not the company's existing water-related policies and practices are consistent with relevant internationally recognized standards and national/local regulations;
|
▪
|
The potential financial impact or risk to the company associated with water-related concerns or issues; and
|
▪
|
Recent, significant company controversies, fines, or litigation regarding water use by the company and its suppliers.
|
I S S G O V E R N A N C E . C O M
|
|
62 of 72
|
▪
|
The level of disclosure of company policies and procedures relating to data security, privacy, freedom of speech, information access and management, and Internet censorship;
|
▪
|
Engagement in dialogue with governments or relevant groups with respect to data security, privacy, or the free flow of information on the Internet;
|
▪
|
The scope of business involvement and of investment in countries whose governments censor or monitor the Internet and other telecommunications;
|
▪
|
Applicable market-specific laws or regulations that may be imposed on the company; and
|
▪
|
Controversies, fines, or litigation related to data security, privacy, freedom of speech, or Internet censorship.
|
▪
|
The scope and prescriptive nature of the proposal;
|
▪
|
Whether the company has significant and/or persistent controversies or regulatory violations regarding social and/or environmental issues;
|
▪
|
Whether the company has management systems and oversight mechanisms in place regarding its social and environmental performance;
|
▪
|
The degree to which industry peers have incorporated similar non-financial performance criteria in their executive compensation practices; and
|
▪
|
The company's current level of disclosure regarding its environmental and social performance.
|
I S S G O V E R N A N C E . C O M
|
|
63 of 72
|
▪
|
The degree to which existing relevant policies and practices are disclosed;
|
▪
|
Whether or not existing relevant policies are consistent with internationally recognized standards;
|
▪
|
Whether company facilities and those of its suppliers are monitored and how;
|
▪
|
Company participation in fair labor organizations or other internationally recognized human rights initiatives;
|
▪
|
Scope and nature of business conducted in markets known to have higher risk of workplace labor/human rights abuse;
|
▪
|
Recent, significant company controversies, fines, or litigation regarding human rights at the company or its suppliers;
|
▪
|
The scope of the request; and
|
▪
|
Deviation from industry sector peer company standards and practices.
|
▪
|
The degree to which existing relevant policies and practices are disclosed, including information on the implementation of these policies and any related oversight mechanisms;
|
▪
|
The company’s industry and whether the company or its suppliers operate in countries or areas where there is
|
▪
|
Recent significant controversies, fines, or litigation regarding human rights involving the company or its suppliers, and whether the company has taken remedial steps; and
|
▪
|
Whether the proposal is unduly burdensome or overly prescriptive.
|
▪
|
The nature, purpose, and scope of the operations and business involved that could be affected by social or political disruption;
|
▪
|
Current disclosure of applicable risk assessment(s) and risk management procedures;
|
▪
|
Compliance with U.S. sanctions and laws;
|
▪
|
Consideration of other international policies, standards, and laws; and
|
▪
|
Whether the company has been recently involved in recent, significant controversies, fines, or litigation related to its operations in "high-risk" markets.
|
▪
|
Controversies surrounding operations in the relevant market(s);
|
▪
|
The value of the requested report to shareholders;
|
▪
|
The company’s current level of disclosure of relevant information on outsourcing and plant closure
|
▪
|
The company’s existing human rights standards relative to industry peers.
|
▪
|
The company’s current disclosure of relevant lobbying policies, and management and board oversight;
|
I S S G O V E R N A N C E . C O M
|
|
64 of 72
|
▪
|
The company’s disclosure regarding trade associations or other groups that it supports, or is a member of, that
|
▪
|
Recent significant controversies, fines, or litigation regarding the company’s lobbying-related activities.
|
▪
|
The company's policies, and management and board oversight related to its direct political contributions and payments to trade associations or other groups that may be used for political purposes;
|
▪
|
The company's disclosure regarding its support of, and participation in, trade associations or other groups that may make political contributions; and
|
▪
|
Recent significant controversies, fines, or litigation related to the company's political contributions or political activities.
|
▪
|
There are no recent, significant controversies, fines, or litigation regarding the company’s political
|
▪
|
The company has procedures in place to ensure that employee contributions to company-sponsored political action committees (PACs) are strictly voluntary and prohibit coercion.
|
I S S G O V E R N A N C E . C O M
|
|
65 of 72
|
8.
|
M u t u a l F u n d P r o x i e s
|
▪
|
Past performance as a closed-end fund;
|
▪
|
Market in which the fund invests;
|
▪
|
Measures taken by the board to address the discount; and
|
▪
|
Past shareholder activism, board activity, and votes on related proposals.
|
▪
|
Past performance relative to its peers;
|
▪
|
Market in which the fund invests;
|
▪
|
Measures taken by the board to address the issues;
|
▪
|
Past shareholder activism, board activity, and votes on related proposals;
|
▪
|
Strategy of the incumbents versus the dissidents;
|
▪
|
Independence of directors;
|
▪
|
Experience and skills of director candidates;
|
▪
|
Governance profile of the company;
|
▪
|
Evidence of management entrenchment.
|
▪
|
Proposed and current fee schedules;
|
▪
|
Fund category/investment objective;
|
▪
|
Performance benchmarks;
|
▪
|
Share price performance as compared with peers;
|
▪
|
Resulting fees relative to peers;
|
▪
|
Assignments (where the advisor undergoes a change of control).
|
▪
|
Stated specific financing purpose;
|
▪
|
Possible dilution for common shares;
|
▪
|
Whether the shares can be used for antitakeover purposes.
|
I S S G O V E R N A N C E . C O M
|
|
66 of 72
|
▪
|
Potential competitiveness;
|
▪
|
Regulatory developments;
|
▪
|
Current and potential returns; and
|
▪
|
Current and potential risk.
|
▪
|
The fund's target investments;
|
▪
|
The reasons given by the fund for the change; and
|
▪
|
The projected impact of the change on the portfolio.
|
▪
|
Political/economic changes in the target market;
|
▪
|
Consolidation in the target market; and
|
▪
|
Current asset composition.
|
▪
|
Potential competitiveness;
|
▪
|
Current and potential returns;
|
▪
|
Risk of concentration;
|
▪
|
Consolidation in target industry.
|
▪
|
The proposal to allow share issuances below NAV has an expiration date no more than one year from the date shareholders approve the underlying proposal, as required under the Investment Company Act of 1940;
|
▪
|
The sale is deemed to be in the best interests of shareholders by (1) a majority of the company's independent directors and (2) a majority of the company's directors who have no financial interest in the issuance; and
|
▪
|
The company has demonstrated responsible past use of share issuances by either:
|
I S S G O V E R N A N C E . C O M
|
|
67 of 72
|
▪
|
Outperforming peers in its 8-digit GICS group as measured by one- and three-year median TSRs; or
|
▪
|
Providing disclosure that its past share issuances were priced at levels that resulted in only small or moderate discounts to NAV and economic dilution to existing non-participating shareholders.
|
▪
|
Strategies employed to salvage the company;
|
▪
|
The fund’s past performance;
|
▪
|
The terms of the liquidation.
|
▪
|
The degree of change implied by the proposal;
|
▪
|
The efficiencies that could result;
|
▪
|
The state of incorporation;
|
▪
|
Regulatory standards and implications.
|
▪
|
Removal of shareholder approval requirement to reorganize or terminate the trust or any of its series;
|
▪
|
Removal of shareholder approval requirement for amendments to the new declaration of trust;
|
▪
|
Removal of shareholder approval requirement to amend the fund's management contract, allowing the contract to be modified by the investment manager and the trust management, as permitted by the 1940 Act;
|
▪
|
Allow the trustees to impose other fees in addition to sales charges on investment in a fund, such as deferred sales charges and redemption fees that may be imposed upon redemption of a fund's shares;
|
▪
|
Removal of shareholder approval requirement to engage in and terminate subadvisory arrangements;
|
▪
|
Removal of shareholder approval requirement to change the domicile of the fund.
|
▪
|
Regulations of both states;
|
▪
|
Required fundamental policies of both states;
|
▪
|
The increased flexibility available.
|
▪
|
Fees charged to comparably sized funds with similar objectives;
|
▪
|
The proposed distributor’s reputation and past performance;
|
▪
|
The competitiveness of the fund in the industry;
|
▪
|
The terms of the agreement.
|
I S S G O V E R N A N C E . C O M
|
|
68 of 72
|
▪
|
Resulting fee structure;
|
▪
|
Performance of both funds;
|
▪
|
Continuity of management personnel;
|
▪
|
Changes in corporate governance and their impact on shareholder rights.
|
▪
|
Performance of the fund’s Net Asset Value (NAV);
|
▪
|
The fund’s history of shareholder relations;
|
▪
|
The performance of other funds under the advisor’s management.
|
I S S G O V E R N A N C E . C O M
|
|
69 of 72
|
I S S G O V E R N A N C E . C O M
|
|
70 of 72
|
Exhibit No.
|
Description of Exhibit
|
||
(a)
|
(i)
|
|
|
|
(ii)
|
|
|
|
(iii)
|
|
|
(b)
|
|
|
|
(c)
|
|
|
For information regarding the rights of the holders of securities, please see Articles IV, VII and VIII of the Declaration of Trust, filed as Exhibit (a)(i) above.
|
(d)
|
(i)
|
(A)
|
|
|
|
(B)
|
|
|
(ii)
|
(A)
|
|
|
|
(B)
|
|
(e)
|
(i)
|
(A)
|
|
|
|
(B)
|
|
(f)
|
|
|
Not applicable.
|
(g)
|
(i)
|
(A)
|
|
|
|
(B)
|
Amendment and Exhibit to the Custody Agreement, reflecting the addition of Roundhill Sports Betting & iGaming ETF (the “Fund”) - Filed Herewith.
|
(h)
|
(i)
|
(A)
|
|
|
|
(B)
|
|
|
(ii)
|
|
|
(iii)
|
|
|
(i)
|
|
|
Opinion and Consent of Counsel– Filed Herewith.
|
(j)
|
|
|
Consent of Independent Registered Public Accounting Firm– Filed Herewith.
|
(k)
|
|
|
Not applicable.
|
(l)
|
|
|
Not applicable.
|
(m)
|
(i)
|
|
|
|
(ii)
|
|
|
(n)
|
|
|
Not applicable.
|
(o)
|
|
|
Reserved.
|
(p)
|
(i)
|
|
|
|
(ii)
|
|
|
|
(iii)
|
|
|
|
(iv)
|
|
Investment Adviser and Sub-Adviser
|
SEC File No.
|
Roundhill Financial LLC
|
801-114971
|
Exchange Traded Concepts, LLC
|
801-70485
|
(a)
|
Foreside Fund Services, LLC (the “Distributor”) serves as principal underwriter for the following investment companies registered under the Investment Company Act of 1940, as amended:
|
1.
|
ABS Long/Short Strategies Fund
|
2.
|
Absolute Shares Trust
|
3.
|
AdvisorShares Trust
|
4.
|
AGF Investments Trust (f/k/a FQF Trust)
|
5.
|
AlphaCentric Prime Meridian Income Fund
|
6.
|
American Century ETF Trust
|
7.
|
American Customer Satisfaction ETF, Series of ETF Series Solutions
|
8.
|
Amplify ETF Trust
|
9.
|
ARK ETF Trust
|
10.
|
Bluestone Community Development Fund (f/k/a The 504 Fund)
|
11.
|
Braddock Multi-Strategy Income Fund, Series of Investment Managers Series Trust
|
12.
|
Brand Value ETF, Series of ETF Series Solutions
|
13.
|
Bridgeway Funds, Inc.
|
14.
|
Brinker Capital Destinations Trust
|
15.
|
Calamos Convertible and High Income Fund
|
16.
|
Calamos Convertible Opportunities and Income Fund
|
17.
|
Calamos Global Total Return Fund
|
18.
|
Carlyle Tactical Private Credit Fund
|
19.
|
Center Coast Brookfield MLP & Energy Infrastructure Fund
|
20.
|
Cliffwater Corporate Lending Fund
|
21.
|
CornerCap Group of Funds
|
22.
|
Davis Fundamental ETF Trust
|
23.
|
Defiance Next Gen Connectivity ETF, Series of ETF Series Solutions
|
24.
|
Defiance Next Gen Food & Agriculture ETF, Series of ETF Series Solutions
|
25.
|
Defiance Quantum ETF, Series of ETF Series Solutions
|
26.
|
Direxion Shares ETF Trust
|
27.
|
Eaton Vance NextShares Trust
|
28.
|
Eaton Vance NextShares Trust II
|
29.
|
EIP Investment Trust
|
30.
|
Ellington Income Opportunities Fund
|
31.
|
EntrepreneurShares Series Trust
|
32.
|
Esoterica Thematic Trust
|
33.
|
Evanston Alternative Opportunities Fund
|
34.
|
EventShares U.S. Legislative Opportunities ETF, Series of Listed Funds Trust
|
35.
|
Exchange Listed Funds Trust (f/k/a Exchange Traded Concepts Trust II)
|
36.
|
Fiera Capital Series Trust
|
37.
|
FlexShares Trust
|
38.
|
Forum Funds
|
39.
|
Forum Funds II
|
40.
|
Friess Small Cap Growth Fund, Series of Managed Portfolio Series
|
41.
|
GraniteShares ETF Trust
|
42.
|
Guinness Atkinson Funds
|
43.
|
Infinity Core Alternative Fund
|
44.
|
Innovator ETFs Trust
|
45.
|
Innovator ETFs Trust II (f/k/a Elkhorn ETF Trust)
|
46.
|
Ironwood Institutional Multi-Strategy Fund LLC
|
47.
|
Ironwood Multi-Strategy Fund LLC
|
48.
|
IVA Fiduciary Trust
|
49.
|
John Hancock Exchange-Traded Fund Trust
|
50.
|
Manor Investment Funds
|
51.
|
Miller/Howard Funds Trust
|
52.
|
Miller/Howard High Income Equity Fund
|
53.
|
Moerus Worldwide Value Fund, Series of Northern Lights Fund Trust IV
|
54.
|
Morningstar Funds Trust
|
55.
|
OSI ETF Trust
|
56.
|
Overlay Shares Core Bond ETF, Series of Listed Funds Trust
|
57.
|
Overlay Shares Foreign Equity ETF, Series of Listed Funds Trust
|
58.
|
Overlay Shares Large Cap Equity ETF, Series of Listed Funds Trust
|
59.
|
Overlay Shares Municipal Bond ETF, Series of Listed Funds Trust
|
60.
|
Overlay Shares Small Cap Equity ETF, Series of Listed Funds Trust
|
61.
|
Pacific Global ETF Trust
|
62.
|
Palmer Square Opportunistic Income Fund
|
63.
|
Partners Group Private Income Opportunities, LLC
|
64.
|
PENN Capital Funds Trust
|
65.
|
Performance Trust Mutual Funds, Series of Trust for Professional Managers
|
66.
|
Plan Investment Fund, Inc.
|
67.
|
PMC Funds, Series of Trust for Professional Managers
|
68.
|
Point Bridge GOP Stock Tracker ETF, Series of ETF Series Solutions
|
69.
|
Quaker Investment Trust
|
70.
|
Renaissance Capital Greenwich Funds
|
71.
|
Reverse Cap Weighted U.S. Large Cap ETF, Series of ETF Series Solutions
|
72.
|
RMB Investors Trust (f/k/a Burnham Investors Trust)
|
73.
|
Robinson Opportunistic Income Fund, Series of Investment Managers Series Trust
|
74.
|
Robinson Tax Advantaged Income Fund, Series of Investment Managers Series Trust
|
75.
|
Roundhill BITKRAFT Esports & Digital Entertainment ETF, Series of Listed Funds Trust
|
76.
|
Salient MF Trust
|
77.
|
SharesPost 100 Fund
|
78.
|
Six Circles Trust
|
79.
|
Sound Shore Fund, Inc.
|
80.
|
Source Dividend Opportunity ETF, Series of Listed Funds Trust
|
81.
|
Strategy Shares
|
82.
|
Syntax ETF Trust
|
83.
|
Tactical Income ETF, Series of Collaborative Investment Series Trust
|
84.
|
The Chartwell Funds
|
85.
|
The Community Development Fund
|
86.
|
The Relative Value Fund
|
87.
|
Third Avenue Trust
|
88.
|
Third Avenue Variable Series Trust
|
89.
|
Tidal ETF Trust
|
90.
|
TIFF Investment Program
|
91.
|
Timothy Plan High Dividend Stock ETF, Series of The Timothy Plan
|
92.
|
Timothy Plan International ETF, Series of The Timothy Plan
|
93.
|
Timothy Plan US Large Cap Core ETF, Series of The Timothy Plan
|
94.
|
Timothy Plan US Small Cap Core ETF, Series of The Timothy Plan
|
95.
|
Transamerica ETF Trust
|
96.
|
TrueMark AI & Deep Learning Fund, Series of Listed Funds Trust
|
97.
|
TrueMark ESG Active Opportunities Fund, Series of Listed Funds Trust
|
98.
|
U.S. Global Investors Funds
|
99.
|
Variant Alternative Income Fund
|
100.
|
VictoryShares Developed Enhanced Volatility Wtd ETF, Series of Victory Portfolios II
|
101.
|
VictoryShares Dividend Accelerator ETF, Series of Victory Portfolios II
|
102.
|
VictoryShares Emerging Market High Div Volatility Wtd ETF, Series of Victory Portfolios II
|
103.
|
VictoryShares Emerging Market Volatility Wtd ETF, Series of Victory Portfolios II
|
104.
|
VictoryShares International High Div Volatility Wtd ETF, Series of Victory Portfolios II
|
105.
|
VictoryShares International Volatility Wtd ETF, Series of Victory Portfolios II
|
106.
|
VictoryShares US 500 Enhanced Volatility Wtd ETF, Series of Victory Portfolios II
|
107.
|
VictoryShares US 500 Volatility Wtd ETF, Series of Victory Portfolios II
|
108.
|
VictoryShares US Discovery Enhanced Volatility Wtd ETF, Series of Victory Portfolios II
|
109.
|
VictoryShares US EQ Income Enhanced Volatility Wtd ETF, Series of Victory Portfolios II
|
110.
|
VictoryShares US Large Cap High Div Volatility Wtd ETF, Series of Victory Portfolios II
|
111.
|
VictoryShares US Multi-Factor Minimum Volatility ETF, Series of Victory Portfolios II
|
112.
|
VictoryShares US Small Cap High Div Volatility Wtd ETF, Series of Victory Portfolios II
|
113.
|
VictoryShares US Small Cap Volatility Wtd ETF, Series of Victory Portfolios II
|
114.
|
VictoryShares USAA Core Intermediate-Term Bond ETF, Series of Victory Portfolios II
|
115.
|
VictoryShares USAA Core Short-Term Bond ETF, Series of Victory Portfolios II
|
116.
|
VictoryShares USAA MSCI Emerging Markets Value Momentum ETF, Series of Victory Portfolios II
|
117.
|
VictoryShares USAA MSCI International Value Momentum ETF, Series of Victory Portfolios II
|
118.
|
VictoryShares USAA MSCI USA Small Cap Value Momentum ETF, Series of Victory Portfolios II
|
119.
|
VictoryShares USAA MSCI USA Value Momentum ETF, Series of Victory Portfolios II
|
120.
|
Vivaldi Opportunities Fund
|
121.
|
West Loop Realty Fund, Series of Investment Managers Series Trust (f/k/a Chilton Realty Income & Growth Fund)
|
122.
|
WisdomTree Trust
|
123.
|
WST Investment Trust
|
124.
|
XAI Octagon Floating Rate & Alternative Income Term Trust
|
(b)
|
The following are the Officers and Manager of the Distributor, the Registrant’s underwriter. The Distributor’s main business address is Three Canal Plaza, Suite 100, Portland, Maine 04101.
|
Name
|
Address
|
Position with Underwriter
|
Position with Registrant
|
Richard J. Berthy
|
Three Canal Plaza, Suite 100
Portland, ME 04101
|
President, Treasurer and Manager
|
None
|
Mark A. Fairbanks
|
Three Canal Plaza, Suite 100
Portland, ME 04101
|
Vice President
|
None
|
Jennifer K. DiValerio
|
899 Cassatt Road,
400 Berwyn Park, Suite 110
Berwyn, PA 19312
|
Vice President
|
None
|
Nanette K. Chern
|
Three Canal Plaza, Suite 100
Portland, ME 04101
|
Vice President and Chief Compliance Officer
|
None
|
Jennifer E. Hoopes
|
Three Canal Plaza, Suite 100
Portland, ME 04101
|
Secretary
|
None
|
(c)
|
Not applicable.
|
Records Relating to:
|
Are located at:
|
Registrant’s Fund Administrator, Fund Accountant and Transfer Agent
|
U.S. Bancorp Fund Services, LLC
615 East Michigan Street
Milwaukee, Wisconsin 53202
|
Registrant’s Custodian
|
U.S. Bank, National Association
1555 N. Rivercenter Drive, Suite 302
Milwaukee, Wisconsin 53212
|
Registrant’s Principal Underwriter
|
Foreside Fund Services, LLC
Three Canal Plaza, Suite 100
Portland, Maine 04101
|
Registrant’s Investment Advisers
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Roundhill Financial LLC
575 5th Avenue, 14th Floor
New York, New York 10017
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Registrant’s Sub-Adviser
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Exchange Traded Concepts, LLC
10900 Hefner Pointe Drive, Suite 207
Oklahoma City, Oklahoma 73120
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Listed Funds Trust
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By:
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/s/ Kent P. Barnes
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Kent P. Barnes
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Secretary
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Signature
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Title
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*/s/ John L. Jacobs
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Trustee
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John L. Jacobs
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*/s/ Koji Felton
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Trustee
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Koji Felton
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*/s/ Pamela H. Conroy
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Trustee
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Pamela H. Conroy
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*/s/ Paul R. Fearday
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Trustee and Chairman
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Paul R. Fearday
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*/s/ Gregory C. Bakken
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President and Principal Executive Officer
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Gregory C. Bakken
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*/s/ Travis G. Babich
Travis G. Babich
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Treasurer and Principal Financial Officer
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*By: /s/ Kent P. Barnes
Kent P. Barnes, Attorney-in-Fact
Pursuant to Powers of Attorney
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(d)(i)(B)
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(d)(ii)(B)
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(e)(i)(B)
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(g)(i)(B)
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(h)(i)(B)
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(i)
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(j)
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(m)(ii)
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Fund
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Rate
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Roundhill BITKRAFT Esports & Digital Entertainment ETF
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0.50%
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Roundhill Sports Betting & iGaming ETF
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0.75%
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LISTED FUNDS TRUST
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ROUNDHILL FINANCIAL INC.
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By: /s/ Kent. P. Barnes
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By: /s/ Tim Maloney
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Name: Kent P. Barnes
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Name: Tim Maloney
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Title: Secretary
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Title: Chief Investment Officer
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Fund
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Minimum Fee
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Rate
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Roundhill Global Esports ETF
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$20,000
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0.04%
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Roundhill Sports Betting & iGaming ETF
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$20,000
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0.04%
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ROUNDHILL FINANCIAL INC.
By: /s/ Tim Maloney
Name: Tim Maloney
Title: Chief Investment Officer
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EXCHANGE TRADED CONCEPTS, LLC
By: /s/ J. Garrett Stevens
Name: J. Garrett Stevens
Title: Chief Executive Officer
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LISTED FUNDS TRUST
By: /s/ Kent P. Barnes
Name: Kent P. Barnes
Title: Secretary
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(i)
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the addition of the following Funds:
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(ii)
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Fund changes of name; and
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(iii)
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the removal of one Fund: Source Dividend Opportunity ETF.
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1.
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Capitalized terms not otherwise defined herein shall have the meanings set forth in the Agreement.
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2.
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Exhibit A to the Agreement is hereby deleted in its entirety and replaced by Exhibit A attached hereto.
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3.
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Except as expressly amended hereby, all of the provisions of the Agreement are restated and in full force and effect to the same extent as if fully set forth herein.
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4.
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This Amendment shall be governed by and the provisions of this Amendment shall be construed and interpreted under and in accordance with the laws of the State of Delaware.
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▪
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$ [ ] – Book entry DTC transaction, Federal Reserve transaction, principal paydown
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§
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$ [ ] – Repurchase agreement, reverse repurchase agreement, time deposit/CD or other non-depository transaction
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§
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$ [ ] – Option/SWAPS/future contract written, exercised or expired
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§
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$[ ] – Mutual fund trade, Margin Variation Wire and outbound Fed wire
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§
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$[ ] – Physical security transaction
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§
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$ [ ] – Check disbursement (waived if U.S. Bank is Administrator)
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§
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Additional fees apply for global servicing. Fund of Fund expenses quoted separately.
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§
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$[ ] per custody sub – account per year (e.g., per sub –adviser, segregated account, etc.)
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§
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Class Action Services – $[ ] filing fee per class action per account, plus [ ]% of gross proceeds, up to a maximum per recovery not to exceed $[ ].
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§
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No charge for the initial conversion free receipt.
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§
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Overdrafts – charged to the account at prime interest rate plus [ ]%, unless a line of credit is in place
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§
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1 – 25 foreign securities – $[ ]
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§
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26 – 50 foreign securities – $[ ]
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§
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Over 50 foreign securities – $[ ]
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§
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Euroclear – Eurobonds only. Eurobonds are held in Euroclear at a standard rate, but other types of securities (including but not limited to equities, domestic market debt and mutual funds) will be subject to a surcharge. In addition, certain transactions that are delivered within Euroclear or from a Euroclear account to a third party depository or settlement system, will be subject to a surcharge.
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§
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For all other markets specified above, surcharges may apply if a security is held outside of the local market.
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§
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A transaction is defined as any purchase/sale, free receipt / free delivery, maturity, tender or exchange of a security.
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§
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Charges incurred by U.S. Bank, N.A. directly or through sub-custodians for account opening fees, tax reclaim fees, local taxes, stamp duties or other local duties and assessments, stock exchange fees, foreign exchange transactions, postage and insurance for shipping, facsimile reporting, extraordinary telecommunications fees, proxy services and other shareholder communications, recurring administration fees, negative interest charges, overdraft charges or other expenses which are unique to a country in which the client or its clients is investing will be passed along as incurred.
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§
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A surcharge may be added to certain miscellaneous expenses listed herein to cover handling, servicing and other administrative costs associated with the activities giving rise to such expenses. Also, certain expenses are charged at a predetermined flat rate.
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§
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SWIFT reporting and message fees.
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Country
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Safekeeping (BPS)
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Transaction fee
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Country
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Safekeeping (BPS)
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Transaction fee
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Country
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Safekeeping (BPS)
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Transaction fee
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Australia
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[ ]
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[ ]
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Hungary
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[ ]
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[ ]
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Poland
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[ ]
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[ ]
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Argentina
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[ ]
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[ ]
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Iceland
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[ ]
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[ ]
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Portugal
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[ ]
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[ ]
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Austria
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[ ]
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[ ]
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India
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[ ]
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[ ]
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Qatar
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[ ]
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[ ]
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Bahrain
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[ ]
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[ ]
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Indonesia
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[ ]
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[ ]
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Romania
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[ ]
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[ ]
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Bangladesh
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[ ]
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[ ]
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Ireland
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[ ]
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[ ]
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Russia
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[ ]
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[ ]
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Belgium
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[ ]
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[ ]
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Israel
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[ ]
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[ ]
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Serbia
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[ ]
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[ ]
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Bermuda
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[ ]
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[ ]
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Italy
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[ ]
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[ ]
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Singapore
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[ ]
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[ ]
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Botswana
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[ ]
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[ ]
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Japan
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[ ]
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[ ]
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Slovakia
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[ ]
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[ ]
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Brazil
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[ ]
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[ ]
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Jordan
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[ ]
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[ ]
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Slovenia
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[ ]
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[ ]
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Bulgaria
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[ ]
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[ ]
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Kenya
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[ ]
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[ ]
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South Africa
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[ ]
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[ ]
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Canada
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[ ]
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[ ]
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Kuwait
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[ ]
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[ ]
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South Korea
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[ ]
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[ ]
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Chile
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[ ]
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[ ]
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Latvia
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[ ]
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[ ]
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Spain
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[ ]
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[ ]
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China Connect
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[ ]
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[ ]
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Lithuania
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[ ]
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[ ]
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Sri Lanka
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[ ]
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[ ]
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China (B Shares)
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[ ]
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[ ]
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Luxembourg
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[ ]
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[ ]
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Eswatini
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[ ]
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[ ]
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Colombia
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[ ]
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[ ]
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Malaysia
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[ ]
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[ ]
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Sweden
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[ ]
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[ ]
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Costa Rica
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[ ]
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[ ]
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Malta
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[ ]
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[ ]
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Switzerland
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[ ]
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[ ]
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Croatia
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[ ]
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[ ]
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Mauritius
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[ ]
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[ ]
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Taiwan
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[ ]
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[ ]
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Cyprus
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[ ]
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[ ]
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Mexico
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[ ]
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[ ]
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Thailand
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[ ]
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[ ]
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Czech Republic
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[ ]
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[ ]
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Morocco
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[ ]
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[ ]
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Tunisia
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[ ]
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[ ]
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Denmark
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[ ]
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[ ]
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Namibia
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[ ]
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[ ]
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Turkey
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[ ]
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[ ]
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Egypt
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[ ]
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[ ]
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Netherlands
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[ ]
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[ ]
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UAE
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[ ]
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[ ]
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Estonia
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[ ]
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[ ]
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New Zealand
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[ ]
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[ ]
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Uganda
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[ ]
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[ ]
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Euroclear
(Eurobonds) |
[ ]
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[ ]
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Nigeria
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[ ]
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[ ]
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Ukraine
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[ ]
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[ ]
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Euroclear
(Non-Eurobonds) |
[ ]
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[ ]
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Norway
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[ ]
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[ ]
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United Kingdom
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[ ]
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[ ]
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Finland
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[ ]
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[ ]
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Oman
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[ ]
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[ ]
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Uruguay
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[ ]
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[ ]
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France
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[ ]
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[ ]
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Pakistan
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[ ]
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[ ]
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Vietnam
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[ ]
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[ ]
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Germany
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[ ]
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[ ]
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Panama
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[ ]
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[ ]
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West African Economic Monetary Union (WAEMU)*
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[ ]
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[ ]
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Ghana
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[ ]
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[ ]
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Peru
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[ ]
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[ ]
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Zambia
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[ ]
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[ ]
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Greece
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[ ]
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[ ]
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Philippines
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[ ]
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[ ]
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Zimbabwe
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[ ]
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[ ]
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Hong Kong
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[ ]
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[ ]
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Saudi Arabia
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[ ]
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[ ]
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▪
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$[ ] – Domestic Equities, Options, ADRs, Foreign Equities, Futures, Forwards, Currency Rates, Mutual Funds, ETFs, Total Return Swaps
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§
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$[ ] – Domestic Corporates, Domestic Convertibles, Domestic Governments, Domestic Agencies, Mortgage Backed, Municipal Bonds
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§
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$[ ] – CMOs, Money Market Instruments, Foreign Corporates, Foreign Convertibles, Foreign Governments, Foreign Agencies, Asset Backed, High Yield
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§
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$[ ] – Interest Rate Swaps, Foreign Currency Swaps
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§
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$[ ] – Bank Loans
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§
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$[ ] – Swaptions, Intraday money market funds pricing, up to 3 times per day
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§
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$[ ] – Credit Default Swaps
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§
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$[ ] per Month Manual Security Pricing (>25 per day)
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§
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$[ ] per Foreign Equity Security per Month
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§
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$[ ] per Domestic Equity Security per Month
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§
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$[ ] per CMOs, Asset Backed, Mortgage Backed Security per Month
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§
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$[ ] for the first fund
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§
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$[ ] for each additional fund 2-5
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§
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$[ ] for each fund over 5 funds
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§
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$[ ] per sub-adviser per fund
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§
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Per adviser relationship, and subject to change based upon board review and approval.
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§
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$[ ] per security per month for fund administrative
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§
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Form N-PORT – $[ ] per year, per Fund
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§
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Form N-CEN – $[ ] per year, per Fund
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§
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$[ ] per fund per standard reporting package*
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-
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Expense reporting package: 2 peer comparison reports (adviser fee) and (net expense ratio w classes on one report) OR Full 15(c) report
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§
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Additional 15c reporting is subject to additional charges
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§
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Standard data source – Morningstar; additional charges will apply for other data services
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§
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Base fee – $[ ] per fund per year
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§
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Setup – $[ ] per fund group
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§
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$[ ] set up fee per fund complex
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§
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$[ ] per fund per month
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§
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1940 Act C-Corp – U.S. Bank Fee Schedule plus $[ ]
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§
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1933 Act C-Corp – U.S. Bank Fee Schedule plus $[ ]
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§
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U.S. Bank Fee Schedule plus $[ ]
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§
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Prepare book-to-tax adjustments & Form 5471 for Controlled Foreign Corporations (CFCs) – $[ ] per year
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§
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Additional Capital Gain Dividend Estimates – (First two included in core services) – $[ ] per additional estimate
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§
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State tax returns - (First two included in core services) – $[ ] per additional return
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§
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Subsequent new fund launch – $[ ] per fund or as negotiated
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§
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Drafting SEC exemptive order application for other requested relief – Negotiated fee
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§
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$[ ] for first three funds in same statutory prospectus
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§
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Fees will be negotiated for fund 4+
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§
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Postage, if necessary
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§
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Federal and state regulatory filing fees
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§
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Expenses from Board of Trustee meetings
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§
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Third party auditing
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§
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EDGAR/XBRL filing
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§
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All other Miscellaneous expenses
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(a)
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A certificate of the Secretary of State of the State of Delaware, dated as of a recent date, as to the existence and good standing of the Trust;
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(b)
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A copy, certified by the Secretary of State of the State of Delaware, of the Trust’s Certificate of Trust and all amendments thereto, as filed with the Secretary of State (the “Certificate of Trust”);
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(c)
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Copies of the Trust’s Amended and Restated Declaration of Trust dated March 19, 2019 (the “Declaration”), the Trust’s Amended and Restated Bylaws, as approved by the Board of Trustees (the “Board”) on March 19, 2019 (the “Bylaws”), and resolutions approved by the Board authorizing the issuance of the Shares of the Fund (the “Resolutions”), each certified by an authorized officer of the Trust; and
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(d)
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A printer’s proof of the Registration Statement.
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